EDISON INTERNATIONAL
The following Unaudited Pro Forma Consolidated Financial Statements of Edison International and its consolidated subsidiaries are included herein:
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| • | Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2012 |
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| • | Unaudited Pro Forma Consolidated Statement of Income for the nine months ended September 30, 2012 |
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| • | Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 2011 |
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| • | Notes to the Unaudited Pro Forma Consolidated Financial Statements |
The Unaudited Pro Forma Consolidated Financial Statements and the related Notes presented reflect the deconsolidation of Edison Mission Energy and its subsidiaries and affiliates ("EME") as a result of voluntary filings by EME and certain of its wholly-owned subsidiaries on December 17, 2012 (the “Petition Date”) for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. Edison International has determined that as a result of the bankruptcy filing and beginning on the Petition Date, that it will no longer consolidate EME for financial reporting purposes. The Unaudited Pro Forma Consolidated Financial Statements have been prepared by applying pro forma adjustments to the amounts previously reported in the Consolidated Financial Statements included in Edison International's Annual Report on Form 10-K for the year ended December 31, 2011 and Unaudited Consolidated Financial Statements included in Edison International's Quarterly Report on Form 10-Q for the period ended September 30, 2012. The Unaudited Pro Forma Consolidated Statements of Income for the nine months ended September 30, 2012 and the year ended December 31, 2011 reflect the deconsolidation of EME, assuming the bankruptcy filing had occurred as of the beginning of the respective calendar year. The Unaudited Pro Forma Consolidated Balance Sheet reflects the deconsolidation of EME, assuming the bankruptcy filing had occurred on September 30, 2012. The pro forma adjustments, as described in the Notes to the Unaudited Pro Forma Consolidated Financial Statements, are based on currently available information.
The Unaudited Pro Forma Consolidated Financial Statements reflect the reclassification of EME from a consolidated entity together with subsidiaries and affiliates to an investment accounted for on the cost method as a result of filing for relief under Chapter 11 of the United States Bankruptcy Code. For purposes of the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2012, the investment in EME is reflected at a fair value of zero. The Unaudited Pro Forma Consolidated Financial Statements are presented for informational purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the bankruptcy filing occurred on, or as of, the dates indicated, nor are they necessarily indicative of future operating results or financial position.
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| Unaudited Pro Forma Consolidated Balance Sheet | | Edison International | |
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| | | | |
| (in millions, unaudited) | September 30, 2012 (a) | Less: Deconsolidation of EME (b) | Pro Forma Adjustments | | Pro Forma |
| ASSETS | | | | | |
| Cash and cash equivalents | $ | 1,080 |
| $ | 698 |
| $ | — |
| | $ | 382 |
|
| Receivables, less allowances for uncollectible accounts | 1,167 |
| 172 |
| 85 |
| (c) | 1,080 |
|
| Accrued unbilled revenue | 787 |
| — |
| — |
| | 787 |
|
| Inventory | 508 |
| 171 |
| — |
| | 337 |
|
| Prepaid taxes | 36 |
| — |
| — |
| | 36 |
|
| Derivative assets | 76 |
