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TRANSCANADA CORPORATION
U.S. GAAP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Condensed Statement of Consolidated Income and Comprehensive Income in Accordance with U.S. GAAP(1)
| Three months ended March 31 | |||||||
---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | ||||||
| (millions of dollars except per share amounts) | |||||||
Revenues | 1,187 | 1,176 | ||||||
Cost of sales | 131 | 143 | ||||||
Other costs and expenses | 418 | 381 | ||||||
Depreciation | 228 | 212 | ||||||
777 | 736 | |||||||
Operating income | 410 | 440 | ||||||
Other (income)/expenses | ||||||||
Equity income(1) | (88 | ) | (109 | ) | ||||
Other expenses(2) | 125 | 210 | ||||||
Income taxes | 146 | 126 | ||||||
183 | 227 | |||||||
Net Income in Accordance with U.S. GAAP | 227 | 213 | ||||||
Adjustments affecting comprehensive income under U.S. GAAP | ||||||||
Foreign currency translation adjustment, net of tax | 5 | 3 | ||||||
Changes in minimum pension liability, net of tax | — | 25 | ||||||
Unrealized loss on derivatives, net of tax(3) | (9 | ) | (13 | ) | ||||
Comprehensive Income in Accordance with U.S. GAAP | 223 | 228 | ||||||
Net Income Per Share in Accordance with U.S. GAAP — Basic and | ||||||||
Diluted | $ | 0.47 | $ | 0.44 | ||||
Net Income Per Share in Accordance with Canadian GAAP — Basic | ||||||||
and Diluted | $ | 0.48 | $ | 0.44 | ||||
Dividends per common share | $ | 0.305 | $ | 0.29 | ||||
Common Shares Outstanding (millions) | ||||||||
Average for the period — Basic | 485.2 | 483.4 | ||||||
Average for the period — Diluted | 487.9 | 486.1 | ||||||
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Reconciliation of Net Income
| Three months ended March 31 | |||||
---|---|---|---|---|---|---|
| 2005 | 2004 | ||||
| (millions of dollars) | |||||
Net Income in Accordance with Canadian GAAP | 232 | 214 | ||||
U.S. GAAP adjustments | ||||||
Unrealized (loss)/gain on energy contracts(4) | (10 | ) | 4 | |||
Tax impact of unrealized (loss)/gain on energy contracts | 4 | (1 | ) | |||
Equity gain/(loss)(5) | 2 | (1 | ) | |||
Tax impact of equity gain/(loss) | (1 | ) | — | |||
Unrealized loss on foreign exchange and interest rate derivatives(3) | — | (4 | ) | |||
Tax impact of loss on foreign exchange and interest rate derivatives | — | 1 | ||||
Net Income in Accordance with U.S. GAAP | 227 | 213 | ||||
Condensed Statement of Consolidated Cash Flows in Accordance with U.S. GAAP(1)
| Three months ended March 31 | |||||
---|---|---|---|---|---|---|
| 2005 | 2004 | ||||
| (millions of dollars) | |||||
Cash Generated from Operations | ||||||
Net cash provided by continuing operations | 345 | 342 | ||||
Net cash provided by/(used in) discontinued operations | 4 | (2 | ) | |||
349 | 340 | |||||
Investing Activities | ||||||
Net cash used in investing activities | (10 | ) | (136 | ) | ||
Financing Activities | ||||||
Net cash provided by/(used in) financing activities | 88 | (167 | ) | |||
Effect of Foreign Exchange Rate Changes on Cash and Short-Term | ||||||
Investments | 2 | 4 | ||||
Increase in Cash and Short-Term Investments | 429 | 41 | ||||
Cash and Short-Term Investments | ||||||
Beginning of period | 124 | 283 | ||||
Cash and Short-Term Investments | ||||||
End of period | 553 | 324 | ||||
Condensed Balance Sheet in Accordance with U.S. GAAP(1)
| March 31, 2005 | December 31, 2004 | ||
---|---|---|---|---|
| (millions of dollars) | |||
Current assets | 1,265 | 908 | ||
Long-term investments(5)(6) | 1,856 | 1,887 | ||
Plant, property and equipment | 16,990 | 17,083 | ||
Regulatory asset(7) | 2,580 | 2,606 | ||
Other assets | 1,272 | 1,217 | ||
23,963 | 23,701 | |||
Current liabilities(8) | 2,765 | 2,573 | ||
Deferred amounts(3)(4)(6) | 835 | 785 | ||
Long-term debt(3) | 9,733 | 9,753 | ||
Deferred income taxes(7) | 2,994 | 3,048 | ||
Preferred securities(9) | 556 | 554 | ||
Non-controlling interests | 470 | 465 | ||
Shareholders' equity | 6,610 | 6,523 | ||
23,963 | 23,701 | |||
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Statement of Other Comprehensive Income in Accordance with U.S. GAAP
| Cumulative Translation Account | Minimum Pension Liability (SFAS No. 87) | Cash Flow Hedges (SFAS No. 133) | Total | |||||
---|---|---|---|---|---|---|---|---|---|
| (millions of dollars) | ||||||||
Balance at December 31, 2004 | (71 | ) | (26 | ) | (4 | ) | (101 | ) | |
Unrealized loss on derivatives, net of tax of $8(3) | — | — | (9 | ) | (9 | ) | |||
Foreign currency translation adjustment, net of tax of $10 | 5 | — | — | 5 | |||||
Balance at March 31, 2005 | (66 | ) | (26 | ) | (13 | ) | (105 | ) | |
Balance at December 31, 2003 | (40 | ) | (98 | ) | (5 | ) | (143 | ) | |
Changes in minimum pension liability, net of tax of $(13) | — | 25 | — | 25 | |||||
Unrealized loss on derivatives, net of tax of $7(3) | — | — | (13 | ) | (13 | ) | |||
Foreign currency translation adjustment, net of tax of $6 | 3 | — | — | 3 | |||||
Balance at March 31, 2004 | (37 | ) | (73 | ) | (18 | ) | (128 | ) | |
- (1)
- In accordance with U.S. GAAP, the condensed statement of consolidated income, consolidated cash flows and balance sheet of TransCanada Corporation (TransCanada or the company) are prepared using the equity method of accounting for joint ventures. Excluding the impact of other U.S. GAAP adjustments, the use of the proportionate consolidation method of accounting for joint ventures, as required under Canadian GAAP, results in the same net income and shareholders' equity.
