EX-99.2 8 a05-19017_1ex99d2.htm EXHIBIT 99

Exhibit 99.2

 

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

 

CONDENSED BALANCE SHEETS
(in millions)

 

 

Balance at December 31,

 

 

 

2004

 

2003

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

183

 

$

673

 

Advances in affiliates

 

22

 

398

 

Other current assets

 

3

 

9

 

Total current assets

 

208

 

1,080

 

Equipment

 

15

 

20

 

Accumulated depreciation

 

(13

)

(15

)

Net equipment

 

2

 

5

 

Restricted cash

 

—

 

361

 

Investments in subsidiaries

 

8,848

 

4,810

 

Other investments

 

31

 

24

 

Deferred income taxes

 

104

 

478

 

Other

 

14

 

32

 

Total Assets

 

$

9,207

 

$

6,790

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable – related parties

 

$

3

 

$

2

 

Accounts payable - other

 

15

 

28

 

Income taxes payable

 

83

 

258

 

Other

 

53

 

158

 

Total current liabilities

 

154

 

446

 

Noncurrent Liabilities:

 

 

 

 

 

Long-term debt

 

280

 

883

 

Net investment in NEGT

 

—

 

1,216

 

Other

 

140

 

30

 

Total noncurrent liabilities

 

420

 

2,129

 

Preferred stock

 

—

 

—

 

Common Shareholders’ Equity

 

 

 

 

 

Common stock

 

6,518

 

6,468

 

Common stock held by subsidiary

 

(718

)

(690

)

Unearned compensation

 

(26

)

(20

)

Accumulated earnings (deficit)

 

2,863

 

(1,458

)

Accumulated other comprehensive loss

 

(4

)

(85

)

Total common shareholders’ equity

 

8,633

 

4,215

 

Total Liabilities and Shareholders’ Equity

 

$

9,207

 

$

6,790

 

 


 

CONDENSED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2004, 2003, and 2002
(in millions, except per share amounts)

 

 

2004

 

2003

 

2002

 

Administrative service revenue

 

$

85

 

$

101

 

$

96

 

Equity in earnings of subsidiaries

 

3,959

 

917

 

1,842

 

Operating expenses

 

(110

)

(133

)

(141

)

Interest income

 

15

 

20

 

30

 

Interest expense

 

(132

)

(200

)

(253

)

Other income (expense)

 

(91

)

2

 

81

 

Income before income taxes

 

3,726

 

707

 

1,655

 

Less: Income tax benefit

 

(94

)

(84

)

(68

)

Income from continuing operations

 

3,820

 

791

 

1,723

 

Gain on disposal of NEGT

 

684

 

—

 

—

 

Discontinued operations

 

—

 

(365

)

(2,536

)

Cumulative effect of changes in accounting principles

 

—

 

(6

)

(61

)

Net income (loss) before intercompany eliminations

 

$

4,504

 

$

420

 

$

(874

)

Weighted average common shares outstanding

 

$

398

 

$

385

 

$

371

 

Earnings (loss) per common share, basic  (1)

 

$

10.80

 

$

1.04

 

$

(2.30

)

Earnings (loss) per common share, diluted (1)

 

$

10.57

 

$

1.02

 

$

(2.27

)

 

CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2003, and 2002
(in millions)

 

 

 

2004

 

2003

 

2002

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

4,504

 

$

420

 

$

(874

)

Gain on disposal of NEGT (net of $30 million payment to NEGT)

 

(684

)

—

 

—

 

Loss from discontinued operations

 

—

 

365

 

2,536

 

Cumulative effect of changes in accounting principles

 

—

 

6

 

61

 

Net income from continuing operations

 

3,820

 

791

 

1,723

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

(3,959

)

(917

)

(1,842

)

Deferred taxes

 

27

 

265

 

(660

)

NEGT settlement payment

 

(30

)

—

 

—

 

Other - net

 

160

 

391

 

458

 

Net cash provided (used) by operating activities

 

18

 

530

 

(321

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

Capital expenditures

 

—

 

—

 

(1

)

Investment in subsidiaries

 

(28

)

—

 

—

 

Increase in Restricted Cash (2)

 

361

 

—

 

—

 

Net cash provided (used) by investing activities

 

333

 

—

 

(1

)

Cash Flows From Financing Activities (3):

 

 

 

 

 

 

 

Common stock issued

 

162

 

166

 

217

 

Common stock repurchased

 

(350

)

—

 

—

 

Long-term debt issued

 

—

 

581

 

847

 

Long-term debt redeemed

 

(652

)

(787

)

(908

)

Other - net

 

(1

)

1

 

—

 

Net cash provided (used) by financing activities

 

(841

)

(39

)

156

 

Net change in cash and cash equivalents

 

(490

)

491

 

(166

)

Cash and cash equivalents at January 1

 

673

 

182

 

348

 

Cash and cash equivalents at December 31

 

183

 

673

 

182

 

 

(1)                                  PG&E Corporation adopted the consensus reached by Emerging Issues Task Force, or EITF, in EITF issue No. 03-06, “Participating Securities and the Two-Class Method under FASB Statement No. 128,” or EITF 03-06, as ratified by the

 


 

Financial Accounting Standards Board on March 31, 2004.

 

PG&E Corporation currently has outstanding $280 million principal amount of convertible subordinated 9.50% notes due 2010, or Convertible Notes, that are entitled to receive (non-cumulative) dividend payments without exercising the conversion option. These Convertible Notes, which were issued in June 2002, meet the criteria of a participating security in the calculation of earnings per share using the “two-class” method.

 

Accordingly, the basic and diluted earnings per share calculations for each of the years in the three year period ended December 31, 2004 reflect the allocation of earnings between PG&E Corporation common stock and the participating security.

 

(2)                                  PG&E Corporation changed the classification of changes in restricted cash balances in this Condensed Statements of Cash Flows for the year ended December 31, 2004, to present such changes as an investing activity. This change in restricted cash balance was previously presented as an operating activity. This change in presentation resulted in a $361 million increase in investing cash flows and corresponding decrease in operating cash flows from the amounts previously reported by PG&E Corporation.  PG&E Corporation did not have any changes in restricted cash balances for the years ended December 31, 2003 and 2002 to reclassify to be consistent with 2004 presentation.

 

(3)                                  PG&E Corporation did not receive any cash dividends during 2004, 2003 and 2002.

 

 


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Boards of Directors and Shareholders of
PG&E Corporation and Pacific Gas and Electric Company

 

We have audited the consolidated financial statements of PG&E Corporation and subsidiaries (the “Company”) and Pacific Gas and Electric Company and subsidiaries (the “Utility”) as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, management’s assessment of the effectiveness of the Company’s and the Utility’s internal control over financial reporting as of December 31, 2004, and the effectiveness of the Company’s and the Utility’s internal control over financial reporting as of December 31, 2004, and have issued our reports thereon dated February 16, 2005 (October 27, 2005 as to the ninth paragraph of Note 1, which report on the financial statements expresses an unqualified opinion and includes an explanatory paragraph relating to accounting changes and changes in certain classifications); such consolidated financial statements and reports are included in this current report on Form 8-K. Our audits also included the consolidated financial statement schedules of the Company included in this current report on Form 8-K.  These consolidated financial statement schedules are the responsibility of the Company’s and the Utility’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

 

 

DELOITTE & TOUCHE LLP

 

San Francisco, California

February 16, 2005

(October 27, 2005 as to footnote 2 to Schedule I)