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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) - OCTOBER 21, 2002
TXU CORP.
(Exact name of registrant as specified in its charter)
TEXAS 1-12833 75-2669310
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
TXU US HOLDINGS COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 1-11668 75-1837355
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
TXU GAS COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 1-3183 75-0399066
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS
75201-3411 (Address of principal executive offices,
including zip code)
REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE - 214-812-4600
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All of the information contained in this Form 8-K is being filed by TXU
Corp. Certain of the information contained in this Form 8-K relates to TXU US
Holdings Company (US Holdings) or TXU Gas Company (TXU Gas), respectively, each
a wholly owned subsidiary of TXU Corp., and such information as its relates to
each of US Holdings or TXU Gas is being filed separately by each such
registrant.
Oncor Electric Delivery Company and TXU Energy Company LLC, each
wholly-owned subsidiaries of US Holdings, are referred to herein as "Oncor" and
"TXU Energy", respectively.
INDEX
ITEM 2. DISPOSITION OF ASSETS
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
Pro Forma Unaudited Consolidated Financial Statements of TXU Corp.
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
June 30, 2002
Unaudited Condensed Consolidated Pro Forma Statement of Income
for the Year Ended December 31, 2001
Unaudited Condensed Consolidated Pro Forma Statement of Income
for the Year Ended December 31, 2000
Unaudited Condensed Consolidated Pro Forma Statement of Income
for the Year Ended December 31, 1999
Unaudited Condensed Consolidated Pro Forma Statement of Income
for the Six Months Ended June 30, 2002
Notes to Unaudited Condensed Consolidated Pro Forma Financial
Statements
Exhibit No. Description
12 TXU Corp. Computation of Ratio of Earnings to Fixed
Charges, and Ratio of Earnings to Combined Fixed
Charges and Preference Dividends
99 TXU Corp. News Release dated October 30, 2002.
FORWARD-LOOKING STATEMENTS
This report and other presentations made by TXU Corp., US Holdings or TXU
Gas contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Although TXU Corp., US Holdings and
TXU Gas each believe that in making any such statement its expectations are
based on reasonable assumptions, any such statement involves uncertainties and
is qualified in its entirety by reference to factors contained in the
Forward-Looking Statements sections of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in TXU Corp.'s, US
Holdings' and TXU Gas' Annual Reports on Form 10-K for the year ended December
31, 2001 and of Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations in TXU Corp.'s, US Holdings' and TXU Gas'
Quarterly Reports on Form 10-Q for the quarterly period ended June 30, 2002, as
well as various regulatory issues; general industry trends; changes in business
strategy or development plans; changes in, or failure or inability to comply
with, governmental regulations, including, without limitation, environmental
regulations; global financial and credit market conditions; unanticipated
changes in operating expenses and capital expenditures; legal and administrative
proceedings and settlements; inability of the various counterparties to meet
their obligations with respect to financial instruments; changes in tax laws;
credit rating agency actions; among others that could cause the actual results
of TXU Corp., US Holdings or TXU Gas to differ materially from those projected
in such forward-looking statements.
Any forward-looking statement speaks only as of the date on which such
statement is made. Neither TXU Corp., US Holdings nor TXU Gas undertakes any
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time. It is
not possible for TXU Corp., US Holdings or TXU Gas to predict all of such
factors, nor can they assess the impact of each such factor or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.
ITEM 2. DISPOSITION OF ASSETS
TXU Europe Limited (TXU Europe) is a private limited company incorporated
under the laws of England and Wales on February 5, 1998. TXU Europe is an
indirect wholly-owned subsidiary of TXU Corp., a Texas corporation. TXU Corp.
engages in electricity generation, wholesale energy sales, trading and risk
management activities, retail energy sales, energy delivery, other energy
related services and, through a joint venture, telecommunications services. TXU
Europe is a holding company for TXU Corp.'s United Kingdom (UK) and other
European operations.
