EXHIBIT 99.2
DOMINION RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
Year Ended December 31,2000 | |||||||
| Louis |
| Pro | ||||
(Millions, except per share data) | |||||||
Operating Revenue | $9,260 | $474 | $9,734 | ||||
Operating Expenses: | |||||||
Electric fuel and energy purchases, net | 1,106 | 1,106 | |||||
Purchased electric capacity | 741 | 741 | |||||
Purchased gas, net | 1,453 | 1,453 | |||||
Liquids, pipeline capacity, and other purchases | 299 | 299 | |||||
Restructuring and other acquisition-related costs | 460 | 460 | |||||
Other operations and maintenance | 2,011 | 117 | $(36) | (G) | 2,092 | ||
Depreciation, depletion and amortization | 1,176 | 129 | 26 | (E) | 1,331 | ||
Other taxes | 485 | 31 |
| 516 | |||
Total operating expenses | 7,731 | 277 | (10) | 7,998 | |||
Income from operations | 1,529 | 197 | 10 | 1,736 | |||
Other income | 93 | 3 | 96 | ||||
Interest and related charges | 1,024 | 41 | 53 | (B) | 1,118 | ||
Income before income taxes | 598 | 159 | (43) | 714 | |||
Income taxes | 183 | 61 | (16) | (D3) | 228 | ||
Income from continuing operations | $ 415 | $ 98 | $(27) | $ 486 | |||
Average shares of common stock - basic | 235.2 | 41.8 | 249.5 | ||||
Earning per share - basic: | |||||||
Income from continuing operations | $1.76 | $2.35 | $1.95 | ||||
Average shares of common stock - diluted | 235.9 | 42.8 | 250.3 | ||||
Earning per share - diluted: | |||||||
Income from continuing operations | $1.76 | $2.29 | $1.94 | ||||
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Data
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DOMINION RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
Nine Months Ended September 30, 2001 | ||||||||
| Louis |
| Pro | |||||
(Millions, except per share data) | ||||||||
Operating Revenue | $8,051 | $509 | $8,560 | |||||
Operating Expenses: | ||||||||
Electric fuel and energy purchases, net | 1,063 | 1,063 | ||||||
Purchased electric capacity | 516 | 516 | ||||||
Purchased gas, net | 1,474 | 1,474 | ||||||
Liquids, pipeline capacity, and other purchases | 164 | 164 | ||||||
Other operations and maintenance | 1,835 | 103 | $(27) | (G) | 1,911 | |||
Depreciation, depletion and amortization | 906 | 97 | 20 | (E) | 1,023 | |||
Other taxes | 299 | 23 |
| 322 | ||||
Total operating expenses | 6,257 | 223 | (7) | 6,473 | ||||
Income from operations | 1,794 | 286 | 7 | 2,087 | ||||
Other income | 71 | 2 | 73 | |||||
Interest and related charges | 760 | 24 | 40 | (B) | 824 | |||
Income before income taxes | 1,105 | 264 | (33) | 1,336 | ||||
Income taxes | 444 | 101 | (13) | (D3) | 532 | |||
Income from continuing operations | $ 661 | $163 | $(20) | $ 804 | ||||
Average shares of common stock - basic | 248.3 | 43.9 | 262.6 | |||||
Earning per share - basic: | ||||||||
Income from continuing operations | $2.67 | $3.72 | $3.06 | |||||
Average shares of common stock - diluted | 250.3 | 44.6 | 264.8 | |||||
Earning per share - diluted: | ||||||||
Income from continuing operations | $2.65 | $3.65 | $3.04 | |||||
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Data
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DOMINION RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
At September 30, 2001 | ||||||||
|
|
| Pro | |||||
(Millions) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ 367 | $ 5 | $ 372 | |||||
Accounts receivable, net | 2,023 | 69 | 2,092 | |||||
Inventories | 547 | 547 | ||||||
Investment securities-trading | 283 | 283 | ||||||
Commodity contract assets | 1,670 | 74 | 1,744 | |||||
Prepayments | 154 | 154 | ||||||
Other | 321 | 5 | 326 | |||||
Total current assets | 5,365 | 153 | 5,518 | |||||
Investments | 3,409 |
| 3,409 | |||||
Property, Plant and Equipment: | ||||||||
Property, plant and equipment | 30,402 | 2,195 | $ 192 | (D1) | 32,789 | |||
Accumulated depreciation, depletion, and amortization | (14,434) | (665) | 665 | (D1) | (14,434) | |||
Total property, plant and equipment | 15,968 | 1,530 | 857 | 18,355 | ||||
Deferred Charges and Other Assets: | ||||||||
Goodwill, net | 3,672 | 468 | (D2) | 4,140 | ||||
Prepaid pension costs | 1,448 | 1,448 | ||||||
Other | 1,408 | 68 |
| 1,476 | ||||
Total deferred charges and other assets | 6,528 | 68 | 468 | 7,064 | ||||
Total assets | $31,270 | $1,751 | $1,325 | $34,346 | ||||
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Data
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DOMINION RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
At September 30, 2001 | ||||||||
|
|
| Pro | |||||
(Millions) | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Securities due within one year | $ 531 | $ 531 | ||||||
Short-term debt | 1,299 | 1,299 | ||||||
Accounts payable, trade | 1,581 | $ 92 | $ 22 | (F) | 1,695 | |||
Commodity contract liabilities | 1,356 | 8 | 1,364 | |||||
Other | 1,439 | 21 | 33 | (F) | 1,493 | |||
Total current liabilities | 6,206 | 121 | 55 | 6,382 | ||||
Long-term Debt: | ||||||||
Long-term debt | 11,251 | 514 | 712 | (B) | 12,477 | |||
Notes payable-affiliates | 513 |
|
| 513 | ||||
Total long-term debt | 11,764 | 514 | 712 | 12,990 | ||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred taxes | 3,164 | 188 | 316 | (D3) | 3,668 | |||
Other | 1,131 | 76 |
| 1,207 | ||||
Total deferred credits and other liabilities | 4,295 | 264 | 316 | 4,875 | ||||
Total liabilities | 22,265 | 899 | 1,083 | 24,247 | ||||
Obligated manditorily redeemable preferred | ||||||||
securities of subsidiary trusts | 935 |
| 200 | (B) | 1,135 | |||
Subsidiary preferred stock not subject to mandatory redemption | 509 |
|
| 509 | ||||
Common Shareholders' Equity: | ||||||||
