Note 33 – Condensed US GAAP financial information

As described in note 32, the October 2002 business combination of National Grid Group plc and Lattice Group plc was accounted for as a merger (pooling of interests) under UK GAAP and as an acquisition (purchase accounting) under US GAAP. The different treatments result in the UK GAAP financial statements being fundamentally different compared to the amounts presented under US GAAP. Due to these differences, condensed US GAAP financial information is presented to more clearly show the operating and financial position that would have been reported under US GAAP.

Condensed US GAAP income statement
 
 
 
 
 
 		 2005
National
Grid
Transco
(UK GAAP)
£m		    
 
2005
US GAAP
adjustments
£m		   2005
National
Grid
Transco
(US GAAP)
£m
Turnover 8,521   13   8,534
Operating costs          
Depreciation (860)   (319)   (1,179)
Payroll and severance costs (941)   (56)   (997)
Purchases of electricity (1,678)   –   (1,678)
Purchases of gas (385)   –   (385)
Rates and property taxes (490)   –   (490)
Electricity transmission services scheme direct costs (301)   –   (301)
EnMO direct costs –   –   –
Replacement expenditure (474)   474   –
Provision for doubtful debts (42)   –   (42)
Other operating charges (1,505)   205   (1,300)
  (6,676)   304   (6,372)
Operating profit 1,845   317   2,162
Share of joint ventures’ operating profit 7   (7)   –
Non-operating items 83   (46)   37
Profit before interest and taxation 1,935   264   2,199
Net interest (783)   323   (460)
Profit on ordinary activities before taxation 1,152   587   1,739
Taxation (245)   (186)   (431)
Profit on ordinary activities after taxation 907   401   1,308
Minority interests 1   (3)   (2)
Interest in equity accounted affiliates (net of tax of £2m)     (2)   (2)
Net income from continuing operations 908   396   1,304
Net loss from discontinued operations (net of tax of £nil)     –   –
Net income for the year 908   396   1,304
Basic earnings per share under US GAAP (pence) - continuing operations         42.3p
Diluted earnings per share under US GAAP (pence) - continuing operations         42.1p
Basic earnings per ADS under US GAAP (pence) - continuing operations         211.5p
Diluted earnings per ADS under US GAAP (pence) - continuing operations         210.5p
Basic earnings per share under US GAAP (pence) - total Group         42.3p
Diluted earnings per share under US GAAP (pence) - total Group         42.1p
Basic earnings per ADS under US GAAP (pence) - total Group         211.5p
Diluted earnings per ADS under US GAAP (pence) - total Group         210.5p
Weighted average number of shares in issue (million) - for basic EPS         3,082
Weighted average number of shares in issue (million) - for diluted EPS         3,096
 
 
 
 
 
 
 		 2004
National
Grid
Transco
(UK GAAP)
(restated)
£m		    
 
2004
US GAAP
adjustments
(restated)
£m		    
2004
National
Grid
Transco
(US GAAP)
£m
Turnover 9,033   (167)   8,866
Operating costs          
Depreciation (866)   (298)   (1,164)
Payroll and severance costs (1,045)   (252)   (1,297)
Purchases of electricity (1,998)   –   (1,998)
Purchases of gas (371)   –   (371)
Rates and property taxes (516)   –   (516)
Electricity transmission services scheme direct costs (277)   –   (277)
EnMO direct costs (158)   158   –
Replacement expenditure (388)   388   –
Provision for doubtful debts (50)   –   (50)
Other operating charges (1,534)   263   (1,271)
  (7,203)   259   (6,944)
Operating profit 1,830   92   1,922
Share of joint ventures’ operating profit 7   (7)   –
Non-operating items 322   (290)   32
Profit before interest and taxation 2,159   (205)   1,954
Net interest (822)   150   (672)
Profit on ordinary activities before taxation 1,337   (55)   1,282
Taxation (261)   (21)   (282)
Profit on ordinary activities after taxation 1,076   (76)   1,000
Minority interests (2)   –   (2)
Interest in equity accounted affiliates (net of tax of £nil)     –   –
Net income from continuing operations 1,074   (76)   998
Net loss from discontinued operations (net of tax of £nil)     –   –
Net income for the year 1,074   (76)   998
Basic earnings per share under US GAAP (pence) - continuing operations         32.5p
Diluted earnings per share under US GAAP (pence) - continuing operations         32.4p
Basic earnings per ADS under US GAAP (pence) - continuing operations         162.5p
Diluted earnings per ADS under US GAAP (pence) - continuing operations         162.0p
Basic earnings per share under US GAAP (pence) - total Group         32.5p
Diluted earnings per share under US GAAP (pence) - total Group         32.4p
Basic earnings per ADS under US GAAP (pence) - total Group         162.5p
Diluted earnings per ADS under US GAAP (pence) - total Group         162.0p
Weighted average number of shares in issue (million) - for basic EPS         3,070
Weighted average number of shares in issue (million) - for diluted EPS         3,077
    US GAAP adjustments    
 
