EXHIBIT 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
On August 11, 1998, Registrant (then known as CalEnergy Company, Inc.
("Company") entered into an Agreement and Plan of Merger with MHC Inc.
("Merger"), then known as MidAmerican Energy Holdings Company ("MHC"). The
Merger closed on March 12, 1999 and Registrant paid $27.15 in cash for each
outstanding share of MHC common stock for a total of approximately $2.42 billion
in a merger, pursuant to which MHC became an indirect wholly owned subsidiary of
the Company. Additionally, Registrant reincorporated in the State of Iowa and
was renamed MidAmerican Energy Holdings Company and upon closing became an
exempt public utility holding company.
The Company and its wholly owned subsidiary MidAmerican Funding LLC
("Funding") financed the purchase of all outstanding shares of MHC common stock
with the net proceeds of a $700 million offering of Funding's senior secured
notes and bonds and an equity contribution from Registrant. A portion of the
Company equity contribution was provided from approximately $940 million in
proceeds to the Company from its sale of senior notes in September and November
of 1998. The balance of the Company equity contribution was funded from cash on
hand and from the proceeds of the Company's recently completed sales of at least
50% of its interest in all of its qualifying facility projects, including 100%
of Coso Finance Partners (Navy I), Coso Energy Developers (BLM) and Coso Power
Developers (Navy II) (collectively the "Coso Partnerships") and 50% of CE
Generation LLC ("CE Generation").
The following unaudited pro forma combined condensed financial statements
are based on the historical consolidated financial statements of the Company and
MHC, combined and adjusted to give effect to the Merger and the transactions
contemplated thereby (including the related financing and the sale of qualifying
facility project interests, excluding the gain on the sale of the qualifying
facility project interests from the pro forma income statement), as described in
the notes thereto. An after-tax gain of $12.4 million, or $0.17 per diluted
share, on the sale of the qualifying facility project interests was reported in
the first quarter of 1999. Certain amounts in the MHC financial statements have
been reclassified to conform to the Company's presentation. These statements
should be read in conjunction with the historical financial statements and notes
thereto.
The unaudited pro forma combined condensed statement of earnings for the
year ended December 31, 1998 presents the results for the Company and MHC as if
the Merger had occurred at the beginning of the year. The accompanying unaudited
pro forma combined condensed balance sheet as December 31, 1998 gives effect to
the Merger as of that date.
The pro forma adjustments are based upon preliminary estimates, information
currently available, and certain assumptions that management believes are
reasonable under the circumstances. The Company's actual consolidated financial
statements will reflect the effects of the Merger on and after the completion of
the Merger rather than the dates indicated above. The unaudited pro forma
combined condensed financial statements neither purport to represent what the
combined results of operations or financial condition actually would have been
had the Merger and related transactions in fact occurred on the assumed dates,
nor to project the combined results of operations and financial position for any
future period.
The Merger will be accounted for by the purchase method and, therefore,
assets and liabilities of MHC will be recorded at their fair values. The excess
of the purchase cost over the fair value of net assets acquired at the
completion of the Merger will be recorded as goodwill. Allocations included in
the pro forma statements are based on analysis which is not yet completed.
Accordingly, the final value of the purchase price and its allocation may
differ, perhaps significantly, from the amounts included in these pro forma
statements.
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PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXPECT PER SHARE DATA)
DEBT OFFERINGS
AND RETIREMENTS QF SALES MERGER
COMPANY (NOTES 1 &2) (NOTE 3) MHC (NOTES 4 & 5) PRO FORMA
---------- --------------- --------- ----------- ------------- -----------
Revenue:
Operating Revenue .............. $2,555,206 $ - $(531,461) $ 1,940,150 $ - $ 3,963,895
Interest and other income ...... 127,505 - 5,192 36,189 - 168,886
---------- ---------- --------- ----------- -------- -----------
Total revenues ............ 2,682,711 - (526,269) 1,976,339 - 4,132,781
---------- ---------- --------- ----------- -------- -----------
Cost and expenses:
Cost of Sales .................. 1,258,539 - - 705,948 (11,599) A 1,952,888
Operating expense .............. 425,004 - (146,980) 771,775 (3,035) A 1,046,764
General and administration ..... 46,401 - (4,963) - - 41,438
Depreciation and amortization .. 333,422 - (116,189) 182,211 33,264 A,B 432,708
Interest expense ............... 406,084 60,027 (64,401) 95,519 - 497,229
Less interest capitalized ...... (58,792) - 347 (3,377) - (61,822)
---------- ---------- --------- ----------- -------- -----------
Total costs and expenses .. 2,410,658 60,027 (332,186) 1,752,076 18,630 3,909,205
---------- ---------- --------- ----------- -------- -----------
Income before income taxes ..... 272,053 (60,027) (194,082) 224,263 (18,630) 223,577
Provision for income taxes ..... 93,265 (24,311) (85,847) 80,013 5,850 C 68,971
---------- ---------- --------- ----------- -------- -----------
Income before minority interest 178,788 (35,716) (108,236) 144,250 (24,480) 154,606
Minority interest .............. 41,276 - - 12,932 - 54,208
---------- ---------- --------- ----------- -------- -----------
Income before extraordinary item $ 137,512 $ (35,716) $(108,236) $ 131,318 $(24,480) $ 100,398
========== ========== ========= =========== ======== ===========
Net Income per share - basic .. 2.29 1.67
Net Income per share - diluted 2.15 1.63
