EX-D-1
Pro Forma Financial Statements for Exelon Corporation
Unaudited Pro Forma Condensed Statement of Income
(Millions Except Per Share Data)
For the Nine Month Period Ended September 30, 2000
<TABLE>
<CAPTION>
PECO
Energy
PECO Energy Prior to
PECO Transition Bond Merger
Energy Pro Forma Pro
As Filed Adjustments(1) Forma
-------- --------------- --------
<S> <C> <C> <C>
Operating Revenues........................ $4,366 $-- $4,366
------ ---- ------
Operating Expenses
Fuel and Energy Interchange............. 1,515 -- 1,515
Operation and Maintenance............... 1,305 -- 1,305
Depreciation and Amortization........... 244 -- 244
Taxes Other Than Income Taxes........... 197 -- 197
------ ---- ------
Total Operating Expenses.............. 3,261 -- 3,261
------ ---- ------
Operating Income.......................... 1,105 -- 1,105
------ ---- ------
Other Income and Deductions
Interest Expense........................ (333) 31 (302)
Other, net.............................. 71 4 75
------ ---- ------
Total Other Income and Deductions..... (262) 35 (227)
------ ---- ------
Income Before Income Taxes and
Extraordinary Item....................... 843 35 878
Income Tax Expense........................ 316 14 330
------ ---- ------
Income Before Extraordinary Item.......... $ 527 $ 21 $ 548
====== ==== ======
Preferred Stock Dividends................. $ 8 $ (1) $ 7
====== ==== ======
Income Before Extraordinary Item per
Share.................................... $ 2.96
======
Income Before Extraordinary Item per
Share--Diluted........................... $ 2.94
======
Average Basic Shares Outstanding.......... 175.0
======
Average Diluted Shares Outstanding........ 176.0
======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements
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<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Income
(Millions Except Per Share Data)
For the Nine Month Period Ended September 30, 2000
<TABLE>
<CAPTION>
PECO
Energy
Prior to Unicom Merger
Merger as Pro Forma Exelon
Pro Forma Filed Adjustments Pro Forma
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues................... $4,366 $5,686 $(42)(7) $10,010
Operating Expenses
Fuel and Energy Interchange........ 1,515 1,705 (42)(7) 3,178
Operation and Maintenance.......... 1,305 1,749 25 (6) 3,079
Depreciation and Amortization...... 244 832 (161)(6) 915
Goodwill Amortization.............. -- -- 86 (6) 86
Taxes Other Than Income Taxes...... 197 406 -- 603
------ ------ ----- -------
Total Operating Expenses......... 3,261 4,692 (92) 7,861
------ ------ ----- -------
Operating Income..................... 1,105 994 50 2,149
------ ------ ----- -------
Other Income and Deductions
Interest Expense................... (302) (412) -- (714)
Preferred and Preference Stock
Dividends......................... -- (25) (10)(8) (35)
Other, net......................... 75 119 (15)(6)
3 (8) 182
------ ------ ----- --------
Total Other Income and
Deductions...................... (227) (318) (22) (567)
------ ------ ----- --------
Income Before Income Taxes and
Extraordinary Item.................. 878 676 28 1,582
Income Tax Expense................... 330 167 60 (10) 557
------ ------ ----- --------
Income Before Extraordinary Item..... $ 548 $ 509 $ (32) $ 1,025
====== ====== ===== ========
Preferred Stock Dividends............ $ 7 $ (7)(8) $ --
====== ===== ========
Income Before Extraordinary Item per
Share............................... $ 2.82 $ 3.22
====== ======
Income Before Extraordinary Item per
Share--Diluted...................... $ 2.80 $ 3.20
====== ======
Average Basic Shares Outstanding..... 180.7 318.5 (5)
====== ======
Average Diluted Shares Outstanding... 181.9 320.6
====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
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<PAGE>
Unaudited Pro Forma Condensed Statement of Income
(Millions Except Per Share Data)
For the Year Ended December 31, 1999
PECO Energy PECO Energy
Securitization Prior to
PECO Energy Pro Forma Merger
As Filed Adjustments(1) Pro Forma
----------- -------------- -----------
Operating Revenues................... $5,437 $-- $5,437
------ ---- ------
Operating Expenses
Fuel and Energy Interchange........ 2,145 -- 2,145
Operation and Maintenance.......... 1,384 -- 1,384
Depreciation and Amortization...... 237 -- 237
Taxes Other Than Income Taxes...... 262 -- 262
------ ---- ------
Total Operating Expenses......... 4,028 -- 4,028