 
 
 
 
 		 2003
National
Grid
Transco
(UK GAAP)
(restated)
£m		    
2003
Lattice pre-
acquisition
(UK GAAP)
(restated)
£m		    
2003
Other
US GAAP
adjustments
(restated)
£m		    
2003
National
Grid
Transco
(US GAAP)
£m
Turnover 9,400   (1,470)   (529)   7,401
Operating costs              
Depreciation (851)   249   (129)   (731)
Payroll and severance costs (1,144)   316   (276)   (1,104)
Purchases of electricity (1,901)   –   –   (1,901)
Purchases of gas (357)   53   –   (304)
Rates and property taxes (537)   130   –   (407)
Electricity transmission services scheme direct costs (252)   –   –   (252)
EnMO direct costs (530)   –   530   –
Replacement expenditure (405)   239   166   –
Provision for doubtful debts (24)   1   –   (23)
Other operating charges (1,827)   545   320   (962)
  (7,828)   1,533   611   (5,684)
Operating profit 1,572   63   82   1,717
Share of joint ventures’ operating profit 124   1   (125)   –
Non-operating expenses (99)   67   27   (5)
Profit before interest and taxation 1,597   131   (16)   1,712
Net interest (970)   203   103   (664)
Profit on ordinary activities before taxation 627   334   87   1,048
Taxation (245)   (29)   16   (258)
Profit on ordinary activities after taxation 382   305   103   790
Minority interests (31)   (1)   29   (3)
Interest in equity accounted affiliates (net of tax of £5m)         3   3
Net income from continuing operations 351   304   135   790
Net loss from discontinued operations (net of tax of £nil)         (39)   (39)
Net income for the year 351   304   96   751
Basic earnings per share under US GAAP (pence) - continuing operations     33.6p
Diluted earnings per share under US GAAP (pence) - continuing operations     32.9p
Basic earnings per ADS under US GAAP (pence) - continuing operations     168.0p
Diluted earnings per ADS under US GAAP (pence) - continuing operations     164.5p
Basic earnings per share under US GAAP (pence) - total Group     31.9p
Diluted earnings per share under US GAAP (pence) - total Group     31.3p
Basic earnings per ADS under US GAAP (pence) - total Group     159.5p
Diluted earnings per ADS under US GAAP (pence) - total Group     156.5p
Net income under US GAAP after £22m dilutive impact of 4.25% Exchangeable Bonds 2008     £m
773
Weighted average number of shares in issue (million) - for basic EPS     2,348
Weighted average number of shares in issue (million) - for diluted EPS     2,468

Basic loss per share and per ADS for discontinued operations under US GAAP was (1.7)p and (8.5)p respectively. Diluted loss per share and per ADS for discontinued operations under US GAAP was (1.6)p and (8.0)p respectively.

Under UK GAAP, the weighted average number of shares in issue for basic EPS for the year ended 31 March 2003 was 3,078m compared with 2,348m under US GAAP. The difference related to shares issued on the business combination of National Grid Group plc and Lattice Group plc. As this transaction was accounted for as a merger (pooling of interests) under UK GAAP, shares issued were included in the weighted average share capital as if they were in issue throughout the year. Under US GAAP, they are included from the date of issue (21 October 2002). This difference impacted 2003 and earlier periods but did not affect 2004 and 2005 and will not affect future accounting periods.

top

Consolidated statement of comprehensive income and changes in shareholders’ equity under US GAAP
 
 		 2005
£m		2004
£m		2003
£m
Net income 1,304 998 751
Additional minimum pension liability (net of tax of £16m charge, £188m charge and
 £417m credit)		 33 415 (886)
Exchange adjustments (net of tax of £nil, £12m charge and £12m credit) (80) (438) (322)
Mark to market of financial instruments (net of tax of £43m charge, £26m credit and £nil) 111 (84) –
Share of joint ventures’ other comprehensive loss – – (10)
Other – – 9
Comprehensive income/(loss) 1,368 891 (458)
Dividends (628) (560) (382)
Shares issued to purchase Lattice – – 6,566
Other shares issued 9 34 2
Share options granted 16 25 29
Repurchase of shares – – (97)
Movement in treasury stock 5 5 7
Shareholders’ equity at 1 April 9,821 9,426 3,759
Shareholders’ equity at 31 March 10,591 9,821 9,426

