|
|
||||||||||||
|
UNITED STATES
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
|
|||||||||||
|
For the quarterly period ended
|
March 31, 2013
|
|||||||||||
|
or
|
||||||||||||
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|||||||||||
|
For the transition period from
|
to
|
|||||||||||
|
Commission File No.
|
Exact Name of Registrants as Specified in their Charters, Address and Telephone Number
|
States of Incorporation
|
I.R.S. Employer
Identification Nos.
|
Former name, former address and former fiscal year, if changed since last report
|
||||||||
|
1-14201
|
SEMPRA ENERGY
|
California
|
33-0732627
|
No change
|
||||||||
|
101 Ash Street
|
||||||||||||
|
San Diego, California 92101
|
||||||||||||
|
(619)696-2000
|
||||||||||||
|
1-03779
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
California
|
95-1184800
|
No change
|
||||||||
|
8326 Century Park Court
|
||||||||||||
|
San Diego, California 92123
|
||||||||||||
|
(619)696-2000
|
||||||||||||
|
1-01402
|
SOUTHERN CALIFORNIA GAS COMPANY
|
California
|
95-1240705
|
No change
|
||||||||
|
555 West Fifth Street
|
||||||||||||
|
Los Angeles, California 90013
|
||||||||||||
|
(213)244-1200
|
||||||||||||
|
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
|
||||||||||||
|
Yes
|
X
|
No
|
||||||||||
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
||||||||||||
|
Sempra Energy
|
Yes
|
X
|
No
|
|||||||||
|
San Diego Gas & Electric Company
|
Yes
|
X
|
No
|
|||||||||
|
Southern California Gas Company
|
Yes
|
X
|
No
|
|||||||||
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
||||||||||||
|
Large
accelerated filer
|
Accelerated filer
|
Non-accelerated filer
|
Smaller reporting company
|
|||||||||
|
Sempra Energy
|
[ X ]
|
[ ]
|
[ ]
|
[ ]
|
||||||||
|
San Diego Gas & Electric Company
|
[ ]
|
[ ]
|
[ X ]
|
[ ]
|
||||||||
|
Southern California Gas Company
|
[ ]
|
[ ]
|
[ X ]
|
[ ]
|
||||||||
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
||||||||||||
|
Sempra Energy
|
Yes
|
No
|
X
|
|||||||||
|
San Diego Gas & Electric Company
|
Yes
|
No
|
X
|
|||||||||
|
Southern California Gas Company
|
Yes
|
No
|
X
|
|||||||||
|
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
|
||||||||||||
|
Common stock outstanding on April 29, 2013:
|
||||||||||||
|
Sempra Energy
|
243,577,278 shares
|
|||||||||||
|
San Diego Gas & Electric Company
|
Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
|
|||||||||||
|
Southern California Gas Company
|
Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy
|
|||||||||||
|
SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
|
||
|
Page
|
||
|
Information Regarding Forward-Looking Statements
|
4
|
|
|
PART I – FINANCIAL INFORMATION
|
||
|
Item 1.
|
Financial Statements
|
5
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
69
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
100
|
|
Item 4.
|
Controls and Procedures
|
101
|
|
PART II – OTHER INFORMATION
|
||
|
Item 1.
|
Legal Proceedings
|
102
|
|
Item 1A.
|
Risk Factors
|
102
|
|
Item 6.
|
Exhibits
|
102
|
|
Signatures
|
105
|
|
This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.
You should read this report in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Part I - Item 1 sections are provided for each reporting company, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companies are combined. All Items other than Part I – Item 1 are combined for the reporting companies.
We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
In this report, when we use words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “contemplates,” “intends,” “depends,” “should,” “could,” “would,” “will,” “may,” “potential,” “target,” “pursue,” “goals,” or similar expressions, or when we discuss our guidance, strategy, plans, goals, initiatives, objectives or intentions, we are making forward-looking statements.
Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include
|
§
|
local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;
|
|
§
|
actions and the timing of actions by the California Public Utilities Commission, California State Legislature, Federal Energy Regulatory Commission, U.S. Department of Energy, Nuclear Regulatory Commission, California Energy Commission, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
|
|
§
|
capital markets conditions, including the availability of credit and the liquidity of our investments;
|
|
§
|
inflation, interest and exchange rates;
|
|
§
|
the impact of benchmark interest rates, generally Moody’s A-rated utility bond yields, on our California Utilities’ cost of capital;
|
|
§
|
the timing and success of business development efforts and construction, maintenance and capital projects, including risks inherent in the ability to obtain, and the timing of granting of, permits, licenses, certificates and other authorizations;
|
|
§
|
energy markets, including the timing and extent of changes and volatility in commodity prices;
|
|
§
|
the availability of electric power, natural gas and liquefied natural gas, including disruptions caused by failures in the North American transmission grid, pipeline explosions and equipment failures;
|
|
§
|
weather conditions, natural disasters, catastrophic accidents, and conservation efforts;
|
|
§
|
risks inherent in nuclear power generation and radioactive materials storage, including the catastrophic release of such materials, the disallowance of the recovery of the investment in or operating costs of the generation facility due to an extended outage, and increased regulatory oversight;
|
|
§
|
risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest;
|
|
§
|
wars, terrorist attacks and cybersecurity threats;
|
|
§
|
business, regulatory, environmental and legal decisions and requirements;
|
|
§
|
expropriation of assets by foreign governments and title and other property disputes;
|
|
§
|
the impact on reliability of SDG&E’s electric transmission and distribution system due to increased power supply from renewable energy sources;
|
|
§
|
the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through our electric transmission and distribution system;
|
|
§
|
the inability or determination not to enter into long-term supply and sales agreements or long-term firm capacity agreements;
|
|
§
|
the resolution of litigation; and
|
|
§
|
other uncertainties, all of which are difficult to predict and many of which are beyond our control.
|
We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described in this report and in our Annual Report on Form 10-K and other reports that we file with the Securities and Exchange Commission.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||
|
(Dollars in millions, except per share amounts)
|
|||||
|
Three months ended March 31,
|
|||||
|
2013
|
2012
|
||||
|
(unaudited)
|
|||||
|
REVENUES
|
|||||
|
Utilities
|
$
|
2,334
|
$
|
2,091
|
|
|
Energy-related businesses
|
316
|
292
|
|||
|
Total revenues
|
2,650
|
2,383
|
|||
|
EXPENSES AND OTHER INCOME
|
|||||
|
Utilities:
|
|||||
|
Cost of natural gas
|
(556)
|
(431)
|
|||
|
Cost of electric fuel and purchased power
|
(447)
|
(388)
|
|||
|
Energy-related businesses:
|
|||||
|
Cost of natural gas, electric fuel and purchased power
|
(111)
|
(129)
|
|||
|
Other cost of sales
|
(48)
|
(33)
|
|||
|
Operation and maintenance
|
(724)
|
(671)
|
|||
|
Depreciation and amortization
|
(295)
|
(257)
|
|||
|
Franchise fees and other taxes
|
(106)
|
(96)
|
|||
|
Gain on sale of asset
|
74
|
―
|
|||
|
Equity earnings, before income tax
|
10
|
12
|
|||
|
Other income, net
|
37
|
75
|
|||
|
Interest income
|
6
|
5
|
|||
|
Interest expense
|
(138)
|
(113)
|
|||
|
Income before income taxes and equity earnings
|
|||||
|
of certain unconsolidated subsidiaries
|
352
|
357
|
|||
|
Income tax expense
|
(178)
|
(117)
|
|||
|
Equity earnings, net of income tax
|
4
|
11
|
|||
|
Net income
|
178
|
251
|
|||
|
Losses (earnings) attributable to noncontrolling interests
|
2
|
(13)
|
|||
|
Preferred dividends of subsidiaries
|
(2)
|
(2)
|
|||
|
Earnings
|
$
|
178
|
$
|
236
|
|
|
Basic earnings per common share
|
$
|
0.73
|
$
|
0.98
|
|
|
Weighted-average number of shares outstanding, basic (thousands)
|
243,294
|
240,566
|
|||
|
Diluted earnings per common share
|
$
|
0.72
|
$
|
0.97
|
|
|
Weighted-average number of shares outstanding, diluted (thousands)
|
247,534
|
243,761
|
|||
|
Dividends declared per share of common stock
|
$
|
0.63
|
$
|
0.60
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SEMPRA ENERGY
|
||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||||||||
|
(Dollars in millions)
|
||||||||||||||
|
Three months ended March 31,
|
||||||||||||||
|
2013
|
2012
|
|||||||||||||
|
(unaudited)
|
||||||||||||||
|
Non-
|
Non-
|
|||||||||||||
|
Sempra
|
controlling
|
Sempra
|
controlling
|
|||||||||||
|
Energy
|
Interests
|
Total
|
Energy
|
Interests
|
Total
|
|||||||||
|
Net income (loss)
|
$
|
180
|
$
|
(2)
|
$
|
178
|
$
|
238
|
$
|
13
|
$
|
251
|
||
|
Other comprehensive income (loss), net of income tax:
|
||||||||||||||
|
Foreign currency translation adjustments
|
10
|
(4)
|
6
|
67
|
4
|
71
|
||||||||
|
Net actuarial gain
|
3
|
―
|
3
|
1
|
―
|
1
|
||||||||
|
Financial instruments
|
(14)
|
3
|
(11)
|
3
|
―
|
3
|
||||||||
|
Total other comprehensive income (loss)
|
(1)
|
(1)
|
(2)
|
71
|
4
|
75
|
||||||||
|
Total comprehensive income (loss)
|
179
|
(3)
|
176
|
309
|
17
|
326
|
||||||||
|
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
(2)
|
―
|
(2)
|
||||||||
|
Total comprehensive income (loss), after preferred
|
||||||||||||||
|
dividends of subsidiaries
|
$
|
177
|
$
|
(3)
|
$
|
174
|
$
|
307
|
$
|
17
|
$
|
324
|
||
|
See Notes to Condensed Consolidated Financial Statements.