DIFFICULT OPERATING ENVIRONMENT IN THE UK
On October 4, 2002, TXU Corp. announced that it was reducing earnings
expectations for 2002 and 2003 due primarily to continued pressure on operating
results in the UK. A significant decrease in wholesale power prices and low
price volatility, due in part to milder than normal weather, had led to
continuing declines in profitability and cash flows from TXU Europe's upstream
electricity generation assets and short-term wholesale trading activities. In
addition, TXU Europe's ability to enter into structured transactions (long-term
trades) had been considerably reduced because of depressed market activity and
lack of available counter-parties due to energy sector-wide credit concerns. A
significant portion of TXU Europe's retail power load in the UK was satisfied
with long-term agreements that obligated TXU Europe to purchase power at prices
considerably in excess of current wholesale market prices. These comparatively
high power purchase costs, combined with increased competition and associated
customer attrition, had resulted in reduced profitability and cash flows from
TXU Europe's retail electric business. TXU Europe's planned actions to address
the situation included restructuring the power purchase agreements and physical
generation positions in the UK, ceasing acquisition and other developmental
activities, reducing administrative costs and enhancing retail margins.
MARKET REACTION AND TXU CORP.'S RESPONSE
Prior to TXU Corp.'s October 4 announcement, concerns were already
prevalent in US financial markets regarding financial performance of the US
power sector. Subsequent to TXU Corp.'s October 4 announcement, concerns also
arose in the financial markets regarding the liquidity of TXU Corp.'s North
American and Australian operations.
TXU Corp. has taken the following actions to address the US financial
markets' concerns about liquidity and to strengthen its credit position:
o Reduced its common stock dividend by 80 percent to an annual indicated rate
of $.50 per share effective with the dividend payable in January 2003
o Significantly reduced planned capital expenditures in all its businesses
o Reversed previous plans to support TXU Europe with up to $700 million in
capital contributions
o Eliminated by amendment the cross-default provision in a US financing
arrangement that would have been triggered by a TXU Europe default
(Australian financing arrangements have no cross-default provisions that
would have been triggered by a TXU Europe default.)
o Drew $2.6 billion in cash on its US revolving credit facilities
o On October 30, 2002, entered into a commitment for a secured credit
facility of up to $1 billion at Oncor. The facility is intended to fund
interim refinancings of approximately $700 million of maturities should
market conditions not support a timely, cost effective refinancing. The
balance will be available for general corporate purposes at Oncor.
The actions to reduce the common stock dividend and capital expenditures
will result in estimated annual cash savings of $850 to $950 million, which is
intended to be used for debt reduction.
Following the announcement of these actions, between October 4 and October
14, 2002, the major credit rating agencies downgraded TXU Europe's credit
ratings to below investment grade. Credit ratings for TXU Corp. and its US and
Australian subsidiaries remain investment grade.
2
IMPACT OF CREDIT RATING DOWNGRADES ON TXU EUROPE
The downgrades of credit ratings to below investment grade have resulted in
a number of potential demands on TXU Europe's liquidity. These demands are in
certain cases at the discretion of TXU Europe's counterparties and include
additional cash or letter of credit collateral requirements and repayment of
indebtedness under various financing and other contractual arrangements. Certain
of these collateral requirements relate to wholesale trading, further limiting
these activities. In addition, events of default have occurred under certain of
these arrangements, and several financing agreements contain cross-default
provisions that accelerate repayment of borrowings. The effect of these
developments on liquidity is significant, and TXU Europe has entered into
negotiations with its creditors regarding these matters.
SALE OF CERTAIN TXU EUROPE OPERATIONS
On October 14, 2002, TXU Corp. announced that TXU Europe was offering for
sale all or portions of its business. Such action effectively represented a
determination by TXU Corp. to exit all of its operations in Europe.
On October 21, 2002, TXU Europe sold certain of its operations to Powergen
UK plc (Powergen), a unit of Germany's E.ON AG, for approximately $2.1 billion
((pound)1.37 billion) in cash.
Concurrently, Powergen terminated the accounts receivable securitization
program, under which TXU Europe had been selling its trade accounts receivable,
for approximately $390 million ((pound)250 million), effectively buying back the
receivables from the participating financial institution.
The operations sold include: (a) the retail electric and gas business in
the UK, consisting of 5.3 million residential, commercial and industrial
customers, and (b) three power plants representing a total of 2.9 gigawatts of
coal-fired generation capacity and a combined heat and power plant, all in the
UK. The sale and purchase agreement also provides for the transfer of
approximately 1,900 employees in the UK to Powergen and the assumption by
Powergen of the associated pension obligations.
