EX-99.2 6 ex-99_2.htm EXHIBIT 99.2 Exhibit 99.2

EXHIBIT 99.2


SOUTHERN UNION COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS


On August 24, 2006, Southern Union Company (“Southern Union” or the “Company”) completed the previously announced sale of the assets of its PG Energy natural gas distribution division (“PG Energy”) for cash proceeds of approximately $580 million, or $556.1 million after consideration of estimated working capital adjustments (the “PGE Disposition”).  Additionally, on August 24, 2006, the Company completed the previously announced sale of the assets of the Rhode Island operations of its New England Gas Company natural gas distribution division (“Rhode Island Division”) to National Grid USA for cash proceeds of approximately $575 million, or $489.9 million after consideration of estimated working capital adjustments and less debt assumed (“the Rhode Island Division Disposition”). 

The operating results of PG Energy and the Rhode Island Division have previously been reported by the Company within discontinued operations. Accordingly, the historical earnings from continuing operations within the accompanying unaudited proforma combined condensed statements of operations for the six months ended June 30, 2006 and the twelve months ended December 31, 2005 do not require adjustments to eliminate the results of PG Energy and the Rhode Island Division. On March 1, 2006, the Company acquired Sid Richardson Energy Services, Ltd. and subsidiaries ("SRES") and Richardson Energy Marketing, Ltd. ("REM") for approximately $1.6 billion in cash (the “Acquisition”) that was funded under a bridge loan facility (the “Bridge Loan”). Under the terms of the Bridge Loan, the Company is required to apply 100 percent of net cash proceeds from asset dispositions against the Bridge Loan. The following unaudited pro forma combined condensed financial statements present the financial information of Southern Union for the periods indicated after giving effect for the interrelated Acquisition, PGE Disposition and Rhode Island Division Disposition.

The unaudited consolidated condensed Southern Union balance sheet as of June 30, 2006 included in the Company’s June 30, 2006 Form 10-Q filing has been adjusted as if the dispositions had occurred on that date. The unaudited pro forma combined condensed statements of operations for the six months ended June 30, 2006 and twelve months ended December 31, 2005 assume that the Acquisition, PGE Disposition and Rhode Island Division Disposition occurred on January 1, 2005.
 
The unaudited pro forma combined condensed financial statements are based upon currently available information and certain assumptions that the Company believes are reasonable. Assumptions underlying the combined condensed pro forma adjustments are described in the accompanying notes and should be read in conjunction with the unaudited combined condensed pro forma financial statements. The unaudited pro forma combined condensed financial statements are furnished for informational purposes only and do not purport to represent the Company’s results of operations or financial condition had the Acquisition or PGE Disposition and Rhode Island Division Disposition actually occurred on the dates indicated or for any future period.

The unaudited pro forma combined condensed financial statements do not contain any adjustments to reflect cost savings or other synergies anticipated as a result of the Acquisition or PGE Disposition and Rhode Island Division Disposition.



Southern Union Company and Subsidiaries
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Six Months Ended June 30, 2006
(In thousands of dollars, except shares and per share amounts)


                          
       
 Proforma Adjustments   
       
   
Southern
 
SRES
                
 
  
 Union
  
REM
               
 
  
 Unaudited
  
Unaudited
          
 Proforma
  
 
  
 Historical
  
Historical (A)
  
 Other (B)
      
 Combined
 
Operating revenues:
                          
Gas distribution 
  
$
386,521
  
$
-
 
$
-
       
$
386,521
 
Gathering and processing 
    
278,734
   
230,549
   
-
         
509,283
 
Gas transportation and storage 
    
432,325
   
-
   
-
         
432,325
 
Other 
    
1,941
   
-
   
-
         
1,941
 
Total operating revenues
    
1,099,521
   
230,549
   
-
         
1,330,070
 
                                 
Operating expenses:
                                
Cost of gas and other energy 
    
636,899
   
220,674
   
(476
)
  
(D
)
  
857,097
 
Revenue—related taxes 
    
20,373
   
-
   
-
         
20,373
 
Operating, maintenance and general 
    
177,135
   
5,340
   
-
         
182,475
 
Depreciation and amortization 
    
69,521
   
3,127
   
9,478
   
(E
)
  
78,999
 
                 
(3,127
)
  
(E
)
      