|
||||||||||||||
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
ASSETS
|
|||||
|
Current assets:
|
|||||
|
Cash and cash equivalents
|
$
|
1,471
|
$
|
475
|
|
|
Restricted cash
|
57
|
46
|
|||
|
Trade accounts receivable, net
|
1,131
|
1,146
|
|||
|
Other accounts and notes receivable, net
|
198
|
153
|
|||
|
Income taxes receivable
|
73
|
56
|
|||
|
Deferred income taxes
|
28
|
148
|
|||
|
Inventories
|
270
|
408
|
|||
|
Regulatory balancing accounts – undercollected
|
411
|
395
|
|||
|
Regulatory assets
|
42
|
62
|
|||
|
Fixed-price contracts and other derivatives
|
88
|
95
|
|||
|
U.S. Treasury grants receivable
|
236
|
258
|
|||
|
Asset held for sale, power plant
|
―
|
296
|
|||
|
Other
|
118
|
157
|
|||
|
Total current assets
|
4,123
|
3,695
|
|||
|
Investments and other assets:
|
|||||
|
Restricted cash
|
19
|
22
|
|||
|
Regulatory assets arising from pension and other postretirement
|
|||||
|
benefit obligations
|
1,167
|
1,151
|
|||
|
Regulatory assets arising from wildfire litigation costs
|
360
|
364
|
|||
|
Other regulatory assets
|
1,233
|
1,227
|
|||
|
Nuclear decommissioning trusts
|
952
|
908
|
|||
|
Investments
|
1,519
|
1,516
|
|||
|
Goodwill
|
1,113
|
1,111
|
|||
|
Other intangible assets
|
434
|
436
|
|||
|
Sundry
|
895
|
878
|
|||
|
Total investments and other assets
|
7,692
|
7,613
|
|||
|
Property, plant and equipment:
|
|||||
|
Property, plant and equipment
|
34,011
|
33,528
|
|||
|
Less accumulated depreciation and amortization
|
(8,553)
|
(8,337)
|
|||
|
Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
December 31, 2012, respectively, related to VIE)
|
25,458
|
25,191
|
|||
|
Total assets
|
$
|
37,273
|
$
|
36,499
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
LIABILITIES AND EQUITY
|
|||||
|
Current liabilities:
|
|||||
|
Short-term debt
|
$
|
762
|
$
|
546
|
|
|
Accounts payable – trade
|
874
|
976
|
|||
|
Accounts payable – other
|
116
|
134
|
|||
|
Dividends and interest payable
|
323
|
266
|
|||
|
Accrued compensation and benefits
|
217
|
337
|
|||
|
Regulatory balancing accounts – overcollected
|
294
|
141
|
|||
|
Current portion of long-term debt
|
1,381
|
725
|
|||
|
Fixed-price contracts and other derivatives
|
71
|
77
|
|||
|
Customer deposits
|
142
|
143
|
|||
|
Reserve for wildfire litigation
|
221
|
305
|
|||
|
Other
|
788
|
608
|
|||
|
Total current liabilities
|
5,189
|
4,258
|
|||
|
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012, respectively,
related to VIE)
|
10,680
|
11,621
|
|||
|
Deferred credits and other liabilities:
|
|||||
|
Customer advances for construction
|
139
|
144
|
|||
|
Pension and other postretirement benefit obligations, net of plan assets
|
1,466
|
1,456
|
|||
|
Deferred income taxes
|
2,248
|
2,100
|
|||
|
Deferred investment tax credits
|
46
|
46
|
|||
|
Regulatory liabilities arising from removal obligations
|
2,783
|
2,720
|
|||
|
Asset retirement obligations
|
2,056
|
2,033
|
|||
|
Fixed-price contracts and other derivatives
|
254
|
252
|
|||
|
Reserve for wildfire litigation
|
45
|
22
|
|||
|
Deferred credits and other
|
1,027
|
1,085
|
|||
|
Total deferred credits and other liabilities
|
10,064
|
9,858
|
|||
|
Contingently redeemable preferred stock of subsidiary
|
79
|
79
|
|||
|
Commitments and contingencies (Note 10)
|
|||||
|
Equity:
|
|||||
|
Preferred stock (50 million shares authorized; none issued)
|
―
|
―
|
|||
|
Common stock (750 million shares authorized; 244 million and 242 million shares
|
|||||
|
outstanding at March 31, 2013 and December 31, 2012, respectively; no par value)
|
2,334
|
2,217
|
|||
|
Retained earnings
|
8,466
|
8,441
|
|||
|
Accumulated other comprehensive income (loss)
|
(377)
|
(376)
|
|||
|
Total Sempra Energy shareholders’ equity
|
10,423
|
10,282
|
|||
|
Preferred stock of subsidiary
|
20
|
20
|
|||
|
Other noncontrolling interests
|
818
|
381
|
|||
|
Total equity
|
11,261
|
10,683
|
|||
|
Total liabilities and equity
|
$
|
37,273
|
$
|
36,499
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||
|
(Dollars in millions)
|
|||||
|
Three months ended March 31,
|
|||||
|
2013
|
2012
|
||||
|
(unaudited)
|
|||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|||||
|
Net income
|
$
|
178
|
$
|
251
|
|
|
Adjustments to reconcile net income to net cash provided
|
|||||
|
by operating activities:
|
|||||
|
Depreciation and amortization
|
295
|
257
|
|||
|
Deferred income taxes and investment tax credits
|
252
|
31
|
|||
|
Gain on sale of asset
|
(74)
|
―
|
|||
|
Equity earnings
|
(14)
|
(23)
|
|||
|
Fixed-price contracts and other derivatives
|
17
|
(12)
|
|||
|
Other
|
6
|
14
|
|||
|
Net change in other working capital components
|
149
|
168
|
|||
|
Changes in other assets
|
17
|
12
|
|||
|
Changes in other liabilities
|
9
|
1
|
|||
|
Net cash provided by operating activities
|
835
|
699
|
|||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|||||
|
Expenditures for property, plant and equipment
|
(531)
|
(811)
|
|||
|
Expenditures for investments
|
(5)
|
(51)
|
|||
|
Proceeds from sale of asset
|
371
|
―
|
|||
|
Distributions from investments
|
15
|
8
|
|||
|
Purchases of nuclear decommissioning and other trust assets
|
(136)
|
(134)
|
|||
|
Proceeds from sales by nuclear decommissioning and other trusts
|
134
|
135
|
|||
|
Decrease in restricted cash
|
52
|
39
|
|||
|
Increase in restricted cash
|
(60)
|
(40)
|
|||
|
Other
|
(2)
|
(5)
|
|||
|
Net cash used in investing activities
|
(162)
|
(859)
|
|||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|||||
|
Common dividends paid
|
(145)
|
(115)
|
|||
|
Preferred dividends paid by subsidiaries
|
(2)
|
(2)
|
|||
|
Issuances of common stock
|
15
|
13
|
|||
|
Repurchases of common stock
|
(45)
|
(16)
|
|||
|
Issuances of debt (maturities greater than 90 days)
|
608
|
1,008
|
|||
|
Payments on debt (maturities greater than 90 days)
|
(645)
|
(347)
|
|||
|
Proceeds from sale of noncontrolling interests, net of $25 in offering costs
|
574
|
―
|
|||
|
Decrease in short-term debt, net
|
(43)
|
(224)
|
|||
|
Distributions to noncontrolling interests
|
(1)
|
(3)
|
|||
|
Other
|
4
|
(4)
|
|||
|
Net cash provided by financing activities
|
320
|
310
|
|||
|
Effect of exchange rate changes on cash and cash equivalents
|
3
|
2
|
|||
|
Increase in cash and cash equivalents
|
996
|
152
|
|||
|
Cash and cash equivalents, January 1
|
475
|
252
|
|||
|
Cash and cash equivalents, March 31
|
$
|
1,471
|
$
|
404
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SEMPRA ENERGY
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|||||
|
(Dollars in millions)
|
|||||
|
Three months ended March 31,
|
|||||
|
2013
|
2012
|
||||
|
(unaudited)
|
|||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|||||
|
Interest payments, net of amounts capitalized
|
$
|
87
|
$
|
62
|
|
|
Income tax payments, net of refunds
|
14
|
38
|
|||
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
|||||
|
Accrued capital expenditures
|
$
|
275
|
$
|
336
|
|
|
