PG&E 2007 Annual Report Download - page 112

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NOTE 9: PREFERRED STOCK
PG&E Corporation has authorized 85 million shares of
preferred stock, which may be issued as redeemable or non-
redeemable preferred stock. No preferred stock of PG&E
Corporation has been issued.
UTILITY
The Utility has authorized 75 million shares of $25 par value
preferred stock and 10 million shares of $100 par value pre-
ferred stock. The Utility specifi es that 5,784,825 shares of the
$25 par value preferred stock authorized are designated as
nonredeemable preferred stock without mandatory redemp-
tion provisions. The remainder of the 75 million shares
of $25 par value preferred stock and the 10 million shares of
$100 par value preferred stock may be issued as redeemable
or nonredeemable preferred stock.
At December 31, 2007 and 2006, the Utility had issued
and outstanding 5,784,825 shares of nonredeemable $25 par
value preferred stock without mandatory redemption provi-
sions. Holders of the Utility’s 5.0%, 5.5%, and 6.0% series
of nonredeemable $25 par value preferred stock have rights
to annual dividends ranging from $1.25 to $1.50 per share.
At December 31, 2007 and 2006, the Utility had issued
and outstanding 4,534,958 shares of redeemable $25 par
value preferred stock without mandatory redemption provi-
sions. The Utility’s redeemable $25 par value preferred stock
is subject to redemption at the Utility’s option, in whole
or in part, if the Utility pays the specifi ed redemption price
plus accumulated and unpaid dividends through the redemp-
tion date. At December 31, 2007, annual dividends ranged
from $1.09 to $1.25 per share and redemption prices
ranged from $25.75 to $27.25 per share.
The last of the Utility’s redeemable $25 par value preferred
stock with mandatory redemption provisions was redeemed
on May 31, 2005. Currently the Utility does not have any
shares of the $100 par value preferred stock with or without
mandatory redemption provisions outstanding.
Dividends on all Utility preferred stock are cumulative.
All shares of preferred stock have voting rights and an equal
preference in dividend and liquidation rights. During the
year ended December 31, 2005, the Utility paid approxi-
mately $16 million of dividends on preferred stock without
mandatory redemption provisions and approximately
$5 million of dividends on preferred stock with mandatory
redemption provisions. During the years ended December 31,
2007 and December 31, 2006, the Utility paid approximately
$14 million of dividends on preferred stock without man-
datory redemption provisions. On December 19, 2007, the
Board of Directors of the Utility declared a cash dividend
on various series of its preferred stock totaling approximately
$3 million that was paid on February 15, 2008 to sharehold-
ers of record on January 31, 2008. Upon liquidation or dis-
solution of the Utility, holders of preferred stock would be
entitled to the par value of such shares plus all accumulated
and unpaid dividends, as specifi ed for the class and series.
On June 15, 2005, the Utility’s Board of Directors
authorized the redemption of all of the outstanding shares
of the Utility’s 7.04% Redeemable First Preferred Stock
totaling approximately $36 million aggregate par value
plus approximately $1 million related to a $0.70 per share
redemption premium. This issue was fully redeemed on
August 31, 2005. In addition to the $25 per share redemp-
tion price, holders of the 7.04% Redeemable First Preferred
Stock received an amount equal to all accumulated and
unpaid dividends through August 31, 2005 on such shares
totaling approximately $211,000.
NOTE 10: EARNINGS PER SHARE
EPS is calculated, utilizing the “two-class” method, by divid-
ing the sum of distributed earnings to common shareholders
and undistributed earnings allocated to common sharehold-
ers by the weighted average number of common shares
outstanding during the period. In applying the “two-class”
method, undistributed earnings are allocated to both com-
mon shares and participating securities. PG&E Corporation’s
Convertible Subordinated Notes are entitled to receive pass-
through dividends and meet the criteria of a participating
security. All PG&E Corporation’s participating securities
participate on a 1:1 basis with shares of common stock.
PG&E Corporation applies the treasury stock method of
refl ecting the dilutive effect of outstanding stock-based com-
pensation in the calculation of diluted EPS in accordance
with SFAS No. 128. SFAS No. 128 requires that proceeds
from the exercise of options and warrants are assumed to
be used to purchase shares of common stock at the average
market price during the reported period. The incremental
shares (the difference between the number of shares assumed
issued upon exercise and the number of shares assumed
purchased) must be included in the number of weighted
average shares of common stock used for the calculation
of diluted EPS.