EIX-SCE 2013 Q3


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                        to

Commission
File Number
 
Exact Name of Registrant
as specified in its charter
 
State or Other Jurisdiction of
Incorporation or Organization
 
IRS Employer
Identification Number
1-9936
 
EDISON INTERNATIONAL
 
California
 
95-4137452
1-2313
 
SOUTHERN CALIFORNIA EDISON COMPANY
 
California
 
95-1240335

EDISON INTERNATIONAL
 
SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
 
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(Registrant's telephone number, including area code)
 
(626) 302-1212
(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.

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No o

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).

Edison International        Yes þ No o    Southern California Edison Company    Yes þ 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 "accelerated filer," "large accelerated filer," and "smaller reporting company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Large Accelerated Filer þ
Accelerated Filer ¨
Non-accelerated Filer ¨
Smaller Reporting Company ¨
Southern California Edison Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-accelerated Filer þ
Smaller Reporting Company ¨
 
 
 
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Edison International        Yes ¨ No þ    Southern California Edison Company    Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of October 25, 2013:
 
 
Edison International
 
325,811,206 shares
Southern California Edison Company
 
434,888,104 shares
 
 
 
 
 
 







TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ERRA Balancing Account
 
 
 
 
 
 
 
 
 
 
 
 


i


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an 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.


ii


GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2012 Form 10-K
 
Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 2012
APS
 
Arizona Public Service Company
ARO(s)
 
asset retirement obligation(s)
BACT
 
best available control technology
Bankruptcy Code
 
Chapter 11 of the United States Bankruptcy Code
Bankruptcy Court
 
United States Bankruptcy Court for the Northern District of Illinois, Eastern Division
Bcf
 
billion cubic feet
CAA
 
Clean Air Act
CAISO
 
California Independent System Operator
CARB
 
California Air Resources Board
CDWR
 
California Department of Water Resources
CEC
 
California Energy Commission
CPUC
 
California Public Utilities Commission
CRRs
 
congestion revenue rights
DOE
 
U.S. Department of Energy
EME
 
Edison Mission Energy
EMG
 
Edison Mission Group Inc.
EPS
 
earnings per share
ERRA
 
energy resource recovery account
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
FIP(s)
 
federal implementation plan(s)
Four Corners
 
coal fueled electric generating facility located in Farmington, New Mexico in
which SCE holds a 48% ownership interest
GAAP
 
generally accepted accounting principles
GHG
 
greenhouse gas
GRC
 
general rate case
GWh
 
gigawatt-hours
IRS
 
Internal Revenue Service
ISO
 
Independent System Operator
kWh(s)
 
kilowatt-hour(s)
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI
 
Mitsubishi Heavy Industries, Inc.
Mohave
 
two coal fueled electric generating facilities that have been decommissioned and site remediated located in Clark County, Nevada in which SCE holds a 56% ownership interest
Moody's
 
Moody's Investors Service
MW
 
megawatts
MWh
 
megawatt-hours
NAAQS
 
national ambient air quality standards
NERC
 
North American Electric Reliability Corporation
Ninth Circuit
 
U.S. Court of Appeals for the Ninth Circuit
NRC
 
Nuclear Regulatory Commission
NSR
 
New Source Review
OII
 
Order Instituting Investigation


iii


Palo Verde
 
large pressurized water nuclear electric generating facility located near
Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)
 
postretirement benefits other than pension(s)
Petition Date
 
December 17, 2012 (date on which EME and certain of its wholly-owned subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code)
PG&E
 
Pacific Gas & Electric Company
PSD
 
Prevention of Significant Deterioration
QF(s)
 
qualifying facility(ies)
ROE
 
return on equity
S&P
 
Standard & Poor's Ratings Services
San Onofre
 
large pressurized water nuclear electric generating facility located in south
San Clemente, California that has been permanently retired in which SCE holds a 78.21% ownership interest
SCE
 
Southern California Edison Company
SCR
 
selective catalytic reduction equipment
SDG&E
 
San Diego Gas & Electric
SEC
 
U.S. Securities and Exchange Commission
SED
 
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or CPSD
Settlement Transaction
 
Certain transactions related to EME's Chapter 11 bankruptcy filing
Support Agreement
 