U.S. Treasury grants receivable
|
(22)
|
17
|
|||
|
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
|
|||||
|
Dividends declared but not paid
|
$
|
160
|
$
|
151
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended March 31,
|
||||
|
2013
|
2012
|
|||
|
(unaudited)
|
||||
|
Operating revenues
|
||||
|
Electric
|
$
|
772
|
$
|
671
|
|
Natural gas
|
167
|
163
|
||
|
Total operating revenues
|
939
|
834
|
||
|
Operating expenses
|
||||
|
Cost of electric fuel and purchased power
|
209
|
163
|
||
|
Cost of natural gas
|
76
|
67
|
||
|
Operation and maintenance
|
297
|
268
|
||
|
Depreciation and amortization
|
134
|
112
|
||
|
Franchise fees and other taxes
|
55
|
46
|
||
|
Total operating expenses
|
771
|
656
|
||
|
Operating income
|
168
|
178
|
||
|
Other income, net
|
11
|
30
|
||
|
Interest income
|
1
|
―
|
||
|
Interest expense
|
(48)
|
(36)
|
||
|
Income before income taxes
|
132
|
172
|
||
|
Income tax expense
|
(51)
|
(60)
|
||
|
Net income
|
81
|
112
|
||
|
Losses (earnings) attributable to noncontrolling interest
|
11
|
(6)
|
||
|
Earnings
|
92
|
106
|
||
|
Preferred dividend requirements
|
(1)
|
(1)
|
||
|
Earnings attributable to common shares
|
$
|
91
|
$
|
105
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||||||||||
|
(Dollars in millions)
|
|||||||||||||
|
Three months ended March 31,
|
|||||||||||||
|
2013
|
2012
|
||||||||||||
|
(unaudited)
|
|||||||||||||
|
Non-
|
Non-
|
||||||||||||
|
controlling
|
controlling
|
||||||||||||
|
SDG&E
|
Interest
|
Total
|
SDG&E
|
Interest
|
Total
|
||||||||
|
Net income (loss)
|
$
|
92
|
$
|
(11)
|
$
|
81
|
$
|
106
|
$
|
6
|
$
|
112
|
|
|
Other comprehensive income, net of income tax:
|
|||||||||||||
|
Financial instruments
|
―
|
3
|
3
|
―
|
―
|
―
|
|||||||
|
Total other comprehensive income
|
―
|
3
|
3
|
―
|
―
|
―
|
|||||||
|
Total comprehensive income (loss)
|
$
|
92
|
$
|
(8)
|
$
|
84
|
$
|
106
|
$
|
6
|
$
|
112
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||||||||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
ASSETS
|
|||||
|
Current assets:
|
|||||
|
Cash and cash equivalents
|
$
|
106
|
$
|
87
|
|
|
Restricted cash
|
15
|
10
|
|||
|
Accounts receivable – trade, net
|
259
|
252
|
|||
|
Accounts receivable – other, net
|
34
|
21
|
|||
|
Due from unconsolidated affiliates
|
1
|
39
|
|||
|
Income taxes receivable
|
―
|
35
|
|||
|
Deferred income taxes
|
12
|
―
|
|||
|
Inventories
|
81
|
82
|
|||
|
Regulatory balancing accounts, net
|
411
|
395
|
|||
|
Regulatory assets arising from fixed-price contracts and other derivatives
|
22
|
39
|
|||
|
Other regulatory assets
|
10
|
10
|
|||
|
Fixed-price contracts and other derivatives
|
45
|
41
|
|||
|
Other
|
43
|
76
|
|||
|
Total current assets
|
1,039
|
1,087
|
|||
|
Other assets:
|
|||||
|
Restricted cash
|
19
|
22
|
|||
|
Deferred taxes recoverable in rates
|
727
|
718
|
|||
|
Regulatory assets arising from fixed-price contracts and other derivatives
|
106
|
110
|
|||
|
Regulatory assets arising from pension and other postretirement
|
|||||
|
benefit obligations
|
307
|
303
|
|||
|
Regulatory assets arising from wildfire litigation costs
|
360
|
364
|
|||
|
Other regulatory assets
|
243
|
252
|
|||
|
Nuclear decommissioning trusts
|
952
|
908
|
|||
|
Sundry
|
143
|
117
|
|||
|
Total other assets
|
2,857
|
2,794
|
|||
|
Property, plant and equipment:
|
|||||
|
Property, plant and equipment
|
14,299
|
14,124
|
|||
|
Less accumulated depreciation and amortization
|
(3,343)
|
(3,261)
|
|||
|
Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
December 31, 2012, respectively, related to VIE)
|
10,956
|
10,863
|
|||
|
Total assets
|
$
|
14,852
|
$
|
14,744
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
LIABILITIES AND EQUITY
|
|||||
|
Current liabilities:
|
|||||
|
Accounts payable
|
$
|
239
|
$
|
300
|
|
|
Due to unconsolidated affiliates
|
35
|
19
|
|||
|
Income taxes payable
|
33
|
―
|
|||
|
Deferred income taxes
|
―
|
26
|
|||
|
Dividends and interest payable
|
55
|
36
|
|||
|
Accrued compensation and benefits
|
63
|
129
|
|||
|
Current portion of long-term debt
|
16
|
16
|
|||
|
Fixed-price contracts and other derivatives
|
47
|
56
|
|||
|
Customer deposits
|
58
|
60
|
|||
|
Construction deposits
|
51
|
51
|
|||
|
Reserve for wildfire litigation
|
221
|
305
|
|||
|
Other
|
170
|
106
|
|||
|
Total current liabilities
|
988
|
1,104
|
|||
|
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012,
respectively, related to VIE)
|
4,289
|
4,292
|
|||
|
Deferred credits and other liabilities:
|
|||||
|
Customer advances for construction
|
18
|
17
|
|||
|
Pension and other postretirement benefit obligations, net of plan assets
|
345
|
340
|
|||
|
Deferred income taxes
|
1,714
|
1,636
|
|||
|
Deferred investment tax credits
|
26
|
25
|
|||
|
Regulatory liabilities arising from removal obligations
|
1,658
|
1,603
|
|||
|
Asset retirement obligations
|
744
|
733
|
|||
|
Fixed-price contracts and other derivatives
|
200
|
209
|
|||
|
Reserve for wildfire litigation
|
45
|
22
|
|||
|
Deferred credits and other
|
361
|
386
|
|||
|
Total deferred credits and other liabilities
|
5,111
|
4,971
|
|||
|
Contingently redeemable preferred stock
|
79
|
79
|
|||
|
Commitments and contingencies (Note 10)
|
|||||
|
Equity:
|
|||||
|
Common stock (255 million shares authorized; 117 million shares outstanding;
|
|||||
|
no par value)
|
1,338
|
1,338
|
|||
|
Retained earnings
|
2,986
|
2,895
|
|||
|
Accumulated other comprehensive income (loss)
|
(11)
|
(11)
|
|||
|
Total SDG&E shareholder's equity
|
4,313
|
4,222
|
|||
|
Noncontrolling interest
|
72
|
76
|
|||
|
Total equity
|
4,385
|
4,298
|
|||
|
Total liabilities and equity
|
$
|
14,852
|
$
|
14,744
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended
March 31,
|
||||
|
2013
|
2012
|
|||
|
(unaudited)
|
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
|
Net income
|
$
|
81
|
$
|
112
|
|
Adjustments to reconcile net income to net cash provided by
|
||||
|
operating activities:
|
||||
|
Depreciation and amortization
|
134
|
112
|
||
|
Deferred income taxes and investment tax credits
|
36
|
152
|
||
|
Fixed-price contracts and other derivatives
|
(2)
|
(3)
|
||
|
Other
|
5
|
(27)
|
||
|
Net change in other working capital components
|
(2)
|
(85)
|
||
|
Changes in other assets
|
4
|
8
|
||
|
Changes in other liabilities
|
8
|
(3)
|
||
|
Net cash provided by operating activities
|
264
|
266
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||
|
Expenditures for property, plant and equipment
|
(237)
|
(398)
|
||
|
Purchases of nuclear decommissioning trust assets
|
(135)
|
(133)
|
||
|
Proceeds from sales by nuclear decommissioning trusts
|
134
|
131
|
||
|
Decrease in restricted cash
|
17
|
37
|
||
|
Increase in restricted cash
|
(19)
|
(36)
|
||
|
Net cash used in investing activities
|
(240)
|
(399)
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
|
Preferred dividends paid
|
(1)
|
(1)
|
||
|
Issuance of long-term debt
|
―
|
249
|
||
|
Payments on long-term debt
