PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
--------------------------------------------
Commission file number 1-1402
----------------------------------------------------
SOUTHERN CALIFORNIA GAS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-1240705
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
555 West Fifth Street, Los Angeles, California 90013-1011
---------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(213) 244-1200
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---
The number of shares of common stock outstanding on November 1, 1996 was
91,300,000.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PAGE 2
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARY
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(Thousands of Dollars)
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -----------------
1996 1995 1996 1995
------ ------ ------ ------
(Unaudited)
Operating Revenues $575,441 $505,292 $1,692,381 $1,689,541
-------- -------- ---------- ----------
Operating Expenses:
Cost of gas distributed 200,500 162,249 594,150 576,094
Operation and maintenance 175,097 151,388 522,445 525,726
Depreciation 63,529 59,089 186,627 177,415
Income taxes 41,075 39,088 111,898 119,052
Other taxes and franchise
payments 21,969 21,979 70,957 72,603
-------- -------- ---------- ----------
Total 502,170 433,793 1,486,077 1,470,890
-------- -------- ---------- ----------
Net Operating Revenue 73,271 71,499 206,304 218,651
-------- -------- ---------- ----------
Other Income and (Deductions):
Interest income 270 2,059 1,076 6,879
Regulatory interest 998 534 1,726 2,116
Allowance for equity funds use
during construction 1,192 1,203 3,914 2,342
Income taxes on non-operating
income (712) (797) (824) (1,090)
Other - net (610) (1,228) (4,791) (4,271)
-------- -------- --------- ---------
Total 1,138 1,771 1,101 5,976
-------- -------- --------- ---------
Interest Charges and (Credits):
Interest on long-term debt 19,265 21,759 59,507 66,210
Other interest 2,661 1,560 7,916 5,050
Allowance for borrowed funds
used during construction (634) (699) (2,197) (1,357)
-------- -------- --------- ---------
Total 21,292 22,620 65,226 69,903
-------- -------- --------- ---------
Net Income 53,117 50,650 142,179 154,724
Dividends on Preferred Stock 1,777 2,888 6,452 8,734
-------- -------- --------- ---------
Net Income Applicable to
Common Stock $ 51,340 $ 47,762 $ 135,727 $ 145,990
======== ======== ========= =========
See Notes to Condensed Consolidated Financial Statements.
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SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(Thousands of Dollars)
September 30 December 31
1996 1995
----------- -----------
(Unaudited)
Utility Plant $5,922,937 $5,807,940
Less accumulated depreciation 2,762,565 2,594,713
---------- ----------
Utility plant - net 3,160,372 3,213,227
---------- ----------
Current Assets:
Cash and cash equivalents 4,498 12,611
Accounts and notes receivable (less
allowance for doubtful receivables of
$17,186 in 1996 and $13,456 in 1995) 244,531 398,515
Regulatory accounts receivable 274,999 260,573
Deferred income taxes 78,970 25,953
Gas in storage 19,803 54,782
Materials and supplies 15,152 14,504
Prepaid expenses 10,617 32,593
---------- ----------
Total current assets 648,570 799,531
---------- ----------
Regulatory Assets 438,506 449,521
---------- ----------
Total $4,247,448 $4,462,279
========== ==========
See Notes to Condensed Consolidated Financial Statements.
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SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
September 30 December 31
1996 1995
------------ -----------
(Unaudited)
Capitalization:
Common equity:
Common stock $ 834,889 $ 834,889
Retained earnings 562,009 613,445
---------- ----------
Total common equity 1,396,898 1,448,334
Preferred stock 96,551 196,551
Long-term debt 1,160,885 1,220,136
---------- ----------
Total capitalization 2,654,334 2,865,021
---------- ----------
Current Liabilities:
Short-term debt 192,971 233,817
Accounts payable 378,623 418,570
Accounts payable-affiliates 87,943 9,734
Accrued taxes and franchise payments 47,496 45,933
Long-term debt due within one year 22,000 95,283
Accrued interest 44,070 43,480
Other accrued liabilities 85,606 50,678
---------- ----------
Total current liabilities 858,709 897,495
---------- ----------
Deferred Credits:
Customer advances for construction 44,193 47,029
Deferred income taxes 458,999 404,308
Deferred investment tax credits 64,743 66,983
Other deferred credits 166,470 181,443
---------- ----------
Total deferred credits 734,405 699,763
---------- ----------
Total $4,247,448 $4,462,279
========== ==========
See Notes to Condensed Consolidated Financial Statements.
