-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PZgQYLGADZOalCUmOdiSC+dr8HuuZb9I4iDQSwRIKXicczW3lmoZ2uxnoP2Y2fcS wllQ6Gv6djL5za1YD3ZxrA== /in/edgar/work/0000893220-00-001175/0000893220-00-001175.txt : 20001027 0000893220-00-001175.hdr.sgml : 20001027 ACCESSION NUMBER: 0000893220-00-001175 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA ENERGY GROUP CENTRAL INDEX KEY: 0000022099 STANDARD INDUSTRIAL CLASSIFICATION: [4923 ] IRS NUMBER: 131594808 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01098 FILM NUMBER: 746325 BUSINESS ADDRESS: STREET 1: 13880 DULLES CORNER LANE STREET 2: SUITE 300 CITY: HENDERON STATE: VA ZIP: 20171-4600 BUSINESS PHONE: 7035616000 MAIL ADDRESS: STREET 1: 13880 DULLES CORNER LANE STREET 2: SUITE 300 CITY: HERNDON STATE: VA ZIP: 20171-4600 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA GAS SYSTEM INC DATE OF NAME CHANGE: 19920703 10-Q 1 w41722e10-q.txt FORM 10-Q COLUMBIA ENERGY GROUP 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended SEPTEMBER 30, 2000 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ______ to ______ Commission file number 1-1098 COLUMBIA ENERGY GROUP (Exact Name of Registrant as Specified in its Charter) Delaware 13-1594808 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 13880 Dulles Corner Lane, Herndon, VA 20171-4600 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (703) 561-6000 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ___ ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $0.01 Par Value:79,530,389 shares outstanding at September 30, 2000. 2 COLUMBIA ENERGY GROUP AND SUBSIDIARIES FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS
Page ---- PART I FINANCIAL INFORMATION --------------------- Item 1 Financial Statements Statements of Consolidated Income 3 Consolidated Balance Sheets 4 Statements of Consolidated Cash Flows 6 Statements of Consolidated Common Stock Equity 7 Statements of Consolidated Comprehensive Income 7 Notes 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3 Quantitative and Qualitative Disclosures About Market Risk 29 PART II OTHER INFORMATION Item 1 Legal Proceedings 30 Item 2 Changes in Securities and Use of Proceeds 31 Item 3 Defaults Upon Senior Securities 31 Item 4 Submission of Matters to a Vote of Security Holders 31 Item 5 Other Information 31 Item 6 Exhibits and Reports on Form 8-K 32 Signature 33
2 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Columbia Energy Group and Subsidiaries STATEMENTS OF CONSOLIDATED INCOME (unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions, except per share amounts) NET REVENUES Energy sales $ 159.2 $ 122.8 $ 1,020.6 $ 1,274.5 Less: Products purchased 25.3 1.8 468.3 689.5 ----------- ----------- ----------- ----------- Gross Margin 133.9 121.0 552.3 585.0 Transportation 147.5 140.5 563.3 509.1 Production gas sales 33.5 31.6 115.3 84.0 Other 39.1 40.2 129.1 153.3 ----------- ----------- ----------- ----------- Total Net Revenues 354.0 333.3 1,360.0 1,331.4 ----------- ----------- ----------- ----------- OPERATING EXPENSES Operation and maintenance 204.9 195.7 638.9 615.3 Settlement of gas supply charges -- -- -- (29.8) Depreciation and depletion 43.5 46.7 153.0 174.1 Other taxes 32.0 33.0 141.3 155.8 ----------- ----------- ----------- ----------- Total Operating Expenses 280.4 275.4 933.2 915.4 ----------- ----------- ----------- ----------- OPERATING INCOME 73.6 57.9 426.8 416.0 ----------- ----------- ----------- ----------- OTHER INCOME (DEDUCTIONS) Interest income and other, net 5.7 8.1 103.8 20.2 Interest expense and related charges (48.3) (41.0) (139.2) (115.6) ----------- ----------- ----------- ----------- Total Other Income (Deductions) (42.6) (32.9) (35.4) (95.4) ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 31.0 25.0 391.4 320.6 Income Taxes 11.5 4.5 145.6 103.9 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS 19.5 20.5 245.8 216.7 ----------- ----------- ----------- ----------- DISCONTINUED OPERATIONS - NET OF TAXES Loss from operations -- (30.2) (1.5) (49.9) Estimated loss on disposal (83.3) (13.0) (110.7) (13.0) ----------- ----------- ----------- ----------- LOSS FROM DISCONTINUED OPERATIONS - NET OF TAXES (83.3) (43.2) (112.2) (62.9) ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ (63.8) $ (22.7) $ 133.6 $ 153.8 =========== =========== =========== =========== BASIC EARNINGS (LOSS) PER SHARE Continuing operations $ 0.25 $ 0.25 $ 3.07 $ 2.63 Loss from discontinued operations -- (0.37) (0.02) (0.61) Estimated loss on disposal (1.05) (0.16) (1.38) (0.16) ----------- ----------- ----------- ----------- BASIC EARNINGS (LOSS) PER SHARE $ (0.80) $ (0.28) $ 1.67 $ 1.86 =========== =========== =========== =========== DILUTED EARNINGS (LOSS) PER SHARE Continuing operations $ 0.24 $ 0.25 $ 3.04 $ 2.61 Loss from discontinued operations -- (0.37) (0.02) (0.60) Estimated loss on disposal (1.03) (0.16) (1.37) (0.16) ----------- ----------- ----------- ----------- DILUTED EARNINGS (LOSS) PER SHARE $ (0.79) $ (0.28) $ 1.65 $ 1.85 =========== =========== =========== =========== DIVIDENDS PAID PER SHARE $ 0.225 $ 0.225 $ 0.675 $ 0.65 BASIC AVERAGE COMMON SHARES OUTSTANDING (thousands) 79,525 81,791 80,163 82,482 DILUTED AVERAGE COMMON SHARES (thousands) 80,441 82,432 80,930 82,925