------ ---- ------
Operating Income..................... 1,409 -- 1,409
------ ---- ------
Other Income and Deductions
Interest Expense................... (396) (50) (446)
Other, net......................... (36) 12 (24)
------ ---- ------
Total Other Income and
Deductions...................... (432) (38) (470)
------ ---- ------
Income Before Income Taxes and
Extraordinary Item.................. 977 (38) 939
Income Tax Expense................... 358 (15) 343
------ ---- ------
Income Before Extraordinary Item..... $ 619 $(23) $ 596
====== ==== ======
Preferred Stock Dividends............ $ 12 $ (1) $ 11
====== ==== ======
Income Before Extraordinary Item per
Share............................... $ 3.10
======
Income Before Extraordinary Item per
Share--Diluted...................... $ 3.08
======
Average Basic Shares Outstanding..... 196.3
======
Average Diluted Shares Outstanding... 197.6
======
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
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Page 39
<PAGE>
Unaudited Pro Forma Condensed Statement of Income
(Millions Except Per Share Data)
For the Year Ended December 31, 1999
Unicom Unicom Unicom
Fossil Sale Securitization Prior to
Unicom Pro Forma Pro Forma Merger
As Filed Adjustments(2) Adjustments(3) Pro Forma
-------- ------------- -------------- ---------
Operating Revenues $6,848 $ -- $ -- $6,848
------ ----- ----- ------
Operating Expenses
Fuel and Energy
Interchange............. 1,549 257 -- 1,806
Operation and
Maintenance............. 2,428 (271) -- 2,157
Depreciation and
Amortization............ 843 26 113 982
Taxes Other Than Income
Taxes................... 508 (16) -- 492
------ ----- ----- ------
Total Operating
Expenses.............. 5,328 (4) 113 5,437
------ ----- ----- ------
Operating Income........... 1,520 4 (113) 1,411
------ ----- ----- ------
Other Income and Deductions
Interest Expense......... (564) -- 20 (544)
Preferred and Preference
Stock Dividends......... (53) -- 10 (43)
Other, net............... 1 -- -- 1
------ ----- ----- ------
Total Other Income and
Deductions............ (616) -- 30 (586)
------ ----- ----- ------
Income Before Income Taxes
and Extraordinary Item.... 904 4 (83) 825
Income Tax Expense......... 307 4 (37) 274
------ ----- ----- ------
Income Before Extraordinary
Item...................... $ 597 $ -- $ (46) $ 551
====== ===== ===== ======
Income Before Extraordinary
Item per Share............ $ 2.75
======
Income Before Extraordinary
Item per Share--Diluted... $ 2.74
======
Average Basic Shares
Outstanding............... 217.3
======
Average Diluted Shares
Outstanding............... 218.1
======
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
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Page 40
<PAGE>
Unaudited Pro Forma Combined Condensed Statement of Income
(Millions Except Per Share Data)
For the Year Ended December 31, 1999
PECO Energy Unicom
Prior to Prior to Merger
Merger Merger Pro Forma Exelon
Pro Forma Pro Forma Adjustments Pro Forma
----------- --------- ----------- ---------
Operating Revenues.......... $5,437 $6,848 $(60)(7) $12,225
------ ------ ---- -------
Operating Expenses
Fuel and Energy
Interchange.............. 2,145 1,806 (60)(7) 3,891
Operation and
Maintenance.............. 1,384 2,157 36 (6) 3,577
Depreciation and
Amortization............. 237 982 (427)(6) 792
Goodwill Amortization..... -- -- 115 (6) 115
Taxes Other Than Income
Taxes.................... 262 492 -- 754
------ ------ ---- -------
Total Operating
Expenses............... 4,028 5,437 (336) 9,129
------ ------ ---- -------
Operating Income............ 1,409 1,411 276 3,096
------ ------ ---- -------
Other Income and Deductions
Interest Expense.......... (446) (544) (990)
Preferred and Preference
Stock Dividends.......... -- (43) (20)(8) (63)
Other, net................ (24) 1 (20)(6)
9 (8) (34)
------ ------ ---- -------
Total Other Income and
Deductions............. (470) (586) (31) (1,087)
------ ------ ---- -------
Income Before Income Taxes
and Extraordinary Item..... 939 825 245 2,009
Income Tax Expense.......... 343 274 163(10) 780
------ ------ ---- -------
Income Before Extraordinary
Item....................... $ 596 $ 551 $ 82 $ 1,229
====== ====== ==== =======
Preferred Stock Dividends... $ 11 $ -- $(11)(8) $ --
====== ====== ==== =======
Income Before Extraordinary
Item per Share............. $ 3.86
=======
Income Before Extraordinary