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SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
September 30
---------------------------
1996 1995
------ ------
(Unaudited)
Cash Flows From Operating Activities:
Net income $ 142,179 $ 154,724
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 186,627 177,415
Deferred income taxes 9,084 21,933
Other (27,644) 4,698
Net change in other working capital
components 283,683 272,395
--------- ---------
Net cash provided by operating
activities 593,929 631,165
--------- ---------
Cash Flows from Investing Activities:
Expenditures for utility plant (123,936) (142,217)
(Increase)Decrease in other assets (9,334) 8,552
--------- ---------
Net cash used in investing activities (133,270) (133,665)
--------- ---------
Cash Flows from Financing Activities:
Redemption of preferred stock (100,000)
Decrease in long-term debt (132,534) (123,631)
Decrease in short-term debt (40,846) (194,384)
Dividends paid (195,392) (175,495)
- --------- --------
Net cash used in financing
activities (468,772) (493,510)
--------- ---------
Increase(Decrease)in Cash and Cash Equivalents (8,113) 3,990
Cash and Cash Equivalents, January 1 12,611 57,531
--------- ---------
Cash and Cash Equivalents, September 30 $ 4,498 $ 61,521
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period:
Interest (net of amount capitalized) $ 61,813 $ 64,166
========= =========
Income Taxes $ 127,140 $ 232,195
========= =========
See Notes to Condensed Consolidated Financial Statements.
PAGE 6
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. MERGER AGREEMENT WITH ENOVA CORPORATION
On October 14, 1996, Pacific Enterprises (PE), the parent of Southern
California Gas Company and Enova Corporation (Enova), the parent company of
San Diego Gas & Electric, announced that their Boards of Directors had
unanimously approved a business combination of the two companies in a
strategic merger of equals in a tax-free transaction to be accounted for as a
pooling of interests. As a result of the combination, PE and Enova will
become subsidiaries of a new holding company and their common shareholders
will become shareholders of the new holding company. Preferred stock of
Pacific Enterprises, Southern California Gas Company (Company) and San Diego
Gas and Electric will remain outstanding. The new company will be
incorporated in California and will be exempt from the Public Utility Holding
Company Act as an intrastate holding company.
The merger is subject to approval by PE's and Enova's shareholders and
approval by governmental and regulatory agencies including the California
Public Utility Commission, Federal Energy Regulatory Commission, Securities
and Exchange Commission, and Department of Justice. Approval of the merger
is expected to occur in late 1997. In the interim, PE and Enova Corporation
intend to form a joint venture to provide integrated energy and energy
related products and services.
2. SUMMARY OF ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements have been
prepared in accordance with the interim period reporting requirements of Form
10-Q. Reference is made to the Form 10-K for the year ended December 31,
1995 for additional information.
Results of operations for interim periods are not necessarily indicative of
results for the entire year. In order to match revenues and costs for
interim reporting purposes, the Company defers revenues related to costs
which it expects to incur later in the year. In the opinion of management,
the accompanying statements reflect all adjustments which are necessary for a
fair presentation. These adjustments are of a normal recurring nature.
Certain changes in account classification have been made in the prior years'
consolidated financial statements to conform to the 1996 financial statement
presentation.
Income taxes are calculated in accordance with SFAS 109. Income tax expense
recognized in a period is the amount of tax currently payable plus or minus
the change in the aggregate deferred tax assets and liabilities. Deferred
taxes are recorded to recognize the future tax consequences of events that
PAGE 7
have been recognized in the financial statements or tax returns. For
additional information regarding income taxes, see Footnote 4 of Notes to
Consolidated Financial Statements in the December 31, 1995 Southern
California Gas Company's Form 10-K filing.