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 4 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) Columbia Energy Group and Subsidiaries CONSOLIDATED BALANCE SHEETS
As of ---------------------------- September 30, December 31, 2000 1999 ------------- ------------ (unaudited) (millions) ASSETS PROPERTY, PLANT AND EQUIPMENT Gas utility and other plant, at original cost $8,054.2 $7,886.2 Accumulated depreciation (3,740.9) (3,659.4) -------- -------- Net Gas Utility and Other Plant 4,313.3 4,226.8 -------- -------- Gas and oil producing properties, full cost method United States cost center 876.9 823.5 Canadian cost center 17.9 12.6 Accumulated depletion (266.3) (251.6) -------- -------- Net Gas and Oil Producing Properties 628.5 584.5 -------- -------- Net Property, Plant and Equipment 4,941.8 4,811.3 -------- -------- INVESTMENTS AND OTHER ASSETS Unconsolidated affiliates 25.7 65.6 Net assets of discontinued operations 279.9 410.0 Assets held for sale 134.6 -- Other 37.1 61.4 -------- -------- Total Investments and Other Assets 477.3 537.0 -------- -------- CURRENT ASSETS Cash and temporary cash investments 30.3 58.1 Accounts receivable, net 278.3 498.5 Gas inventory 236.5 144.9 Other inventories - at average cost 14.6 16.1 Prepayments 80.0 70.7 Regulatory assets 56.3 52.7 Underrecovered gas costs 92.3 40.5 Deferred property taxes 24.5 79.9 Exchange gas receivable 458.4 275.4 Other 39.6 31.0 -------- -------- Total Current Assets 1,310.8 1,267.8 -------- -------- REGULATORY ASSETS 344.9 358.1 DEFERRED CHARGES 25.7 63.1 -------- -------- TOTAL ASSETS $7,100.5 $7,037.3 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 5 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) Columbia Energy Group and Subsidiaries CONSOLIDATED BALANCE SHEETS
As of --------------------------- September 30, December 31, 2000 1999 ------------- ------------ (unaudited) (millions) CAPITALIZATION AND LIABILITIES CAPITALIZATION Common stock equity $2,034.3 $2,064.0 Long-term debt 1,639.2 1,639.3 -------- -------- Total Capitalization 3,673.5 3,703.3 -------- -------- CURRENT LIABILITIES Short-term debt 54.1 465.5 Current maturities of long-term debt 311.1 311.1 Accounts and drafts payable 238.7 240.8 Accrued taxes 144.5 216.1 Accrued interest 75.6 32.4 Estimated rate refunds 7.3 21.4 Overrecovered gas costs 8.8 14.6 Transportation and exchange gas payable 223.7 297.5 Deferred revenue 436.0 40.0 Other 305.5 366.8 -------- -------- Total Current Liabilities 1,805.3 2,006.2 -------- -------- OTHER LIABILITIES AND DEFERRED CREDITS Deferred income taxes, noncurrent 741.1 661.9 Investment tax credits 31.6 32.6 Postretirement benefits other than pensions 116.7 91.0 Regulatory liabilities 34.3 36.4 Deferred revenue 512.2 300.8 Other 185.8 205.1 -------- -------- Total Other Liabilities and Deferred Credits 1,621.7 1,327.8 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $7,100.5 $7,037.3 ======== ========
5 6 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) Columbia Energy Group and Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- (millions) OPERATING ACTIVITIES Net income $133.6 $153.8 Adjustments to reconcile net income to net cash from continuing operations: Loss from discontinued operations 1.5 49.9 Loss from disposal of discontinued operations 110.7 13.0 Depreciation and depletion 153.0 174.1 Deferred income taxes 64.6 64.8 Gain on sale of partnership (90.5) -- Earnings from equity investment, net of distributions (9.7) (10.4) Deferred revenue 211.4 (10.5) Other - net 21.4 (36.5) ------ ------ 596.0 398.2 Change in components of working capital: Accounts receivable, net of sale 112.2 180.0 Sale of accounts receivable 77.7 -- Gas inventory (91.6) (24.6) Other inventories - at average cost 1.5 3.7 Prepayments (9.3) (7.9) Accounts payable (12.3) 32.6 Accrued taxes (71.6) (121.4) Accrued interest 43.2 35.7 Estimated rate refunds (14.1) (18.3) Estimated supplier obligations -- (40.7) Under/Overrecovered gas costs (57.6) (49.2) Exchange gas receivable/payable (256.8) 117.5 Deferred revenue 396.0 1.5 Other working capital 41.3 66.2 ------ ------ Net Cash From Continuing Operations 754.6 573.3 Net Cash From Discontinued Operations 17.9 (136.4) ------ ------ Net Cash From Operating Activities 772.5 436.9 ------ ------ INVESTMENT ACTIVITIES Capital expenditures (305.9) (311.0) Capital expenditures - assets held for sale (41.1) -- Sale and purchase of investments 107.5 (63.2) ------ ------ Net Investment Activities (239.5) (374.2) ------ ------ FINANCING ACTIVITIES Dividends paid (54.1) (53.5) Issuance of common stock 5.4 9.5 Issuance (repayment) of short-term debt (411.4) 376.5 Retirement of long-term debt -- (52.5) Purchase of treasury stock (114.1) (132.3) Other financing activities 13.4 (213.0) ------ ------ Net Financing Activities (560.8) (65.3) ------ ------ Decrease in cash and temporary cash investments (27.8) (2.6) Cash and temporary cash investments at beginning of year 58.1 20.8 ------ ------ CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30 * $ 30.3 $ 18.2 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 89.0 $ 75.3 Cash paid for income taxes (net of refunds) $ 68.2 $ 69.7