Transaction Support Agreement dated as of December 16, 2012 by and among Edison Mission Energy, Edison International and the Noteholders named therein
Tehachapi Project
 
an 11-segment project consisting of new and upgraded transmission lines and associated substations primarily built to enhance reliability and enable the delivery of renewable energy
US EPA
 
U.S. Environmental Protection Agency
VIE(s)
 
variable interest entity(ies)



iv

















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1


PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
Consolidated Statements of Income
Edison International
 




 
Three months ended September 30,

Nine months ended
September 30,
(in millions, except per-share amounts, unaudited)
2013

2012

2013

2012
Operating revenue
$
3,960


$
3,734


$
9,638


$
8,802

Fuel
95


83


249


220

Purchased power
1,713


1,612


3,569


3,049

Operation and maintenance
971


993


2,809


2,891

Depreciation, decommissioning and amortization
392


399


1,224


1,187

Asset impairment and others
—


(66
)

575


(65
)
Total operating expenses
3,171


3,021


8,426


7,282

Operating income
789


713


1,212


1,520

Interest and other income
28


38


91


110

Interest expense
(137
)

(131
)

(402
)

(390
)
Other expenses
(15
)

(10
)

(38
)

(36
)
Income from continuing operations before income taxes
665


610


863


1,204

Income tax expense
177


228


173


421

Income from continuing operations
488


382


690


783

Loss from discontinued operations, net of tax
(25
)

(167
)

(1
)

(360
)
Net income
463


215


689


423

Dividends on preferred and preference stock of utility
25


25


75


66

Net income attributable to Edison International common shareholders
$
438


$
190


$
614


$
357

Amounts attributable to Edison International common shareholders:




 

 
Income from continuing operations, net of tax
$
463


$
357


$
615


$
717

Loss from discontinued operations, net of tax
(25
)

(167
)

(1
)

(360
)
Net income attributable to Edison International common shareholders
$
438


$
190


$
614


$
357

Basic earnings (loss) per common share attributable to Edison International common shareholders:




 

 
Weighted-average shares of common stock outstanding
326


326


326


326

Continuing operations
$
1.42


$
1.09


$
1.88


$
2.20

Discontinued operations
(0.08
)

(0.51
)

—


(1.11
)
Total
$
1.34


$
0.58


$
1.88


$
1.09

Diluted earnings (loss) per common share attributable to Edison International common shareholders:




 

 
Weighted-average shares of common stock outstanding, including effect of dilutive securities
328


329


329


328

Continuing operations
$
1.41


$
1.09


$
1.87


$
2.18

Discontinued operations
(0.07
)

(0.51
)

—


(1.09
)
Total
$
1.34


$
0.58


$
1.87


$
1.09

Dividends declared per common share
$
0.3375


$
0.325


$
1.0125


$
0.975


The accompanying notes are an integral part of these consolidated financial statements.

2


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income
Edison International
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended
September 30,
(in millions, unaudited)
2013
 
2012
 
2013
 
2012
Net income
$
463

 
$
215

 
$
689

 
$
423

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
 
 
 
Net loss arising during the period, net of income tax benefit of $4 and $3 for the nine months ended September 30, 2013 and 2012, respectively
—

 
—

 
(2
)
 
(3
)
Amortization of net loss included in net income, net of income tax expense of $1 and $2 for the three months ended September 30, 2013 and 2012 and $3 and $7 for the nine months ended September 30, 2013 and 2012, respectively
3

 
4

 
10

 
12

Unrealized loss on derivatives qualified as cash flow hedges:
 
 
 
 
 
 
 
Unrealized holding loss arising during the period, net of income tax benefit of $11 for the three months and $13 for the nine months ended September 30, 2012, respectively
—

 
(16
)
 
—

 
(19
)
Reclassification adjustments included in net income, net of income tax expense (benefit) of $1 for the three months and $(12) for the nine months ended September 30, 2012, respectively
—

 
1

 
—

 
(19
)
Other comprehensive income (loss), net of tax
3

 
(11
)
 
8

 
(29
)
Comprehensive income
466

 
204

 
697

 
394

Less: Comprehensive income attributable to noncontrolling interests
25

 
25

 
75

 
66

Comprehensive income attributable to Edison International
$
441

 
$
179

 
$
622

 
$
328



The accompanying notes are an integral part of these consolidated financial statements.