Item per Share--Diluted.... $ 3.83
=======
Average Basic Shares
Outstanding................ 318.5 (5)
=======
Average Diluted Shares
Outstanding................ 320.6
=======
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
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Page 41
<PAGE>
Unaudited Pro Forma Combined Condensed Balance Sheet
(In millions)
As of September 30, 2000
PECO Energy Unicom Merger Exelon
As As Pro Forma Pro Forma
Filed Filed Adjustments Balance
----------- ------- ----------- ---------
ASSETS
Utility Plant, net ........... $ 5,196 $12,436 $ (4,817)(6) $12,815
Current Assets
Cash and Temporary Cash
Investments................ 169 1,056 (40)(9) 1,185
Accounts Receivable, net.... 776 1,445 -- 2,221
Inventories, at average
cost....................... 232 258 -- 490
Other Current Assets........ 180 2,189 84(6) 2,453
------- ------- -------- -------
1,357 4,948 44 6,349
------- ------- -------- -------
Deferred Debits and Other
Assets
Regulatory Assets........... 6,016 1,527 -- 7,543
Goodwill.................... 192 78 4,586 (6) 4,856
Investments and Other
Property, net.............. 722 3,524 -- 4,246
Other....................... 184 70 38 (6) 292
------- ------- -------- -------
7,114 5,199 4,624 16,937
------- ------- -------- -------
Total..................... $13,667 $22,583 $ (149) $36,101
======= ======= ======== =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stock Equity......... $ 1,727 $ 3,701 $ (510)(4)
(2,300)(6)
4,586 (6)
(40)(9) $ 7,164
Preferred and Preference
Stock...................... 174 -- -- 174
Company Obligated
Mandatorily
Redeemable Preferred
Securities................. 128 350 (21)(6) 457
Long-Term Debt.............. 6,252 7,134 (70)(6)
510 (4) 13,826
------- ------- -------- -------
8,281 11,185 2,155 21,621
------- ------- -------- -------
Current Liabilities
Notes Payable, Bank......... 284 1,478 -- 1,762
Accounts Payable............ 308 929 -- 1,237
Other Current Liabilities... 938 979 -- 1,917
------- ------- -------- -------
1,530 3,386 -- 4,916
------- ------- -------- -------
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<PAGE>
Deferred Credits and Other
Liabilities
Deferred Income Taxes....... 2,444 3,452 (1,533)(6) 4,363
Unamortized Investment Tax
Credits.................... 275 462 (402)(6) 335
Nuclear Decommissioning
Liability For Retired
Plants..................... -- 1,288 -- 1,288
Other....................... 1,137 2,810 (369)(6) 3,578
------- ------- -------- -------
3,856 8,012 (2,304) 9,564
------- ------- -------- -------
Total..................... $13,667 $22,583 $ (149) $36,101
======= ======= ======== =======
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
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<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
1. PECO Energy used a portion of the proceeds from the securitization of its
stranded costs to repurchase common stock in order to achieve the number of
shares outstanding that were contemplated in the merger agreement. All
share repurchases are reflected in the historical balance sheet presented
herein. The effects of the use of proceeds from the securitization of
stranded costs by PECO Energy on the pro forma combined condensed
statements of income were as follows (in million):
Year Ended Nine Months Ended
December 31, 1999 September 30, 2000
----------------- ------------------
Transition Bond Interest Expense... $318 $240
Interest Savings Associated with
Higher Cost Debt that was
Repurchased....................... (159) (120)
Transition Bond Interest Expense
Included In Historical Interest
Expense........................... (192) (216)
Interest Savings Included in
Historical Interest Expense....... 83 65
---- ----
$ 50 $(31)
==== ====
PECO Energy Obligated Mandatorily
Redeemable Preferred Securities
($221 million @ 9%)............... $(20) $(15)
Interest Savings Included in
Historical Financial Statements... 8 11
---- ----
$(12) $ (4)
==== ====
PECO Preferred Stock Dividends
($37 million @ 6.12%)............. $ (2) $ (2)
PECO Preferred Stock Dividend
Savings Included in Historical
Financial Statements.............. 1 1
---- ----
$ (1) $ (1)
==== ====
2. The Unicom fossil sale Pro Forma Adjustments for the combined condensed
statement of income for the Year Ended December 31, 1999 reflect the
continuing impact of the sale of ComEd's fossil generating plants which was
completed in December 1999.