| 39 |
| — |
| | 37 |
|
| Restricted cash and cash equivalents | 116 |
| 116 |
| — |
| | — |
|
| Margin and collateral deposits | 88 |
| 79 |
| — |
| | 9 |
|
| Regulatory assets | 250 |
| — |
| 20 |
| (d) | 270 |
|
| Deferred income taxes | 231 |
| (3 | ) | 112 |
| (g) | 346 |
|
| Other current assets | 94 |
| 40 |
| 8 |
| (c) | 62 |
|
| Assets of discontinued operations | 61 |
| 61 |
| — |
| | — |
|
| Total current assets | 4,494 |
| 1,373 |
| 225 |
| | 3,346 |
|
| Nuclear decommissioning trusts | 3,997 |
| — |
| — |
| | 3,997 |
|
| Investments in unconsolidated affiliates | 544 |
| 542 |
| — |
|
| 2 |
|
| Other investments | 189 |
| 11 |
| 11 |
| (c) | 189 |
|
| Total investments | 4,730 |
| 553 |
| 11 |
| | 4,188 |
|
| Utility property, plant and equipment, less accumulated depreciation of $7,378 | 29,314 |
| — |
| — |
| | 29,314 |
|
| Competitive power generation and other property, plant and equipment, net | 4,544 |
| 4,471 |
| — |
| | 73 |
|
| Total property, plant and equipment | 33,858 |
| 4,471 |
| — |
| | 29,387 |
|
| Derivative assets | 117 |
| 43 |
| — |
| | 74 |
|
| Restricted deposits | 89 |
| 87 |
| — |
| | 2 |
|
| Rent payments in excess of levelized rent expense under plant operating leases | 855 |
| 855 |
| — |
| | — |
|
| Regulatory assets | 5,677 |
| — |
| 391 |
| (d) | 6,068 |
|
| Other long-term assets | 725 |
| 303 |
| 277 |
| (c)(h) | 699 |
|
| Total long-term assets | 7,463 |
| 1,288 |
| 668 |
| | 6,843 |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Total assets | $ | 50,545 |
| $ | 7,685 |
| $ | 904 |
| | $ | 43,764 |
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See the notes to the Unaudited Pro Forma Consolidated Financial Statements.
2
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| Unaudited Pro Forma Consolidated Balance Sheet | | Edison International | |
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| (in millions, except share amounts, unaudited) | September 30, 2012 (a) | Less: Deconsolidation of EME (b) | Pro Forma Adjustments | | Pro Forma |
| LIABILITIES AND EQUITY | | | | | |
| Short-term debt | $ | 429 |
| $ | 21 |
| $ | — |
| | $ | 408 |
|
| Current portion of long-term debt | 565 |
| 565 |
| — |
| | — |
|
| Accounts payable | 1,257 |
| 46 |
| 197 |
| (c)(g) | 1,408 |
|
| Accrued taxes | 105 |
| (5 | ) | 1 |
| (g) | 111 |
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| Accrued interest | 207 |
| 102 |
| — |
| | 105 |
|
| Customer deposits | 193 |
| — |
| — |
| | 193 |
|
| Derivative liabilities | 109 |
| 1 |
| 20 |
| (d) | 128 |
|
| Regulatory liabilities | 493 |
| — |
| — |
| | 493 |
|
| Other current liabilities | 855 |
| 111 |
| 8 |
| (c) | 752 |
|
| Liabilities of discontinued operations | 61 |
| 61 |
| — |
| | — |
|
| Total current liabilities | 4,274 |
| 902 |
| 226 |
| | 3,598 |
|
| Long-term debt | 13,708 |
| 4,478 |
| — |
| | 9,230 |
|
| Deferred income taxes | 5,745 |
| (487 | ) | (944 | ) | (f)(g)(i) | 5,288 |
|
| Deferred investment tax credits | 108 |
| 5 |
| — |
| | 103 |
|
| Customer advances | 149 |
| — |
| — |
| | 149 |
|
| Derivative liabilities | 717 |
| 125 |
| 391 |
| (d) | 983 |
|
| Pensions and benefits | 2,884 |
| 253 |
| 196 |
| (f) | 2,827 |
|
| Asset retirement obligations | 2,804 |
| 73 |
| — |
| | 2,731 |
|
| Regulatory liabilities | 5,249 |
| — |
| — |
| | 5,249 |
|
| Other deferred credits and other long-term liabilities | 2,887 |
| 854 |
| 1,238 |
| (c)(g)(h) | 3,271 |
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| Total deferred credits and other liabilities | 20,543 |
| 823 |
| 881 |
| | 20,601 |
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| Total liabilities | 38,525 |
| 6,203 |
| 1,107 |
| | 33,429 |