top

Condensed US GAAP balance sheet
 
 		   2005
£m		   2004
£m
Assets        
Current assets        
Cash and cash equivalents   525   528
Marketable securities   156   102
Accounts and notes receivable   553   496
Inventories   101   91
Regulatory assets   443   512
Prepaid expenses and other current assets   599   596
Total current assets   2,377   2,325
Property, plant and equipment cost   34,282   32,216
Property, plant and equipment accumulated depreciation   (10,022)   (9,091)
    24,260   23,125
Goodwill cost   6,156   5,698
Goodwill accumulated amortisation and impairments   (97)   (93)
    6,059   5,605
Intangible assets   272   50
Investments   152   155
Regulatory assets   2,907   3,136
Other debtors   1,247   951
Total assets   37,274   35,347
Liabilities and shareholders' equity        
Current liabilities        
Bank overdrafts   18   26
Accounts payable   1,111   1,036
Short-term borrowings   3,229   1,644
Accrued income taxes   79   122
Purchased power obligations   54   57
Liability for index-linked swap contracts   99   100
Other accrued liabilities   1,263   1,402
Total current liabilities   5,853   4,387
Long-term borrowings   11,475   12,256
Purchased power obligations   90   149
Liability for index-linked swap contracts   228   291
Post-retirement benefits   1,515   1,681
Deferred income taxes   5,475   4,867
Other liabilities   2,009   1,841
Total liabilities   26,645   25,472
Minority interest - equity   10   12
Cumulative preference stock issued by Group undertakings   28   42
Shareholders’ equity        
Common stock (par value £0.10 per share; shares authorised 5,000m;
 shares issued 2005: 3,090m; 2004: 3,088m)		   309   309
Additional paid in capital   7,793   7,768
Other reserves   359   359
Retained earnings   3,377   2,701
Other comprehensive loss   (1,218)   (1,282)
Treasury stock   (29)   (34)
Equity shareholders’ funds   10,591   9,821
Total liabilities and shareholders’ equity   37,274   35,347

top

Other comprehensive loss can be analysed as follows:
 
 		 2005
£m		 2004
£m
Foreign exchange losses (901) (821)
Additional minimum pension liability (623) (672)
Mark to market of financial instruments 66 (88)
Taxation 236 295
Other 4 4
  (1,218) (1,282)

top

Segmental information under US GAAP

Segments have been determined in accordance with SFAS 131 and segmented financial information has been presented in accordance with US GAAP.

 
 		 2005
£m		2004(i)
£m		 2003(i)
£m
Turnover by business segment      
Continuing operations      
UK electricity and gas transmission 1,937 1,875 1,615
US electricity transmission 283 318 400
UK gas distribution 2,223 2,229 1,239
US electricity and gas distribution 3,112 3,495 3,306
US stranded cost recoveries 420 505 586
Wireless infrastructure 208 72 61
Other activities 844 834 401
Sales between businesses (493) (462) (207)
Group turnover - continuing operations 8,534 8,866 7,401
Operating profit by business segment      
Continuing operations      
UK electricity and gas transmission 711 676 573
US electricity transmission 121 124 116
UK gas distribution 712 758 567
US electricity and gas distribution 356 237 350
US stranded cost recoveries 121 135 148
Wireless infrastructure 4 6 (23)
Other activities 137 (14) (14)
Operating profit - continuing operations 2,162 1,922 1,717

Turnover and operating profit in the other segment relates primarily to the UK.

(i) Prior year comparatives have been amended to reflect changes in business segments (see note 2).
  Property, plant and equipment
 
 		 2005
£m		2004(i)
£m
Analysis by business segment    
Continuing operations    
UK electricity and gas transmission 6,642 6,442
US electricity transmission 1,176 1,174
UK gas distribution 10,479 10,233
US electricity and gas distribution 3,401 3,428
US stranded cost recoveries 7 6
Wireless infrastructure 681 65
Other activities 1,874 1,777
  24,260 23,125
Analysis by geographical region    
UK 19,350 18,335
US 4,633 4,652
Rest of the World 277 138
  24,260 23,125
(i) Prior year comparatives have been amended to reflect changes in business segments (see note 2).

top

Goodwill
 
 
 
 		 UK electricity
and gas
transmission
£m		  
US electricity
transmission
£m		  
UK gas
distribution
£m		 US electricity
and gas
distribution
£m		 US stranded
cost
recoveries
£m		  
Wireless
infrastructure
£m		  
Other
activities
£m		  
 
Total
£m
1 April 2003 753 403 3,040 1,568 – 86 50 5,900
Exchange adjustments – (55) – (214) – (3) (15) (287)
Additions – – – – – – 1 1
Impairment – – – – – – (20) (20)
Adjustments to
 provisional fair value		 3 – (50) – – – 58 11
1 April 2004 756 348 2,990 1,354 – 83 74 5,605
Exchange adjustments – (11) – (44) – (3) – (58)
Additions – – – – – 512 – 512
31 March 2005 756 337 2,990 1,310 – 592 74 6,059

top