o Fuel and Energy Interchange: Reflects the elimination of fossil fuel
expense and the replacement impact of purchasing power under the power
purchase agreements entered into with the purchaser of the fossil
assets at the time of the fossil sale, as provided below (in
millions):
Fossil Fuel Expense.......................... $(616)
Energy Interchange Expense................... 873
-----
Total........................................ $ 257
=====
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<PAGE>
o Operation and Maintenance: Reflects the elimination of the fossil
generating plants operation and maintenance expenses.
o Depreciation and Amortization: Reflects the following (in millions):
Elimination of Fossil Plant Depreciation............ $ (73)
Additional Amortization of Regulatory Assets........ 99
-----
Total............................................. $ 26
=====
The Unicom pro forma adjustments reflecting the sale of ComEd's fossil
generating plants include increased regulatory asset amortization because
those adjustments on a prior-to-merger, pro forma basis would result in
ComEd's earnings exceeding the earnings cap provision of the Illinois
Public Utilities Act.
o Taxes Other Than Income Taxes: Reflects the elimination of real estate
and payroll taxes related to the ownership of the fossil plants.
The pro forma adjustments do not reflect the income effects of the
reinvestment of cash proceeds received from the fossil sale.
3. Reflects Unicom's purchase, at prevailing market prices, of approximately
26.3 million shares of Unicom common stock that were subject to certain
forward purchase contracts at December 31, 1999. During 1999, Unicom
entered into forward purchase arrangements with financial institutions for
the repurchase of approximately 26.3 million shares of Unicom common stock.
The repurchase arrangements were settled in January 2000 on a physical
(i.e. shares) basis. Effective January 2000, the share repurchases have
reduced outstanding shares and common stock equity. Prior to the
settlement, the repurchase arrangements were recorded as a receivable on
the Consolidated Balance Sheet of Unicom based on the aggregate market
value of the shares deliverable under the arrangements.
In addition, reflects adjustments to net interest expense and preferred and
preference stock dividends related to the use of securitization proceeds as
follows (in millions):
Pro forma adjustment to eliminate historical
interest expense associated with higher cost
debt that was repurchased........................................ $(20)
Pro forma adjustment to eliminate historical
dividend provisions associated with higher cost
preferred and preference stock that was repurchased.............. $(10)
The Unicom Securitization pro forma adjustments include increased
regulatory asset amortization of $113 million because those adjustments on
a prior-to-merger, pro forma basis would result in ComEd's earnings
exceeding the earnings cap provision of the Illinois Public Utilities Act.
4. Reflects the payment of the cash portion of the merger consideration to
Unicom common shareholders.
