UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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Commission file number 1-40
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PACIFIC ENTERPRISES
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(Exact name of registrant as specified in its charter)
California 94-0743670
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 West Fifth Street, Los Angeles, California 90013-1011
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(Address of principal executive offices)
(Zip Code)
(213) 244-1200
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(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
----- -----
Common stock outstanding: Wholly owned by Sempra Energy
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
<CAPTION>
Three Months Ended
June 30,
-----------------------
2000 1999
------- ------
<S> <C> <C>
Operating revenues $630 $621
---- ----
Expenses
Cost of natural gas distributed 264 241
Operating and maintenance 168 196
Depreciation 67 65
Income taxes 44 35
Other taxes and franchise payments 22 20
---- ----
Total 565 557
---- ----
Operating Income 65 64
---- ----
Other Income and (Deductions)
Interest income 20 4
Regulatory interest (5) (4)
Allowance for equity funds used
during construction 1 --
Taxes on non-operating income (2) --
Preferred dividends of subsidiaries (1) 1
Other - net 2 (6)
---- ----
Total 15 (5)
---- ----
Income Before Interest Charges 80 59
---- ----
Interest Charges
Long-term debt 16 20
Other 15 --
Allowance for borrowed funds used
during construction -- (1)
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Total 31 19
---- ----
Net Income 49 40
Preferred Dividend Requirements 1 1
---- ----
Earnings Applicable to Common Shares $ 48 $ 39
==== ====
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
<CAPTION>
Six Months Ended
June 30,
------------------
2000 1999
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<S> <C> <C>
Operating revenues $1,328 $1,235
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Expenses
Cost of natural gas distributed 610 497
Operating and maintenance 318 356
Depreciation 131 130
Income taxes 88 76
Other taxes and franchise payments 50 45
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Total 1,197 1,104
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Operating Income 131 131
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Other Income and (Deductions)
Interest income 28 7
Regulatory interest (5) (8)
Allowance for equity funds used
during construction 1 1
Taxes on non-operating income (4) 1
Preferred dividends of subsidiaries (1) 1
Other - net 2 (2)
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Total 21 --
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Income Before Interest Charges 152 131
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Interest Charges
Long-term debt 35 41
Other 17 3
Allowance for borrowed funds used
during construction (1) (1)
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Total 51 43
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Net Income 101 88
Preferred Dividend Requirements 2 2
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Earnings Applicable to
Common Shares $ 99 $ 86
===== =====
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
<CAPTION>
Balance at
------------------------
June 30, December 31,
2000 1999
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<S> <C> <C>
ASSETS
Property, plant and equipment $ 6,260 $ 6,190
Accumulated depreciation (3,472) (3,352)
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Property, plant and equipment - net 2,788 2,838
Current Assets
Cash and cash equivalents 142 11
Accounts receivable (less allowance
for doubtful receivables of $18 at
June 30, 2000 and $16 at December 31, 1999 264 295
Due from affiliates 317 73
Income taxes receivable 43 34
Inventories 21 78
Other 6 9
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Total current assets 793 500
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Regulatory assets 185 258
Notes receivable - affiliates 253 164
Investments 80 33
Other assets 76 56
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594 511
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Total $4,175 $3,849
====== ======
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
<CAPTION>
Balance at
-------------------------
June 30, December 31,
2000 1999
---------- -----------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock $ 1,259 $ 1,282
Retained earnings 157 58
Accumulated other comprehensive income 30 6
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Total common equity 1,446 1,346
Preferred 80 80
Long-term debt 940 939
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Total capitalization 2,466 2,365
Current Liabilities
Accounts payable 215 220
Regulatory balancing accounts - net 322 154
Other taxes payable 9 --
Deferred income taxes 7 8
Interest accrued 27 29
Current portion of long-term debt 30 30
Other 222 206
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Total current liabilities 832 647
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Customer advances for construction 26 27