Estimated liabilities for environmental remediation are recorded when the
amounts are probable and estimable. Amounts authorized to be recovered in
rates are recorded as regulatory asset. Possible recoveries of environmental
remediation liabilities from third parties are not deducted from the
liability shown on the balance sheet. For additional information regarding
commitments and contingencies, see Footnote 4 of Notes to Consolidated
Financial Statements in the December 31, 1995 Southern California Gas
Company's Form 10-K filing.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements contained in this Form 10-Q and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1995 Form 10-K.
INFORMATION REGARDING FORWARD-LOOKING COMMENTS
The following discussion includes forward-looking statements with respect to
matters inherently involving various risks and uncertainties. These
statements are identified by the words "estimates", "expects", "anticipates",
"plans", "believes" and similar expressions.
The analyses employed to develop these statements are necessarily based upon
various assumptions involving judgments with respect to the future including,
among others, national, regional and local economic, competitive and
regulatory conditions, technological developments, inflation rates, weather
conditions, business decisions, and other uncertainties, all of which are
difficult to predict and many of which are beyond the control of the Southern
California Gas Company (Company). Accordingly, while the Company believes
that the assumptions upon which the forward-looking statements are based, are
reasonable for purposes of making these statements, there can be no assurance
that these assumptions will approximate actual experience or that the
expectations set forth in the forward-looking statements derived from these
assumptions will be realized.
SUMMARY
The Company reported net income of $53 million in the third quarter of 1996
compared to $51 million in the third quarter of 1995. The Company's net
income for the quarter is slightly above results from a year ago although its
PAGE 8
authorized return on equity for 1996 is 11.6 percent, down from 12 percent a
year ago. Additionally, SoCalGas also is absorbing a 3 percent productivity
factor as part of a prior regulatory settlement. The results reflect
continued operating efficiency and reduced capital investment.
A settlement was reached by SoCalGas, major energy consumers, other major
energy utilities, and the Public Utilities Commission's Office of Ratepayer
Advocates (ORA) on its 1997 cost of capital proceedings. Return on Equity
will remain at 11.6 percent for 1997 and the common equity component of the
capital structure will increase to 48.0 percent from 47.4 percent authorized
in 1996. The increase in the common equity component could potentially add
$2 million to earnings for SoCalGas in 1997. An administrative law judge
(ALJ) of the California Public Utility Commission (CPUC) has ruled in favor
of the cost of capital settlement.
The Company is continuing its efforts to implement Performance Based
Ratemaking (PBR) in regulatory proceedings before the CPUC. If approved by
the CPUC, PBR rates will be implemented sometime during the last half of
1997.
A contract agreement on wages and working conditions was reached with the
Company's represented workers, which comprise approximately 73% of the full
time active workforce, in September 1996.
Finally, Pacific Enterprises (Parent) and Enova Corporation, the parent
company of San Diego Gas & Electric announced that their Board of Directors
had unanimously approved a business combination of the two companies in a
strategic merger of equals in a tax free transaction to be accounted for as a
pooling of interests. See additional discussion in Note 1 to the Financial
Statements.
RESULTS OF OPERATIONS
Net income for the third quarter of 1996 was $51 million compared
to $48 million for the same period 1995. For the nine months ended September
30, 1996, net income was $136 million compared to $146 million for the same
period in 1995. Excluding non-recurring items (described below), results for
the nine months were approximately even with last year.
The Company's year-to-date earnings decreased primarily due to a one-time non-
cash charge in the second quarter of $26.6 million, after-tax, related to the
Comprehensive Settlement of excess gas costs and other regulatory matters.
(See additional discussion of the non-cash charge below).
This reduction was partially offset by $13.6 million after-taxes,
representing one-time favorable settlements. One settlement is from gas
producers and the other reflects the resolution of environmental insurance
claims.
PAGE 9
Year-to-date results were also reduced by $6.6 million, after-tax, due to of
lower noncore revenues and throughput. In the first nine months of 1996,
noncore throughput fell below levels used by the CPUC in establishing rates
as a result of Utility Electric Generation (UEG) customers being able to
purchase abundant, inexpensive hydro-generated electricity produced due to
abnormally high snow and rainfall last winter. Also having a negative effect
on earnings was the decrease in the rate of return on common equity from 12.0
percent in 1995 to 11.6 percent in 1996. Both of these were offset by lower
than authorized operation and maintenance expenses.