|
(3)
|
(3)
|
||
|
Distributions to noncontrolling interests
|
(1)
|
―
|
||
|
Other
|
―
|
(2)
|
||
|
Net cash (used in) provided by financing activities
|
(5)
|
243
|
||
|
Increase in cash and cash equivalents
|
19
|
110
|
||
|
Cash and cash equivalents, January 1
|
87
|
29
|
||
|
Cash and cash equivalents, March 31
|
$
|
106
|
$
|
139
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
||||
|
Interest payments, net of amounts capitalized
|
$
|
28
|
$
|
17
|
|
Income tax refunds
|
―
|
62
|
||
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
||||
|
Accrued capital expenditures
|
$
|
102
|
$
|
134
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
|
||||
|
Dividends declared but not paid
|
$
|
1
|
$
|
1
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended March 31,
|
||||
|
2013
|
2012
|
|||
|
(unaudited)
|
||||
|
Operating revenues
|
$
|
983
|
$
|
880
|
|
Operating expenses
|
||||
|
Cost of natural gas
|
454
|
349
|
||
|
Operation and maintenance
|
306
|
289
|
||
|
Depreciation and amortization
|
100
|
87
|
||
|
Franchise fees and other taxes
|
40
|
36
|
||
|
Total operating expenses
|
900
|
761
|
||
|
Operating income
|
83
|
119
|
||
|
Other income, net
|
4
|
4
|
||
|
Interest expense
|
(17)
|
(17)
|
||
|
Income before income taxes
|
70
|
106
|
||
|
Income tax expense
|
(24)
|
(40)
|
||
|
Net income/Earnings attributable to common shares
|
$
|
46
|
$
|
66
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||
|
(Dollars in millions)
|
|||||
|
Three months ended March 31,
|
|||||
|
2013
|
2012
|
||||
|
(unaudited)
|
|||||
|
Net income
|
$
|
46
|
$
|
66
|
|
|
Total other comprehensive income, net of income tax
|
―
|
―
|
|||
|
Total comprehensive income
|
$
|
46
|
$
|
66
|
|
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
ASSETS
|
|||||
|
Current assets:
|
|||||
|
Cash and cash equivalents
|
$
|
72
|
$
|
83
|
|
|
Accounts receivable – trade, net
|
466
|
539
|
|||
|
Accounts receivable – other, net
|
94
|
51
|
|||
|
Due from unconsolidated affiliates
|
276
|
24
|
|||
|
Income taxes receivable
|
96
|
104
|
|||
|
Deferred income taxes
|
―
|
3
|
|||
|
Inventories
|
34
|
151
|
|||
|
Regulatory assets
|
4
|
4
|
|||
|
Other
|
26
|
35
|
|||
|
Total current assets
|
1,068
|
994
|
|||
|
Other assets:
|
|||||
|
Regulatory assets arising from pension and other postretirement
|
|||||
|
benefit obligations
|
848
|
835
|
|||
|
Other regulatory assets
|
155
|
148
|
|||
|
Sundry
|
79
|
77
|
|||
|
Total other assets
|
1,082
|
1,060
|
|||
|
Property, plant and equipment:
|
|||||
|
Property, plant and equipment
|
11,317
|
11,187
|
|||
|
Less accumulated depreciation and amortization
|
(4,244)
|
(4,170)
|
|||
|
Property, plant and equipment, net
|
7,073
|
7,017
|
|||
|
Total assets
|
$
|
9,223
|
$
|
9,071
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
|
(Dollars in millions)
|
|||||
|
March 31,
|
December 31,
|
||||
|
2013
|
2012(1)
|
||||
|
(unaudited)
|
|||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||
|
Current liabilities:
|
|||||
|
Accounts payable – trade
|
$
|
282
|
$
|
383
|
|
|
Accounts payable – other
|
70
|
82
|
|||
|
Due to unconsolidated affiliate
|
―
|
37
|
|||
|
Deferred income taxes
|
8
|
―
|
|||
|
Accrued compensation and benefits
|
94
|
116
|
|||
|
Regulatory balancing accounts, net
|
294
|
141
|
|||
|
Current portion of long-term debt
|
254
|
4
|
|||
|
Customer deposits
|
76
|
76
|
|||
|
Temporary LIFO liquidation
|
49
|
―
|
|||
|
Other
|
155
|
124
|
|||
|
Total current liabilities
|
1,282
|
963
|
|||
|
Long-term debt
|
1,159
|
1,409
|
|||
|
Deferred credits and other liabilities:
|
|||||
|
Customer advances for construction
|
106
|
111
|
|||
|
Pension and other postretirement benefit obligations, net of plan assets
|
867
|
855
|
|||
|
Deferred income taxes
|
897
|
881
|
|||
|
Deferred investment tax credits
|
20
|
20
|
|||
|
Regulatory liabilities arising from removal obligations
|
1,110
|
1,103
|
|||
|
Asset retirement obligations
|
1,247
|
1,238
|
|||
|
Deferred credits and other
|
254
|
256
|
|||
|
Total deferred credits and other liabilities
|
4,501
|
4,464
|
|||
|
Commitments and contingencies (Note 10)
|
|||||
|
Shareholders' equity:
|
|||||
|
Preferred stock
|
22
|
22
|
|||
|
Common stock (100 million shares authorized; 91 million shares outstanding;
|
|||||
|
no par value)
|
866
|
866
|
|||
|
Retained earnings
|
1,411
|
1,365
|
|||
|
Accumulated other comprehensive income (loss)
|
(18)
|
(18)
|
|||
|
Total shareholders' equity
|
2,281
|
2,235
|
|||
|
Total liabilities and shareholders' equity
|
$
|
9,223
|
$
|
9,071
|
|
|
(1)
|
Derived from audited financial statements.
|
||||
|
See Notes to Condensed Consolidated Financial Statements.
|
|||||
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended March 31,
|
||||
|
2013
|
2012
|
|||
|
(unaudited)
|
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
|
Net income
|
$
|
46
|
$
|
66
|
|
Adjustments to reconcile net income to net cash provided by
|
||||
|
operating activities:
|
||||
|
Depreciation and amortization
|
100
|
87
|
||
|
Deferred income taxes and investment tax credits
|
18
|
14
|
||
|
Other
|
―
|
(1)
|
||
|
Net change in other working capital components
|
250
|
280
|
||
|
Changes in other assets
|
3
|
3
|
||
|
Changes in other liabilities
|
(6)
|
―
|
||
|
Net cash provided by operating activities
|
411
|
449
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||
|
Expenditures for property, plant and equipment
|
(179)
|
(165)
|
||
|
Increase in loans to affiliates, net
|
(243)
|
(200)
|
||
|
Net cash used in investing activities
|
(422)
|
(365)
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
|
Common dividends paid
|
―
|
(50)
|
||
|
Net cash used in financing activities
|
―
|
(50)
|
||
|
(Decrease) increase in cash and cash equivalents
|
(11)
|
34
|
||
|
Cash and cash equivalents, January 1
|
83
|
36
|
||
|
Cash and cash equivalents, March 31
|
$
|
72
|
$
|
70
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
||||
|
Interest payments, net of amounts capitalized
|
$
|
12
|
$
|
5
|
|
Income tax refunds, net
|
―
|
17
|
||
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
||||
|
Accrued capital expenditures
|
$
|
76
|
$
|
64
|
|
See Notes to Condensed Consolidated Financial Statements.
|
||||
SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PRINCIPLES OF CONSOLIDATION
Sempra Energy
Sempra Energy’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 holding company, and its consolidated subsidiaries and variable interest entities (VIEs). Sempra Energy’s principal operating units are
|
§
|
San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), which are separate, reportable segments;
|
|
§
|
Sempra International, which includes our Sempra South American Utilities and Sempra Mexico reportable segments; and
|
|
§
|
Sempra U.S. Gas & Power, which includes our Sempra Renewables and Sempra Natural Gas reportable segments.
|
We provide descriptions of each of our segments in Note 11.