Post-retirement benefits other than pensions 162 158
Deferred income taxes 266 223
Deferred investment tax credits 54 56
Deferred credits and other liabilities 349 353
Preferred stock of subsidiary 20 20
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Total deferred credits and
other liabilities 877 837
------ ------
Contingencies and commitments (Note 2)
Total $4,175 $3,849
====== ======
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in millions
<CAPTION>
Six Months Ended
June 30,
------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 101 $ 88
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 131 130
Deferred income taxes and investment
tax credits 33 6
Other 24 (5)
Net change in other working capital components 5 189
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Net cash provided by operating
activities 294 408
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (86) (75)
Loans to affiliates (89) --
Other - net 14 (15)
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Net cash used in investing activities (161) (90)
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CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid -- (100)
Preferred dividends paid (2) (1)
Payment on long-term debt -- (2)
Decrease in short-term debt -- (43)
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Net cash used in financing activities (2) (146)
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Increase (Decrease) in Cash and Cash Equivalents 131 172
Cash and Cash Equivalents, January 1 11 27
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Cash and Cash Equivalents, June 30 $ 142 $ 199
===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amount capitalized $ 78 $ 43
===== =====
Income tax payments, net of refunds $ 71 $ 119
===== =====
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
Dividend of affiliates to Sempra Energy $ -- $ 413
===== =====
See notes to Consolidated Financial Statements.
</table
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
This Quarterly Report on Form 10-Q is that of Pacific Enterprises (PE
or the Company), the parent company of Southern California Gas
Company (SoCalGas). The Company's common stock is wholly owned by
Sempra Energy, a California-based Fortune 500 energy services
company. The financial statements herein are the Consolidated
Financial Statements of PE and its sole direct subsidiary, SoCalGas.
The accompanying Consolidated Financial Statements have been prepared
in accordance with the interim-period-reporting requirements of Form
10-Q. Results of operations for interim periods are not necessarily
indicative of results for the entire year. In the opinion of
management, the accompanying statements reflect all adjustments
necessary for a fair presentation. These adjustments are only of a
normal recurring nature. Certain changes in classification have been
made to prior presentations to conform to the current financial
statement presentation.
The Company's significant accounting policies are described in the
notes to Consolidated Financial Statements in the Company's 1999
Annual Report. The same accounting policies are followed for interim
reporting purposes.
Information in this Quarterly Report is unaudited and should be read
in conjunction with the Company's 1999 Annual Report.
As described in the notes to Consolidated Financial Statements in the
Company's 1999 Annual Report, SoCalGas accounts for the economic
effects of regulation on utility operations in accordance with
Statement of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation" (SFAS No. 71).
2. MATERIAL CONTINGENCIES
NATURAL GAS INDUSTRY RESTRUCTURING
The natural gas industry experienced an initial phase of
restructuring during the 1980s by deregulating natural gas sales to
noncore customers. On January 21, 1998, the CPUC released a staff
report initiating a project to assess the current market and
regulatory framework for California's natural gas industry. The
general goals of the plan are to consider reforms to the current
regulatory framework emphasizing market-oriented policies benefiting
California's natural gas consumers.
In July 1999, after hearings, the CPUC issued a decision stating
which gas regulatory changes it found most promising, encouraging
parties to submit settlements addressing those changes, and providing
for further hearings if necessary.
In October 1999, the State of California enacted a law (AB 1421)
which requires that natural gas utilities provide "bundled basic gas
service" (including transmission, storage, distribution, purchasing,
revenue-cycle services and after-meter services) to all core
customers, unless the customer chooses to purchase natural gas from a
non-utility provider. The law prohibits the CPUC from unbundling most
distribution-related natural gas services (including meter reading)
and after-meter services (including leak investigation, inspecting
customer piping and appliances, pilot relighting and carbon monoxide
investigation) for core customers. The objective is to preserve both
customer safety and customer choice.