After the sale, TXU Europe continues to retain: (a) its energy trading
assets and liabilities; (b) several long-term power purchase agreements in the
UK; (c) operations in Germany consisting of a national retail energy provider
with 200,000 customers, as well as majority interests in two businesses
providing power, gas, heating and water services: the city utility in Kiel (51%
owned) with 250,000 customers and the city utility in Braunschweig (74.9% owned)
with 210,000 customers; (d) operations in Scandinavia consisting of an 80% owned
wholesale power business in Finland, selling over four terawatt hours of
electricity annually, a 45% interest in an electricity distribution business in
Finland with access to 90,000 customers and a retail energy business with 80,000
customers in Norway; and (e) two plants in the UK and interests in various
renewable energy projects, mostly wind farms.
TXU Europe and its subsidiaries have not entered into formal administration
processes in the UK (similar to bankruptcy proceedings in the US). However,
consistent with UK law, these remaining operations are being managed by the
directors of TXU Europe for the benefit of the creditors of TXU Europe and its
subsidiaries. The sales proceeds discussed above, as well as any other proceeds
that may be realized, will not be available to TXU Corp.
TXU Corp. expects to record a charge of approximately $4.2 billion in the
fourth quarter of 2002, consisting primarily of the write-off of its investment
in TXU Europe ($3.6 billion as of June 30, 2002). The charge also includes
write-offs of receivables due from TXU Europe and amounts previously recorded in
other comprehensive income, consisting primarily of the cumulative translation
loss associated with TXU Europe, as well as certain anticipated income tax and
other obligations related to the exiting of the European operations. This charge
is before consideration of any income tax deduction with respect to the tax
basis ($3.4 billion) of TXU Corp.'s investment in TXU Europe, as well as certain
income tax contingencies, as such matters continue to be under review.
Based on these events and the circumstances under which the remaining
operations of TXU Europe are being managed, TXU Corp. believes that the most
meaningful presentation of required pro forma financial information for TXU
Corp., included in Item 7 hereof, would assume the exiting of all of its
European operations and the write-off of its investment in TXU Europe.
3
CREDIT RATINGS OF TXU CORP. AND ITS US AND AUSTRALIAN SUBSIDIARIES
Because of liquidity concerns arising from the conditions in the US power
sector and following the TXU Europe events, Moody's is currently reviewing it
ratings of TXU Corp. and its US and Australian subsidiaries.
The current credit ratings, which are all investment grade, for TXU Corp.
and its US and Australian subsidiaries are presented below:
TXU Corp. US Holdings Oncor TXU Energy TXU Gas TXU Australia
--------- ----------- ------ ---------- ------- -------------
(Senior Unsecured) (Senior Unsecured) (Secured) (Senior Unsecured) (Senior Unsecured) (Senior Unsecured)
S&P ........ BBB- BBB- BBB BBB BBB BBB
Moody's .... Baa3 Baa3 A3 Baa2 Baa2 Baa2
Fitch ...... BBB BBB+ A- BBB+ BBB BBB
A rating reflects only the view of a rating agency and it is not a
recommendation to buy, sell or hold securities. Any rating can be revised upward
or downward at any time by a rating agency if such rating agency decides that
circumstances warrant such a change.
As previously noted, TXU Corp. has taken several actions to address the US
financial markets' concerns about liquidity and to strengthen its credit
position. These include:
o Reduced its common stock dividend by 80 percent to an annual indicated rate
of $.50 per share effective with the dividend payable in January 2003
o Significantly reduced planned capital expenditures in all its businesses
o Reversed previous plans to support TXU Europe with up to $700 million in
capital contributions
o Eliminated by amendment the cross-default provision in a US financing
arrangement that would have been triggered by a TXU Europe default
(Australian financing arrangements have no cross-default provisions that
would have been triggered by a TXU Europe default.)
o Drew $2.6 billion in cash on its US revolving credit facilities
o On October 30, 2002, entered into a commitment for a secured credit
facility of up to $1 billion at Oncor. The facility is intended to fund
interim refinancings of approximately $700 million of maturities should
market conditions not support a timely, cost effective refinancing. The
balance will be available for general corporate purposes at Oncor.