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| Commitments and contingencies | | | | | |
| Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding) | 2,385 |
| 1,377 |
| 1,377 |
| (e) | 2,385 |
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| Accumulated other comprehensive loss | (168 | ) | (128 | ) | (33 | ) | (f) | (73 | ) |
| Retained earnings | 7,806 |
| (9 | ) | (1,551 | ) | (e)(f)(i) | 6,264 |
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| Total Edison International's common shareholders' equity | 10,023 |
| 1,240 |
| (207 | ) | | 8,576 |
|
| Preferred and preference stock of utility | 1,759 |
| — |
| — |
| | 1,759 |
|
| Other noncontrolling interests | 238 |
| 242 |
| 4 |
| (e) | — |
|
| Total noncontrolling interests | 1,997 |
| 242 |
| 4 |
| | 1,759 |
|
| Total equity | 12,020 |
| 1,482 |
| (203 | ) | | 10,335 |
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| | | | | | |
| Total liabilities and equity | $ | 50,545 |
| $ | 7,685 |
| $ | 904 |
| | $ | 43,764 |
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See the notes to the Unaudited Pro Forma Consolidated Financial Statements.
3
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| Unaudited Pro Forma Consolidated Statement of Income | | Edison International | |
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| (in millions, except per-share amounts, unaudited) | Nine Months Ended September 30, 2012 As Reported (a) | Less: Deconsolidation of EME (b) | Pro Forma Adjustments | | Pro Forma |
| Electric utility | $ | 8,791 |
| $ | — |
| $ | — |
| | $ | 8,791 |
|
| Competitive power generation | 1,009 |
| 1,007 |
| (2 | ) | (c) | — |
|
| Other | — |
| — |
| 11 |
| (c) | 11 |
|
| Total operating revenue | 9,800 |
| 1,007 |
| 9 |
| | 8,802 |
|
| Fuel | 678 |
| 458 |
| — |
| | 220 |
|
| Purchased power | 3,049 |
| — |
| — |
| | 3,049 |
|
| Operations and maintenance | 3,450 |
| 568 |
| 9 |
| (c) | 2,891 |
|
| Deprecation, decommissioning and amortization | 1,389 |
| 202 |
| — |
| | 1,187 |
|
| (Gain) loss on sale of assets and other | (60 | ) | 5 |
| — |
| | (65 | ) |
| Total operating expenses | 8,506 |
| 1,233 |
| 9 |
| | 7,282 |
|
| Operating income (loss) | 1,294 |
| (226 | ) | — |
| | 1,520 |
|
| Interest and dividend income | 19 |
| 13 |
| — |
| | 6 |
|
| Equity in income from unconsolidated affiliates, net | 42 |
| 42 |
| — |
| | — |
|
| Other income | 105 |
| 1 |
| — |
| | 104 |
|
| Interest expense | (643 | ) | (253 | ) | — |
| | (390 | ) |
| Other expenses | (36 | ) | — |
| — |
| | (36 | ) |
| Income (loss) from continuing operations before income taxes | 781 |
| (423 | ) | — |
| | 1,204 |
|
| Income tax expense (benefit) | 217 |
| (204 | ) | — |
| | 421 |
|
| Income (loss) from continuing operations before noncontrolling interests | 564 |
| (219 | ) | — |
| | 783 |
|
| Dividends on preferred and preference stock of utility | 66 |
| — |
| — |
| | 66 |
|
| Other noncontrolling interests | 12 |
| 12 |
| — |
| | — |
|
| Income (loss) from continuing operations | $ | 486 |
| $ | (231 | ) | $ | — |
| | $ | 717 |
|
| Basic earnings per common share attributable to Edison International common shareholders: | | | | | |
| Weighted-average shares of common stock outstanding | 326 |
| | | | 326 |
|
| Continuing operations | $ | 1.49 |
| | | | $ | 2.20 |
|
| | | | | | |
| Diluted earnings per common share attributable to Edison International common shareholders: | | | | | |
| Weighted-average shares of common stock outstanding, including effect of dilutive securities | 328 |
| | | | 328 |
|
| Continuing operations | $ | 1.48 |
| | | | $ | 2.19 |
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See the notes to the Unaudited Pro Forma Consolidated Financial Statements.