Between late 1999 and April 2000, several conflicting settlements
were filed by various groups of parties that address the changes the
CPUC found promising in July 1999. Hearings were held in May and June
of 2000, and a CPUC decision is expected by year-end 2000. The
principal issues in dispute include: whether firm, tradable rights to
capacity on SoCalGas' major gas transmission lines should be created,
with SoCalGas at risk for market demand for the recovery of the cost
of these facilities; the extent to which SoCalGas' storage services
should be further unbundled and SoCalGas be put at greater risk for
recovery of storage costs; the manner in which interstate pipeline
capacity held by SoCalGas to serve core markets should be allocated
to core customers who purchase gas from energy service providers
other than SoCalGas; and the recovery of the utilities' costs to
implement whatever regulatory changes are adopted. Additional
proposals include improving the access of energy service providers to
sell gas supply to core customers of SoCalGas and SDG&E.
Consistent with Sempra Energy's corporate policies favoring the
unbundling of commodity and nonessential services, SoCalGas and its
affiliate, San Diego Gas & Electric Company, are supporting changes
that they believe will provide greater customer choice in utility
services and greater access to gas supply service from energy service
providers in the core market. However, a coalition of gas-fired
electric generators and consumer groups has also proposed the CPUC
require SoCalGas to absorb 25 percent of the above-market cost of
some capacity SoCalGas has contracted for on interstate pipelines.
SoCalGas is actively opposing this proposal, contending that
regulatory changes developed after the capacity was committed should
not be considered in evaluating the propriety of the commitment.
Certain parties contend that the restructuring process is an
appropriate venue for addressing whether SoCalGas should refund
retroactively to September 1999 the cost in rates of ownership and
operation of one SoCalGas storage field. SoCalGas is also actively
opposing this proposal and the propriety of this venue for its
resolution.
QUASI-REORGANIZATION
In 1993, PE divested its merchandising operations and most of its oil
and gas exploration and production business. In connection with the
divestitures, PE effected a quasi-reorganization for financial
reporting purposes effective December 31, 1992. Unitary tax issues
and certain other liabilities established in connection with the
quasi-reorganization were favorably resolved in November 1999. Excess
reserves of $80 million resulting from the favorable resolution of
these issues were added to shareholders' equity at that time. Other
liabilities established in connection with discontinued operations
and the quasi-reorganization will be resolved in future years.
Management believes the provisions for these matters are adequate.
3. COMPREHENSIVE INCOME
Comprehensive income for the three-month periods ended June 30, 2000
and 1999 was $37 million and $40 million, respectively. Comprehensive
income for the six-month periods ended June 30, 2000 and 1999 was
$124 million and $88 million, respectively. For the 2000 periods, the
following is a reconciliation of net income to comprehensive income.
Three months Six months
ended ended
(Dollars in millions) June 30, 2000 June 30, 2000
--------------------------------------------------------------------
Net income $ 49 $ 101
Change in unrealized gain on
marketable securities (12) 21
Minimum pension liability adjustments -- 2
--------------------------------
Comprehensive income $ 37 $ 124
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For the 1999 periods, comprehensive income was equal to earnings
applicable to common shares. As was the case for the three-month and
six-month periods ended June 30, 2000, it is likely that
comprehensive income in future periods will differ significantly from
net income and will be more volatile than net income as long as the
available-for-sale securities are held.
4. SEGMENT INFORMATION
Previously, the Company had two separately managed reportable
segments: SoCalGas and Sempra Energy Trading (SET). However, PE
dividended its SET holdings to Sempra Energy during the second
quarter of 1999. Information concerning SoCalGas' own segments is
provided in its Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements contained in this Form 10-Q and Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1999 Annual Report.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not
historical fact and constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
words "estimates," "believes," "expects," "anticipates," "plans,"
"intends," "may" and "should" or similar expressions, or discussions
of strategy or of plans are intended to identify forward-looking
statements that involve risks, uncertainties and assumptions. Future
results may differ materially from those expressed in the forward-
looking statements.