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. * Columbia considers all highly liquid short-term investments to be cash equivalents. 6 7 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) Columbia Energy Group and Subsidiaries STATEMENTS OF CONSOLIDATED COMMON STOCK EQUITY
As of ---------------------------- September 30, December 31, 2000 1999 ----------- ----------- (unaudited) (millions) Common stock, $.01 par value, authorized 200,000,000 shares, issued 83,898,689 and 83,786,942 shares, respectively $ 0.8 $ 0.8 Additional paid in capital 1,617.0 1,611.6 Retained earnings 666.4 586.9 Unearned employee compensation (0.3) (0.6) Accumulated other comprehensive income (loss) (0.5) 0.3 Treasury stock, at cost (4,368,300 and 2,478,500 shares) (249.1) (135.0) ----------- ------------ TOTAL COMMON STOCK EQUITY $ 2,034.3 $ 2,064.0 =========== =============
Columbia Energy Group and Subsidiaries STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
For the year to date period ended ------------------------------- September 30, December 31, 2000 1999 ------------- ------------ (unaudited) (millions) COMPREHENSIVE INCOME Net income $133.6 $249.2 Other Comprehensive Income (Loss): Foreign currency translation adjustment (0.8) 0.5 ------ ------ COMPREHENSIVE INCOME $132.8 $249.7 ====== ======
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 7 8 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) Columbia Energy Group and Subsidiaries NOTES 1. Basis of Accounting Presentation The accompanying unaudited consolidated financial statements for Columbia Energy Group (Columbia) reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with generally accepted accounting principles. The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Columbia's 1999 Annual Report on Form 10-K (Form 10-K) and Quarterly Reports on Form 10-Q for the first and second quarters of 2000. Income for interim periods may not be indicative of results for the calendar year due to weather variations and other factors. Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. As discussed in Note 5, the 1999 financial statements have been reclassified to report Columbia Propane Corporation (Columbia Propane), Columbia Petroleum Corporation (Columbia Petroleum) and Columbia Energy Services Corporation (Columbia Energy Services) Wholesale and Trading operations, Major Accounts and Retail Mass Markets businesses as discontinued operations. 2. Diluted Average Common Shares Computation Financial Accounting Standards Board Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128), requires dual presentation of basic and diluted earnings per share (EPS). Basic EPS includes no dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilutive effect of stock options. The numerator in calculating both basic and diluted earnings per share for each year is reported net income. The computation of diluted average common shares follows:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- Diluted Average Common Shares Computation 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------- Denominator (thousands) Basic average common shares outstanding 79,525 81,791 80,163 82,482 Dilutive potential common shares - options 916 641 767 443 - ------------------------------------------------------------------------------------------------------------- DILUTED AVERAGE COMMON SHARES 80,441 82,432 80,930 82,925 =============================================================================================================
3. Treasury Stock In March 2000, Columbia announced that it had restarted its open market share repurchase program, that was authorized by Columbia's Board of Directors (Columbia's Board). The program had been suspended since October 1999, when Columbia's Board authorized Columbia's management to explore strategic alternatives to enhance shareholder value. Under the recommenced program, Columbia was allowed to repurchase up to $300 million of its common shares through July 14, 2000. The repurchase program authorized Columbia to make purchases in the open market or otherwise. The timing and terms of purchases, and the number of shares actually purchased, were determined by management based on several factors including market conditions. Purchased shares are held in treasury at cost and are available for general corporate purposes or resale at a future date or may be retired. During the first nine months of 2000, Columbia purchased 1,889,800 common shares at a cost of $114.1 million under the recommenced program. As of September 30, 2000, Columbia had 8 9 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) purchased 4,368,300 common shares at a cost of $249.1 million. 4. Business Segment Information Columbia manages its operations in four primary business segments: transmission and storage; distribution; exploration and production; and power generation and other operations. The following table provides information concerning these major business segments. Revenues include intersegment sales to affiliated subsidiaries, which are eliminated when consolidated. Affiliated sales are recognized on the basis of prevailing market or regulated prices. Operating income is derived from revenues and expenses directly associated with each segment.