- (2)
- Other expenses included an allowance for funds used during construction of $1 million for the three months ended March 31, 2005 (March 31, 2004 — $1 million).
- (3)
- All foreign exchange and interest rate derivatives are recorded in the company's consolidated financial statements at fair value under Canadian GAAP. Under the provisions of SFAS No. 133 "Accounting for Derivatives and Hedging Activities", all derivatives are recognized as assets and liabilities on the balance sheet and measured at fair value. For derivatives designated as fair value hedges, changes in the fair value are recognized in earnings together with an equal or lesser amount of changes in the fair value of the hedged item attributable to the hedged risk. For derivatives designated as cash flow hedges, changes in the fair value of the derivatives that are effective in offsetting the hedged risk are recognized in other comprehensive income until the hedged item is recognized in earnings. Any ineffective portion of the change in fair value is recognized in earnings each period. Substantially all of the amounts recorded in the three months ended March 31, 2005 and 2004 as differences between U.S. and Canadian GAAP, for net income, relate to the differences in accounting treatment with respect to the hedged items and, for comprehensive income, relate to cash flow hedges.
- (4)
- Substantially all of the amounts recorded in the three months ended March 31, 2005 and 2004 as differences between U.S. and Canadian GAAP in respect of energy contracts relate to gains and losses on derivative energy contracts for periods before they were documented as hedges for purposes of U.S. GAAP and to differences in accounting with respect to physical energy trading contracts in the U.S. and Canada.
- (5)
- Under Canadian GAAP, pre-operating costs incurred during the commissioning phase of a new project are deferred until commercial production levels are achieved. After such time, those costs are amortized over the estimated life of the project. Under U.S. GAAP, such costs are expensed as incurred. Certain start-up costs incurred by Bruce Power L.P. (an equity investment) are required to be expensed under U.S. GAAP. Under both Canadian GAAP and U.S. GAAP, interest is capitalized on expenditures relating to construction of development projects actively being prepared for their intended use. In Bruce Power, L.P. under U.S. GAAP, the carrying value of development projects against which interest is capitalized is lower due to the expensing of pre-operating costs.
- (6)
- Financial Interpretation (FIN) 45 requires the recognition of a liability for the fair value of certain guarantees that require payments contingent on specified types of future events. The measurement standards of FIN 45 are applicable to guarantees entered into after January 1, 2003. For U.S. GAAP purposes, the fair value of guarantees recorded as a liability at March 31, 2005 was $9 million (December 31, 2004 — $9 million) and relates to the company's equity interest in Bruce Power L.P.
- (7)
- Under U.S. GAAP, the company is required to record a deferred income tax liability for its cost-of-service regulated businesses. As these deferred income taxes are recoverable through future revenues, a corresponding regulatory asset is recorded for U.S. GAAP purposes.
- (8)
- Current liabilities at March 31, 2005 include dividends payable of $153 million (December 31, 2004 — $146 million) and current taxes payable of $244 million (December 31, 2004 — $260 million).
- (9)
- The fair value of the preferred securities at March 31, 2005 was $574 million (December 31, 2004 — $572 million). The company made preferred securities charges payments of $12 million for the three months ended March 31, 2005 (March 31, 2004 — $12 million).
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Summarized Financial Information of Long-Term Investments
The following summarized financial information of long-term investments includes those investments that are accounted for by the equity method under U.S. GAAP (including those that are accounted for by the proportionate consolidation method under Canadian GAAP).
| Three months ended March 31 | ||||
---|---|---|---|---|---|
| 2005 | 2004 | |||
| (millions of dollars) | ||||
Income | |||||
Revenues | 291 | 275 | |||
Other costs and expenses | (141 | ) | (119 | ) | |
Depreciation | (40 | ) | (33 | ) | |
Financial charges and other | (22 | ) | (14 | ) | |
Proportionate share of income before income taxes of long-term investments | 88 | 109 | |||
| March 31, 2005 | December 31, 2004 | |||
---|---|---|---|---|---|
| (millions of dollars) | ||||
Balance sheet | |||||
Current assets | 353 | 361 | |||
Plant, property and equipment | 2,920 | 3,020 | |||
Current liabilities | (197 | ) | (248 | ) | |
Deferred amounts (net) | (222 | ) | (199 | ) | |
Non-recourse debt | (979 | ) | (1,030 | ) | |
Deferred income taxes | (19 | ) | (17 | ) | |
Proportionate share of net assets of long-term investments | 1,856 | 1,887 | |||
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