Taxes, other than on income and revenues 
    
22,954
   
-
   
476
   
(D
)
  
23,430
 
Total operating expenses
    
926,882
   
229,141
   
6,351
         
1,162,374
 
Operating income
    
172,639
   
1,408
   
(6,351
)
        
167,696
 
                                 
Other income (expenses):
                                
Interest 
    
(105,199
)
  
(356
)
  
(13,730
)
  
(F
)
  
(87,579
)
                 
(2,600
)
  
(F
)
      
                 
5,177
   
(F
)
      
                 
675
   
(G
)
      
                 
28,454
   
(I
)
      
Earnings from unconsolidated investments 
    
27,399
   
-
   
-
         
27,399
 
Other, net 
    
38,643
   
109
   
-
         
38,752
 
Total other expenses, net
    
(39,157
)
  
(247
)
  
17,976
         
(21,428
)
                                 
Earnings from continuing operations before
                                
income taxes 
    
133,482
   
1,161
   
11,625
         
146,268
 
                                 
Federal and state income taxes (benefit)
    
43,742
   
(148
)
  
4,328
   
(H
)
  
47,922
 
Net earnings from continuing operations
    
89,740
   
1,309
   
7,297
         
98,346
 
Preferred stock dividends
    
(8,682
)
  
-
   
-
         
(8,682
)
Net earnings available for common stockholders
                                
from continuing operations 
  
$
81,058
  
$
1,309
 
$
7,297
       
$
89,664
 
                                 
Net earnings available for common stockholders
                                
from continuing operations per share: 
                                
Basic
  
$
0.72
                    
$
0.80
 
Diluted
  
$
0.70
                    
$
0.78
 
Weighted average shares outstanding:
                                
Basic
    
111,807,253
                      
111,807,253
  
                                 
Diluted
    
114,993,178
                      
114,993,178
  
                                 


See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

2

Southern Union Company and Subsidiaries
Unaudited Pro Forma Combined Condensed Statement of Operations
For the Twelve Months Ended December 31, 2005
(In thousands of dollars, except shares and per share amounts)



 
       
 Proforma Adjustments 
              
 
  
Southern
 
SRES
                    
 
  
Union
  
REM
           
Proforma
 
 
  
Historical
 
Historical (A)
  
Other (B)
       
Combined
  
Operating revenues:
                              
Gas distribution
  
$
752,699
  
$
-
 
$
-
             
$
752,699
  
Gathering and processing
          
2,451,254
   
(1,082,080
)
  
(C
)
        
1,369,174
 
Gas transportation and storage
    
505,233
   
-
   
-
               
505,233
 
Other
    
8,950
   
-
   
-
               
8,950
 
Total operating revenues
    
1,266,882
   
2,451,254
   
(1,082,080
)
              
2,636,056
 
                                       
Operating expenses:
                                      
Cost of gas and other energy
    
529,450
   
2,276,153
   
(1,082,080
)
  
(C
)
        
1,721,020
 
                 
(2,503
)
  
(D
)
            
Revenue—related taxes
    
40,080
   
-
   
-
               
40,080
 
Operating, maintenance and general
    
302,025
   
73,149
   
-
               
375,174
 
Depreciation and amortization
    
92,562
   
18,843
   
56,858
   
(E
)
        
149,420
 
                 
(18,843
)
  
(E
)
            
Taxes, other than on income and revenues
    
33,648
   
-
   
2,503
   
(D
)
        
36,151
 
Total operating expenses
    
997,765
   
2,368,145
   
(1,044,065
)
              
2,321,845
 
Operating income
    
269,117
   
83,109
   
(38,015
)
              
314,211
 
                                       
Other income (expenses):
                                      
Interest
    
(128,470
)
  
(4,373
)
  
(84,960
)
  
(F
)
        
(161,374
)
                 
(5,200
)
  
(F
)
            
                 
6,083
   
(G
)
            
                 
55,546
   
(I
)
            
                                       
Earnings from unconsolidated investments
    
70,742
         
-
               
70,742
 
Other, net
    
(8,241
)
  
(6,109
)
  
-
               
(14,350
)
Total other expenses, net
    
(65,969
)
  
(10,482
)
  
(28,531
)
              
(104,982
)
                                       
Earnings from continuing operations before income taxes
    
203,148
   
72,627
   
(66,546
)
              