Certain financing and other arrangements of TXU Corp. and its US and
Australian subsidiaries contain provisions that are specifically affected by
changes in credit ratings. The material provisions are described below:
TXU CORP.
As fully described in the TXU Corp. Annual Report on Form 10-K for the year
ended December 31, 2001 (2001 Form 10-K), in connection with the Pinnacle
transaction, a decline in the credit rating for TXU Corp.'s unsecured, senior
long-term obligations to two notches below investment grade (i.e. to or below
'BB' by S&P or Fitch or 'Ba2' by Moody's), coupled with a decline in the market
price of TXU Corp. common stock below $21.93 per share for ten consecutive
trading days, TXU Corp. would be required to sell equity or otherwise raise cash
proceeds sufficient to repay Pinnacle's senior secured notes ($810 million
outstanding at September 30, 2002).
In the event of a downgrade of TXU Corp. to below investment grade, TXU
Energy or one of its investment grade affiliates will be required to provide an
additional guarantee of the obligations under the lease (approximately $145
million) for the TXU Energy Plaza headquarters building or provide a letter of
credit within 30 days of any such ratings decline. It is anticipated that TXU
Energy would provide a guarantee in the event of a downgrade.
4
TXU ENERGY
TXU Energy has entered into certain trading contracts and lease
arrangements that in some instances give the other party the right, but not the
obligation, to request TXU Energy to post collateral in the event that it's
credit rating falls below investment grade.
Based on its current trading positions, if TXU Energy was downgraded below
investment grade, counterparties would have the option to request TXU Energy to
post additional collateral of approximately $230 million.
In addition, TXU Energy has a number of transactions where the
counterparties would have the right to request TXU Energy to post collateral if
its credit rating fell below investment grade. The amount TXU Energy would post
under these transactions would depend, in part, on the value of the contract at
that time. Based on current market conditions, the maximum TXU Energy might have
to post for these transactions is approximately $338 million.
TXU Energy is also the obligor on leases that total $168 million. Under the
terms of those leases, if TXU Energy's credit rating falls below investment
grade, TXU Energy could: sell the assets, assign the leases to a new obligor
which is investment grade, post a letter of credit or defease the leases.
ERCOT also has rules in place to assure adequate credit worthiness for
parties that schedule power on the ERCOT System. Under those rules, if TXU
Energy's credit ratings fell below investment grade, TXU Energy could be
required to post collateral of approximately $52 million.
ACCOUNTS RECEIVABLE PROGRAM FOR US SUBSIDIARIES
Under the $600 million Accounts Receivables Sale Program, all originators
(currently TXU Gas, TXU Energy Retail Company LP, SESCO Energy Services Company
and Oncor), are required to maintain a 'BBB-' (S&P) and a 'Baa3' (Moody's)
rating (or supply a parent guarantee with a similar rating). A downgrade below
the required ratings for an originator would prevent that originator from
selling its accounts receivables under the program. If all originators are
downgraded so that there are no eligible originators, the facility would
terminate. Upon termination, cash flows to the originators would be delayed as
collections of sold receivables were used to repurchase the undivided interests
of the financial institutions instead of purchasing new receivables. The level
of cash flows would normalize in approximately 16 to 31 days. As of September
30, 2002, $1.25 billion of receivables were sold under the program in exchange
for cash of $600 million (representing the undivided interests of the financial
institutions) and $632 million in subordinated notes.
TXU AUSTRALIA
In the event that TXU Australia's credit rating falls below investment
grade, there are cross currency swaps and interest rate swaps in effect with
banks who have the right to terminate the swaps. However, the contracts are
currently in the money on a net basis.
TXU Australia has several contracts that may require additional guarantees
or cash collateral amounting to approximately $62 million if the credit rating
falls below investment grade.
OTHER
Other agreements of TXU Corp. and its subsidiaries, including some of the
credit facilities, contain terms pursuant to which the interest rates charged
under the agreements may be adjusted depending on the credit ratings of TXU
Corp. or its subsidiaries.
