EXHIBIT 99.2
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PRO FORMA FINANCIAL INFORMATION
(26) Unaudited Pro Forma Financial Information. The following unaudited pro
forma information reflects the historical combined condensed consolidated
financial data of NiSource and Columbia after accounting for the merger as a
purchase business combination. Accordingly, you should read the following
information together with the historical consolidated financial statements of
NiSource and Columbia and all related notes. The unaudited pro forma combined
condensed consolidated balance sheet assumes the merger was completed as of
September 30, 2000. The unaudited pro forma combined condensed consolidated
statements of income from continuing operations assumes the merger was completed
at the beginning of the periods stated.
The information presented below is not necessarily indicative of the
results of operations that would have occurred had the merger actually been
completed at the beginning of the periods stated, or the actual financial
position that would have resulted had the merger actually been completed on
September 30, 2000. The information is also not necessarily indicative of the
future results of operations or financial position of New NiSource. In addition,
NiSource management has identified significant synergies and merger savings
which are not reflected in the pro forma combined condensed consolidated
financial data. NiSource expects to record a restructuring charge during the
fourth quarter of 2000 reflecting costs associated with a workforce reduction
and other merger-related costs. NiSource has not yet quantified the amount of
this charge.
The information below reflects completion of the merger using a holding
company structure, which involves the creation of a new holding company,
currently named New NiSource, and two separate but concurrent mergers. In this
merger, a wholly-owned subsidiary of New NiSource will merge into NiSource. In
the other merger, a second wholly-owned subsidiary of New NiSource will merge
into Columbia. NiSource and Columbia will be the surviving corporations in those
mergers and will be wholly-owned by New NiSource. Immediately after these
mergers, NiSource will merge into New NiSource. New NiSource will then change
its name to "NiSource Inc." and will serve as a holding company for Columbia and
its subsidiaries and the subsidiaries of NiSource.
The pro forma combined condensed consolidated financial data assume
that 30% of Columbia's shares are each exchanged for 3.04414 New NiSource common
shares, and 70% of Columbia's shares are exchanged for $70 in cash plus $2.60
stated amount of a SAILS. The total aggregated purchase price for the
transaction using this assumption is approximately $5.8 billion.
The merger is being accounted for by the purchase method. The purchase
price has been allocated to the assets acquired and liabilities assumed based
upon their estimated fair values. The accompanying allocation anticipates that
the fair market value of Columbia's regulated operations reasonably approximates
the underlying book values of these operations. As a result, the purchase price
paid in excess of the estimated fair value of non-regulated operations and the
book value, which is a proxy for fair value, of regulated operations has been
allocated to goodwill. Allocations included in the pro forma combined condensed
consolidated financial statements are based on analyses that are not yet
completed. Management continues to assess the strategic nature and fit of
certain assets and operations of the combined entity. Additionally, management
continues to assess financial exposure to litigation, environmental, regulatory
and other similar contingencies as part of the merger. Another ongoing
assessment includes the requirements to fulfill the combined company's human
resource needs. Accordingly, the final value of the purchase price and its
allocation may differ, perhaps significantly, from the amounts included in the
accompanying pro forma statements.
On October 30, 2000 NiSource received an order from the SEC approving
the merger. This order requires NiSource to dispose of its water operations
three years from the date of the merger. Management has not developed a formal
plan of disposition responsive to the order and, accordingly, has not reflected
the water operations as a discontinued operation or assets held for sale.
The pro forma financial statements and notes should be read in
conjunction with the historical consolidated financial statements and related
notes of NiSource and CEG. These statements were prepared in accordance with
rules and regulations established by the Securities and Exchange Commission and
are not necessarily reflective of the actual or future results of operations or
financial position of the combined company.
New NiSource Inc.