We refer to SDG&E and SoCalGas collectively as the California Utilities, which do not include the utilities in our Sempra International and Sempra U.S. Gas & Power operating units. Sempra Global is the holding company for most of our subsidiaries that are not subject to California utility regulation. All references in these Notes to “Sempra International,” “Sempra U.S. Gas & Power” and their respective reportable segments are not intended to refer to any legal entity with the same or similar name.
In the first quarter of 2013, a Sempra Energy subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova), completed a private offering and concurrent public offering of common stock in Mexico. IEnova is reported within the Sempra Mexico reportable segment. We discuss the offerings and IEnova further in Note 5.
Sempra Energy uses the equity method to account for investments in affiliated companies over which we have the ability to exercise significant influence, but not control. We discuss our investments in unconsolidated subsidiaries in Note 4 herein and in Note 4 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012.
SDG&E
SDG&E’s Condensed Consolidated Financial Statements include its accounts and the accounts of a VIE of which SDG&E is the primary beneficiary, as we discuss in Note 5 under “Variable Interest Entities.” SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.
SoCalGas
SoCalGas’ Condensed Consolidated Financial Statements include its subsidiaries, which comprise less than one percent of its consolidated financial position and results of operations. SoCalGas’ common stock is wholly owned by Pacific Enterprises (PE), which is a wholly owned subsidiary of Sempra Energy.
BASIS OF PRESENTATION
This is a combined report of Sempra Energy, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. References in this report to “we,” “our” and “Sempra Energy Consolidated” are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.
We have prepared the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) and 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. We evaluated events and transactions that occurred after March 31, 2013 through the date the financial statements were issued and, 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.
All December 31, 2012 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2012 consolidated financial statements. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim-period-reporting provisions of U.S. GAAP and the Securities and Exchange Commission.
You should read the information in this Quarterly Report in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012 (the Annual Report) which is a combined report for Sempra Energy, SDG&E and SoCalGas.
Sempra South American Utilities has controlling interests in two electric distribution utilities in South America. Sempra Natural Gas owns Mobile Gas Service Corporation (Mobile Gas) in southwest Alabama and Willmut Gas Company (Willmut Gas) in Mississippi, and Sempra Mexico owns Ecogas Mexico, S. de R.L. de C.V. (Ecogas) in Northern Mexico, all natural gas distribution utilities. The California Utilities, Sempra Natural Gas’ Mobile Gas and Willmut Gas, and Sempra Mexico’s Ecogas prepare their financial statements in accordance with U.S. GAAP provisions governing regulated operations, as we discuss in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes, except for the adoption of new accounting standards as we discuss in Note 2.
We describe below recent pronouncements that have had or may have a significant effect on our financial statements. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our financial condition, results of operations, cash flows or disclosures.
SEMPRA ENERGY, SDG&E AND SOCALGAS
Accounting Standards Update (ASU) 2011-11, “Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11) and ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (ASU 2013-01): In order to allow for balance sheet comparison between U.S. GAAP and International Financial Reporting Standards (IFRSs), ASU 2011-11 requires enhanced disclosures related to financial assets and liabilities eligible for offsetting in the statement of financial position. An entity must disclose both gross and net information about financial instruments and transactions subject to a master netting arrangement and eligible for offset, including cash collateral received and posted.
ASU 2013-01 clarifies that the scope of ASU 2011-11 applies to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions.
We adopted ASU 2011-11 and ASU 2013-01 on January 1, 2013 as required and it did not affect our financial condition, results of operations or cash flows. We provide the additional disclosure in Note 7.
ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02): ASU 2013-02 requires an entity to present, either on the face of the statement of operations or in the notes to financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.
We adopted ASU 2013-02 on January 1, 2013 as required and it did not affect our financial condition, results of operations or cash flows. We provide the additional disclosure in Note 5.
ASU 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” (ASU 2013-04): The standard provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in the ASU also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations.
We will adopt ASU 2013-04 on January 1, 2014 as required and do not expect it to affect our financial condition, results of operations or cash flows. We will provide the additional disclosure in our 2014 interim financial statements.
We discuss our investments in unconsolidated entities in Note 4.
SEMPRA NATURAL GAS
Mesquite Power Sale
In February 2013, Sempra Natural Gas sold one 625-megawatt (MW) block of its 1,250-MW Mesquite Power natural gas-fired power plant in Arizona, including a portion related to common plant, for approximately $371 million in cash to the Salt River Project Agricultural Improvement and Power District (SRP). The asset was classified as held for sale at December 31, 2012 and we recognized a gain on the sale of $74 million in 2013. In connection with the sale, we entered into a 20-year operations and maintenance agreement with SRP on February 28, 2013, whereby SRP assumes plant operations and maintenance of the facility, including our remaining 625-MW block. We provide additional information concerning the operations and maintenance agreement in Note 10.
Willmut Gas Company
In May 2012, Sempra Natural Gas acquired 100 percent of the outstanding common stock of Willmut Gas, a regulated natural gas distribution utility serving approximately 20,000 customers in Hattiesburg, Mississippi, for $19 million in cash and the assumption of $10 million of liabilities. Pro forma impacts on revenues and earnings for Sempra Energy had the acquisition occurred on January 1, 2011 were additional revenues of $6 million and negligible earnings for the three months ended March 31, 2012.
We provide additional information concerning all of our equity method investments in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
SEMPRA SOUTH AMERICAN UTILITIES
Sempra South American Utilities owns 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. As a result of the devaluation of the Argentine peso at the end of 2001 and subsequent changes in the value of the peso, Sempra South American Utilities reduced the carrying value of its investment by a cumulative total of $270 million as of March 31, 2013. These noncash adjustments, based on fluctuations in the value of the Argentine peso, did not affect earnings, but were recorded in Comprehensive Income and Accumulated Other Comprehensive Income (Loss).
In December 2006, we decided to sell our Argentine investments, and we continue to actively pursue their sale. We continue to evaluate the fair value of our investment based on several factors and as a result, recorded a noncash impairment charge of $10 million ($7 million after-tax) in the first quarter of 2013. The net charge is reported in Equity Earnings, Net of Income Tax on the Condensed Consolidated Statement of Operations for the three months ended March 31, 2013. The remaining carrying value of our investment is $20 million, excluding an $80 million deferred tax asset associated with the investment. We provide additional information concerning our investments in Sodigas Pampeana and Sodigas Sur in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
SEMPRA RENEWABLES
Sempra Renewables invested $5 million and $50 million in its renewable wind generation joint ventures in the three months ended March 31, 2013 and 2012, respectively.
RBS SEMPRA COMMODITIES
RBS Sempra Commodities LLP (RBS Sempra Commodities) is a United Kingdom limited liability partnership that owned and operated commodities-marketing businesses previously owned by us. We and our partner in the joint venture, The Royal Bank of Scotland plc (RBS), sold substantially all of the partnership’s businesses and assets in four separate transactions completed in 2010 and early 2011. We account for our investment in RBS Sempra Commodities under the equity method, and report our share of partnership earnings and other associated costs in Parent and Other.
In April 2011, we and RBS entered into a letter agreement (Letter Agreement) which amended certain provisions of the agreements that formed RBS Sempra Commodities. The Letter Agreement addresses the wind-down of the partnership and the distribution of the partnership’s remaining assets. The investment balance of $126 million at March 31, 2013 reflects remaining distributions expected to be received from the partnership in accordance with the Letter Agreement. The timing and amount of distributions may be impacted by the matters we discuss related to RBS Sempra Commodities in Note 10 under “Other Litigation.” In addition, amounts may be retained by the partnership for an extended period of time to help offset unanticipated future general and administrative costs necessary to complete the dissolution of the partnership.
In connection with the Letter Agreement described above, we also released RBS from its indemnification obligations with respect to the items for which J.P. Morgan Chase & Co. (JP Morgan), one of the buyers of the partnership’s businesses, has agreed to indemnify us.