4
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| Unaudited Pro Forma Consolidated Statement of Income | | Edison International | |
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| (in millions, except per-sher amounts, unaudited) | Year Ended December 31, 2011 As Reported (a) | Less: Deconsolidation of EME (b) | Pro Forma Adjustments | | Pro Forma |
| Electric utility | $ | 10,574 |
| $ | — |
| $ | — |
| | $ | 10,574 |
|
| Competitive power generation | 2,186 |
| 2,180 |
| (6 | ) | (c) | — |
|
| Other | — |
| — |
| 14 |
| (c) | 14 |
|
| Total operating revenue | 12,760 |
| 2,180 |
| 8 |
| | 10,588 |
|
| Fuel | 1,166 |
| 799 |
| — |
| | 367 |
|
| Purchased power | 2,989 |
| — |
| — |
| | 2,989 |
|
| Operations and maintenance | 4,776 |
| 1,066 |
| 8 |
| (c) | 3,718 |
|
| Deprecation, decommissioning and amortization | 1,737 |
| 310 |
| — |
| | 1,427 |
|
| Asset impairments, lease terminations and other | 1,772 |
| 1,746 |
| — |
| | 26 |
|
| Total operating expenses | 12,440 |
| 3,921 |
| 8 |
| | 8,527 |
|
| Operating income (loss) | 320 |
| (1,741 | ) | — |
| | 2,061 |
|
| Interest and dividend income | 37 |
| 31 |
| — |
| | 6 |
|
| Equity in income from unconsolidated affiliates, net | 86 |
| 86 |
| — |
| | — |
|
| Other income | 156 |
| 15 |
| — |
| | 141 |
|
| Interest expense | (808 | ) | (323 | ) | — |
| | (485 | ) |
| Other expenses | (55 | ) | — |
| — |
| | (55 | ) |
| Income (loss) from continuing operations before income taxes | (264 | ) | (1,932 | ) | — |
| | 1,668 |
|
| Income tax expense (benefit) | (288 | ) | (856 | ) | — |
| | 568 |
|
| Income (loss) from continuing operations before noncontrolling interests | 24 |
| (1,076 | ) | — |
| | 1,100 |
|
| Dividends on preferred and preference stock of utility | 59 |
| — |
| — |
| | 59 |
|
| Other noncontrolling interests | (1 | ) | (1 | ) | — |
| | — |
|
| Net income (loss) from continuing operations | $ | (34 | ) | $ | (1,075 | ) | $ | — |
| | $ | 1,041 |
|
| Basic earnings (loss) per common share attributable to Edison International common shareholders: | | | | | |
| Weighted-average shares of common stock outstanding | 326 |
| | | | 326 |
|
| Continuing operations | $ | (0.10 | ) | | | | $ | 3.19 |
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| | | | | | |
| Diluted earnings (loss) per common share attributable to Edison International common shareholders: | | | | | |
| Weighted-average shares of common stock outstanding, including effect of dilutive securities | 326 |
| | | | 329 |
|
| Continuing operations | $ | (0.10 | ) | | | | $ | 3.17 |
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See the notes to the Unaudited Pro Forma Consolidated Financial Statements.