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------------------- REVENUES Transmission and Storage Unaffiliated 133.9 130.0 444.3 425.8 Intersegment 53.2 44.6 176.4 184.9 - --------------------------------------------------------------------------------------------------------------------- TOTAL 187.1 174.6 620.7 610.7 - --------------------------------------------------------------------------------------------------------------------- Distribution Unaffiliated 196.7 167.9 1,233.3 1,504.5 Intersegment 0.1 -- 0.9 0.9 - --------------------------------------------------------------------------------------------------------------------- TOTAL 196.8 167.9 1,234.2 1,505.4 - --------------------------------------------------------------------------------------------------------------------- Exploration and Production Unaffiliated 39.4 35.6 131.3 96.6 Intersegment 0.5 0.2 1.4 1.2 - --------------------------------------------------------------------------------------------------------------------- TOTAL 39.9 35.8 132.7 97.8 - --------------------------------------------------------------------------------------------------------------------- Power Generation and Other Unaffiliated 10.4 6.8 38.9 18.2 Intersegment (0.2) 0.1 (0.2) (0.4) - --------------------------------------------------------------------------------------------------------------------- TOTAL 10.2 6.9 38.7 17.8 - --------------------------------------------------------------------------------------------------------------------- Adjustments and eliminations Unaffiliated 0.3 -- 0.3 -- Intersegment (53.6) (44.9) (178.5) (186.6) - --------------------------------------------------------------------------------------------------------------------- TOTAL (53.3) (44.9) (178.2) (186.6) - --------------------------------------------------------------------------------------------------------------------- CONSOLIDATED 380.7 340.3 1,848.1 2,045.1 - --------------------------------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) Transmission and Storage 61.3 55.4 252.1 255.5 Distribution 12.3 1.3 149.9 148.1 Exploration and Production 15.5 11.6 51.3 24.1 Power Generation and Other (15.8) 0.9 (14.5) (1.3) Corporate 0.3 (11.3) (12.0) (10.4) - --------------------------------------------------------------------------------------------------------------------- CONSOLIDATED 73.6 57.9 426.8 416.0 ======================================================================================================================
5. Discontinued Operations On May 22, 2000, as a result of its ongoing strategic assessment, Columbia announced that it decided to sell Columbia Propane, a propane marketer. Columbia also announced its decision to sell Columbia Petroleum, a diversified petroleum distribution company. Columbia Propane and Columbia Petroleum are reported as discontinued operations and therefore the financial statements for 1999 9 10 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) have been reclassified accordingly. In the third quarter 2000, Columbia sold its Retail Mass Marketing business to The New Power Company. The proceeds from the sale were $44.2 million. Columbia Energy Services ceased operations of its Major Accounts business during the third quarter of 2000. Columbia Energy Services' Wholesale and Trading operations, Major Accounts and Retail Mass Markets businesses are reported as discontinued operations. The revenues from discontinued operations were $153.1 million (Gas-$20.8 million, Power Trading-$1 million, Propane-$49.9 million, Petroleum-$73.6 million and Other $7.8 million) and $657.9 million (Gas-$186.9 million, Power Trading-$12.2 million, Propane-$213.7 million, Petroleum-$217.4 million and Other-$27.7 million) for the three months and nine months ended September 30, 2000, respectively. The revenues from discontinued operations were $1,638.1 million (Gas-$1,098.3 million, Power Trading-$453.2 million, Propane-$31.2 million, and Petroleum-$49.4 million and Other-$6 million) and $4,542.8 million (Gas-$3,376.4 million, Power Trading $1,005.1 million, Propane-$78.5 million, Petroleum-$70.8 million and Other $12 million) for the three months and nine months ended September 30, 1999. The loss from discontinued operations and the estimated loss on disposal information are provided in the following table.
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Loss from discontinued operations -- 48.9 2.0 77.4 Income tax benefit -- 18.7 .5 27.5 - -------------------------------------------------------------------------------------------------------------------------- NET LOSS FROM DISCONTINUED OPERATIONS -- 30.2 1.5 49.9 - -------------------------------------------------------------------------------------------------------------------------- Estimated loss on disposal 128.2 20.0 166.3 20.0 Income tax benefits 44.9 7.0 55.6 7.0 - -------------------------------------------------------------------------------------------------------------------------- NET ESTIMATED LOSS ON DISPOSAL 83.3 13.0 110.7 13.0 - --------------------------------------------------------------------------------------------------------------------------
The net assets of the discontinued operations were as follows:
($ in millions) SEPTEMBER 30, 2000 December 31, 1999 - ------------------------------------------------------------------------------------------------------------------ NET ASSETS OF DISCONTINUED OPERATIONS Accounts receivable, net 62.0 416.7 Property, Plant and Equipment, net 220.5 212.0 Other assets 127.4 239.6 Accounts payable (74.6) (388.4) Other liabilities (55.4) (69.9) - ----------------------------------------------------------------------------------------------------------------- NET ASSETS OF DISCONTINUED OPERATIONS 279.9 410.0 - -----------------------------------------------------------------------------------------------------------------
6. Voluntary Incentive Retirement Programs On September 30, 1999, Columbia Gas Transmission Corporation (Columbia Transmission) announced the introduction of their voluntary incentive retirement program (VIRP). Approximately 600 Columbia Transmission employees were eligible for the program, which provides a retirement incentive for active employees who were age fifty and above with at least five years of service as of March 1, 2000. During the acceptance period that began on January 1, 2000, and closed on January 31, 2000, 486 employees elected early retirement. The majority of the retirements occurred in the first quarter of 2000. As a result of settlement gains, Columbia Transmission recorded a net gain of $13.4 million in the first nine months of 2000 related to its VIRP. 10 11 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (CONTINUED) In February 2000, the five distribution subsidiaries and Columbia Energy Group Service Corporation (Service Corp.) announced the introduction of their VIRP. Approximately 880 employees were eligible for the program, which provides a retirement incentive for certain active employees who were age fifty and above with at least five years