3


Consolidated Balance Sheets

Edison International
 







(in millions, unaudited)

September 30,
2013

December 31,
2012
ASSETS

 

 
Cash and cash equivalents

$
610


$
170

Receivables, less allowances of $72 and $75 for uncollectible accounts at respective dates

1,174


762

Accrued unbilled revenue

798


550

Inventory

272


340

Prepaid taxes

27


22

Derivative assets

47


129

Margin and collateral deposits

14


8

Regulatory assets

506


572

Other current assets

155


119

Total current assets

3,603


2,672

Nuclear decommissioning trusts

4,332


4,048

Other investments

201


186

Total investments

4,533


4,234

Utility property, plant and equipment, less accumulated depreciation of $7,817 and $7,424 at respective dates

29,734


30,200

Nonutility property, plant and equipment, less accumulated depreciation of $74 and $123 at respective dates

75


73

Total property, plant and equipment

29,809


30,273

Derivative assets

207


85

Restricted deposits

4


4

Regulatory assets

8,015


6,422

Other long-term assets

527


704

Total long-term assets

8,753


7,215











































 
 
 
 
 







Total assets

$
46,698


$
44,394



The accompanying notes are an integral part of these consolidated financial statements.

4


Consolidated Balance Sheets

Edison International
 


 

 
(in millions, except share amounts, unaudited)

September 30,
2013
 
December 31,
2012
LIABILITIES AND EQUITY

 

 
Short-term debt

$
1,528


$
175

Current portion of long-term debt

401


—

Accounts payable

1,240


1,423

Accrued taxes

103


61

Accrued interest

102


176

Customer deposits

199


193

Derivative liabilities

174


126

Regulatory liabilities

629


536

Deferred income taxes

159


64

Other current liabilities

854


990

Total current liabilities

5,389


3,744

Long-term debt

9,232


9,231

Deferred income taxes

6,546


6,127

Deferred investment tax credits

106


104

Customer advances

132


149

Derivative liabilities

1,137


939

Pensions and benefits

2,237


2,614

Asset retirement obligations

3,371


2,782

Regulatory liabilities

4,989


5,214

Other deferred credits and other long-term liabilities

2,117


2,299

Total deferred credits and other liabilities

20,635


20,228

Total liabilities

35,256


33,203

Commitments and contingencies (Note 12)






Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at each date)

2,397


2,373

Accumulated other comprehensive loss

(79
)

(87
)
Retained earnings

7,371


7,146

Total Edison International's common shareholders' equity

9,689


9,432

Preferred and preference stock of utility

1,753


1,759

Total noncontrolling interests

1,753


1,759

Total equity

11,442


11,191

Total liabilities and equity

$
46,698


$
44,394



The accompanying notes are an integral part of these consolidated financial statements.

5


Consolidated Statements of Cash Flows

Edison International
 
 

Nine months ended
September 30,
(in millions, unaudited)

2013

2012
Cash flows from operating activities:

 

 
Net income

$
689


$
423

Less: Loss from discontinued operations

(1
)

(360
)
Income from continuing operations

690


783

Adjustments to reconcile to net cash provided by operating activities:



 
Depreciation, decommissioning and amortization

1,224


1,187

Regulatory impacts of net nuclear decommissioning trust earnings

265


147

Other amortization and other

54


51

Asset impairment

575


—

Gain on sale of assets and other
 
(2
)
 
(65
)
Stock-based compensation

18


24

Deferred income taxes and investment tax credits

257


176

Proceeds from U.S. treasury grants

—


29

Changes in operating assets and liabilities:



 
Receivables

(406
)

(328
)
Inventory

68


13

Margin and collateral deposits, net of collateral received

(74
)

6

Prepaid taxes

(5
)

319

Other current assets

(276
)

(254
)
Accounts payable

155


162

Accrued taxes

27


61

Other current liabilities

(130
)

(124
)
Derivative assets and liabilities, net

207


1

Regulatory assets and liabilities, net

94


210

Other assets

127


(26
)
Other liabilities

(615
)

