Item 1. BUSINESS
GENERAL
Pepco Holdings, Inc. (Pepco Holdings), formerly New RC, Inc., was
incorporated under the laws of Delaware on February 9, 2001, as a wholly
owned subsidiary of Potomac Electric Power Company (Pepco or the Company).
Pepco Holdings has issued 100 shares of common stock (with a par value of
$.01), all of which are owned by Pepco. Pepco Holdings has not commenced
operations and therefore as of December 31, 2001 has no operating results.
Pepco Holdings will be a holding company registered under the Public Utility
Holding Company Act of 1935, as amended.
On February 12, 2001, the Company and Conectiv announced that each
company's board of directors approved an agreement for a strategic
transaction whereby the Company will effectively acquire Conectiv for a
combination of cash and stock valued at approximately $2.2 billion. The
combination, which will be accounted for as a purchase, has received approval
from both companies' shareholders, from the Pennsylvania and Virginia Public
Service Commissions, and from the Federal Energy Regulatory Commission
(FERC). Additionally, the Delaware Public Service Commission voted on
March 19, 2002 to approve the merger and antitrust clearance has been
received under the Hart-Scott-Rodino Antitrust Improvements Act effective
August 7, 2001. Pending the receipt of various other regulatory approvals,
the transaction is expected to close during the second quarter of 2002. Both
Pepco and Conectiv will become subsidiaries of the new holding company, Pepco
Holdings.
For additional information refer to Item 8. Financial Statements and
Supplementary Data, herein.
Item 2.
Item 2. PROPERTIES
None.
Item 3.
Item 3. LEGAL PROCEEDINGS
None.
Part II
Item 5.
Item 5.
-
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
None.
Item 8.
Item 8.
-
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PEPCO HOLDINGS, INC.
STATEMENTS OF EARNINGS AND RETAINED INCOME
FROM INCEPTION (FEBRUARY 9, 2001) THROUGH DECEMBER 31, 2001
REVENUE
$ -
EXPENSES
$ -
NET INCOME
$ -
Retained Income at Beginning of Period
$ -
Retained Income at End of Period
$ -
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Formation and Organization
Organization
Pepco Holdings, Inc. (Pepco Holdings), formerly New RC, Inc., was
incorporated under the laws of Delaware on February 9, 2001, as a wholly
owned subsidiary of Potomac Electric Power Company (Pepco). Pepco Holdings
has issued 100 shares of common stock (with a par value of $.01), all of
which are owned by Pepco. Pepco Holdings has not commenced operations and
therefore as of December 31, 2001 has no operating results. Pepco Holdings
will be a holding company registered under the Public Utility Holding Company
Act of 1935, as amended.
Pepco, Pepco Holdings, and Conectiv (a Delaware corporation), entered
into an Agreement and Plan of Merger (Agreement) on February 9, 2001,
providing for a reorganization in which two wholly owned and newly formed
subsidiaries of Pepco Holdings will merge with and into Pepco and Conectiv,
respectively. As a result of these mergers, Pepco and Conectiv will be
wholly owned subsidiaries of Pepco Holdings and existing Pepco and Conectiv
shareholders will own all outstanding shares of Pepco Holdings. The
transaction will be accounted for as a purchase of Conectiv by Pepco under
the purchase accounting method, and the total consideration of approximately
$2.2 billion will consist of 50% in cash and 50% in stock. Pepco's
historical financial statements will become the historical financial
statements of Pepco Holdings upon the consummation of the transaction. The
transaction has received approval from both companies' shareholders, the
Pennsylvania and Virginia Public Service Commissions, and from the Federal
Energy Regulatory Commission. Additionally, antitrust clearance has been
received under the Hart-Scott-Rodino Antitrust Improvements Act (HSR)
effective August 7, 2001. Pending the receipt of various other regulatory
approvals, the transaction is expected to close during the second quarter of
2002.
(2) Summary of Significant Accounting Policies
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141 (SFAS 141)
entitled "Business Combinations," which applies to all business combinations
initiated after June 30, 2001. This statement requires that the purchase
method of accounting be used for all business combinations. Additionally,
intangible assets that can be identified and named must be recognized as
assets apart from goodwill if certain criteria are met. Due to the pending
acquisition of Conectiv, the Company is in the process of assessing the
provisions of SFAS 141 in order to determine the impact it will have on its
financial position and results of operations.
In June 2001, the FASB issued SFAS No. 142 (SFAS 142) entitled "Goodwill
and Other Intangible Assets," which is required to be applied starting with
fiscal years beginning after December 15, 2001. This statement establishes
the accounting and reporting standards for goodwill and other intangible
assets and requires that goodwill no longer be amortized but rather tested
for impairment based on the criteria prescribed in the statement. Due to the
pending acquisition of Conectiv, the Company is in the process of assessing
the provisions of SFAS 142 in order to determine the impact it will have on
its financial position and results of operations.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Item 9.
Item 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Part IV
Item 14.
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits required by Securities and Exchange Commission Regulation
S-K (summarized below).
Exhibit
No.
Description of Exhibit
Reference
3.1
Charter of the Company. . . . . . .
Filed herewith.
3.2
Bylaws of the Company. . . . . . . .
Filed herewith.
(b) Documents List.
None.
(c) Reports on Form 8-K.
None.
Exhibit 23 Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-4 (Number 333-57042) of Pepco Holdings, Inc. (formerly
New RC, Inc.) of our report dated March 29, 2002 relating to the financial
statements which appear in this Form 10-K.
PricewaterhouseCoopers LLP
Washington, D.C.
March 29, 2002
Report of Independent Accountants
March 29, 2002
To the Board of Directors of
Pepco Holdings, Inc.
In our opinion, the accompanying Balance Sheet and the related Statement of
Earnings and Retained Income and Statement of Cash Flows present fairly, in
all material respects, the financial position of Pepco Holdings, Inc. at
December 31, 2001, and the results of its operations and its cash flows from
inception (February 9, 2001) through December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements
in accordance with auditing standards generally accepted in the United States
of America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Washington, D.C.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Washington, District of Columbia, on the 29th day of March, 2002.
PEPCO HOLDINGS, INC.
(Registrant)
By D. R. WRAASE
(Dennis R. Wraase,
President and Treasurer)
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature
Title
Date
(i),
Principal Executive Officer
(ii),
Principal Financial Officer
(iii)
Principal Accounting Officer
D. R. WRAASE
(Dennis R. Wraase)
President, Treasurer
and Director
March 29, 2002