of service as of June 1, 2000. During the acceptance period that began on April 1, 2000, and closed on April 30, 2000, 679 employees elected early retirement. The majority of the retirements occurred in the second quarter of 2000. The distribution subsidiaries and Service Corp. recorded a net charge of $8.8 million in the first nine months of 2000 related to their VIRP. The VIRPs did not result in a curtailment of the pension plan as defined in Statement of Financial Accounting Standards No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits". In September 2000, Columbia announced that employees of the five distribution subsidiaries and Service Corp. that were not eligible for the February 2000 VIRP, as well as the employees of Columbia Energy Resources, Inc. would be offered a VIRP. Approximately 400 employees are eligible for the program, which provides a retirement incentive for certain employees who are age fifty and above with a least five years of service as of January 1, 2001, and are not a member of a bargaining unit. The eligible employees for this VIRP have approximately 45 days after the closing date of the merger with NiSource, Inc. to elect early retirement. The actual retirement date for those employees electing the VIRP will be based on the specific business needs of the business units. Retirement costs for these employees are funded through the pension plan and will not have a significant impact on Columbia's consolidated net income. 11 12 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING INCOME (LOSS) BY SEGMENT
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) Transmission and Storage $ 61.3 $ 55.4 $ 252.1 $ 255.5 Distribution 12.3 1.3 149.9 148.1 Exploration and Production 15.5 11.6 51.3 24.1 Power Generation and Other (15.8) 0.9 (14.5) (1.3) Corporate 0.3 (11.3) (12.0) (10.4) -------- -------- --------- --------- CONSOLIDATED $ 73.6 $ 57.9 $ 426.8 $ 416.0 ======== ======== ======== ========
DEGREE DAYS (DISTRIBUTION SERVICE TERRITORY)
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Actual 149 80 3,294 3,341 Normal 41 41 3,600 3,568 % Colder (warmer) than normal 263 95 (9) (6) % Colder (warmer) than prior period 86 95 (1) 16
12 13 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS Forward-Looking Statements The following Management's Discussion and Analysis of Financial Condition and Results of Operations, including statements regarding market risk sensitive instruments, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Investors and prospective investors should understand that many factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected. These forward-looking statements include, but are not limited to, statements concerning Columbia's plans, dispositions, objectives, expected performance, expenditures and recovery of expenditures through rates, stated on either a consolidated or segment basis, underlying assumptions and statements that are other than historical fact. From time to time, Columbia may publish or otherwise make available forward-looking statements of this nature. All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of Columbia, are also expressly qualified by these cautionary statements. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially. Realization of Columbia's objective and expected performance is subject to a wide range of risks and can be adversely affected by, among other things, increased competition in deregulated energy markets, weather conditions, fluctuations in energy-related commodity prices, service territories, successful consummation of dispositions, growth opportunities for Columbia's regulated and nonregulated businesses, dealings with third parties over whom Columbia has no control, actual operating experience of acquired assets, the ability to integrate acquired operations into its operations, the regulatory process, regulatory and legislative changes, changes in general economic, capital and commodity market conditions and counter-party credit risk, many of which are beyond the control of Columbia. In addition, the relative contributions to profitability by each segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time. With respect to any references made to ratings assigned to Columbia's debt securities, there can be no assurance that Columbia will be successful in maintaining its quality of credit, or that such credit ratings will continue for any given period of time, or that they will not be revised downward or that they will not be withdrawn entirely by the rating agencies. Credit ratings reflect only the views of the rating agencies, whose methodology and the significance of their ratings may be obtained from them. Third Quarter Results Income from Continuing Operations Columbia reported consolidated income from continuing operations for the third quarter 2000 of $19.5 million, or $0.24 per share, a decrease of $1 million, or $0.01 per share from the same period last year. Including discontinued operations, Columbia reported a net loss of $63.8 million, or $0.79 per share, for the third quarter 2000 compared to a net loss of $22.7 million, or $0.28 per share, in the same period last year. All per share amounts are on a diluted basis. After adjusting for one-time items, third quarter 2000 income from continuing operations was $32.4 million, compared to $26.3 million in the same period last year. The effect of higher interest expense and additional costs related to the fiber-optics network being built was largely offset by the favorable effect of lower labor and benefit costs and higher natural gas prices received for production. The lower labor and benefits costs were attributable to voluntary incentive retirement programs (VIRP) implemented at several subsidiaries earlier this year. One-time items in the current quarter include costs recorded for a previously disclosed regulatory issue related to certain prior transactions by the transmission subsidiaries as well as employee-related payments 13 14 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) made primarily resulting from the achievement of specific objectives in the development of Columbia Electric, Corporation's (Columbia Electric's) projects. In last year's third quarter, income was reduced by approximately $5.8 million after-tax for professional fees associated with the tender offer by NiSource, Inc (NiSource). Revenues Total third quarter 2000 consolidated net revenues (operating revenues less associated products purchased costs) were $354 million, a $20.7 million increase over the same period last year. The increase was primarily attributable to higher natural gas prices for Columbia Energy Resources, Inc.'s (Columbia Resources') production volumes and an increase in transportation services that more than offset the effect of a small decrease in natural gas production. Expenses Operating expenses for the third quarter of 2000 were $280.4 million, an increase of $5 million over the same period last year. The increase was largely due to additional costs for certain prior transactions by the