326

Operating cash flows from continuing operations

2,253


2,698

Operating cash flows from discontinued operations, net

—


(540
)
Net cash provided by operating activities

2,253


2,158

Cash flows from financing activities:

 

 
Long-term debt issued

398


395

Long-term debt issuance costs

(4
)

(4
)
Long-term debt repaid

(5
)

(4
)
Bonds remarketed, net

195

 
—

Bonds purchased

(196
)

—

Preference stock issued, net

387


804

Preference stock redeemed

(400
)

(75
)
Short-term debt financing, net

1,352


(31
)
Settlements of stock-based compensation, net

(40
)

(34
)
Dividends to noncontrolling interests

(82
)

(63
)
Dividends paid

(330
)

(318
)
Financing cash flows from continuing operations

1,275


670

Financing cash flows from discontinued operations, net

—


354

Net cash provided by financing activities

$
1,275


$
1,024


The accompanying notes are an integral part of these consolidated financial statements.

6


Consolidated Statements of Cash Flows

Edison International
 
 

Nine months ended
September 30,
(in millions, unaudited)

2013

2012
Cash flows from investing activities:

 

 
Capital expenditures

$
(2,761
)

$
(3,105
)
Proceeds from sale of nuclear decommissioning trust investments

4,574


1,525

Purchases of nuclear decommissioning trust investments and other

(4,857
)

(1,689
)
Proceeds from sale of interest in project, net

—


107

Investments in new businesses

(18
)

—

Customer advances for construction and other investments

(26
)

7

Investing cash flows from continuing operations

(3,088
)

(3,155
)
Investing cash flows from discontinued operations, net

—


(361
)
Net cash used by investing activities

(3,088
)

(3,516
)
Net increase (decrease) in cash and cash equivalents

440


(334
)
Cash and cash equivalents at beginning of period

170


1,469

Cash and cash equivalents at end of period

610


1,135

Cash and cash equivalents from discontinued operations

—


753

Cash and cash equivalents from continuing operations

$
610


$
382



The accompanying notes are an integral part of these consolidated financial statements.

7

















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8


Consolidated Statements of Income
Southern California Edison Company

 
 
Three months ended September 30,
 
Nine months ended
September 30,
(in millions, unaudited)
 
2013
 
2012
 
2013
 
2012
Operating revenue
 
$
3,957

 
$
3,731

 
$
9,631

 
$
8,794

Fuel
 
95

 
82

 
249

 
220

Purchased power
 
1,713

 
1,612

 
3,569

 
3,049

Operation and maintenance
 
875

 
906

 
2,540

 
2,622

Depreciation, decommissioning and amortization
 
392

 
399

 
1,223

 
1,187

Property and other taxes
 
78

 
73

 
229

 
229

Asset impairment
 
—

 
—

 
575

 
—

Total operating expenses
 
3,153

 
3,072

 
8,385

 
7,307

Operating income
 
804

 
659

 
1,246

 
1,487

Interest and other income
 
27

 
38

 
89

 
108

Interest expense
 
(131
)
 
(124
)
 
(384
)
 
(373
)
Other expenses
 
(15
)
 
(9
)
 
(38
)
 
(36
)
Income before income taxes
 
685

 
564

 
913

 
1,186

Income tax expense
 
183

 
176

 
196

 
384

Net income
 
502

 
388

 
717

 
802

Less: Dividends on preferred and preference stock
 
25

 
25

 
75

 
66

Net income available for common stock
 
$
477

 
$
363

 
$
642

 
$
736


Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended
September 30,
(in millions, unaudited)
 
2013
 
2012
 
2013
 
2012
Net income
 
$
502

 
$
388

 
$
717

 
$
802

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
 
 
 
 
Net loss arising the during period, net of income tax benefit of $3 for both the nine months ended September 30, 2013 and 2012
 
—

 
—

 
(4
)
 
(4
)
Amortization of net loss included in net income, net of income tax expense of $1 for both the three months ended September 30, 2013 and 2012 and $3 and $4 for the nine months ended September 30, 2013 and 2012, respectively
 
2

 
1

 
5

 
5

Other comprehensive income, net of tax
 
2

 
1

 
1

 
1

Comprehensive income
 
$
504

 
$
389

 
$
718

 
$
803



The accompanying notes are an integral part of these consolidated financial statements.