The table below compares SoCalGas' throughput and revenues by customer class
for the nine months ended September 30, 1996 and 1995.
($ in Millions, Gas Sales Trans. & Exchg. Total
vol. in billion
cubic feet) Throughput Revenue Throughput Revenue Throughput Revenue
1996:
Residential 159 $1,118 2 $ 6 161 $1,124
Comm'l/Ind'l. 61 351 215 173 276 524
Utility Elec. 109 61 109 61
Wholesale 94 48 94 48
Exchange 4 4
-------------------------------------------------------------
Total in Rates 220 $1,469 424 $288 644 1,757
Bal. & Other (65)
------
Total Op. Rev. $1,692
======
1995:
Residential 172 $1,254 2 $ 5 174 $1,259
Comm'l/Ind'l. 75 443 185 146 260 589
Utility Elec. 168 92 168 92
Wholesale 4 7 95 41 99 48
Exchange 10 1 10 1
-------------------------------------------------------------
Total in Rates 251 $1,704 460 $285 711 $1,989
Bal. & Other (299)
------
Total Op. Rev. $1,690
======
Operating revenue increased $70 million and $2 million for the three and nine
months ended September 30, 1996 respectively. The increase in operating
revenues for the quarter is primarily due to higher gas costs and higher
operating and maintenance expense in the quarter. Since those costs are
recoverable in rates, they are also recorded as revenues resulting in
increased revenues in 1996 (see Note 2, Notes to Condensed Consolidated
Financial Statements [unaudited] for a discussion of accounting policies).
PAGE 10
As part of the Comprehensive Settlement which resolved future excess gas cost
issues, the CPUC ruled that rates charged to noncore customers for the five-
year period ending August 1, 1999 would be based on actual volumes delivered
in 1991. The Company was permitted to retain any revenue enhancements from
throughput exceeding these levels subject to a crediting mechanism for
revenues in excess of certain limits. The Company estimated the amount of
these future revenue enhancements and applied them to reduce the 1993 charge
for the Comprehensive Settlement.
Due to continuing developments in the CPUC's regulatory restructuring of the
electric utility industry, the Company now anticipates that future throughput
to noncore customers will not meet levels projected in 1993 at the time of
the Comprehensive Settlement. Consequently, it believes it will not realize
the remaining revenue enhancements that were applied to offset the costs of
the Comprehensive Settlement and in the second quarter charged that amount to
revenues resulting in a reduction in earnings of $26.6 million after-tax. In
connection with the 1992 quasi-reorganization, the Parent established a
reserve for excess gas costs and consequently, the charge to the Company's
income had no effect on the Parent's consolidated income. The Company's
assets and liabilities were not adjusted in connection with the quasi-
reorganization in 1992, since it is a regulated entity whose assets and
liabilities, for the most part, are recorded on the basis of future rate
recovery. While the company is not pleased that the cost of the
Comprehensive Settlement is greater than originally estimated, we continue to
believe that this is a good settlement which enhances the company's
competitive position.
Throughput, the total gas sales and transportation volumes moved through the
Company's system, decreased in 1996 as a result of lower demands, primarily
by UEG customers. This was the result of an abundance of inexpensive hydro-
electricity. The availability of hydrogenerated electricity has been
declining through the third quarter and is now closer to normal levels.
Cost of gas distributed was $201 million and $594 million for the three and
nine months ended September 30, 1996. This represents an increase of $37
million and $18 million compared to the same periods in 1995, respectively.
The increase is primarily due to an increase in the average cost of gas
purchased to $1.78 per million cubic feet (MCF) for the third quarter of 1996
compared to $1.58 per MCF for the third quarter of 1995. Under the current
regulatory framework, changes in revenue resulting from changes in volumes in
the core market and cost of gas do not affect net income.
Operating and maintenance expenses for the three and nine months ended
September 30, 1996 increased $24 million and decreased $3 million,
respectively, when compared to 1995. As a result of the completion of the
Company's reorganization to business units on July 1, 1995, certain expenses
were not incurred in the third quarter of 1995 as originally planned, but
were incurred later in the year. Also, a lump sum bonus totaling $5.7
million was paid to represented employees in September 1996 as a result of
the union contract signing.