transmission subsidiaries and employee-related costs for Columbia Electric's projects, as mentioned above. Tempering these increases were reduced labor and benefits costs as a result of implementing the VIRP. Third quarter 1999 included professional fees relating to the tender offer made by NiSource. Other Income (Deductions) Other Income (Deductions), which includes interest income and other, net and interest expense and related charges, decreased income by $42.6 million for the third quarter of 2000 compared to a decrease of $32.9 million in the same period last year. Interest income and other, net of $5.7 million for the third quarter 2000 was down $2.4 million from the same period last year reflecting reduced short-term investments. Interest expense and related charges of $48.3 million in the third quarter of 2000, increased $7.3 million compared to the same period in 1999 primarily due to additional short-term borrowings in the current period. Income Taxes Income tax expense of $11.5 million in the third quarter of 2000 increased $7 million over the third quarter of 1999 as the effect of higher pre-tax income was more than offset by the recording of certain deferred taxes. Nine-Month Results Income from Continuing Operations Columbia's income from continuing operations for the first nine months of 2000 was $245.8 million, or $3.04 per share, an increase of $29.1 million, or $0.43 per share, over the $216.7 million, or $2.61 per share, for the same period in 1999. Excluding third quarter one-time items in 2000 and 1999 mentioned above, and the gain recorded earlier this year on the sale of Cove Point LNG, costs for tender-offer related professional fees, and a $20.6 million after-tax gain recorded in 1999 related to a producer settlement, income from continuing operations for 2000 was $212.6 million, an increase of $17.1 million over that in 1999, despite warmer weather. This improvement was largely due to an increase in natural gas production and prices together with lower labor and benefits costs as a result of the VIRPs. The improvement for the VIRPs was due in part to settlement gains recorded in the first and third quarters of 2000. Tempering these improvements were higher interest costs reflecting additional short-term borrowings and higher operation and maintenance costs. 14 15 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) Revenues For the nine months ended September 30, 2000, net revenues of $1,360 million increased $28.6 million over the same period in 1999. The improvement was primarily related to higher gas prices and production for Columbia Resources' operations and increased transportation services. Partially offsetting this increase were lower revenues from the sale of base gas volumes for the transmission and storage operations and reduced gas sales by the distribution segment due to warmer weather in 2000. Expenses Operating expenses for the first nine months of 2000 were $933.2 million, an increase of $17.8 million over the same period last year, due to a reduction in the first quarter of 1999 operating expenses for the producer settlement. Operating expenses were higher in the current period due to additional costs for certain prior transactions by the transmission subsidiaries and costs related to Columbia Electric's projects, as mentioned above. Tempering these higher expenses was lower gross receipts taxes and the beneficial effect of the VIRP. Also decreasing operating expense during the first nine months of 2000 was a reduction in depreciation expense, as provided for under the terms of Columbia Gas of Ohio, Inc.'s (Columbia of Ohio) 1999 regulatory settlement. Other Income (Deductions) Other Income (Deductions), decreased income by $35.4 million for the first nine months of 2000 compared to a reduction to income of $95.4 million in the same period last year. Interest income and other, net of $103.8 million for the 2000 period was up $83.6 million over the same period in 1999. The increase was due to the sale of Cove Point LNG, mentioned previously, partially offset by reduced interest income on short-term investments. In 1999, a $2.9 million gain was recorded as a result of the sale of Columbia Energy Resources' surface coal property. Interest expense and related charges increased $23.6 million in the first nine months of 2000, due to additional short-term borrowings due in part to fund the stock repurchase program together with higher interest rates on short-term borrowings. Income Taxes Income tax expense of $145.6 million in the first nine months of 2000 increased $41.7 million over the same period in 1999 due to higher pre-tax income and certain tax benefits realized last year. Discontinued Operations Earlier in 2000, Columbia undertook an evaluation of the appropriateness of remaining in some of its businesses given the rapidly changing energy industry and its pending merger with NiSource. During the course of this assessment, it was determined to essentially exit the energy marketing operations, which includes the propane, petroleum and Columbia Energy Services Corporation's (Columbia Energy Services) Mass Marketing businesses, as discussed below. In accordance with generally accepted accounting principles, the results from the following businesses are now reported as discontinued operations. In the fourth quarter of 1999, Columbia Energy Services, a wholly-owned subsidiary of Columbia, sold its Wholesale and Trading operations to Enron North America Corporation. In late 1999, Columbia Energy Services also decided to exit its Major Accounts business. In May 2000, Columbia Energy Services sold its internet-based energy marketing operation, Energy.com. Also in May 2000, Columbia announced that it was in the process of preparing its propane and petroleum businesses for sale. Columbia's propane business is the fifth largest propane marketer in the United States, with operations in more than 30 states and nearly 350,000 customers. The petroleum business is a 15 16 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) diversified petroleum distribution operation that engages in retail and wholesale petroleum product sales, transportation, and branded gasoline distribution. In the third quarter of 2000, Columbia sold its retail energy mass marketing business to The New Power Company, a national residential and small business energy provider. For the third quarter of 2000, discontinued operations reflected an after-tax loss of $83.3 million, compared to a $43.2 million after-tax loss in the same period last year. Included in the amount recorded for discontinued operations is an additional loss on the propane and petroleum businesses to reflect the anticipated sale of these assets. For the first nine months of 2000, discontinued operations represented an after-tax loss of $112.2 million, $49.3 million greater than for the same period in 1999. Liquidity and Capital Resources A significant portion of Columbia's operations is subject to seasonal fluctuations in cash flow. During the heating season, which is primarily from November through