These statements are necessarily based upon various assumptions
involving judgments with respect to the future and other risks,
including, among others, local, regional, national and international
economic, competitive, political and regulatory conditions and
developments; technological developments; capital market conditions;
inflation rates; interest rates; energy markets, including the timing
and extent of changes in commodity prices; weather conditions;
business, regulatory or legal decisions; the pace of deregulation of
retail natural gas and electricity delivery; the timing and success
of business development efforts; and other uncertainties -- all of
which are difficult to predict and many of which are beyond the
control of the Company. Readers are cautioned not to rely unduly on
any forward-looking statements and are urged to review and consider
carefully the risks, uncertainties and other factors which affect the
Company's business described in this quarterly report and other
reports filed by the Company from time to time with the Securities
and Exchange Commission.
See also "Factors Influencing Future Performance" below.
CAPITAL RESOURCES AND LIQUIDITY
The Company's California utility operations continue to be the major
source of liquidity. In addition, working capital requirements are
met through the issuance of short-term and long-term debt. Cash and
cash equivalents at June 30, 2000 are available for investment in
utility plant, the retirement of debt and other corporate purposes.
Major changes in cash flows not described elsewhere are described
below.
CASH FLOWS FROM OPERATING ACTIVITIES
For the six-month period ended June 30, 2000, the decrease in cash
flows from operations is primarily due to the increase in affiliate
receivables, offset by the increase in balancing accounts.
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment are estimated
to be $200 million for the full year 2000 and will be financed
primarily by internally generated funds. Construction, investment and
financing programs are continuously reviewed and revised in response
to changes in competition, customer growth, inflation, customer
rates, the cost of capital, and environmental and regulatory
requirements.
CASH FLOWS FROM FINANCING ACTIVITIES
For the six-month period ended June 30, 2000, the increase in cash
flows from financing activities is primarily due to 1999 short-term
debt repayments and dividends paid to Sempra Energy, neither of which
occurred in the corresponding 2000 period.
RESULTS OF OPERATIONS
Consolidated earnings consist primarily of the results from SoCalGas.
SoCalGas' net income increased 2 percent and 4 percent for the three-
month and six-month periods ended June 30, 2000, respectively,
compared to the same periods in 1999, primarily due to reduced
operating and maintenance expenses. Consolidated earnings were also
affected by interest income accrued on increased affiliate
receivables.
UTILITY OPERATIONS
The table below summarizes natural gas volumes and revenues for
SoCalGas by customer class for the six-month periods ended June 30,
2000 and 1999.
</TABLE>
<TABLE>
Southern California Gas Company
Gas Sales, Transportation and Exchange
For the six-month periods ended June 30
(Volumes in billion cubic feet, dollars in millions)
<CAPTION>
Gas Sales Transportation & Exchange Total
--------------------------------------------------------------
Volumes Revenue Volumes Revenue Volumes Revenue
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000:
Residential 136 $1,016 2 $ 8 138 $1,024
Commercial and industrial 44 282 160 124 204 406
Utility electric generation -- -- 99 38 99 38
Wholesale -- -- 74 26 74 26
--------------------------------------------------------------
180 $1,298 335 $196 515 1,494
Balancing accounts and other (166)
--------
Total $1,328
------------------------------------------------------------------------------------------
1999:
Residential 162 $1,017 1 $ 4 163 $1,021
Commercial and industrial 46 241 152 122 198 363
Utility electric generation -- -- 49 20 49 20
Wholesale -- -- 80 28 80 28
--------------------------------------------------------------
208 $1,258 282 $174 490 1,432
Balancing accounts and other (201)
--------
Total $1,231
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</TABLE>
Utility natural gas revenues increased 8 percent for the six-month
period ended June 30, 2000, compared to the corresponding period in
1999. The increase is primarily due to higher natural gas prices.
Cost of natural gas distributed increased 23 percent for the six-
month period ended June 30, 2000 compared to the corresponding period
in 1999. The increase is primarily due to higher natural gas prices.
Under the current regulatory framework, changes in core-market
natural gas prices do not affect net income since, as explained more
fully in the 1999 Annual Report, current or future customer rates
normally recover the actual cost of natural gas.
