Current Report

0000950120-06-000181.txt : 20060405 0000950120-06-000181.hdr.sgml : 20060405 20060405171908 ACCESSION NUMBER: 0000950120-06-000181 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060331 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060405 DATE AS OF CHANGE: 20060405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNISOURCE ENERGY CORP CENTRAL INDEX KEY: 0000941138 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860786732 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13739 FILM NUMBER: 06742931 BUSINESS ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE STREET 2: SUITE 100 CITY: TUCSON STATE: AZ ZIP: 85701 BUSINESS PHONE: 520-571-4000 MAIL ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE, SUITE 100 STREET 2: P.O. BOX 711 CITY: TUCSON STATE: AZ ZIP: 85702 8-K 1 form8-k.htm CURRENT REPORT Current Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT

(DATE OF EARLIEST EVENT REPORTED): March 31, 2006

Commission File Number	Registrant; State of Incorporation; Address; and Telephone Number	IRS Employer Identification Number

1-13739	UNISOURCE ENERGY CORPORATION	86-0786732
	(An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets

On March 31, 2006, Advanced Energy Technologies, Inc. (AET), an indirect, wholly-owned subsidiary of UniSource Energy Corporation (UniSource Energy) completed the sale of all of the capital stock of Global Solar Energy, Inc. (Global Solar) to Solon AG and I-Sol Ventures GmbH.

The buyers paid $16 million in cash, which was used to satisfy $10 million of secured promissory notes held by a UniSource Energy subsidiary with the remainder paid to AET. UniSource Energy expects to record approximately $1 million of after-tax losses related to the discontinued operations and disposal of Global Solar.

In addition to the cash purchase price, Global Solar granted AET a ten year option to purchase, for a nominal amount, between 5 and 10 percent of the common stock of Global Solar, determined on a fully diluted basis. The option is only exercisable after the seventh anniversary of the closing or upon the occurrence of certain events including a sale of all or substantially all of the assets of Global Solar, a merger, a change of control transaction, an initial public offering of Global Solar common stock or the payment by Global Solar of dividends in excess of specified amounts.

Item 9.01 Financial Statements and Exhibits

(b) Pro Forma Financial Information

Exhibit Number	Description of Exhibit
99.1	Pro Forma Financial Information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 5, 2006		UNISOURCE ENERGY CORPORATION —————————————————— (Registrant) / s / Kevin P. Larson
		—————————————————— Senior Vice President and Principal Financial Officer

Exhibit Index

Exhibit Number	Description of Exhibit
99.1	Pro Forma Financial Information

EX-99.1 2 ex99-1.htm PRO FORMA FINANCIAL INFORMATION Pro Forma Financial Information

Exhibit 99.1

Pro Forma Financial Information

The unaudited pro forma condensed consolidated financial statements present financial information for UniSource Energy giving effect to the sale of Global Solar. The unaudited pro forma condensed statements of income for the years ended December 31, 2005, 2004 and 2003 are presented as if the disposition of Global Solar had occurred at the beginning of the year presented. The unaudited pro forma condensed balance sheet as of December 31, 2005 is presented as if the transaction occurred on that date, as more fully described in the accompanying notes to the pro forma condensed consolidated financial information. The pro forma adjustments are based on available information that management believes are reasonable at the date of this filing.

The unaudited pro forma condensed consolidated financial information should be read in conjunction with the UniSource Energy historical financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2005. The unaudited pro forma condensed consolidated financial information presented herein is for informational purposes only. It is not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the disposition been completed as of the dates presented. The information is not representative of future results of operations or financial position.

UNISOURCE ENERGY CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2005

(Unaudited)

			Pro Forma
	As Reported		Adjustments						Pro Forma
	- Thousands of Dollars, Except Per Share Amounts -
Operating Revenues
Electric Retail Sales	$	895,411	$	-				$	895,411
Electric Wholesale Sales		178,667		-					178,667
Gas Revenue		135,909		-					135,909
Other Revenues		19,548		(5,479	)	(a	)		14,069
Total Operating Revenues		1,229,535		(5,479	)				1,224,056

Operating Expenses
Fuel		226,278		-					226,278
Purchased Energy		324,351		-					324,351
Other Operations and Maintenance		228,237		(12,637	)	(a	)		215,600
Depreciation and Amortization		135,556		(2,979	)	(a	)		132,577
Amortization of Transition Recovery Asset		56,418		-					56,418
Taxes Other Than Income Taxes		47,737		(409	)	(a	)		47,328
Total Operating Expenses		1,018,577		(16,025	)				1,002,552
Operating Income		210,958		10,546					221,504

Other Income (Deductions)
Interest Income		19,838		-					19,838
Other Income		8,830		-					8,830
Total Other Income (Deductions)		28,668		-					28,668

Interest Expense
Long-Term Debt		76,762		-					76,762
Interest on Capital Leases		79,098		-					79,098
Other Interest Expense		4,436		-					4,436
Total Interest Expense		160,296		-					160,296