209,229
 
                                       
Federal and state income taxes (benefit)
    
50,052
   
307
   
(24,775
)
  
(H
)
        
25,584
 
Net earnings from continuing operations
    
153,096
   
72,320
   
(41,771
)
              
183,645
 
Preferred stock dividends
    
(17,365
)
  
-
   
-
               
(17,365
)
Net earnings available for common stockholders
                                      
from continuing operations
  
$
135,731
  
$
72,320
 
$
(41,771
)
            
$
166,280
  
                                       
Net earnings available for common stockholders
                                      
from continuing operations per share:
                                      
Basic
  
$
1.24
                          
$
1.52
  
Diluted
  
$
1.20
                          
$
1.47
  
Weighted average shares outstanding:
                                      
Basic
    
109,395,418
                            
109,395,418
  
                                       
Diluted
    
112,794,210
                            
112,794,210
  
                                       




See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

3

Southern Union Company and Subsidiaries 
Unaudited Pro Forma Condensed Balance Sheet  
As of June 30, 2006
(In thousands of dollars)

 

       
ASSETS 
                
                       
       
Southern Union
                
       
Unaudited
  
Proforma 
      
Proforma 
  
       
Historical 
  
Adjustments 
      
Combined 
  
                         
Property, plant and equipment:
                              
Plant in service 
      
$
4,859,229
  
$
-
       
$
4,859,229
 
Construction work in progress 
        
158,389
   
-
         
158,389
 
 
        
5,017,618
   
-
         
5,017,618
 
Less accumulated depreciation and amortization 
        
(545,141
)
  
-
         
(545,141
)
Net property, plant and equipment
        
4,472,477
   
-
         
4,472,477
 
 
                              
Current assets:
                              
Cash and cash equivalents 
        
37,198
   
1,046,063
   
(J
)
  
-
 
               
(1,046,063
)
  
(K
)
      
               
(16,688
)
  
(L
)
      
               
(20,510
)
  
(M
)
      
Accounts receivable, net of allowances  
        
239,520
   
-
         
239,520
 
Accounts receivable – affiliates  
        
11,775
   
-
         
11,775
 
Inventories  
        
216,935
   
-
         
216,935
 
Gas imbalances - receivable 
        
76,810
   
-
         
76,810
 
Prepayments and other assets 
        
73,617
   
(94
)
  
(L
)
  
73,523
 
Assets held for sale 
        
1,251,051
   
(1,251,051
)
  
(J
)
  
-
 
Total current assets
        
1,906,906
   
(1,288,343
)
        
618,563
 
 
                              
Goodwill
       
90,208
   
-
         
90,208
 
 
                              
Deferred charges:
                             
Regulatory assets  
        
57,509
   
-
         
57,509
 
Deferred charges 
        
92,683
   
(28,157
)
  
(N
)
  
60,684
 
               
(3,532
)
  
(J
)
      
               
(310
)
  
(L
)
      
 Total deferred charges
        
150,192
   
(31,999
)
        
118,193
 
 
                              
Unconsolidated investments
       
709,953
   
-
         
709,953
 
 
                              
Other
        
43,141
   
-
         
43,141
 
                               
 Total assets
      
$
7,372,877
  
$
(1,320,342
)
      
$
6,052,535
 
                               
 

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements


4

Southern Union Company and Subsidiaries 
Unaudited Pro Forma Condensed Balance Sheet
As of June 30, 2006
(In thousands of dollars)


STOCKHOLDERS' EQUITY AND LIABILITIES              
                                      
   
Southern
Union  
                                
   
Unaudited  
       
 Proforma
            
 Proforma
       
   
Historical  
       
 Adjustments
              Combined
 
     
                                      
Stockholders’ equity:
                                          
Common stock, $1 par value; authorized 200,000,000 shares; 
                                          
issued 113,084,025 shares at June 30, 2006
  
$
113,084 
  
 
 
  
$
 -               
$
 113,084   
 
              
Preferred stock, no par value; authorized 6,000,000 shares; 
                 -                         
issued 920,000 shares at June 30, 2006
   
230,000  
    
 
     -                  230,000                   
Premium on capital stock 
    
1,687,693
          -                 
1,687,693
     
                                           
Less treasury stock, at cost 
    
(27,566
)
         -                 
(27,566
)
    