PAGE 11
Depreciation and amortization expense increased $6 million and $11 million
for the three and nine months ended September 30, 1996, respectively, when
compared to 1995. The increase is partially due to the completion and
installation of the Customer Information System in April 1996 which was
capitalized at $65 million and has a ten-year life.
RECENT CPUC REGULATORY ACTIVITY
Under the Gas Cost Incentive Mechanism (GCIM), the Company can recover all
costs in excess of the benchmark level to the extent they fall within a
tolerance band which extends to 4 percent above the benchmark. If the
Company's cost of gas exceeds the tolerance level, then the excess costs are
shared equally between customers and shareholders. All savings from gas
purchased below the benchmark are shared equally between customers and
shareholders.
The Company's purchased gas costs were $12.4 million below the specified GCIM
benchmark for the period April 1995 to March 1996. A filing has been made
with the CPUC requesting a $6.2 million reward for shareholders under the
procurement portion of the incentive mechanism. The reward amount will be
recognized in income when a final CPUC decision has been issued.
The Company enters into gas futures contracts in the open market on a limited
basis. The Company's intention is to use gas futures contracts to mitigate
risk and better manage gas costs. The CPUC has approved the use of gas
futures for managing risk associated with the GCIM.
REGULATORY ACTIVITY INFLUENCING FUTURE PERFORMANCE.
Future regulatory restructuring, increased competitiveness in the industry
and the electric industry restructuring will affect the Company's future
performance. The Company has filed a "Performance Based Regulation" (PBR)
application with the CPUC to replace the general rate case and certain other
regulatory proceedings. This new approach, if adopted as filed, would
maintain cost based rates, at inflation less a productivity factor, but would
link financial performance with changes in productivity, increased gas usage,
and new products and services. In May 1996, the Company submitted a
supplemental PBR filing to the CPUC proposing that customer rates be reduced
by approximately $62 million, or 4% from current levels.
In a report issued in October 1996, the ORA proposed an additional $162
million rate reduction. It is expected a number of these proposed
disallowances will be overturned due to possible errors in the ORA's
assumptions and calculations. Other areas of disallowances would result in
discontinuance of programs, which, if approved, would result in no negative
impact on the Company's earnings.
While it is not the Company's policy to predict the ultimate outcome of
regulatory proceedings, given the nature of the proposed disallowances and
PAGE 12
its ability to manage its business within the constraints of the regulatory
environment, the Company does not believe that the proposed rate reduction
will have a materially negative impact on its earnings. Per the procedural
schedule adopted by the CPUC, open hearings on the application are scheduled
to begin in mid-November. A final decision would then be expected in the
summer of 1997.
In March 1996, the Company filed its 1996 Biennial Cost Allocation Proceeding
with the CPUC. In its filing, the Company is seeking a total rate reduction
of $138 million. The rate reduction reflects amounts previously collected in
rates, but not expended for conservation programs, research and development
programs and purchased gas costs. A CPUC decision is expected in the fourth
quarter.
In August 1996, a settlement was reached by the Company's major energy
consumers, other major energy utilities and the ORA on its 1997 cost of
capital. The settlement which avoided potential costly administrative
hearings, allows the Company an authorized return on common equity of 11.6
percent and a 9.49 percent return on rate base. Also allowed, was a 60 basis
point increase in the Company's authorized common equity ratio to 48.0
percent. The increase in the common equity component will potentially add $2
million to earnings in 1997. An ALJ has issued a ruling in support of the
cost of capital settlement. The CPUC is expected to issue its decision in
the fourth quarter of 1996.
As discussed in the 1995 Form 10-K, existing interstate pipeline capacity
into California exceeds current demand by over 1 billion cubic feet per day.
Cost of unsubscribed capacity may be charged back to firm customers.
However, the Federal Energy Regulatory Commission (FERC) has approved a
settlement with Transwestern which calls for firm customers, including the
Company, to subsidize unsubscribed pipeline costs for a five-year period with
Transwestern assuming full responsibility after that time. A settlement was
also reached with El Paso, in which customers, including the Company, will
pay for a portion of the unused capacity. The customers may also receive
credits from El Paso for unused capacity sold. The settlement is for a ten-
year period and is awaiting approval by the FERC. The Company expects a
ruling will be issued in the first half of 1997.