We recorded no equity earnings or losses related to the partnership for the three months ended March 31, 2013 and 2012.
We discuss the RBS Sempra Commodities sales transactions, the Letter Agreement and other matters concerning the partnership in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
U.S. TREASURY GRANTS RECEIVABLE
As of March 31, 2013, Sempra Renewables has recorded grants receivable totaling $236 million. Based on eligible costs at its Mesquite Solar 1 and Copper Mountain Solar 2 generating facilities, the grants are recognized as receivables when the projects, or portions of projects, are placed into service. The grants are expected to be received in 2013. During the first quarter of 2013, the federal government imposed automatic federal budget cuts, known as “sequestration,” as required by The Budget Control Act of 2011. As a result, cash grant payments to eligible taxpayers for renewable energy projects were reduced, and Sempra Renewables recorded a reduction to its grants receivable of $23 million and a reversal of income tax benefit of $5 million during the first quarter of 2013.
TEMPORARY LIFO LIQUIDATION
SoCalGas values natural gas inventory by the last-in first-out (LIFO) method. As inventories are sold, differences between the LIFO valuation and the estimated replacement cost are reflected in customer rates. Temporary LIFO liquidation represents the difference between the carrying value of natural gas inventory withdrawn during the period for delivery to customers and the projected cost of the replacement of that inventory during summer months.
INVENTORIES
The components of inventories by segment are as follows:
|
INVENTORY BALANCES
|
|||||||||||||||||
|
(Dollars in millions)
|
|||||||||||||||||
|
Natural Gas
|
Liquefied Natural Gas
|
Materials and Supplies
|
Total
|
||||||||||||||
|
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
||||||||||
|
SDG&E
|
$
|
1
|
$
|
3
|
$
|
―
|
$
|
―
|
$
|
80
|
$
|
79
|
$
|
81
|
$
|
82
|
|
|
SoCalGas
|
8
|
128
|
―
|
―
|
26
|
23
|
34
|
151
|
|||||||||
|
Sempra South American
|
|||||||||||||||||
|
Utilities
|
―
|
―
|
―
|
―
|
38
|
34
|
38
|
34
|
|||||||||
|
Sempra Mexico
|
―
|
―
|
7
|
8
|
12
|
8
|
19
|
16
|
|||||||||
|
Sempra Renewables
|
―
|
―
|
―
|
―
|
3
|
3
|
3
|
3
|
|||||||||
|
Sempra Natural Gas
|
84
|
109
|
6
|
8
|
5
|
5
|
95
|
122
|
|||||||||
|
Sempra Energy Consolidated
|
$
|
93
|
$
|
240
|
$
|
13
|
$
|
16
|
$
|
164
|
$
|
152
|
$
|
270
|
$
|
408
|
|
GOODWILL
Goodwill is the excess of the purchase price over the fair value of the identifiable net assets of acquired companies measured at the time of acquisition. Goodwill is not amortized but is tested annually on October 1 for impairment or whenever events or changes in circumstances necessitate an evaluation. Impairment of goodwill occurs when the carrying amount (book value) of goodwill exceeds its implied fair value. If the carrying value of the reporting unit, including goodwill, exceeds its fair value, and the book value of goodwill is greater than its fair value on the test date, we record a goodwill impairment loss.
Goodwill included on the Sempra Energy Condensed Consolidated Balance Sheets is recorded as follows:
|
GOODWILL
|
|||||||||
|
(Dollars in millions)
|
|||||||||
|
Sempra
|
|||||||||
|
South American
|
Sempra
|
Sempra
|
|||||||
|
Utilities
|
Mexico
|
Natural Gas
|
Total
|
||||||
|
Balance at December 31, 2012
|
$
|
1,014
|
$
|
25
|
$
|
72
|
$
|
1,111
|
|
|
Foreign currency translation(1)
|
2
|
―
|
―
|
2
|
|||||
|
Balance at March 31, 2013
|
$
|
1,016
|
$
|
25
|
$
|
72
|
$
|
1,113
|
|
|
(1)
|
We record the offset of this fluctuation to other comprehensive income.
|
||||||||
We provide additional information concerning goodwill in Notes 1 and 3 of the Notes to Consolidated Financial Statements in the Annual Report.
VARIABLE INTEREST ENTITIES (VIE)
We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based upon qualitative and quantitative analyses, which assess
|
§
|
the purpose and design of the VIE;
|
|
§
|
the nature of the VIE’s risks and the risks we absorb;
|
|
§
|
the power to direct activities that most significantly impact the economic performance of the VIE; and
|
|
§
|
the obligation to absorb losses or right to receive benefits that could be significant to the VIE.
|
SDG&E
Tolling Agreements
SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based upon our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If we determine that SDG&E is the primary beneficiary, SDG&E and Sempra Energy consolidate the entity that owns the facility as a VIE, as we discuss below.
Otay Mesa VIE
SDG&E has an agreement to purchase power generated at the Otay Mesa Energy Center (OMEC), a 605-MW generating facility. In addition to tolling, the agreement provides SDG&E with the option to purchase the power plant at the end of the contract term in 2019, or upon earlier termination of the purchased-power agreement, at a predetermined price subject to adjustments based on performance of the facility. If SDG&E does not exercise its option, under certain circumstances, it may be required to purchase the power plant at a predetermined price, which we refer to as the put option.
The facility owner, Otay Mesa Energy Center LLC (OMEC LLC), is a VIE (Otay Mesa VIE), of which SDG&E is the primary beneficiary. SDG&E has no OMEC LLC voting rights and does not operate OMEC. In addition to the risks absorbed under the tolling agreement, SDG&E absorbs separately through the put option a significant portion of the risk that the value of Otay Mesa VIE could decline. SDG&E and Sempra Energy have consolidated Otay Mesa VIE since the second quarter of 2007. Otay Mesa VIE’s equity of $72 million at March 31, 2013 and $76 million at December 31, 2012 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interest for SDG&E.
OMEC LLC has a loan outstanding of $342 million at March 31, 2013, the proceeds of which were used for the construction of OMEC. The loan is with third party lenders and is secured by OMEC’s property, plant and equipment. SDG&E is not a party to the loan agreement and does not have any additional implicit or explicit financial responsibility to OMEC LLC. The loan fully matures in April 2019 and bears interest at rates varying with market rates. In addition, OMEC LLC has entered into interest rate swap agreements to moderate its exposure to interest rate changes. We provide additional information concerning the interest rate swaps in Note 7.
Other Variable Interest Entities
SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various power purchase arrangements which include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary. SDG&E has determined that no contracts, other than the one relating to Otay Mesa VIE mentioned above, result in SDG&E being the primary beneficiary as of March 31, 2013. In addition to the tolling agreements described above, other variable interests involve various elements of fuel and power costs, including certain construction costs, tax credits, and other components of cash flow expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects are not expected to significantly affect the financial position, results of operations, or liquidity of SDG&E. In addition, SDG&E is not exposed to losses or gains as a result of these other VIEs, because all such variability would be recovered in rates.
Sempra Energy’s other operating units also enter into arrangements which could include variable interests. We evaluate these arrangements and applicable entities based upon the qualitative and quantitative analyses described above. Certain of these entities are service companies that are VIEs. As the primary beneficiary of these service companies, we consolidate them. In all other cases, we have determined that these contracts are not variable interests in a VIE and therefore are not subject to the U.S. GAAP requirements concerning the consolidation of VIEs.