March, cash receipts from sales and transportation services typically exceed cash requirements. Conversely, during the remainder of the year, cash on hand together with external short-term and long-term financing, as needed, is used to purchase gas to place in storage for heating season deliveries, perform necessary maintenance of facilities, make capital improvements in plant and expand service. Net cash from continuing operations for the first nine months of 2000 was $754.6 million, a $181.3 million increase over the same period in 1999. The increase was primarily due to prepayments received for natural gas to be delivered in the future, differences associated with exchange gas activity and other working capital items partially offset by reduced cash receipts due to the impact of warmer weather. Columbia satisfies its liquidity requirements primarily through internally generated funds and from the sale of commercial paper, which is supported by two unsecured bank revolving credit facilities (Credit Facilities) that totaled $1.35 billion on September 30, 2000. On October 11, 2000, the Credit Facilities were amended and restated, and decreased in aggregate to $900 million. The existing $450 million 364-day facility was increased in size to $850 million, and is scheduled to expire in October 2001. The existing $900 million five-year facility was decreased in size to $50 million, shortened to a two-year facility expiring in October 2002, and will be solely used to support the issuance of letters of credit. Interest rates on borrowings under the Credit Facilities are based upon the London Interbank Offered Rate, Certificate of Deposit rates or other short-term interest rates. In addition, the Credit Facilities have a utilization fee if borrowings exceed a certain level. The interest rate margins and facility fee on the commitment amounts are based on Columbia's public debt ratings. Moody's Investors Service, Inc. (Moody's), Fitch Investors Service (Fitch) and Standard & Poor's Ratings Group (S&P) rating of Columbia's long-term debt is A3, A and BBB+, respectively. Columbia's long-term debt ratings are currently under review for a possible change by Moody's, Fitch and S&P. Under the Credit Facilities, higher debt ratings result in lower facility fees and interest rate margins on borrowings. Columbia's commercial paper ratings are P-2 by Moody's, F-1 by Fitch and A-2 by S&P. As of September 30, 2000, Columbia had approximately $127.9 million of letters of credit issued, of which approximately $49 million were issued under the Credit Facilities, and $54.1 million of commercial paper was outstanding. 16 17 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) In 1998, Columbia entered into several fixed-to-floating interest-rate swap agreements to modify the interest characteristics of $300 million of its outstanding long-term debt. As a result of these transactions, that portion of Columbia's long-term debt is now subject to fluctuations in interest rates. This allows Columbia to benefit from a lower interest rate environment. In order to maintain a balance between fixed and floating interest rates, Columbia is targeting average annual floating rate debt exposure for 10 to 20% of its outstanding long-term debt. Columbia has an effective shelf registration statement on file with the Securities and Exchange Commission (SEC) for the issuance of up to $1 billion in aggregate of debentures, common stock or preferred stock in one or more series. Currently, Columbia has $750 million available under the shelf registration. Management believes that its sources of funding are sufficient to meet the short-term and long-term liquidity needs of Columbia. Common Stock Repurchase Program During 1999, Columbia's Board of Directors (Columbia's Board) authorized the repurchase of up to $500 million of Columbia's common stock through July 14, 2000, in the open market or otherwise. During that period a total of 4,368,300 common shares has been repurchased under this program at a cost of $249.1 million. Purchased shares are held in treasury to be made available for general corporate purposes, resold at a future date or retired. Merger Agreement On February 28, 2000, Columbia announced that it had entered into an Agreement and Plan of Merger, dated as of February 27, 2000, and subsequently amended and restated on March 31, 2000 (Merger Agreement), between Columbia and NiSource. Columbia's Board determined to enter into the Merger Agreement after a comprehensive evaluation of strategic alternatives that might generate value greater than that which Columbia's business plan could create. In early June 2000, the shareholders of both companies approved the merger between NiSource and Columbia Energy Group. As provided for in the Merger Agreement, NiSource has organized a new company that will serve as the holding company for Columbia and its subsidiaries after the completion of the transaction. Pursuant to the terms of the Merger Agreement, each of Columbia and NiSource will be merged with newly formed special purpose subsidiaries of the new holding company, and each will become a wholly-owned subsidiary of the new holding company. Immediately following these mergers, NiSource will be merged into the new holding company, which will then change its name to NiSource. Subject to the terms and conditions of the Merger Agreement, upon completion of the transaction, Columbia's shareholders will receive, for each share of Columbia common stock, $70 in cash plus $2.60 face value SAILS(SM) (a unit consisting of a zero coupon debt security with a forward equity contract). Columbia's shareholders also have the option to elect to receive (in lieu of cash and SAILS(SM)) shares in the new holding company in a tax-free exchange, for up to 30% of the outstanding shares of Columbia common stock. Pursuant to the stock election option, each Columbia share will be exchanged for up to $74 in new holding company stock. If the average closing price of NiSource shares during the 30 days prior to the closing of the transaction is greater than $16.50, Columbia shareholders will receive shares of the new holding company valued at $74 for each share of Columbia stock, and if the average closing price of NiSource shares during the 30 days prior to closing of the transaction is $16.50 or below, Columbia 17 18 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) shareholders will receive 4.4848 shares of new holding company stock for each Columbia share. Upon completion of the transaction, NiSource shareholders will receive one share of holding company stock for each share of NiSource common stock that they own. As of the filing date of this Form 10-Q, regulatory actions on the merger have been completed in all of the necessary states and the Federal Energy Regulatory Commission (FERC). Approval from the SEC is expected in the near future and it is anticipated that the merger will be completed on November 1, 2000. Voluntary Retirement Programs In September 1999, Columbia Transmission announced a VIRP that provided a retirement