Less common stock held in trust
    
(10,610
)
         -                 
(10,610
)
    
Deferred compensation plans 
    
10,674
          -                 
10,674
     
Accumulated other comprehensive loss 
    
(54,096
)
        
25,864
   
(L
)
        
(28,232
)
    
Retained earnings (accumulated deficit) 
    
-
         
(164,119
)
  
(N
)
        
(164,119
)
    
Total stockholders' equity 
    
1,949,179
         
(138,255
)
              
1,810,924
     
 
                                                      
Long-term debt and capital lease obligation
   
1,522,694
         
(15,000
)
  
(M
)
        
1,507,694
     
 
                                                      
Total capitalization
    
3,471,873  
    
 
    
(153,255 
)
 
 
         3,318,618                   
 
                                                      
Current liabilities:
    
                                   
Long-term debt and capital lease obligation  
                                          
due within one year  
    
576,164
          -                 
576,164
     
Notes payable  
    
1,851,000
         
(1,046,063
)
  
(K
)
        
805,863
     
                 
926
   
(M
)
                
Accounts payable and accrued liabilities 
    
202,411
          -                 
202,411
     
Federal, state and local taxes payable 
    
38,695
         
17,922
   
(N
)
        
56,617
     
Accrued interest 
    
41,324
         
(665
)
  
(M
)
        
40,659
     
Customer deposits 
    
14,268
          -                 
14,268
     
Deferred gas purchases 
    
13,697
          -                 
13,697
     
Gas imbalances - payable 
    
113,538
          -                 
113,538
     
Other  
    
126,679
         
(4,382
)
  
(L
)
        
122,297
     
Liabilities related to assets held for sale 
    
204,633
         
(204,633
)
  
(J
)
        
-
     
Total current liabilities 
    
3,182,409
         
(1,236,895
)
              
1,945,514
     
 
                                                      
Deferred credits:
                                          
Regulatory liabilities  
    
7,142
          -                 
7,142
     
Deferred credits 
    
291,221
         
(45,801
)
  
(L
)
        
241,055
     
                 
(4,365
)
  
(N
)
                
Total deferred credits 
    
298,363
         
(50,166
)
              
248,197
     
 
                                                      
Accumulated deferred income taxes
   
420,232
         
16,571
   
(L
)
        
540,206
     
 
                
103,403  
    
(N 
)
  
 
 
                      
Commitments and contingencies
                                          
 
                                                      
Total stockholders' equity and liabilities
  
$
7,372,877 
 
  
$
(1,320,342 
  
)
 
 
 
        
$
 6,052,535   
 
              
                                           
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

5

SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS



Adjustments to the Unaudited Pro Forma Combined Condensed Statements of Operations:
      
                       
(A)
Reflects the historical SRES and REM results of operations amounts for the two month period ended February 28, 2006 and twelve month period ended December 31, 2005.
                       
(B)
Reflects proforma adjustments related to the Acquisition, PGE Disposition and Rhode Island Division Disposition.
                       
(C)
Reflects the elimination of historical affiliate sales and cost of sales transactions between SRES and REM.
                         
(D)
Reflects the reclassification of historical amounts relating to SRES and REM Taxes, other than on income to conform to Southern Union's presentation.
                         
(E)
Reflects the elimination of historical depreciation and amortization expense of SRES and REM and the adjustment for depreciation and amortization expense related to the stepped-up basis of Property, plant and equipment ("PP&E") and definite-lived intangibles ("Intangibles") of $1.57 billion. The estimated fair value of the assets has been adjusted to reflect the results of a third-party appraisal.
 

   
12 Months Ended  
  
2 Months Ended
  
   
December 31, 2005  
  
February 28, 2006
  
 
(In thousands)    
  
        
 (1)
  
Estimated new book value of PP&E and Intangibles
  
$
1,566,445
  
$
1,566,445
 
Estimated average future useful life (in years)
    
27.55
    
27.55
  
Estimated annual depreciation and amortization expense
    
56,858
   
56,858
 
Adjustment factor for the 2006 period (2 months/12 months)
    
-
    
16.67
%
Estimated pro forma depreciation and amortization expense
  
$
56,858
  
$
9,478
 
               
Eliminate historical depreciation expense prior to the Acquisition
  
$
18,843
  
$
3,127
 
               
 

   
(1) As the Acquisition was completed on March 1, 2006, the Company's historical results of operations included in its June 30, 2006 Form 10-Q already include depreciation and amoritization expense for the four month period ended June 30, 2006 resulting from the Acquisition.
                         