Income From Continuing Operations Before Income Taxes		79,330		10,546					89,876
Income Tax Expense		32,560		5,063		(b	)		37,623

Income from Continuing Operations	$	46,770	$	5,483				$	52,253

Weighted-average Shares of Common Stock Outstanding (000)
Basic		34,798							34,798
Diluted		38,851							38,851

Income From Continuing Operations per Common Share
Basic	$	1.35						$	1.51
Diluted	$	1.30						$	1.44

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

UNISOURCE ENERGY CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2004

(Unaudited)

			Pro Forma
	As Reported		Adjustments						Pro Forma
	- Thousands of Dollars, Except Per Share Amounts -
Operating Revenues
Electric Retail Sales	$	862,258	$	-				$	862,258
Electric Wholesale Sales		160,154		-					160,154
Gas Revenue		126,666		-					126,666
Other Revenues		19,900		(3,990	)	(a	)		15,910
Total Operating Revenues		1,168,978		(3,990	)				1,164,988

Operating Expenses
Fuel		212,514		-					212,514
Purchased Energy		250,668		-					250,668
Other Operations and Maintenance		252,711		(9,036	)	(a	)		243,675
Depreciation and Amortization		135,315		(2,896	)	(a	)		132,419
Amortization of Transition Recovery Asset		50,153		-					50,153
Taxes Other Than Income Taxes		48,227		(361	)	(a	)		47,866
Total Operating Expenses		949,588		(12,293	)				937,295
Operating Income		219,390		8,303					227,693

Other Income (Deductions)
Interest Income		20,192		-					20,192
Other Income		8,591		-					8,591
Total Other Income (Deductions)		28,783		-					28,783

Interest Expense
Long-Term Debt		80,968		-					80,968
Interest on Capital Leases		85,912		-					85,912
Other Interest Expense		1,428		-					1,428
Total Interest Expense		168,308		-					168,308

Income From Continuing Operations Before Income Taxes		79,865		8,303					88,168
Income Tax Expense		33,946		3,240		(b	)		37,186

Income from Continuing Operations	$	45,919	$	5,063				$	50,982

Weighted-average Shares of Common Stock Outstanding (000)
Basic		34,380							34,380
Diluted		35,041							35,041

Income From Continuing Operations per Common Share
Basic	$	1.34						$	1.48
Diluted	$	1.31						$	1.45

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

UNISOURCE ENERGY CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2003

(Unaudited)

			Pro Forma
	As Reported		Adjustments						Pro Forma
	- Thousands of Dollars, Except Per Share Amounts -
Operating Revenues
Electric Retail Sales	$	746,578	$	-				$	746,578
Electric Wholesale Sales		151,111		-					151,111
Gas Revenue		46,520		-					46,520
Other Revenues		28,546		(2,104	)	(a	)		26,442
Total Operating Revenues		972,755		(2,104	)				970,651

Operating Expenses
Fuel		210,163		-					210,163
Purchased Energy		132,754		-					132,754
Other Operations and Maintenance		216,323		(10,892	)	(a	)		205,431
Depreciation and Amortization		130,643		(2,748	)	(a	)		127,895
Amortization of Transition Recovery Asset		31,752		-					31,752
Taxes Other Than Income Taxes		48,115		(385	)	(a	)		47,730
Total Operating Expenses		769,750		(14,025	)				755,725
Operating Income		203,005		11,921					214,926

Other Income (Deductions)
Interest Income		20,493		-					20,493
Other Income		1,686		-					1,686
Total Other Income (Deductions)		22,179		-					22,179

Interest Expense
Long-Term Debt		80,844		-					80,844
Interest on Capital Leases		84,080		-					84,080
Other Interest Expense		1,708		-					1,708
Total Interest Expense		166,632		-					166,632

Income From Continuing Operations Before Income Taxes		58,552		11,921					70,473
Income Tax Expense		12,082		4,449		(b	)		16,531

Income from Continuing Operations	$	46,470	$	7,472				$	53,942

Weighted-average Shares of Common Stock Outstanding (000)
Basic		33,828							33,828
Diluted		34,339							34,339

Income From Continuing Operations per Common Share
Basic	$	1.38						$	1.60
Diluted	$	1.35						$	1.57

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

UNISOURCE ENERGY CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2005

(Unaudited)

				Pro Forma
	As Reported			Adjustments						Pro Forma
ASSETS	- Thousands of Dollars -
Utility Plant
Plant in Service	$	3,167,900		$	-				$	3,167,900
Utility Plant under Capital Leases		723,900			-					723,900
Construction Work in Progress		160,186			-					160,186
Total Utility Plant		4,051,986			-					4,051,986
Less Accumulated Depreciation and Amortization		(1,408,158	)		-					(1,408,158	)
Less Accumulated Amortization of Capital Lease Assets		(472,367	)		-					(472,367	)
Total Utility Plant - Net		2,171,461			-					2,171,461