Operating and maintenance expenses decreased 11 percent for the six-
month period ended June 30, 2000 compared to the corresponding period
in 1999, primarily due to the dividending of the Company's nonutility
subsidiaries to Sempra Energy in early 1999 and reduced operating and
maintenance expenses at SoCalGas.
Net income at SoCalGas increased slightly for the three-month and
six-month periods ended June 30, 2000, compared to the same
periods in 1999, due to reduced operating and maintenance
expenses.
FACTORS INFLUENCING FUTURE PERFORMANCE
The Company's performance will depend on the results of SoCalGas.
Because of the ratemaking and regulatory process, electric and
natural gas industry restructuring, and the changing energy
marketplace, there are several factors that will influence the
Company's future financial performance. These factors are discussed
in this section.
Industry Restructuring
See discussion of industry restructuring in Note 2 of the notes to
Consolidated Financial Statements.
Performance-Based Regulation (PBR)
To promote efficient operations and improved productivity and to move
away from reasonableness reviews and disallowances, the CPUC has been
directing utilities to use PBR. PBR has replaced the general rate
case and certain other regulatory proceedings for the California
utilities. Under PBR, regulators require future income potential to
be tied to achieving or exceeding specific performance and
productivity goals, as well as cost reductions, rather than relying
solely on expanding utility plant in a market where a utility already
has a highly developed infrastructure. The utility's PBR mechanism is
scheduled to be updated at December 31, 2002, to reflect, among other
things, changes in costs and volumes.
Key elements of the mechanisms include an initial reduction in base
rates, an indexing mechanism that limits future rate increases to the
inflation rate less a productivity factor, a sharing mechanism with
customers if earnings exceed the authorized rate of return on rate
base, and rate refunds to customers if service quality deteriorates.
Specifically, the key elements of the mechanisms include the
following:
-- Earnings up to 25 basis points in excess of the authorized rate of
return on rate base are retained 100 percent by shareholders.
Earnings that exceed the authorized rate of return on rate base by
greater than 25 basis points are shared between customers and
shareholders on a sliding scale that begins with 75 percent of the
additional earnings being given back to customers and declining to 0
percent as earned returns approach 300 basis points above authorized
amounts. There is no sharing if actual earnings fall below the
authorized rate of return. In 1999, SoCalGas was authorized to earn
9.49 percent on rate base. For 2000, the authorized return is again
9.49 percent.
-- Base rates are indexed based on inflation less an estimated
productivity factor.
-- The mechanism authorizes penalties of up to $4 million annually,
or more in certain, limited situations, related to performance
involving employee safety, customer satisfaction, and call-center
responsiveness.
-- A mechanism allows for pricing flexibility for residential and
small-commercial customers, with any shortfalls in revenue being
borne by shareholders and with any increase in revenue shared between
shareholders and customers.
-- Annual cost of capital proceedings are replaced by an automatic
adjustment mechanism. If changes in certain indices exceed
established tolerances, there would be an automatic adjustment of
rates for the change in the cost of capital according to a formula
which applies a percentage of the change to various capital
components.
Cost of Capital
For 2000, SoCalGas is authorized to earn a rate of return on common
equity (ROE) of 11.6 percent and a 9.49 percent return on rate base
(ROR), the same as in 1999, unless interest-rate changes are large
enough to trigger an automatic adjustment as discussed in the
Company's 1999 Annual Report.
Biennial Cost Allocation Proceeding (BCAP)
The BCAP determines how a utility's natural gas transportation costs
are allocated among various customer classes (residential,
commercial, industrial, etc.). In October 1998, the California
utilities filed 1999 BCAP applications requesting that new rates
become effective August 1, 1999, and remain in effect through
December 31, 2002. On April 20, 2000, the CPUC issued a decision
adopting overall decreases in natural gas revenues of $210 million
for SoCalGas for transportation rates effective June 1, 2000. Since
the decrease reflects anticipated changes in corresponding costs, it
has no effect on net income.