(F)
Reflects the inclusion of interest expense and the amortization of related loan issuance costs associated with Southern Union's $1.6 billion Bridge Loan used to finance the Acquisition. The interest rate used in the following calculation is 5.31 percent, based on a spread of 57.5 basis points over the one-month USD LIBOR quote in accordance with the terms of the Bridge Loan, as of March 31, 2006. Additionally, in connection with this borrowing, Southern Union incurred approximately $7.8 million of direct costs. These issuance costs were capitalized and are amortized as an adjustment to interest expense for pro forma purposes over the eighteen month period included in the pro forma presentation rather than the Bridge Loan's actual 364 day term. For every 1/8 percent change in the interest rate assumed for the Bridge Loan, the monthly interest expense would change by approximately $167,000.
 

 
6


     
12 Months Ended 
    
2 Months Ended
  
     
December 31, 2005 
    
February 28, 2006
  
     
(In thousands) 
  
           
(1)
 
Principal Bridge Loan balance outstanding
  
$
1,600,000
  
$
1,600,000
  
Estimated interest rate on the Bridge Loan
    
5.31
%
  
5.31
%
Estimated interest expense on the Bridge Loan
    
84,960
   
84,960
 
Adjustment factor for the 2006 period (59 days/365 days)
    
-
   
16.16
%
Estimated pro forma Bridge Loan interest expense
  
$
84,960
  
$
13,730
  
               
 

   
(1) As the Acquisition was completed on March 1, 2006, the Company's historical results of operations included in its June 30, 2006 Form 10-Q already include Bridge Loan
interest expense for the four month period ended June 30, 2006 resulting from the Acquisition.

     
12 Months Ended 
    
6 Months Ended
  
     
December 31, 2005 
    
June 30, 2006
  
     
(In thousands) 
  
               
Bridge Loan issuance costs
  
$
7,800
  
$
7,800
  
Amortization adjustment factor for 18 month period
    
66.67
%
  
33.33
%
Estimated pro forma Bridge Loan issuance cost amortization
  
$
5,200
  
$
2,600
  
               
Eliminate historical Bridge Loan issuance cost amortization
        
$
5,177
  
               


(G)
  
Reflects the elimination of historical interest expense associated with SRES borrowings that were not assumed by Southern Union in the Acquisition.
                         
(H)
  
Reflects the income tax consequences of the pro forma adjustments at Southern Union's estimated statutory federal and state tax rate of 37.23 percent.
                         
(I)
  
Reflects the reduction in interest expense associated with the repayment of amounts outstanding on the Bridge Loan from the estimated net proceeds of $1.046 billion received from the PGE Disposition and Rhode Island Division Disposition. The interest expense adjustment for the period prior to the Acquisition is calculated using the credit facility rate of 5.31 percent as of March 31, 2006. The interest expense adjustment for the four month period ended June 30, 2006 is calculated using the 5.57 percent historical average rate applicable to the Bridge Loan for the same four month period.
 

     
12 Months Ended 
    
6 Months Ended
  
     
December 31, 2005 
    
June 30, 2006
  
   
(In thousands) 
  
               
Estimated net sales proceeds from PGE Disposition
  
$
556,134
  
$
556,134
  
Estimated net sales proceeds from Rhode Island Division Disposition
    
489,929
   
489,929
 
Total estimated net sales proceeds
    
1,046,063
   
1,046,063
 
Estimated Bridge Loan interest rate prior to March 1, 2006
    
5.31
%
  
5.31
%
Estimated Bridge Loan interest rate for the four month period ended June 30, 2006
    
-
   
5.57
%
Estimated interest expense for the 2005 period
    
55,546
       
Estimated interest expense for the two month period ended February 28, 2006
          
8,979
 
Estimated interest expense for the four month period ended June 30, 2006
          
19,475
 
Estimated proforma interest expense adjustment
  
$
55,546
  
$
28,454
  
               

7


 
Adjustments to the Unaudited Proforma Condensed Balance Sheet:

(J)
Reflects net proceeds received from the PGE Disposition and the Rhode Island Division Disposition and the elimination of the PG Energy and Rhode Island Division balances as of June 30, 2006 included in Assets held for sale and Liabilities related to assets held for sale balances. Also reflected is a true up to the estimated loss on sale of approximately $3.9 million related to these two divisions which is included as a component of the adjustment to Retained earnings (accumulated deficit) described in Note (N) which is primarily comprised of a $3.5 million write-off of debt issuance costs associated with the Rhode Island Division’s debt that was assumed in the disposition.
 