5
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
INDEX TO FINANCIAL INFORMATION
PAGE
(B) PRO FORMA FINANCIAL INFORMATION
Unaudited Condensed Consolidated Pro Forma Financial Information
of TXU Corp.:
Unaudited Condensed Consolidated Pro Forma Balance Sheet
as of June 30, 2002 ............................................ 8
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Year Ended December 31, 2001 .................... 9
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Year Ended December 31, 2000 .................... 10
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Year Ended December 31, 1999 .................... 11
Unaudited Condensed Consolidated Pro Forma Statement of
Income for the Six Months Ended June 30, 2002................... 12
Notes to Unaudited Condensed Consolidated Pro Forma
Financial Statements ........................................... 13
6
PRO FORMA FINANCIAL INFORMATION OF TXU CORP.
The following condensed consolidated pro forma financial statements of TXU
Corp. have been prepared to give effect to the exiting of all of the European
operations and the write-off of the investment in TXU Europe.
The condensed consolidated pro forma financial statements have been derived
from and should be read in conjunction with TXU Corp.'s historical consolidated
financial statements contained in its annual report on Form 10-K for the fiscal
year ended December 31, 2001 and its quarterly report on Form 10-Q for the
quarter ended June 30, 2002. The Unaudited Condensed Consolidated Pro Forma
Balance Sheet as of June 30, 2002 gives effect to the exiting of TXU Europe as
if it had occurred on June 30, 2002. The Unaudited Condensed Consolidated Pro
Forma Statements of Income for the years ended December 31, 2001, 2000 and 1999
and the six month period ended June 30, 2002 give effect to the exiting of TXU
Europe as if it had occurred on January 1, 1999. The pro forma financial
information does not give effect to any other events concerning TXU Europe
subsequent to the respective periods presented. The pro forma financial
information is based on TXU Corp.'s and TXU Europe's previously reported
historical financial statements and adjusted for the assumptions and estimates
described in the accompanying Notes to the Unaudited Condensed Consolidated Pro
Forma Financial Statements. The assumptions and estimates impacting the pro
forma adjustments are based on the information currently available to TXU Corp,
and may be subject to change. The unaudited pro forma statements of income are
not necessarily indicative of the financial results that would have been
realized had the exiting of TXU Europe occurred on the indicated dates, nor are
they necessarily indicative of future financial results. In addition, results
for the six-month period presented herein are not necessarily indicative of
results for a full year's operations.
7
TXU CORP.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2002
($ MILLION)
Less TXU
TXU Corp. Europe Pro forma Consolidated
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents........................... $ 1,015 $ 756 -- 259
Accounts receivable................................. 3,487 1,440 105 (a) 1,942
Inventories - at average cost....................... 563 109 -- 454
Prepayments......................................... 275 91 -- 184
Commodity contract assets........................... 1,462 705 -- 757
Other current assets................................ 229 142 -- 87
------- ------- ------- -------
Total current assets............................. 7,031 3,243 105 3,683
------- ------- ------- -------
Investments
Restricted cash..................................... 525 525 -- --
Other investments................................... 1,672 700 -- 972
Property, plant and equipment - net.................... 20,864 1,233 -- 19,631
Goodwill............................................... 7,326 5,739 -- 1,587
Regulatory assets - net................................ 1,717 -- -- 1,717
Commodity contracts assets............................. 915 318 -- 597
Cash flow hedges and other derivatives assets.......... 352 197 -- 155
Deferred debits and other assets....................... 982 785 -- 197
------- ------- ------- -------
Total assets..................................... $41,384 $12,740 $ 105 $28,539
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable:
Commercial paper................................. $ 1,124 -- -- 1,124
Banks............................................ 914 245 -- 669
Notes payable-- affiliate........................... -- 98 (98)(b) --
Long-term debt due currently........................ 1,295 26 -- 1,269
Accounts payable.................................... 2,609 1,318 -- 1,291
Commodity contract liabilities...................... 1,280 720 -- 560
Other current liabilities........................... 1,587 390 (177)(c) 1,374
------- ------- ------- -------
Total current liabilities........................ 8,809 2,797 (275) 6,287
------- ------- ------- -------
Accumulated deferred income taxes...................... 3,428 81 -- 3,347
