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.