9


Consolidated Balance Sheets
Southern California Edison Company

(in millions, unaudited)
 
September 30,
2013
 
December 31, 2012
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
522

 
$
45

Receivables, less allowances of $72 and $75 for uncollectible accounts at respective dates
 
1,127

 
755

Accrued unbilled revenue
 
798

 
550

Inventory
 
272

 
340

Prepaid taxes
 
22

 
48

Derivative assets
 
47

 
129

Regulatory assets
 
506

 
572

Other current assets
 
167

 
123

Total current assets
 
3,461

 
2,562

Nuclear decommissioning trusts
 
4,332

 
4,048

Other investments
 
130

 
116

Total investments
 
4,462

 
4,164

Utility property, plant and equipment, less accumulated depreciation of $7,817 and $7,424 at respective dates
 
29,734

 
30,200

Nonutility property, plant and equipment, less accumulated depreciation of $68 and $117 at respective dates
 
70

 
70

Total property, plant and equipment
 
29,804

 
30,270

Derivative assets
 
207

 
85

Regulatory assets
 
8,015

 
6,422

Other long-term assets
 
372

 
531

Total long-term assets
 
8,594

 
7,038

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
46,321

 
$
44,034


The accompanying notes are an integral part of these consolidated financial statements.

10


Consolidated Balance Sheets
Southern California Edison Company

(in millions, except share amounts, unaudited)
 
September 30,
2013
 
December 31, 2012
LIABILITIES AND EQUITY
 
 
 
 
Short-term debt
 
$
1,354

 
$
175

Current portion of long-term debt
 
400

 
—

Accounts payable
 
1,228

 
1,297

Accrued taxes
 
148

 
72

Accrued interest
 
101

 
172

Customer deposits
 
199

 
193

Derivative liabilities
 
174

 
126

Regulatory liabilities
 
629

 
536

Deferred income taxes
 
159

 
81

Other current liabilities
 
842

 
861

Total current liabilities
 
5,234

 
3,513

Long-term debt
 
8,828

 
8,828

Deferred income taxes
 
7,033

 
6,669

Deferred investment tax credits
 
106

 
104

Customer advances
 
132

 
149

Derivative liabilities
 
1,137

 
939

Pensions and benefits
 
1,726

 
2,245

Asset retirement obligations
 
3,371

 
2,782

Regulatory liabilities
 
4,989

 
5,214

Other deferred credits and other long-term liabilities
 
1,774

 
1,848

Total deferred credits and other liabilities
 
20,268

 
19,950

Total liabilities
 
34,330

 
32,291

Commitments and contingencies (Note 12)
 


 


Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date)
 
2,168

 
2,168

Additional paid-in capital
 
589

 
581

Accumulated other comprehensive loss
 
(28
)
 
(29
)
Retained earnings
 
7,467

 
7,228

Total common shareholder's equity
 
10,196

 
9,948

Preferred and preference stock
 
1,795

 
1,795

Total equity
 
11,991

 
11,743

Total liabilities and equity
 
$
46,321

 
$
44,034



The accompanying notes are an integral part of these consolidated financial statements.

11


Consolidated Statements of Cash Flows
Southern California Edison Company
 
 
Nine months ended
September 30,
(in millions, unaudited)
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Net income
 
$
717

 
$
802

Adjustments to reconcile to net cash provided by operating activities:
 
 
 
 
 Depreciation, decommissioning and amortization
 
1,223

 
1,187

 Regulatory impacts of net nuclear decommissioning trust earnings
 
265

 
147

 Other amortization
 
55

 
55

 Asset impairment
 
575

 
—

 Stock-based compensation
 
11

 
13

 Deferred income taxes and investment tax credits
 
197

 
426

 Proceeds from U.S. treasury grants
 
—

 
29

Changes in operating assets and liabilities:
 
 
 
 
 Receivables
 
(371
)
 
(336
)
 Inventory
 
68

 
13

 Margin and collateral deposits, net of collateral received
 
(74
)
 