Common stock | 6,137 | 894 | (C, I ) | 7,031 | ||||
Other paid-in capital | 23 | 511 | (511) | (H) | 23 | |||
Accumulated other comprehensive income | 188 | 63 | (63) | (H) | 188 | |||
Retaining earnings | 1,213 | 289 | (289) | (H) | 1,213 | |||
Treasury stock |
| (11) | 11 | (H) |
| |||
Total common shareholders' equity | 7,561 | 852 | 42 | 8,455 | ||||
Total liabilities and shareholders' equity | $31,270 | $1,751 | $1,325 | $34,346 | ||||
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Data
PAGE 5
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL DATA
The Unaudited Pro Forma Combined Condensed Consolidated Financial Data are based on the following assumptions:
A. Certain revenues, expenses, assets and liabilities of Louis Dreyfus have been reclassified to conform to Dominion's presentation.
B. The issuance of $950 million of long-term debt and $200 million of trust preferred securities by CNG, a wholly-owned subsidiary of Dominion, at an average coupon rate of 6.14% to fund the cash consideration distributed in exchange for the outstanding shares of Louis Dreyfus at the closing of the merger. In addition, Dominion retired $185 million of Louis Dreyfus bank debt with proceeds from these financings and assuming any excess proceeds from the issuance of long term debt will be used to retire existing long term debt. Additionally, certain debt of Louis Dreyfus, which was not retired, is adjusted to reflect fair market value.
C. The issuance of 14.3 million shares of Dominion common stock at the closing of the merger based on the exchange ratio of 0.3226 share of Dominion common stock for each share of Louis Dreyfus common stock, amounting to $881 million, and the conversion of Louis Dreyfus common stock options into Dominion common stock options with an estimated fair value of $13 million.
D. Purchase adjustments which have been made to the assets and liabilities of Louis Dreyfus to reflect the effect of the merger being accounted for as a purchase business combination are as follows (in millions):
Total oil and gas exploration and production properties (1) | $857 |
Goodwill (2) | 468 |
Deferred taxes (3) | 316 |
1. Oil and gas exploration and production properties are adjusted to reflect the Louis Dreyfus exploration and production properties at estimated fair value. The fair value of proved reserves are estimated to be $1.5 billion and unproved properties are estimated to be $812 million.
2. Goodwill is recognized, representing the portion of the purchase price in excess of the estimated fair value of identified assets and liabilities. No amortization of goodwill is included in the Unaudited Pro Forma Combined Condensed Consolidated Financial Data, as provided in Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets, for business combinations completed after June 30, 2001. The final allocation of the purchase price will be based on the fair value of identified assets and liabilities. Accordingly, goodwill will be adjusted as a result of the final determination of such fair values and thus may differ significantly from the amount reported in the Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet.
3. Deferred taxes are adjusted to record the additional deferred taxes, resulting primarily from the recognition of the estimated fair value of the Louis Dreyfus exploration and production properties. The estimated provision for income taxes related to the pro forma adjustments are based on an assumed combined federal and state income tax rate of 38%.
E. Pro forma adjustments reflect the additional depletion related to the adjustment of the Louis Dreyfus exploration and production properties to estimated fair value under the full cost method of accounting. See Note G.
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F. Direct costs of the merger include approximately $22 million for fees of financial advisors, legal counsel, and independent auditors. In addition, estimated payments of $33 million are expected to be made under certain employment contracts, seismic licensing agreements and other liabilities. The Unaudited Pro Forma Combined Condensed Consolidated Financial Data do not reflect the nonrecurring costs and expenses associated with integrating the operations of the two companies, nor any of the anticipated recurring expense savings arising from the integration.
G. Dominion uses the full cost method to account for its oil and gas operations. Louis Dreyfus utilized the successful efforts method of accounting for its oil and gas operations. The pro forma data reflect an estimate of the change from the successful efforts method to the full cost method for the Louis Dreyfus oil and gas operations. This change resulted in a $6 million and $4 million increase in after-tax earnings in the Unaudited Pro Forma Combined Condensed Consolidated Statements of Income from Continuing Operations for the year ended December 31, 2000 and the nine months ended September 30, 2001, respectively.
H. The application of the purchase method of accounting eliminates the preexisting balances of Louis Dreyfus' other paid-in capital, accumulated other comprehensive income, retained earnings, and treasury stock.
I. The Louis Dreyfus Stock Option Plan ("Stock Option Plan") provides for awards of stock options to certain employees and non-employee directors. The Unaudited Pro Forma Combined Condensed Consolidated Financial Data reflect the exchange of those Louis Dreyfus common stock options outstanding at the time of the merger for options to purchase .7 million shares of Dominion common stock.