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
as of September 30, 2000
Pro Forma
(Dollars in thousands) NiSource CEG Adjustments Consolidated
============= ============= ============= =============
Assets
Property, Plant and Equipment:
Net Utility Plant $ 4,773,669 $ 4,313,300 $ -- $ 9,086,969
Net Other Plant 127,841 628,500 219,573 G 975,914
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Total Property, Plant and Equipment 4,901,510 4,941,800 219,573 10,062,883
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Investments:
Investment in unconsolidated affiliates 165,484 305,600 (12,773) L 458,311
Other 34,345 171,700 (134,600) O 71,445
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Total Investments 199,829 477,300 (147,373) 529,756
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Current Assets:
Cash and cash equivalents 51,029 30,300 -- 81,329
Accounts receivable, less reserve 425,216 278,300 -- 703,516
Exchange gas -- 458,400 -- 458,400
Energy adjustment clauses 94,280 92,300 -- 186,580
Other inventories 90,273 14,600 -- 104,873
Natural gas in storage 190,928 236,500 -- 427,428
Price risk management assets 447,219 -- -- 447,219
Prepayments and other current assets 45,774 200,400 -- 246,174
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Total Current Assets 1,344,719 1,310,800 -- 2,655,519
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Other Assets
Regulatory assets 205,958 344,900 -- 550,858
Intangible assets, less accumulated provision
for amortization 75,183 3,300 3,539,347 A,O 3,617,830
Prepayments and other assets 356,968 22,400 48,050 J 427,418
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Total Other Assets 638,109 370,600 3,587,397 4,596,106
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$ 7,084,167 $ 7,100,500 $ 3,659,597 $ 17,844,264
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See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
New NiSource Inc.
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
as of September 30, 2000
Pro Forma
(Dollars in thousands) NiSource CEG Adjustments Consolidated
============= ============= ============= =============
Capitalization and Liabilities
Capitalization:
Common stock - without par $ 870,930 $ -- $ (870,930)D $ --
Common stock, $.01 par value -- 800 (800)D --
Common stock, $.01 par value -- -- 1,938 E 1,938
Additional paid-in capital 172,649 1,617,000 498,048 D,E,L 2,287,697
Treasury shares (516,065) (249,100) 765,165 K --
Retained earnings 824,551 665,600 (665,600)D 824,551
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Common Shareholders' Equity 1,352,065 2,034,300 (272,179) 3,114,186
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Cumulative Preferred Stock 135,811 -- -- 135,811
Company-obligated preferred securities of
subsidiary trust holding solely Company
debentures 345,000 -- -- 345,000
SAILS -- -- 106,100 M 106,100
Long-term debt, less current portion 1,737,291 1,639,200 2,494,563 I,N 5,871,054
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Total Capitalization 3,570,167 3,673,500 2,328,484 9,572,151
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Current Liabilities:
Current portion of long-term debt 89,420 311,100 -- 400,520
Short term borrowings 748,608 -- 3,828,916 H 4,577,524
Short term borrowings -- 54,100 (2,628,916)I (2,574,816)
Accounts payable 368,020 238,700 -- 606,720
Dividends declared on common and preferred stocks 33,679 -- -- 33,679
Transportation and exchange gas -- 223,700 -- 223,700
Taxes accrued 26,478 144,500 -- 170,978
Interest accrued 27,425 75,600 -- 103,025
Price risk management liabilities 453,302 -- -- 453,302
Deferred revenue -- 436,000 -- 436,00
Other accruals 220,642 321,600 -- 542,242
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Total Current Liabilities 1,967,574 1,805,300 1,200,000 4,972,874
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Other:
Deferred income taxes 931,922 741,100 83,262 G 1,756,284
Deferred investment tax credits, being
amortized over life of related property 89,217 31,600 -- 120,817
Deferred credits 112,609 -- -- 112,609
Deferred revenue -- 512,200 -- 512,200
Customers advances and contributions in aid to
construction 157,475 21,900 -- 179,375
Accrued liability for postretirement benefits 169,305 116,700 -- 286,005
Other 85,898 198,200 47,851 J 331,949
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Total Other 1,546,426 1,621,700 131,113 3,299,239
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$ 7,084,167 $ 7,100,500 $ 3,659,597 $ 17,844,264
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See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
New NiSource Inc.