Basic shares outstanding ...... 60,139 60,139
Diluted shares outstanding ..... 74,100 (5,654) D 68,446
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PRO FORMA UNAUDITED COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
DEBT OFFERINGS
AND RETIREMENTS QF SALES MERGER
COMPANY (NOTES 1 &2) (NOTE 3) MHC (NOTE 4) PRO FORMA
---------- --------------- ------------ ----------- ----------- -----------
Cash and Investments ............... $1,606,148 $ 56,623 $ 816,042 $ 9,221 $(2,424,779) $ 63,255
Restricted cash & Investments ...... 637,571 - (132,183) - - 505,388
Marketable securities .............. - - - 398,554 - 398,554
Accounts receivable ................ 528,116 - (89,486) 211,241 - 649,871
Properties, plants, contracts
and equipment, net ............... 4,236,039 - (1,174,518) 2,791,433 (34,295) 5,818,659
Excess of cost over fair value of
net assets acquired, net ......... 1,538,176 - (310,700) - 1,345,238 2,572,714
Equity investments ................. 125,036 - 43,438 - - 168,474
Deferred charges and other assets .. 432,438 4,581 (63,681) 923,484 (71,485) 1,225,337
---------- --------- ----------- ---------- ----------- -----------
Total assets .................. $9,103,524 $ 61,204 $ (911,089) $4,333,933 $(1,185,321) $11,402,252
========== ========= =========== ========== =========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable ................... $ 305,757 $ - $ (39,945) $ 172,779 $ - $ 438,591
Other accrued liabilities .......... 1,009,091 (17,432) (7,562) 598,226 75,802 1,658,125
Parent Company Debt ................ 2,645,991 (569,501) - - - 2,076,490
Subsidiary and Project Debt ........ 3,093,810 700,000 (692,210) 1,446,888 4,076 4,552,564
Deferred income taxes .............. 543,391 (20,486) (194,233) 733,331 (65,955) 996,048
---------- --------- ----------- ---------- ----------- -----------
Total liabilities .................. 7,598,040 92,581 (933,950) 2,951,224 13,923 9,721,818
---------- --------- ----------- ---------- -----------
Deferred income .................... 58,468 - - - - 58,468
---------- --------- ----------- ---------- ----------- -----------
Convertible preferred securities
of subsidiary .................... 553,930 - - - - 553,930
Preferred stock of subsidiary ...... 66,033 - - 181,759 1,706 249,498
---------- --------- ----------- ---------- ----------- -----------
Stockholders' Equity:
Common Stock ....................... 5,602 - - - - 5,602
Additional paid in capital ......... 1,233,088 - - 1,200,950 (1,200,950) 1,233,088
Retained earnings .................. 340,496 (31,377) 22,861 - - 331,980
Treasury Stock ..................... (752,178) - - - - (752,178)
Cumulative effect of foreign
currency translation adjust ...... 45 - - - - 45
---------- --------- ----------- ---------- ----------- -----------
Total Stockholders' Equity ......... 827,053 (31,377) 22,861 1,200,950 (1,200,950) 818,537
---------- --------- ----------- ---------- ----------- -----------
Total liabilities and
stockholders' equity ............. $9,103,524 $ 61,204 $ (911,089) $4,333,933 $(1,185,321) $11,402,252
========== ========= =========== ========== =========== ===========
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The Unaudited Pro Forma Combined Condensed Financial Data are based on the
following assumptions:
1. Issuance of $700 million notes of a subsidiary, net of $4.5 million debt
issue costs, with a weighted average interest rate of 6.5%. Issuance of
$1,400 million senior notes and bonds of the Company with a weighted average
interest rate of 7.26%. Issuance of $100 million 7.52% senior notes.
2. Retirement of the $529.6 million, 10.25% Senior Discount Notes, of which
$160.1 million was retired in the fourth quarter of 1998 and $369.5 million
was retired in January 1999, and $195.8 million of 9.875% Limited Recourse
Notes. The 1999 retirements included call premiums of $38.6 million and
write-off of deferred financing costs of $13.3 million.
3. The sale of Coso for cash proceeds of $205 million and the sale of a 50%
interest in CE Generation for cash proceeds of $447 million, less
transaction costs of $10 million and including $400 million from the of
proceeds of the 7.42% Senior Secured Bonds issued by CE Generation
(collectively the "QF Sales"). The pro forma income statement excludes the
gain on the sale of the qualifying facility project interests. An after tax
gain of $12.4 million, or $0.17 per diluted share, on the sale of the
qualifying facility project interests was reported in the first quarter of
1999.
4. The use of the net proceeds detailed above to purchase MHC for $2,439.8
million, including accrued transaction costs of $15 million recorded in
other liabilities. The preliminary adjustments which have been made to the
assets and liabilities of MHC to reflect the effect of the Merger accounted
for as a purchase business combination follow (in thousands):
Goodwill $1,345,238
Power purchase contract (34,295)
Other assets (71,485)
Other liabilities (60,802)
Long-term debt (4,076)
Deferred taxes 65,955
Preferred securities of subsidiaries (1,706)
----------
$1,238,829
==========
Included in other assets is primarily an adjustment to reflect the fair
value of MHC's investment in real estate. Included in other liabilities are
primarily adjustments to reflect MHC's compensation obligations and to
reflect MHC's long-term contracts at fair value based on the estimated
market prices for similar purchases with similar remaining maturities.
5. A. Record amortization of the purchase price accounting adjustments using
the straight line or other applicable method over their remaining
estimated lines.
B. Record amortization of the excess purchase price over the net assets
acquired using the straight line method over 40 years.
C. Includes income tax expense for the effects of the pro forma
adjustments which affect taxable income at an effective rate of 40.5%.
D. Earnings per share-diluted is further adjusted for certain convertible
securities which are antidilutive on a pro forma basis.
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