5
EDISON INTERNATIONAL
Notes to the Unaudited Pro Forma Consolidated Financial Statements
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| (a) | Amounts represent historical financial information from Edison International's Quarterly Report on Form 10-Q for the period ended September 30, 2012 or from Edison International's Annual Report on Form 10-K for the year ended December 31, 2011. Beginning in the third quarter of 2012, EME's Homer City met the definition of a discontinued operation and was classified separately in EME's and Edison International's consolidated financial statements. The December 31, 2011 financial statements for EME and Edison International have not been reclassified to reflect EME's Homer City as a discontinued operation. This reclassification has no impact on the unaudited pro forma financial statements. |
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| (b) | Amounts represent the EME Consolidated Statement of Income for the nine months ended September 30, 2012 and for the year ended December 31, 2011 or EME's Consolidated Balance Sheet as of September 30, 2012. As discussed above, the December 31, 2011 financial statements for EME and Edison International have not been reclassified to reflect EME's Homer City as a discontinued operation. |
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| (c) | Adjustments relate to intercompany transactions and balances between Edison International and EME, which as a result of the deconsolidation would no longer be eliminated in consolidation. In addition, all remaining revenue from Edison Mission Group, which is not significant, will be classified as "Other" revenue. |
The following table summarizes the pro forma adjustments related to intercompany balances:
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| | Amount (in millions) | | | Amount (in millions) |
| Description | Asset Line Item | | Liability Line Item |
| Income taxes and other | Accounts receivable | $85 | | Accounts payable | $85 |
| Prepaid items | Other current assets | $8 | | Other current liabilities | $8 |
| Workers compensation deposits | Other investments | $11 | | Other deferred credits and other long-term liabilities | $11 |
| Intercompany retainer | Other long-term assets | $4 | | Other deferred credits and other long-term liabilities | $4 |
| Recognized intercompany tax benefits | Other long-term assets | $81 | | Other deferred credits and other long-term liabilities | $81 |
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| (d) | Adjustments relate to a power purchase agreement between Southern California Edison Company, a subsidiary of Edison International, and EME, which amounts, prior to the deconsolidation, were eliminated in the consolidation process. Subsequent to the deconsolidation, these amounts are shown as "Derivative liabilities" and "Regulatory assets." |
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| (e) | Subsequent to the deconsolidation, Edison International will account for its investment in EME using the cost method of accounting. For purposes of the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2012, the investment in EME is reflected at zero. In addition to the reclassification of investment in EME to the cost method, the following pro forma adjustments are included: |
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| • | Recognition of $128 million of losses previously unrealized by EME as part of accumulated other comprehensive loss and reflected as a reduction in retained earnings. |
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| • | Represents an investment of $4 million by a subsidiary of Edison International, Mission Energy Holding Company, in Capistrano Wind Holding, Inc. an affiliate of EME and recorded by EME as a non-controlling interest. For purposes of the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2012, the investment in Capistrano Wind Holding, Inc. is reflected at zero. |
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| (f) | Amounts include certain of EME's employee retirement related liabilities that Edison International would assume upon effectiveness of the plan of reorganization or have a joint liability for, and related balances included in accumulated other comprehensive income, net of deferred taxes of $21 million and a $142 million reduction in retained earnings. |
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| (g) | Amounts include recognized short-term and long-term tax benefits of approximately $112 million and $951 million, respectively, primarily related to net operating losses and production tax credit forwards that pertain to Edison |
International's consolidated or combined federal and state tax returns. Such amounts are based on the carrying value at September 30, 2012 and may be impacted by future events. During the period that EME continues to be included in the consolidated and/or combined federal and state tax returns of Edison International and is subject to tax allocation agreements that currently exist, Edison International would make tax payments to EME when net operating losses and production tax credits are utilized to reduce tax liabilities of the consolidated group.
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| (h) | Amounts include liabilities for uncertain tax positions of EME of $192 million reflected on consolidated tax returns of Edison International. The pro forma adjustments include a receivable of this amount from EME. |
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| (i) | Amounts include an increase in deferred tax liabilities of $28 million from changes in state apportionment rates resulting from the expected transfer of EME stock and reflected as a reduction in retained earnings. |