The Condensed Consolidated Statements of Operations of Sempra Energy and SDG&E include the following amounts associated with Otay Mesa VIE. The amounts are net of eliminations of transactions between SDG&E and Otay Mesa VIE. The financial statements of other consolidated VIEs are not material to the financial statements of Sempra Energy. The captions on the table below generally correspond to SDG&E’s Condensed Consolidated Statements of Operations.
|
AMOUNTS ASSOCIATED WITH OTAY MESA VIE
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended March 31,
|
||||
|
2013
|
2012
|
|||
|
Operating revenues
|
||||
|
Electric
|
$
|
(1)
|
$
|
―
|
|
Natural gas
|
―
|
―
|
||
|
Total operating revenues
|
(1)
|
―
|
||
|
Operating expenses
|
||||
|
Cost of electric fuel and purchased power
|
(17)
|
(19)
|
||
|
Operation and maintenance
|
17
|
4
|
||
|
Depreciation and amortization
|
7
|
6
|
||
|
Total operating expenses
|
7
|
(9)
|
||
|
Operating (loss) income
|
(8)
|
9
|
||
|
Interest expense
|
(3)
|
(3)
|
||
|
(Loss) income before income taxes/Net (loss) income
|
(11)
|
6
|
||
|
Losses (earnings) attributable to noncontrolling interest
|
11
|
(6)
|
||
|
Earnings
|
$
|
―
|
$
|
―
|
We provide additional information regarding Otay Mesa VIE in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Net Periodic Benefit Cost
The following three tables provide the components of net periodic benefit cost:
|
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
|
||||||||
|
(Dollars in millions)
|
||||||||
|
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
|
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
|
2013
|
2012
|
2013
|
2012
|
|||||
|
Service cost
|
$
|
27
|
$
|
23
|
$
|
7
|
$
|
8
|
|
Interest cost
|
37
|
41
|
11
|
14
|
||||
|
Expected return on assets
|
(40)
|
(39)
|
(15)
|
(13)
|
||||
|
Amortization of:
|
||||||||
|
Prior service cost (credit)
|
1
|
1
|
(1)
|
―
|
||||
|
Actuarial loss
|
15
|
12
|
2
|
3
|
||||
|
Regulatory adjustment
|
(32)
|
(30)
|
2
|
3
|
||||
|
Total net periodic benefit cost
|
$
|
8
|
$
|
8
|
$
|
6
|
$
|
15
|
|
NET PERIODIC BENEFIT COST – SDG&E
|
||||||||
|
(Dollars in millions)
|
||||||||
|
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
|
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
|
2013
|
2012
|
2013
|
2012
|
|||||
|
Service cost
|
$
|
8
|
$
|
7
|
$
|
2
|
$
|
2
|
|
Interest cost
|
10
|
12
|
2
|
2
|
||||
|
Expected return on assets
|
(13)
|
(12)
|
(2)
|
(1)
|
||||
|
Amortization of:
|
||||||||
|
Prior service cost
|
―
|
―
|
1
|
1
|
||||
|
Actuarial loss
|
4
|
4
|
―
|
―
|
||||
|
Regulatory adjustment
|
(8)
|
(10)
|
―
|
―
|
||||
|
Total net periodic benefit cost
|
$
|
1
|
$
|
1
|
$
|
3
|
$
|
4
|
|
NET PERIODIC BENEFIT COST – SOCALGAS
|
||||||||
|
(Dollars in millions)
|
||||||||
|
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
|
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
|
2013
|
2012
|
2013
|
2012
|
|||||
|
Service cost
|
$
|
16
|
$
|
13
|
$
|
4
|
$
|
5
|
|
Interest cost
|
23
|
25
|
9
|
11
|
||||
|
Expected return on assets
|
(25)
|
(24)
|
(12)
|
(11)
|
||||
|
Amortization of:
|
||||||||
|
Prior service cost (credit)
|
1
|
1
|
(2)
|
(1)
|
||||
|
Actuarial loss
|
9
|
6
|
2
|
3
|
||||
|
Regulatory adjustment
|
(24)
|
(20)
|
2
|
3
|
||||
|
Total net periodic benefit cost
|
$
|
―
|
$
|
1
|
$
|
3
|
$
|
10
|
Benefit Plan Contributions
The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2013:
|
Sempra Energy
|
||||||
|
(Dollars in millions)
|
Consolidated
|
SDG&E
|
SoCalGas
|
|||
|
Contributions through March 31, 2013:
|
||||||
|
Pension plans
|
$
|
11
|
$
|
―
|
$
|
2
|
|
Other postretirement benefit plans
|
7
|
3
|
3
|
|||
|
Total expected contributions in 2013:
|
||||||
|
Pension plans
|
$
|
154
|
$
|
57
|
$
|
70
|
|
Other postretirement benefit plans
|
26
|
11
|
11
|
|||
RABBI TRUST
In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra Energy maintains dedicated assets, including investments in life insurance contracts, in a Rabbi Trust, which trust totaled $492 million and $510 million at March 31, 2013 and December 31, 2012, respectively.
The following table provides the per share computations for our earnings for the three months ended March 31, 2013 and 2012. Basic earnings per common share (EPS) is calculated by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
|
EARNINGS PER SHARE COMPUTATIONS
|
|||||
|
(Dollars in millions, except per share amounts; shares in thousands)
|
|||||
|
Three months ended March 31,
|
|||||
|
2013
|
2012
|
||||
|
Numerator:
|
|||||
|
Earnings/Income attributable to common shareholders
|
$
|
178
|
$
|
236
|
|
|
Denominator:
|
|||||
|
Weighted-average common shares outstanding for basic EPS
|
243,294
|
240,566
|
|||
|
Dilutive effect of stock options, restricted stock awards and restricted stock units
|
4,240
|
3,195
|
|||
|
Weighted-average common shares outstanding for diluted EPS
|
247,534
|
243,761
|
|||
|
|
|||||
|
Earnings per share:
|
|||||
|
Basic
|
$
|
0.73
|
$
|
0.98
|
|
|
Diluted
|
$
|
0.72
|
$
|
0.97
|
|
The dilution from common stock options is based on the treasury stock method. Under this method, proceeds based on the exercise price plus unearned compensation and windfall tax benefits recognized and minus tax shortfalls recognized are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits are tax deductions we would receive upon the assumed exercise of stock options in excess of the deferred income taxes we recorded related to the compensation expense on the stock options. Tax shortfalls occur when the assumed tax deductions are less than recorded deferred income taxes. The calculation excludes options for which the exercise price on common stock was greater than the average market price during the period (out-of-the-money options). We had no such antidilutive stock options outstanding during the three months ended March 31, 2013 and 767,833 such options outstanding during the three months ended March 31, 2012.
We had no stock options outstanding during either the three months ended March 31, 2013 or 2012 that were antidilutive because of the unearned compensation and windfall tax benefits included in the assumed proceeds under the treasury stock method.
The dilution from unvested restricted stock awards (RSAs) and restricted stock units (RSUs) is also based on the treasury stock method. Proceeds equal to the unearned compensation and windfall tax benefits recognized and minus tax shortfalls recognized related to the awards and units are assumed to be used to repurchase shares on the open market at the average market price for the period. The windfall tax benefits recognized or tax shortfalls recognized are the difference between tax deductions we would receive upon the assumed vesting of RSAs or RSUs and the deferred income taxes we recorded related to the compensation expense on such awards and units. There were 774 antidilutive RSUs from the application of unearned compensation in the treasury stock method for the three months ended March 31, 2013 and no such antidilutive RSUs for the three months ended March 31, 2012. There were 3,090 and 15,932 such antidilutive RSAs for the three months ended March 31, 2013 and 2012, respectively.
Each performance-based RSU represents the right to receive between zero and 1.5 shares of Sempra Energy common stock based on Sempra Energy’s four-year cumulative total shareholder return compared to the Standard & Poor’s (S&P) 500 Utilities Index, as follows:
|
Four-Year Cumulative Total Shareholder Return Ranking versus S&P 500 Utilities Index(1)
|
Number of Sempra Energy Common Shares Received for Each Restricted Stock Unit(2)
|
|
|
75th Percentile or Above
|
1.5
|
|
|
50th Percentile
|
1
|
|
|
35th Percentile or Below
|
―
|
|
|
(1)
|
If Sempra Energy ranks at or above the 50th percentile compared to the S&P 500 Index, participants will receive a minimum of 1.0 share for each restricted stock unit.
|
|
|
(2)
|
Participants may also receive additional shares for dividend equivalents on shares subject to restricted stock units, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.
|
|
RSAs have a maximum potential of 100 percent vesting. We include our performance-based RSUs in potential dilutive shares at zero to 150 percent to the extent that they currently meet the performance requirements for vesting, subject to the application of the treasury stock method. Due to market fluctuations of both Sempra Energy stock and the comparative index, dilutive RSU shares may vary widely from period-to-period. We include our RSAs, which are solely service-based, in potential dilutive shares at 100 percent.
RSUs and RSAs may be excluded from potential dilutive shares by the application of unearned compensation in the treasury stock method, as we discuss above, or because performance goals are currently not met. The maximum excluded RSAs and RSUs, assuming performance goals were met at maximum levels, were 1,659,995 and 3,191,073 for the three months ended March 31, 2013 and 2012, respectively.
SHARE-BASED COMPENSATION
We discuss our share-based compensation plans in Note 9 of the Notes to Consolidated Financial Statements in the Annual Report. We recorded share-based compensation expense, net of income taxes, of $6 million and $5 million for the three months ended March 31, 2013 and 2012, respectively. Pursuant to our share-based compensation plans, we granted 645,502 performance-based RSUs, 103,222 service-based RSUs and 4,617 RSAs during the three months ended March 31, 2013, primarily in January.