Unaudited Pro Forma Combined Condensed Statement of Income from Continuing Operations
For Nine Months Ended September 30, 2000
Pro Forma
(Dollars in thousands, except for per share amounts) NiSource CEG Adjustments Consolidated
============= ============= ============= =============
Operating Revenues $ 2,996,066 $ 1,828,300 $ -- $ 4,824,366
Cost of Sales 1,835,891 468,300 -- 2,304,191
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Operating Margin 1,160,175 1,360,000 -- 2,520,175
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Operating Expenses and Taxes (except income) :
Operation and maintenance 458,213 638,900 (7,500)P 1,089,613
Settlement of supply charges -- -- -- --
Depreciation, depletion and amortization 253,217 153,000 74,597 F 480,814
Taxes (except income) 73,170 141,300 -- 214,470
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784,600 933,200 67,097 1,784,897
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Operating Income 375,574 426,800 (67,097) 733,660
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Other Income (Deductions) 59,861Q 103,800Q -- 163,661
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435,436 530,600 (67,097) 898,939
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Interest and Other Charges:
Interest expense 146,304 139,200 230,789 B 516,293
Minority interest 15,266 -- -- 15,266
Dividend requirements on preferred stock of
subsidiaries 6,045 -- -- 6,045
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Total 167,615 139,200 230,789 537,604
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Income Before Income Taxes 267,821 391,400 (297,886) 361,335
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Income Taxes 112,792Q 145,600Q (87,793)C,F,P 170,599
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Net Income from continuing operations 155,029 245,800 (210,093) 190,736
============= ============= ============= =============
Average common shares outstanding - basic 121,652 80,163 -- 201,815
Common shares retired -- -- (80,163)D (80,163)
Common shares issued -- -- 54,351 E 54,351
Average number of common shares -- -- - 176,003
Diluted shares 3,628 767 (767)D 3,628
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Total Diluted Shares 125,280 80,930 -- 179,631
Basic earnings per average common share from
continuing operations $ 1.27 $ 3.06 -- $ 1.08
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Diluted earnings per average common share from
continuing operations $ 1.23 $ 3.03 -- $ 1.06
============= ============= ============= =============
Common shares outstanding at end of period (000) 121,320 79,530 -- 175,671
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
New NiSource Inc.
Unaudited Pro Forma Combined Condensed Statement of Income from Continuing Operations
For Twelve Months Ended September 30, 2000
Pro Forma
(Dollars in thousands, except for per share amounts) NiSource CEG Adjustments Consolidated
============= ============= ============= =============
Operating Revenues $ 3,880,751 $ 2,620,000 $ -- $ 6,500,751
Cost of Sales 2,318,352 683,400 -- 3,001,752
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Operating Margin 1,562,399 1,936,600 -- 3,498,999
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Operating Expenses and Taxes (except income) :
Operation and maintenance 637,042 862,200 (7,500)P 1,491,742
Settlement of supply charges -- (1,900) -- (1,900)
Depreciation, depletion and amortization 336,167 181,600 99,462 F 617,229
Taxes (except income) 98,933 188,700 -- 287,633
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1,072,142 1,230,600 91,962 2,394,704
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Operating Income 490,257 706,000 (91,962) 1,104,295
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Other Income (Deductions) 51,287Q 118,500Q -- 169,787
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541,544 524,500 (91,962) 1,274,082
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Interest and Other Charges:
Interest expense 193,543 187,800 307,718 B 689,061
Minority interest 19,020 -- -- 19,020
Dividend requirements on preferred stock of
subsidiaries 8,115 -- -- 8,115
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Total 220,678 187,800 307,718 716,196
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Income Before Income Taxes 320,866 636,700 (399,680) 557,886
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Income Taxes 132,881Q 219,800Q (118,006)C,F,P 234,675
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Net Income from continuing operations 187,985 416,900 (281,674) 323,211
============= ============= ============= =============
Average common shares outstanding - basic 122,423 80,423 -- 202,846
Common shares retired -- -- (80,423)D (80,423)
Common shares issued -- -- 72,468 E 72,468
Average number of common shares -- -- - 194,891
Diluted shares 3,143 767 (767)D 3,143
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Total Diluted Shares 125,566 81,190 -- 198,034
Basic earnings per average common share from
continuing operations $ 1.53 $ 5.18 -- $ 1.65
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Diluted earnings per average common share from
continuing operations $ 1.49 $ 5.13 -- $ 1.63
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Common shares outstanding at end of period (000) 121,320 79,530 -- 193,788
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
New NiSource Inc.