Investment tax credits................................. 464 -- -- 464
Commodity contract liabilities......................... 573 339 -- 234
Cash flow hedges and other derivative liabilities...... 500 246 -- 254
Other deferred credits and noncurrent liabilities...... 2,515 934 -- 1,581
Long-term debt, less amounts due currently............. 15,376 4,582 -- 10,794
Mandatorily redeemable, preferred securities of
subsidiary trusts, each holding solely junior
subordinated debentures of the obligated company.... 515 -- -- 515
Preferred securities of subsidiary perpetual trust
of TXU Europe 150 150 -- --
Preferred stock of subsidiaries........................ 211 -- -- 211
Shareholders' equity
Preference stock.................................... 300 -- -- 300
Common stock without par value...................... 7,134 -- -- 7,134
Retained earnings................................... 1,984 -- 4,241 (d) (2,257)
Accumulated other comprehensive income.............. (575) -- (250)(d) (325)
------- ------- ------- -------
Total shareholders' equity....................... 8,843 -- 3,991 4,852
------- ------- ------- -------
Total liabilities and shareholders' equity ...... $41,384 $ 9,129 $ 3,716 $28,539
======= ======= ======= =======
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
8
TXU CORP.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF
INCOME FOR THE YEAR ENDED
DECEMBER 31, 2001
($ MILLION)
Less TXU
TXU Corp. Europe Consolidated
Historical Historical Pro Forma
---------- ---------- ------------
Operating revenues....................................... $27,927 $12,719 $15,208
------- ------- -------
Operating expenses
Energy purchased for resale and fuel consumed......... 20,250 10,863 9,387
Operation and maintenance............................. 3,390 1,043 2,347
Depreciation and other amortization................... 1,001 216 785
Goodwill amortization................................. 220 177 43
Taxes other than income............................... 781 -- 781
------- ------- -------
Total operating expenses........................... 25,642 12,299 13,343
------- ------- -------
Operating income......................................... 2,285 420 1,865
Other income (deductions) - net.......................... (117) (46) (71)
Interest income.......................................... 176 99 77
Interest expense and other charges....................... 1,537 578 959
------- ------- -------
Income before income taxes and extraordinary items....... 807 (105) 912
Income tax expense (benefit)(e).......................... (24) (297) 273
------- ------- -------
Income before extraordinary items........................ $ 831 $ 192 $ 639
======= ======= =======
Average shares of common stock outstanding (millions).... 259 259 259
Per share of common stock:
Basic and diluted earnings
Income before extraordinary items and after
preference stock dividends........................ $3.12 $0.74 $2.38
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
9
TXU CORP.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF
INCOME FOR THE YEAR ENDED
DECEMBER 31, 2000
($ MILLION)
Less TXU
TXU Corp. Europe Consolidated
Historical Historical Pro Forma
---------- ---------- ------------
Operating revenues....................................... $22,009 $ 7,044 $14,965
------- ------- -------
Operating expenses
Energy purchased for resale and fuel consumed......... 14,634 5,110 9,524
Operation and maintenance............................. 3,028 867 2,161
Depreciation and other amortization................... 1,010 241 769
Goodwill amortization................................. 204 154 50
Taxes other than income............................... 656 -- 656
------- ------- -------
Total operating expenses........................... 19,532 6,372 13,160
------- ------- -------
Operating income......................................... 2,477 672 1,805
Other income (deductions) - net.......................... 238 121 117
Interest income.......................................... 129 90 39
Interest expense and other charges....................... 1,591 574 1,017
------- ------- -------
Income before income taxes and extraordinary items....... 1,253 309 944
Income tax expense (benefit)(e) ......................... 337 58 279
------- ------- -------
Income before extraordinary items........................ $ 916 $ 251 $ 665
------- ------- -------
Average shares of common stock outstanding (millions).... 264 264 264
Per share of common stock:
Basic and diluted earnings
Income before extraordinary items and after
preference stock dividends........................ $3.43 $0.95 $2.48
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
10
TXU CORP.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF
INCOME FOR THE YEAR ENDED
DECEMBER 31, 1999
($ MILLION)
Less TXU
TXU Corp. Europe Consolidated
Historical Historical Pro Forma
---------- ---------- ------------
Operating revenues....................................... $17,118 $ 6,090 $11,028
------- ------- -------
Operating expenses
Energy purchased for resale and fuel consumed......... 9,523 3,869 5,654