CAPITALIZED FINANCING COSTS
Capitalized financing costs include capitalized interest costs and, primarily at the California Utilities, an allowance for funds used during construction (AFUDC) related to both debt and equity financing of construction projects. The following table shows capitalized financing costs for the three months ended March 31, 2013 and 2012.
|
CAPITALIZED FINANCING COSTS
|
||||
|
(Dollars in millions)
|
||||
|
Three months ended March 31,
|
||||
|
2013
|
2012
|
|||
|
Sempra Energy Consolidated:
|
||||
|
AFUDC related to debt
|
$
|
6
|
$
|
14
|
|
AFUDC related to equity
|
15
|
35
|
||
|
Other capitalized financing costs
|
5
|
11
|
||
|
Total Sempra Energy Consolidated
|
$
|
26
|
$
|
60
|
|
SDG&E:
|
||||
|
AFUDC related to debt
|
$
|
4
|
$
|
12
|
|
AFUDC related to equity
|
10
|
29
|
||
|
Total SDG&E
|
$
|
14
|
$
|
41
|
|
SoCalGas:
|
||||
|
AFUDC related to debt
|
$
|
2
|
$
|
2
|
|
AFUDC related to equity
|
5
|
6
|
||
|
Total SoCalGas
|
$
|
7
|
$
|
8
|
COMPREHENSIVE INCOME
The following tables present the changes in Accumulated Other Comprehensive Income by component and amounts reclassified out of Accumulated Other Comprehensive Income (Loss) to net income, excluding amounts attributable to noncontrolling interests:
|
CHANGES IN COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (1)
|
|||||||||||
|
(Dollars in millions)
|
|||||||||||
|
Foreign
|
Total
|
||||||||||
|
Currency
|
Unamortized
|
Unamortized
|
Accumulated Other
|
||||||||
|
Translation
|
Net
|
Prior Service
|
Financial
|
Comprehensive
|
|||||||
|
Adjustments
|
Actuarial Loss
|
Credit
|
Instruments
|
Income (Loss)
|
|||||||
|
Sempra Energy Consolidated:
|
|||||||||||
|
Balance as of December 31, 2012
|
$
|
(240)
|
$
|
(102)
|
$
|
1
|
$
|
(35)
|
$
|
(376)
|
|
|
Other comprehensive income (loss) before
|
|||||||||||
|
reclassifications
|
10
|
―
|
―
|
(16)
|
(6)
|
||||||
|
Amounts reclassified from accumulated other
|
|||||||||||
|
comprehensive income
|
―
|
3
|
―
|
2
|
5
|
||||||
|
Net other comprehensive income (loss)
|
10
|
3
|
―
|
(14)
|
(1)
|
||||||
|
Balance as of March 31, 2013
|
$
|
(230)
|
$
|
(99)
|
$
|
1
|
$
|
(49)
|
$
|
(377)
|
|
|
(1)
|
All amounts are net of income tax, if subject to tax, and exclude noncontrolling interests.
|
||||||||||
|
RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||||
|
(Dollars in millions)
|
||||||||||
|
Three months ended March 31, 2013
|
||||||||||
|
Amount reclassified
|
||||||||||
|
Details about accumulated
|
from accumulated other
|
Affected line item
|
||||||||
|
other comprehensive income components
|
comprehensive income (loss)
|
on Condensed Consolidated Statement of Operations
|
||||||||
|
Sempra Energy Consolidated:
|
||||||||||
|
Financial instruments:
|
||||||||||
|
Interest rate instruments
|
$
|
3
|
Interest Expense
|
|||||||
|
Interest rate instruments
|
2
|
Equity Earnings, Before Income Tax
|
||||||||
|
Total Before Income Tax
|
5
|
|||||||||
|
(1)
|
Income Tax Expense
|
|||||||||
|
Net of Income Tax
|
4
|
|||||||||
|
(2)
|
Earnings Attributable to Noncontrolling Interests
|
|||||||||
|
$
|
2
|
|||||||||
|
Amortization of defined benefit pension
|
||||||||||
|
and postretirement benefits items:
|
||||||||||
|
Actuarial loss
|
$
|
5
|
(1)
|
|||||||
|
(2)
|
Income Tax Expense
|
|||||||||
|
Net of Income Tax
|
$
|
3
|
||||||||
|
SDG&E:
|
||||||||||
|
Financial instruments:
|
||||||||||
|
Interest rate instruments
|
$
|
2
|
Interest Expense
|
|||||||
|
(2)
|
Earnings Attributable to Noncontrolling Interest
|
|||||||||
|
$
|
―
|
|||||||||
|
(1)
|
Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).
|
|||||||||
For the three months ended March 31, 2013, Other Comprehensive Income, excluding amounts attributable to noncontrolling interests, at SDG&E and SoCalGas was negligible and reclassifications out of Accumulated Other Comprehensive Income (Loss) to Net Income were negligible as well for SoCalGas.
The amounts for comprehensive income in the Condensed Consolidated Statements of Comprehensive Income are net of income tax expense (benefit) as follows:
|
INCOME TAX EXPENSE (BENEFIT) ASSOCIATED WITH OTHER COMPREHENSIVE INCOME
|
|||||||||||||||
|
(Dollars in millions)
|
|||||||||||||||
|
Three months ended March 31,
|
|||||||||||||||
|
2013
|
2012
|
||||||||||||||
|
Sempra
|
Sempra
|
||||||||||||||
|
Energy
|
Energy
|
||||||||||||||
|
Share-
|
Non-
|
Share-
|
Non-
|
||||||||||||
|
holders'
|
controlling
|
Total
|
holders'
|
controlling
|
Total
|
||||||||||
|
Equity
|
Interests
|
Equity
|
Equity
|
Interests
|
Equity
|
||||||||||
|
Sempra Energy Consolidated:
|
|||||||||||||||
|
Other comprehensive income before
|
|||||||||||||||
|
reclassifications:
|
|||||||||||||||
|
Financial instruments
|
$
|
(7)
|
$
|
―
|
$
|
(7)
|
$
|
2
|
$
|
―
|
$
|
2
|
|||
|
Amounts reclassified from accumulated other
|
|||||||||||||||
|
comprehensive income:
|
|||||||||||||||
|
Pension and other postretirement benefits
|
$
|
2
|
$
|
―
|
$
|
2
|
$
|
1
|
$
|
―
|
$
|
1
|
|||
|
Financial instruments
|
1
|
―
|
1
|
1
|
―
|
1
|
|||||||||
Income tax amounts associated with other comprehensive income during the three months ended March 31, 2013 and 2012 at SDG&E and SoCalGas were negligible.
SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
The following two tables provide a reconciliation of Sempra Energy’s and SDG&E’s shareholders’ equity and noncontrolling interests for the three months ended March 31, 2013 and 2012.
|
SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
|
||||||
|
(Dollars in millions)
|
||||||
|
Sempra
|
||||||
|
Energy
|
Non-
|
|||||
|
Shareholders’
|
controlling
|
Total
|
||||
|
Equity
|
Interests
|
Equity
|
||||
|
Balance at December 31, 2012
|
$
|
10,282
|
$
|
401
|
$
|
10,683
|
|
Comprehensive income (loss)
|
179
|
(3)
|
176
|
|||
|
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
|||
|
Share-based compensation expense
|
10
|
―
|
10
|
|||
|
Common stock dividends declared
|
(153)
|
―
|
(153)
|
|||
|
Issuance of common stock
|
15
|
―
|
15
|
|||
|
Repurchase of common stock
|
(45)
|
―
|
(45)
|
|||
|
Tax benefit related to share-based compensation
|
2
|
―
|
2
|
|||
|
Sale of noncontrolling interests, net of offering costs
|
135
|
439
|
574
|
|||
|
Equity contributed by noncontrolling interest
|
―
|
4
|
4
|
|||
|
Distributions to noncontrolling interests
|
―
|
(3)
|
(3)
|
|||
|
Balance at March 31, 2013
|
$
|
10,423
|
$
|
838
|
$
|
11,261
|
|
Balance at December 31, 2011
|
$
|
9,775
|
$
|
403
|
$
|
10,178
|
|
Comprehensive income
|
309
|
17
|
326
|
|||
|
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
|||
|
Share-based compensation expense
|
11
|
―
|
11
|
|||
|
Common stock dividends declared
|
(144)
|
―
|
(144)
|
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|
Issuance of common stock | ||||||