Unaudited Pro Forma Combined Condensed Statement of Income from Continuing Operations
For Twelve Months Ended September 30, 1999
Pro Forma
(Dollars in thousands, except for per share amounts) NiSource CEG Adjustments Consolidated
============= ============= ============= =============
Operating Revenues $ 3,144,576 $ 2,800,900 $ -- $ 5,945,476
Cost of Sales 1,651,051 892,900 -- 2,543,951
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Operating Margin 1,493,525 1,908,000 -- 3,401,525
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Operating Expenses and Taxes (except income) :
Operation and maintenance 617,016 838,600 -- O 1,455,616
Settlement of supply charges -- (31,700) -- (31,700)
Depreciation, depletion and amortization 311,404 202,700 99,462 F 13,566
Taxes (except income) 103,569 203,200 -- 306,769
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1,031,989 1,212,800 99,462 2,344,251
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Operating Income 461,536 695,200 (99,462) 1,057,274
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Other Income (Deductions) (18,030) 34,900 -- 16,870
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443,506 730,100 (99,462) 1,074,144
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Interest and Other Charges:
Interest expense 166,617 164,200 307,718 B 638,535
Minority interest 17,693 -- -- 17,693
Dividend requirements on preferred stock of
subsidiaries 8,334 -- -- 8,334
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Total 192,644 164,200 307,718 664,562
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Income Before Income Taxes 250,862 565,900 (407,180) 409,582
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Income Taxes 90,448 178,100 (120,850)C,F,P 147,698
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Net Income from continuing operations 160,414 387,800 (286,330) 261,884
============= ============= ============= =============
Average common shares outstanding - basic 124,343 82,210 -- 206,553
Common shares retired -- -- (80,163)D (82,210)
Common shares issued -- -- 72,468 E 72,468
Average number of common shares -- -- - 196,811
Diluted shares 996 499 (499)D 996
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Total Diluted Shares 125,339 82,709 -- 197,807
Basic earnings per average common share from
continuing operations $ 1.29 $ 4.71 -- $ 1.33
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Diluted earnings per average common share from
continuing operations $ 1.28 $ 4.68 -- $ 1.32
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Common shares outstanding at end of period (000) 124,139 81,305 -- 196,607
See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statement
A. To reflect the purchase price allocation to goodwill. The adjustments
include the step-up applied to Columbia common shares, estimated merger
costs NiSource will incur and costs relating to certain compensation
obligations, net of tax benefits.