Operation and maintenance............................. 3,088 918 2,170
Depreciation and other amortization................... 1,080 281 799
Goodwill amortization................................. 191 140 51
Taxes other than income............................... 642 -- 642
------- ------- -------
Total operating expenses........................... 14,524 5,208 9,316
------- ------- -------
Operating income......................................... 2,594 882 1,712
Other income (deductions) - net.......................... 262 12 250
Interest income.......................................... 134 102 32
Interest expense and other charges....................... 1,556 562 994
------- ------- -------
Income before income taxes and extraordinary items....... 1,434 434 1,000
Income tax expense (benefit)(e) ......................... 449 134 315
------- ------- -------
Income before extraordinary items........................ $ 985 $ 300 $ 685
------- ------- -------
Average shares of common stock outstanding (millions).... 279 279 279
Per share of common stock:
Basic and diluted earnings
Income before extraordinary items and after
preference stock dividends........................ $3.53 $1.07 $2.46
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
11
TXU CORP.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED
JUNE 30, 2002
($ MILLION)
Less TXU
TXU Corp. Europe Consolidated
Historical Historical Pro Forma
---------- ---------- ------------
Operating revenues....................................... $15,302 $ 7,117 $ 8,185
Operating expenses
Energy purchased for resale and fuel consumed......... 11,573 6,543 5,030
Operation and maintenance............................. 1,667 363 1,304
Depreciation and other amortization................... 472 48 424
Goodwill amortization................................. -- -- --
Taxes other than income............................... 361 -- 361
Total operating expenses........................... 14,073 6,954 7,119
Operating income......................................... 1,229 163 1,066
Other income (deductions-- net) ......................... (18) (10) (8)
Interest income.......................................... 23 10 13
Interest expense and other charges....................... 591 166 425
Income before income taxes and extraordinary items....... 643 (3) 646
Income tax expense (benefit)(e) ......................... 170 (23) 193
Income before extraordinary items........................ $ 473 $ 20 $ 453
Average shares of common stock outstanding (millions).... 267 267 267
Per share of common stock:
Basic and diluted earnings
Income before extraordinary items and after
preference stock dividends........................ $1.73 $0.07 $1.66
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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TXU CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Certain previously reported historical amounts for the years 2001, 2000 and
1999 have been reclassified to conform to current classifications.
PRO FORMA ADJUSTMENTS
Pro forma adjustments have been made within the condensed consolidated pro
forma financial statements to reflect:
(a) Write-off of a deferred tax asset for tax benefits related to the UK
that are not recognized in TXU Europe's results of operations.
(b) Write-off of TXU Corp. note receivable from TXU Europe
(c) Record liabilities associated with income taxes and other anticipated
obligations arising from the exiting of the TXU Europe operations, and
income tax effects of pro forma adjustments.
(d) Write-off of net investment in TXU Europe (including the related other
comprehensive income) and the impact of the entries noted above.
Detail of Total Impact on Retained Earnings
-------------------------------------------
Write-off of Europe investment ........................... $3,611
Write-off of TXU Corp. receivables due from TXU Europe ... 98
Write-off of deferred tax asset........................... 105
Write-off of other comprehensive income .................. 250
Impact of other pro forma adjustments, including tax
effects (effective tax rate of 35%) of write-offs of
the note receivable and other comprehensive income ..... 177
------
$4,241
======
(e) Includes tax benefit reported in TXU Australia's results associated
with the UK business ($34 million in 2001, $35 million in 2000, $19
million in 1999 and $17 million for the six months ended June 30,
2002).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
TXU CORP.
By: /s/ Biggs C. Porter
-----------------------------------
Name: Biggs C. Porter
Title: Controller and Principal
Accounting Officer
Date: November 5, 2002
TXU US HOLDINGS COMPANY
By: /s/ Biggs C. Porter
-----------------------------------
Name: Biggs C. Porter
Title: Vice-President, Principal
Accounting Officer
Date: November 5, 2002
TXU GAS COMPANY
By: /s/ Biggs C. Porter
-----------------------------------
Name: Biggs C. Porter
Title: Vice-President, Principal
Accounting Officer
Date: November 5, 2002
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