     
Rhode Island Division 
    
PG Energy
    
Total
  
     
(In thousands) 
  
                     
Sales price
  
$
575,000
  
$
580,000
  
$
1,155,000
  
Estimated working capital adjustment
    
(6,809
)
  
(23,866
)
  
(30,675
)
Debt assumed
    
(76,595
)
  
-
   
(76,595
)
Unpaid interest on debt assumed
    
(1,667
)
  
-
   
(1,667
)
Estimated net cash proceeds
  
$
489,929
  
$
556,134
  
$
1,046,063
  
                     


(K)
Reflects a cash payment of $1.0 billion to repay a portion of the Bridge Loan from the proceeds received from the PGE Disposition and the Rhode Island Division Disposition. The Company is required to apply the net sales proceeds against the Bridge Loan.
   
(L)
Reflects the elimination of the pension-related assets and liabilities including balances recorded in Accumulated other comprehensive loss, and the related deferred tax balances for both the PG Energy pension plan and the Rhode Island Division pension plan, that were assumed by UGI Corporation and National Grid. Additionally, resulting from the August 24, 2006 definitive agreement between Southern Union and UGI Corporation, Southern Union agreed to transfer PG Energy’s pension obligation to UGI Corporation. Southern Union provided additional funding of approximately $15.1 million for the unfunded pension liability. The pro forma adjustments also reflect the impact of $1.6 million of additional funding made in July 2006. This adjustment reflects the aforementioned cash payments and a $9.3 million charge associated with the settlement of the PG Energy pension plan which is included as a component of the adjustment to Retained earnings (accumulated deficit) described in Note (N).
   
(M)
Reflects a cash payment of $21.4 million to retire mortgage bonds with principal, premium and accrued interest payable amounts totaling $15.0 million, $5.8 million and $665,000, respectively. Such mortgage bonds were collateralized by certain PG Energy assets that were sold. Such retirement was funded with cash on hand of $20.5 million and borrowings of $926,000 under the Company’s revolving credit facility. The $5.8 million premium amount is included as a component of the adjustment to Retained earnings (accumulated deficit) described in Note (N).
   
(N)
Reflects the estimated adjustments to the balance sheet as of June 30, 2006 as a result of the like-kind exchange discussed below and the estimated income tax expense associated with the PGE Disposition and the Rhode Island Division Disposition previously disclosed in ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Net Earnings from Discontinued Operations in the Company’s Form 8-K filed with the SEC on July 17, 2006. The Company anticipates the PGE Disposition and Rhode Island Division Disposition will qualify as part of a like-kind exchange of property covered by Section 1031 of the Internal Revenue Code thereby enabling the Company to achieve certain tax deferrals. The adjustments assume no goodwill for tax purposes was allocated to assets sold and a like-kind efficiency of approximately 90 percent. If it is subsequently determined that a portion of the value of the assets sold will be assigned to tax goodwill, an estimated shift of $3.7 million of income tax from deferred to currently payable will occur for every $10 million increment of goodwill. For every 5 percent change in like-kind efficiency, a corresponding shift of approximately $13.3 million of income tax from deferred to current payable would occur. Retained earnings (accumulated deficit) has been reduced by approximately $145.1 million primarily due to (i) the tax expense associated with the $376.2 million of book basis goodwill for which no tax basis had been previously assigned and (ii) the tax expense associated with the tax gain on the assets sold. This adjustment to Retained earnings (accumulated deficit), combined with the other adjustments described in the Notes referenced below, results in a total adjustment to Retained earnings (accumulated deficit) of $164.1 million as follows:
 

     
(In thousands) 
  
Tax expense associated with dispositions
 
$
145,117
  
Premium paid related to mortgage bonds (Note M)
    
5,771
 
Settlement of PG Energy pension plan (Note L)
    
9,344
 
Additional loss associated with dispositions (Note J)
    
3,887
 
   
$
164,119