6

 Prepaid taxes
 
26

 
230

 Other current assets
 
(279
)
 
(295
)
 Accounts payable
 
174

 
165

 Accrued taxes
 
76

 
49

 Other current liabilities
 
(131
)
 
(120
)
 Derivative assets and liabilities, net
 
207

 
63

 Regulatory assets and liabilities, net
 
94

 
147

 Other assets
 
142

 
(26
)
 Other liabilities
 
(629
)
 
101

Net cash provided by operating activities
 
2,346

 
2,656

Cash flows from financing activities:
 
 
 
 
Long-term debt issued
 
398

 
395

Long-term debt issuance costs
 
(4
)
 
(4
)
Long-term debt repaid
 
(5
)
 
(4
)
Bonds remarketed, net
 
195

 
—

Bonds purchased
 
(196
)
 
—

Preference stock issued, net
 
387

 
804

Preference stock redeemed
 
(400
)
 
(75
)
Short-term debt financing, net
 
1,178

 
(45
)
Settlements of stock-based compensation, net
 
(36
)
 
(24
)
Dividends paid
 
(321
)
 
(411
)
Net cash provided by financing activities
 
1,196

 
636

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(2,761
)
 
(3,105
)
Proceeds from sale of nuclear decommissioning trust investments
 
4,574

 
1,525

Purchases of nuclear decommissioning trust investments and other
 
(4,857
)
 
(1,689
)
Customer advances for construction and other investments
 
(21
)
 
10

Net cash used by investing activities
 
(3,065
)
 
(3,259
)
Net increase in cash and cash equivalents
 
477

 
33

Cash and cash equivalents, beginning of period
 
45

 
57

Cash and cash equivalents, end of period
 
$
522

 
$
90


The accompanying notes are an integral part of these consolidated financial statements.

12


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.    Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). SCE is an investor-owned public utility primarily engaged in the business of supplying electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of nonutility subsidiaries that are engaged in competitive businesses related to the delivery or use of electricity. Such competitive business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent and its nonutility subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in Note 1 of "Notes to Consolidated Financial Statements" included in the 2012 Form 10-K. The same accounting policies are followed for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2013, discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with the financial statements and notes included in the 2012 Form 10-K.
Beginning in the fourth quarter of 2012, Edison Mission Energy ("EME") met the definition of a discontinued operation and was classified separately in Edison International's consolidated financial statements. Except as indicated, amounts in the notes to the consolidated financial statements relate to continuing operations of Edison International. See Note 16 for information related to discontinued operations.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periods ended September 30, 2013 are not necessarily indicative of the operating results for the full year.
The December 31, 2012 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Cash Equivalents
Cash equivalents included investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
 
Edison International
 
SCE
(in millions)
September 30,
2013
 
December 31, 2012
 
September 30,
2013
 
December 31, 2012
Money market funds
$
518

 
$
107

 
$
453

 
$
5

Cash is temporarily invested until required for check clearing from the primary disbursement accounts. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:
 
Edison International
 
SCE
(in millions)
September 30,
2013
 
December 31, 2012
 
September 30,
2013
 
December 31, 2012
Uncleared checks reclassified to accounts payable
$
202

 
$
247

 
$
201

 
$
242


13


Inventory
Inventory is stated at the lower of cost or market, cost being determined by the weighted-average cost method for fuel, and the average cost method for materials, supplies and spare parts. Inventory consisted of the following:
(in millions)
September 30,
2013
 
December 31, 2012
Materials, supplies and spare parts
$
250

 
$
319

Fuel
22

 
21

Total inventory
$
272

 
$
340

As a result of the permanent retirement of San Onofre, SCE has reclassified $100 million of its inventory to a regulatory asset, see Note 9 for further details.
Greenhouse Gas Allowances
SCE is allocated greenhouse gas ("GHG") allowances annually which it is then required to sell them into quarterly auctions. GHG proceeds from the auction are recorded as a regulatory liability to be refunded to customers. SCE purchases GHG allowances from quarterly auctions or bilateral parties to satisfy its compliance obligations and recovers such costs of GHG from customers. GHG allowances held for use are classified as "Other current assets" on the consolidated balance sheets and are stated at the lower of weighted-average cost or market.
Earnings Per Share
Edison International computes earnings per share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, including stock options, performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares. Stock options awarded during the period 2003 through 2006 received dividend equivalents. EPS attributable to Edison International common shareholders was computed as follows:
 