Key elements of the 1999 BCAP decision for SoCalGas include (1) the
first update to customer throughput forecasts since the Global
Settlement (the 1994 comprehensive settlement of natural gas
regulatory issues, described in the Company's 1999 Annual Report on
Form 10-K), (2) a return to the pre-Global Settlement 75%/25%
(ratepayer/shareholder) balancing treatment for noncore revenues
excluding certain transactions, and (3) 50%/50% balancing treatment
of unbundled noncore storage. The shareholder portion of noncore
transportation and storage revenues is excluded from the PBR sharing
mechanism.
Gas Cost Incentive Mechanism (GCIM)
This mechanism for evaluating SoCalGas' natural gas purchases
substantially replaced the previous process of reasonableness
reviews. GCIM compares SoCalGas' cost of natural gas with a benchmark
level, which is the average price of 30-day firm spot supplies in the
basins in which SoCalGas purchases natural gas. The mechanism permits
full recovery of all costs within a tolerance band above the
benchmark price and refunds all savings within a tolerance band below
the benchmark price. The costs or savings outside the tolerance band
are shared equally between customers and shareholders.
The CPUC approved the use of natural gas futures for managing risk
associated with the GCIM. SoCalGas enters into natural gas futures
contracts in the open market on a limited basis to mitigate risk and
better manage natural gas costs.
In June 1999, SoCalGas filed its annual GCIM application with the
CPUC, requesting an award of $8 million for the annual period ended
March 31, 1999. On June 8, 2000 the CPUC approved the $8 million
award and deferred decision regarding extending the GCIM beyond March
31, 2000 until an evaluation is performed by the Commission staff.
The evaluation report is expected in January 2001.
In June 2000, SoCalGas filed its annual GCIM application with the
CPUC, requesting an award of $10 million for the annual period ended
March 31, 2000. A CPUC decision is expected during the first quarter
of 2001.
INTERNATIONAL OPERATIONS
In conjunction with the 1998 business combination in which PE became
a wholly owned subsidiary of Sempra Energy, PE's ownership interests
in international subsidiaries were transferred to Sempra Energy at
book value in March 1999.
OTHER OPERATIONS
Sempra Energy Trading (SET) is a leading energy trading and marketing
firm headquartered in Stamford, Connecticut. SET engages primarily in
natural gas, petroleum and power marketing (domestic and
international). Effective April 1999, PE transferred its ownership
interest in SET to Sempra Energy. PE's interest in SET did not have a
significant effect on PE's income in 1999.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133
"Accounting for Derivative Instruments and Hedging Activities." As
amended, SFAS 133, which is effective for the company on January
1, 2001, requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial
position, measure those instruments at fair value and recognize
changes in the fair value of derivatives in earnings in the period
of change unless the derivative qualifies as an effective hedge
that offsets certain exposures. The effect of this standard on the
company's Consolidated Financial Statements has not yet been
determined.
In December 1999, the Securities Exchange Commission (SEC) staff
issued Staff Accounting Bulletin (SAB) 101 - Revenue Recognition.
SABs are not rules issued by the SEC. Rather, they represent
interpretations and practices followed by the SEC's staff in
administering the disclosure requirements of the federal
securities laws. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements; it
does not change the existing rules on revenue recognition. SAB 101
sets forth the basic criteria that must be met before revenue
should be recorded. Implementation of SAB 101 is required by the
fourth quarter of 2000 and will have no effect on the company's
Consolidated Financial Statements.
ITEM 3. MARKET RISK
There have been no significant changes in the risk issues affecting
the Company subsequent to those discussed in the Annual Report on
Form 10-K for 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor its subsidiaries are party to, nor is their
property the subject of, any material pending legal proceedings other
than routine litigation incidental to their businesses.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedules
27.1 Financial Data Schedule for the six-month period ended
June 30, 2000.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed after March 31, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly cause this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PACIFIC ENTERPRISES
-------------------
(Registrant)
Date: August 11, 2000 By: /s/ F. H. Ault
----------------------------
F. H. Ault
Vice President and Controller