Weighted average consideration to be paid for Columbia common shares $ 72.54
Columbia Common Shares (in thousands):
Outstanding at September 30, 2000 excluding shares held by NiSource 79,350
-----------------
Fair value of consideration $ 5,756,084
Less: Columbia's net equity at September 30, 2000 2,034,300
Less: Profit from sale of electric facility 86,300
NiSource ownership of Columbia shares 13,313
-----------------
Consideration in excess of Columbia book value $ 3,648,797
Reserves for contractual obligations 47,851
Value of nonqualified stock options cashed out 111,413
Estimated merger costs 50,000
Estimated tax benefits associated with non-qualified stock options
and contractual obligations (48,050)
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Allocable purchase price $ 3,810,010
Less:
Step-up allocated to non-utility properties, net of deferred taxes (136,311)
Adjustment to CEG debt (134,353)
------------------
Amount allocated to goodwill $ 3,539,346
=================
The weighted average consideration of $72.54 assumes that holders of
30% of Columbia's shares will elect to receive 3.04414 of New NiSource
common shares and that the holders of 70% of the shares will receive
$70 in cash and $2.60 stated amount of SAILS. The accompanying
allocation anticipates that the fair market value of Columbia's
regulated operations reasonably approximates the underlying book value
of these operations. This allocation is based on analyses that are not
yet completed. Accordingly, the final value of the purchase price and
its allocation may differ, perhaps significantly, from the amounts
included in the accompanying pro forma statements.
B. To adjust historical interest expense to reflect the cost of the
increased indebtedness from completion of the merger. The pro forma
statements assume a weighted average 7.8% per annum interest rate on
the indebtedness incurred to complete the merger. A one-eighth percent
variance from the assumed rate increases or decreases pre-tax interest
expense by approximately $4.8 million on an annual basis.
C. To recognize the estimated pro forma income tax effect of additional
interest expense reflected in adjustment (B).
D. To eliminate Columbia and NiSource common shareholders' equity and
related common shares.
E. To reflect the issuance of 3.04414 shares of New NiSource common stock
for each converted share of Columbia common stock and the issuance of
one share of New NiSource common stock for each old NiSource common
share.
F. To adjust historical depreciation, depletion and amortization expense
for the preliminary purchase price allocation reflected in these pro
forma financial statements. The amount allocated to goodwill reflects
amortization on a straight-line basis over a 40-year period. The amount
allocated to net other plant reflects amortization on a straight-line
basis over a 20-year period. This adjustment also reflects the deferred
income tax impact of amortizing the amount allocated to net other
plant.
G. To reflect the allocation of purchase price to the exploration
production properties including $219.6 million to net other plant and
related deferred income taxes of $83.3 million.
H. To reflect the issuance of $3.8 billion of short-term acquisition debt.
I. To reflect the reclassification of acquisition debt from short-term
to long-term consistent with NiSource's intent and ability to refinance
such amounts.
J. To reflect a liability of $47.9 million related to contractual
obligations associated with employment agreements of Columbia including
related tax benefits. The adjustment also reflects the estimated tax
benefits associated with the cash out of Columbia stock options.
K. To reflect the cancellation of NiSource and Columbia treasury shares.
L. To eliminate NiSource investments in Columbia common shares at
September 30, 2000 and allocate to purchase price.
M. To reflect the fair value purchase price consideration of SAILS, units
consisting of zero coupon securities and forward equity contracts.
N. To reflect the fair value adjustment of CEG's long term debt
outstanding.
O. To reflect the sale of Columbia's electric facilities expected to be
completed in the fourth quarter 2000. The adjustment reduces
investments by $134.6 million and increases equity by $86.3 million.
Net proceeds of $220.9 million will be used to reduce debt.
P. To reflect the elimination of compensation expense of certain CEG
employees associated with additional amounts paid as a result of the
merger, along with the related income tax effect.
Q. Other Income (Deductions) from continuing operations for the nine month
and twelve month periods ended September 30, 2000 reflect pre-tax gains
of $51.9 million for NiSource in connection with its disposition of MHP
and $95.2 million for CEG in connection with the sale of Cove Point
LNG. Amounts included in Income Taxes related to these sales include
$25.8 million for the disposition of MHP and $36.2 million for the sale
of Cove Point LNG. Operating revenues, operating income and net income
from continuing operations reflected in the accompanying unaudited pro
forma combined condensed consolidated statements of income from
continuing operations for MHP and Cove Point LNG are not significant to
each company.
4