Three months ended September 30,
 
Nine months ended
September 30,
(in millions)
2013
 
2012
 
2013
 
2012
Basic earnings per share – continuing operations:
 
 
 
 
 
 
 
Income from continuing operations available to common shareholders
$
463

 
$
357

 
$
615

 
$
717

Weighted average common shares outstanding
326

 
326

 
326

 
326

Basic earnings per share – continuing operations
$
1.42

 
$
1.09

 
$
1.88

 
$
2.20

Diluted earnings per share – continuing operations:
 
 
 
 
 
 
 
Income from continuing operations available to common shareholders
$
463

 
$
357

 
$
615

 
$
717

Income impact of assumed conversions
—

 
—

 
1

 
—

Income from continuing operations available to common shareholders and assumed conversions
$
463

 
$
357

 
$
616

 
$
717

Weighted average common shares outstanding
326

 
326

 
326

 
326

Incremental shares from assumed conversions
2

 
3

 
3

 
2

Adjusted weighted average shares – diluted
328

 
329

 
329

 
328

Diluted earnings per share – continuing operations
$
1.41

 
$
1.09

 
$
1.87

 
$
2.18

Stock-based compensation awards to purchase 4,109,363 and 3,238,581 shares of common stock for the three months ended September 30, 2013 and 2012, respectively, and 4,109,363 and 4,819,683 for the nine months ended September 30, 2013 and 2012, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares during the respective periods and, therefore, the effect would have been antidilutive.

14


Asset Retirement Obligation
SCE is in the process of developing a comprehensive decommissioning plan following its decision to permanently retire San Onofre. See Note 9 for further details. The asset retirement obligation ("ARO") liability related to San Onofre increased by $455 million in the second quarter of 2013 based on an updated decommissioning cost estimate for the retirement of both San Onofre Units 2 and 3. The ARO liability related to San Onofre at September 30, 2013 was $2.71 billion.
The following table summarizes the changes in SCE's ARO liability, including San Onofre and Palo Verde:
(in millions)
September 30,
2013
 
December 31,
2012
Beginning balance
$
2,782

 
$
2,610

Accretion expense1
134

 
161

Revisions
455

 
12

Liabilities settled
—

 
(1
)
Ending balance
$
3,371

 
$
2,782

1 
An asset retirement obligation represents the present value of a future obligation. Accretion expense is an increase in the liability to account for the time value of money resulting from discounting.
Related-Party Transactions
In 2008, EME was awarded by SCE, through a competitive bidding process, a 10-year power sales contract with SCE for the output of a 479 MW gas-fired peaking facility referred to as the Walnut Creek project. The power sales agreement was approved by the CPUC and FERC in 2008. Deliveries under the power sales agreement commenced in June 2013 and the expense for power purchased was $64 million and $70 million for the three- and nine-months ended September 30, 2013, respectively.
New Accounting Guidance
Accounting Guidance Adopted in 2013
Offsetting Assets and Liabilities
In January 2013, the FASB issued accounting standard updates modifying the disclosure requirements about the nature of an entity's rights of offsetting recognized assets and liabilities in the statement of financial position under master netting agreements and similar arrangements associated with derivative instruments, repurchase agreements and securities lending transactions. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions and descriptions of setoff rights. Edison International and SCE adopted this guidance effective January 1, 2013. The adoption of this standard did not impact the consolidated income statements, balance sheets or cash flows of Edison International or SCE. See Note 6 for further details.
Items Reclassified out of Accumulated Other Comprehensive Income
In February 2013, the FASB issued an accounting standards update which requires disclosure related to items reclassified out of accumulated other comprehensive income ("AOCI"). The guidance requires companies to present separately, for each component of other comprehensive income, current period reclassifications and the remainder of the current-period other comprehensive income. In addition, for certain current period reclassifications, an entity is required to disclose the effect of the item reclassified out of AOCI on the respective line item(s) of net income. Edison International and SCE adopted this guidance effective January 1, 2013. See Note 14 for further details.
Accounting Guidance Not Yet Adopted
In July 2013, the FASB issued an accounting standards update that will require that an unrecognized tax benefit be presented on the balance sheet as a reduction of a deferred tax asset for a net operating loss ("NOL") or tax credit carryforward under certain circumstances. This proposal is effective January 1, 2014 and is not expected to have a material impact on the consolidated financial statements.