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<PAGE>
5. Reflects issuance of Exelon shares in exchange for PECO Energy and Unicom
common stock net of shares which were repurchased by PECO Energy and Unicom
as follows:
PECO Pro Forma
Energy Unicom Exelon
------- ------- ---------
(Shares in 000's)
Actual shares outstanding at September 30,
2000..................................... 170,523 169,367
Shares repurchased-Note (9)............... -- (730)
Shares issued pursuant to stock
option exercises ....................... -- 463
------- -------
Remaining shares to be exchanged.......... 170,523 169,100
Exchange factor........................... 1.0 .875
------- -------
Remaining shares to be exchanged.......... 170,523 147,963 318,486
======= ======= =======
6. Reflects the recognition of goodwill equal to the excess of the purchase
price including estimated transaction costs and stock-based compensation
costs resulting from the merger over the estimated net fair value of the
assets acquired and liabilities assumed of Unicom. The adjustment assumes
total purchase consideration equal to cash of approximately $510 million,
approximately 148 million shares of Exelon Common Stock at a price of
$35.89 based on the average closing price of PECO Energy Common Stock
between January 3 and 12, 2000 and stock-based compensation cost for
certain Unicom employees. PECO Energy's transaction costs of approximately
$33 million represent the estimated costs to be incurred for the merger
that meet the requirements for inclusion in the purchase price. Goodwill
for the balance sheet presented is based on the following calculation
(dollars in millions, except per share data):
Cash Consideration (Note 4).................... $510
Common Share Consideration:
Unicom shares converted..................... 169,100
Conversion rate............................. .875
----------
Exelon Shares Issued........................ 147,963
Exchange price.............................. $ 35.89
----------
Total Common Share Consideration...................... 5,310
Transaction Costs........................................... 33
Stock-based Compensation Costs for Certain Unicom Employees 94
------
Purchase Price.............................................. 5,947
Less: Book value of Unicom's Pro Forma net assets
as of September 30, 2000.................................... 3,661
------
Subtotal.................................................... 2,286
Increase (decrease) to goodwill for estimated fair value
adjustments to the following assets acquired and liabilities
assumed:
Utility Plant $ 4,817
Deferred Income Taxes (1,533)
Unamortized Investment Tax Credits (402)
Deferred Credits (369)
Long-Term Debt (including COMPRS) (91)
Other (122)
----------
Net Fair Value adjustment................................... 2,300
------
Goodwill.................................................... $4,586
======
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<PAGE>
Utility Plant: Primarily reflects the estimated fair value analyses of
ComEd's nuclear stations based on discounted cash flows and independent
appraisals. The $4.8 billion reduction to utility plant is estimated to
reduce nuclear depreciation expense by approximately $215 million annually.
Deferred Income Taxes: Represents the tax effect of purchase accounting
adjustments described above, except for goodwill.
Unamortized Investment Tax Credits: Represents the adjustment of ComEd's
nuclear plant investment tax credits to fair value. This adjustment is
estimated to reduce the amortization of the investment tax credits by
approximately $26 million annually.
Deferred Credits: Primarily reflects elimination of unrecognized net
actuarial gains, prior service costs and transition obligations related to
pension benefits and post-retirement obligations at September 30, 2000.
Final allocation amounts may differ primarily as a result of discount rates
at the time of closing and the final determination of severed employees.
The adjustments are estimated to increase pension benefits and
post-retirement benefit expense by approximately $16 million, annually.
Long-Term Debt: Represents the adjustment of long-term debt including
transitional trust notes and Company Obligated Mandatorily Redeemable
Preferred Securities to fair value at September 30, 2000. The final fair
value determination will be based on prevailing market interest rates at
the time of closing. The adjustment is estimated to increase expense by
approximately of $20 million in the first year, declining in subsequent
years.
Other: Represents miscellaneous estimated fair value adjustments including
stock-based compensation costs for certain Unicom employees not included in
the purchase price and emission allowances. These adjustments are estimated
to increase operating expenses by approximately $20 million in each of the
first two years.
Goodwill: Represents additional goodwill resulting from the estimated
adjustments reflected above, to be amortized over 40 years.
The Merger Pro Forma Adjustments for the combined condensed statement of
income for the year ended December 31, 1999, as a result of the increased
merger pro forma common stock equity balance, include a reversal of the
increased regulatory asset amortization related to the Unicom pro forma
adjustments discussed in Notes 2 and 3, of $99 million and $113 million,
respectively.
7. Reflects the elimination of purchased power and off-system sales
transactions between PECO Energy and Unicom.
8. Reflects the reclassification of PECO Energy preferred stock dividends and
interest on PECO Energy obligated mandatorily redeemable preferred
securities for consistent presentation.
9. Reflects the repurchase of approximately $40 million of Unicom's
outstanding common shares prior to closing. Through September 30, 2000,
Unicom repurchased approximately $960 million of the $1.0 billion common
share repurchase required by the merger agreement.
10. Reflects investment tax credit amortization and the tax effect of purchase
accounting adjustments described above, except for goodwill amortization
and preferred stock dividends.
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