The Company believes that the FERC approved settlement with Transwestern and
the proposed settlement with El Paso will not have a significant impact on
liquidity or on the results of operations as a result of the requirement to
subsidize unsubscribed pipeline costs for a five-year period. The
settlements result in a reduction in the costs that the Company could
possibly have to pay in the future as a result of unsubscribed pipeline
capacity. While the inclusion in rates of any costs associated with
unsubscribed pipeline capacity may impact the Company's ability to compete in
highly contested markets, the Company does not believe its inclusion will
have a significant impact on volumes transported or sold.
PAGE 13
As part of its continuing evaluation of the impact of electric restructing on
operations, the Company reviewed the requirements of SFAS 121 "Accounting for
the Impairment of Long Lived Assets and Long Lived Assets to be disposed of."
Although Management believes that the volume of gas transported may be
adversely impacted by the electric restructuring, it is not anticipated that
it would result in an impairment of assets as defined in SFAS 121 because the
expected discounted future cash flows from the Company's investment in its
gas transportation infrastructure is greater than its carrying amount.
OTHER ACTIVITY
Approximately 5,500 field, clerical and technical employees of the Company
are represented by the Utility Workers' Union of America or the International
Chemical Workers' Union. In June, a union decertification petition was filed
with the National Labor Relations Board (NLRB) by members of the Company's
unions. The petition was withdrawn by the represented employees supporting
the petition drive in August 1996.
In September 1996, the Company's represented employees approved a new
contract on wages and working conditions which will expire on March 31, 1998.
This agreement provides the basis for a constructive working relationship
between the Company and the Unions to better address business issues. Key
provisions give the Company flexibility to create a multi-skilled workforce
through reclassification and training, the right to establish management-
employee teams to address proficiency and the right to outsource noncore
functions such as billings, all of which enhance the Company's ability to be
more competitive. Full time represented employees have employment security
for the duration of the contract. Additionally, these employees received a
2.7 percent lump sum signing bonus in September, 1996 which totaled $5.7
million.
For additional information, see the discussion under the caption "Management
Discussion and Analysis - Factors influencing Future Performance" in the
Company's 1995 Form 10-K.
LIQUIDITY
Cash flows from operations were $92 million and $594 million for the three
and nine months ended September 30, 1996, respectively. This represents a
decrease of $37 million and $10 million, respectively from 1995. The
decrease for the three and nine months is primarily due to higher collections
of regulatory accounts receivable in 1995 compared to 1996.
Capital expenditures were $39 and $124 million for the three and nine months
ended September 30, respectively. This represents a decrease of $5 million
and $18 million, respectively from 1995. Capital expenditures for utility
plant are expected to be $215 million in 1996 and will be financed primarily
by internally-generated funds.
PAGE 14
Cash flows from financing activities were a negative $39 million and $469
million for the three and nine months ended September 30, 1996, respectively.
For the nine months this represents a preferred stock redemption of $100
million, repayment of commercial paper of $107 million, payment of $67
million of Swiss Franc bonds and dividends of $195 million.
The redeemed preferred stock included $50 million of the Company's Series A
Flexible Auction preferred stock and $50 million of the Company's Series C
Flexible Auction preferred stock.
On April 30, 1996 investors put back $67 million of the Company's perpetual
Swiss Franc bonds representing 90% of the total $75 million outstanding. the
next available put date for the outstanding balance is the year 2006. The
Company borrowed these funds from the Parent and anticipates refinancing this
amount through the issuance of medium-term notes.
The Company paid dividends of $189 million on common stock to its Parent and
$6 million on preferred stock for a total of $195 million. This compares to
$175 million in 1995.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) There were no reports of Form 8-K filed during the quarter ended
September 30, 1996.
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.
SOUTHERN CALIFORNIA GAS COMPANY
- -------------------------------
(Registrant)
Ralph Todaro
- -------------------------------
Ralph Todaro
Vice President and Controller
(Chief Accounting Officer and
duly authorized signatory)
Date: February 5, 1997