15


Note 2.    Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the nine months ended September 30, 2013:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Subtotal
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,373

 
$
(87
)
 
$
7,146

 
$
9,432

 
$
1,759

 
$
11,191

Net income
—

 
—

 
614

 
614

 
75

 
689

Other comprehensive income
—

 
8

 
—

 
8

 
—

 
8

Common stock dividends declared ($1.0125 per share)
—

 
—

 
(330
)
 
(330
)
 
—

 
(330
)
Dividends, distributions to noncontrolling interests
—

 
—

 
—

 
—

 
(75
)
 
(75
)
Stock-based compensation and other
5

 
—

 
(45
)
 
(40
)
 
—

 
(40
)
Noncash stock-based compensation and other
19

 
—

 
(6
)
 
13

 
(1
)
 
12

Issuance of preference stock
—

 
—

 
—

 
—

 
387

 
387

Redemption of preference stock
—

 
—

 
(8
)
 
(8
)
 
(392
)
 
(400
)
Balance at September 30, 2013
$
2,397

 
$
(79
)
 
$
7,371

 
$
9,689

 
$
1,753

 
$
11,442

During the first quarter of 2013, SCE redeemed all outstanding shares of Series B and C preference stock and charged the issuance costs to retained earnings.
The following table provides Edison International's changes in equity for the nine months ended September 30, 2012:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Subtotal
 
Other
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2011
$
2,360

$
(139
)
 
$
7,834

 
$
10,055

 
$
2

 
$
1,029

 
$
11,086

Net income
—

—

 
357

 
357

 
—

 
66

 
423

Other comprehensive loss
—

(29
)
 
—

 
(29
)
 
—

 
—

 
(29
)
Contributions from noncontrolling interests
—

—

 
—

 
—

 
238

 
—

 
238

Transfer of assets to Capistrano Wind Partners
(21
)
—

 
—

 
(21
)
 
—

 
—

 
(21
)
Common stock dividends declared ($0.975 per share)
—

—

 
(318
)
 
(318
)
 
—

 
—

 
(318
)
Dividends, distributions to noncontrolling interests and other
—

—

 
—

 
—

 
(2
)
 
(66
)
 
(68
)
Stock-based compensation and other
19

—

 
(64
)
 
(45
)
 
—

 
—

 
(45
)
Noncash stock-based compensation and other
27

—

 
(2
)
 
25

 
—

 
—

 
25

Issuance of preference stock
—

—

 
—

 
—

 
—

 
804

 
804

Redemption of preference stock
—

—

 
(1
)
 
(1
)
 
—

 
(74
)
 
(75
)
Balance at September 30, 2012
$
2,385

$
(168
)
 
$
7,806

 
$
10,023

 
$
238

 
$
1,759

 
$
12,020


16


The following table provides SCE's changes in equity for the nine months ended September 30, 2013:
 
Equity Attributable to SCE
 
 
 
 
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,168

 
$
581

 
$
(29
)
 
$
7,228

 
$
1,795

 
$
11,743

Net income
—

 
—

 
—

 
717

 
—

 
717

Other comprehensive income
—

 
—

 
1

 
—

 
—

 
1

Dividends declared on common stock
—

 
—

 
—

 
(360
)
 
—

 
(360
)
Dividends declared on preferred and preference stock
—

 
—

 
—

 
(75
)
 
—

 
(75
)
Stock-based compensation and other
—

 
3

 
—

 
(39
)
 
—

 
(36
)
Noncash stock-based compensation and other
—

 
10

 
—

 
4

 
—

 
14

Issuance of preference stock
—

 
(13
)
 
—

 
—

 
400

 
387

Redemption of preference stock
—

 
8

 
—

 
(8
)