Investments and Other Property		225,060			(13,066	)	(c	)		211,994
Current Assets		444,514			8,850		(d	)		453,364
Regulatory and Other Assets		285,745			-					285,745

Total Assets	$	3,126,780		$	(4,216	)			$	3,122,564

CAPITALIZATION AND OTHER LIABILITIES
Capitalization
Common Stock Equity	$	616,741		$	(949	)	(e	)	$	615,792
Capital Lease Obligations		665,737			-					665,737
Long-Term Debt		1,212,420			-					1,212,420
Total Capitalization		2,494,898			(949	)				2,493,949

Current Liabilities		344,033			(14,806	)	(f)(g	)		329,227
Deferred Credits and Other Liabilities		287,849			11,539		(g	)		299,388

Total Capitalization and Other Liabilities	$	3,126,780		$	(4,216	)			$	3,122,564

See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Unaudited)

1. Transaction Summary

On March 31, 2006, Advanced Energy Technologies, Inc. (AET), an indirect, wholly-owned subsidiary of UniSource Energy Corporation (UniSource Energy) sold all of the capital stock of Global Solar Energy, Inc. (Global Solar) to Solon AG and I-Sol Ventures GmbH (collectively “the Buyers”). As part of the sale transaction, on March 30, 2006, we acquired the minority interest held by a third party.

Upon closing of the sale, effective March 31, 2006, the Buyers paid $16 million in cash, which was used to satisfy $10 million of secured promissory notes and accrued interest of $1.3 million held by a UniSource Energy subsidiary with the remainder payable to AET. In addition to the cash purchase price, Global Solar granted AET a ten year option to purchase, for a nominal amount, between 5 and 10 percent of the common stock of Global Solar, determined on a fully diluted basis. The option is only exercisable after the seventh anniversary of the closing or upon the occurrence of certain events including a sale of all or substantially all of the assets of Global Solar, a merger, a change of control transaction, an initial public offering of Global Solar common stock or the payment by Global Solar of dividends in excess of specified amounts.

2. Basis of Presentation

The above unaudited pro forma condensed consolidated financial statements present financial information for UniSource Energy giving effect to the sale of Global Solar. The unaudited pro forma condensed balance sheet as of December 31, 2005 is presented as if the transaction occurred on that date. The unaudited pro forma condensed statements of income for the years ended December 31, 2005, 2004 and 2003 are presented as if the transaction had occurred at the beginning of the year presented. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of UniSource Energy and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2005.

The unaudited pro forma condensed consolidated financial statements include adjustments related to the sale of Global Solar. These adjustments are based on information available that UniSource Energy believes is reasonable as of the date of this filing. Actual results may differ from the information presented. The pro forma adjustments are described in the following notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial statements.

3. Pro Forma Condensed Consolidated Statements of Income

(a)	Reflects the elimination of revenues and expenses of Global Solar for the years ended December 31, 2005, 2004 and 2003.

(b)	Reflects the elimination of UniSource Energy’s tax benefit recognized as a result of Global Solar’s losses for the years ended December 31, 2005, 2004 and 2003.

4. Pro Forma Condensed Consolidated Balance Sheet

(c)	Reflects the elimination of Global Solar’s long-term assets of $13 million from Other Property as of December 31, 2005.

(d)	Includes the net cash received of $14.9 million, equal to the gross proceeds from the sale of $16 million, less: $1.1 million of estimated closing costs, $0.1 million to purchase the minority interest of Global Solar stock owned by a third party and $6 million of Global Solar's current assets.

(e)	Reflects the estimated after tax loss recognized on the sale of Global Solar of approximately $1 million as follows (in thousands):

Net proceeds	$14,920
Payment of MEH note payable ⁽¹⁾	(11,325)
Payment of amounts owed to AET ⁽²⁾	(1,405)
Basis in Global Solar stock ⁽³⁾	(3,761)
Estimated loss on sale	(1,571)
Income tax expense	(622)
Estimated after-tax loss on sale	$(949)

⁽¹⁾ Represents $10 million note payable and $1.3 million of related accrued interest owed to Millennium Energy Holdings, Inc. (“MEH”), a wholly owned subsidiary of UniSource Energy.

⁽²⁾ Represents $1.4 million payable to AET as of December 31, 2005 required to be repaid using proceeds from the sale.

⁽³⁾ Represents the basis in Global Solar stock as of December 31, 2005, adjusted for the $0.1 million payment to purchase the minority interest in Global Solar’s stock (see 4(d) above).

(f)	Includes a $0.6 million income tax benefit related to the estimated $1.6 million loss on the sale of Global Solar.

(g)	Reflects the reclassification of noncurrent deferred tax assets of $12 million included in UniSource Energy’s noncurrent deferred tax liabilities reported in Deferred Credits and Other Liabilities to UniSource Energy’s current taxes payable reported in Current Liabilities.