incentive for active employees who were age fifty and above with at least five years of service as of March 1, 2000. Approximately 486 of its 600 eligible employees elected early retirement under this program with the majority of the retirements occurring in the first quarter of 2000. In February 2000, the five distribution subsidiaries and Columbia Energy Group Service Corp. (Columbia Service Corp) also announced a VIRP for selected areas within these organizations. Of the 879 employees eligible for the program, 679 employees elected early retirement. Most of the retirements from this second VIRP occurred on June 1, 2000, with the remainder scheduled to occur on December 1, 2000, due to business needs. In September 2000, Columbia announced that employees of the five distribution subsidiaries and Service Corp. that were not eligible for the February 2000 program, as well as the employees of Columbia Resources would be offered a VIRP. To be eligible for the VIRP, an employee must be age fifty and above with at least five years of service as of January 1, 2001, and not be a member of a bargaining unit. The approximately 400 employees eligible for the program have about 45 days after the closing date of the merger with NiSource to elect early retirement. The actual retirement date for those employees electing the VIRP will be based on the specific business needs of the business units. Retirement costs for these employees are funded through the pension plan. Costs related to implementing these programs will not have a significant effect on Columbia's consolidated annual income and they are expected to reduce future labor and benefits costs due to a reduced employee complement. Presentation of Segment Information Columbia revised its presentation of its primary business segment information beginning with the reporting of second quarter 2000 results. As a result of the discontinuation of most of the businesses within the Energy Marketing Operations, this segment has been deleted. (See Note 5 of Part 1, Item 1 - Financial Statements for additional information.) In addition, due to the recent sale of Cove Point LNG, the Power Generation, LNG and Other Operations segment has been renamed Power Generation and Other. The results for Columbia Service Partners Inc., which provides energy-related services to primarily residential customers, were previously in Energy Marketing Operations. These operations were reclassified to Power Generation and Other Operations. Market Risk Exposure Some of Columbia's non-rate regulated subsidiaries are exposed to market risk due primarily to fluctuations in commodity prices. In order to help minimize this risk, Columbia has adopted a policy that provides for commodity hedging activities to help ensure stable cash flow and favorable prices and margins. Financial instruments authorized for use by Columbia for hedging include futures, swaps and options. 18 19 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONSOLIDATED RESULTS (CONTINUED) Due to the sale of Columbia's Wholesale and Trading business in late 1999, and the Mass Marketing business in 2000, Columbia's use of derivatives has been significantly reduced. Columbia Resources utilizes financial instruments to fix prices for a portion of its future production volumes, which are hedged in the marketplace through a third party. Columbia Propane Corporation, which is currently being prepared for sale, utilizes financial instruments to help protect the value of its propane and petroleum inventories and commitments. Derivative instruments continue to be controlled within predetermined limits as provided by Columbia's senior management. Columbia's policy prohibits any Columbia subsidiary from entering into derivative transactions that are not effectively connected with its business. Market risks are monitored by an independent risk control group that operates separately from the area that creates or actively manages these risk exposures in order to monitor compliance with Columbia's stated risk management policies. As a result of hedging activities and forward price sales, at September 30, 2000, Columbia's exposure to commodity price risk through 2002 for Columbia Resources' production and propane operations was not material. Columbia also utilizes fixed-to-floating interest rate swap agreements to modify the interest characteristics of a portion of its outstanding long-term debt. As a result of these transactions, $300 million of Columbia's long-term debt is now subject to fluctuations in interest rates. 19 20 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) TRANSMISSION AND STORAGE OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (millions) OPERATING REVENUES Transportation revenues $138.0 $125.3 $463.8 $442.2 Storage revenues 44.5 44.5 133.2 138.5 Other revenues 4.6 4.8 23.7 30.0 ----- ----- ----- ----- Total Operating Revenues 187.1 174.6 620.7 610.7 ----- ----- ----- ----- OPERATING EXPENSES Operation and maintenance 86.2 80.9 245.9 264.4 Settlement of gas supply charges -- -- -- (29.8) Depreciation 27.2 26.2 81.8 79.8 Other taxes 12.4 12.1 40.9 40.8 ----- ----- ----- ----- Total Operating Expenses 125.8 119.2 368.6 355.2 ----- ----- ----- ----- OPERATING INCOME $ 61.3 $ 55.4 $252.1 $255.5 ====== ====== ====== ====== THROUGHPUT (Bcf) Transportation Columbia Transmission Market area 141.2 149.3 705.6 707.7 Columbia Gulf Mainline 149.5 144.5 457.2 441.4 Short-haul 52.5 57.5 150.5 166.1 Intrasegment eliminations (138.5) (135.8) (435.7) (420.1) ------ ------- -------- ------- Total Throughput 204.7 215.5 877.6 895.1 ====== ====== ======= ========
20 21 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) TRANSMISSION AND STORAGE OPERATIONS (CONTINUED) Proposed Millennium Pipeline Project The proposed Millennium Pipeline Project (Millennium Project), in which Columbia Transmission is participating and will serve as developer and operator, will transport western gas supplies to northeast and mid-Atlantic markets. The 442-mile pipeline will connect to TransCanada PipeLines Ltd. at a new Lake Erie export point and transport approximately 700,000 Mcf (thousand cubic feet) per day to eastern markets. There are currently seven shippers who have signed agreements for a significant portion, in aggregate, of the available capacity. Based on delays attributed to the regulatory approval process at the FERC, the Millennium Project sponsors have advised the FERC of a revised in-service date of November 1, 2002. The sponsors of the proposed Millennium Project are Columbia Transmission, Westcoast Energy, Inc., TransCanada PipeLines Ltd. and MCN Energy Group, Inc. Mainline '99 Columbia Gulf Transmission Company's (Columbia Gulf's) largest expansion of its mainline facilities, referred to as Mainline '99, will increase Columbia Gulf's certificated capacity to nearly 2.2 billion cubic feet (Bcf) per day by replacing certain compressor units and increasing the horsepower capacity of other compressor stations. On December 1, 1999, approximately 270,000 Dth/day of additional capacity was made available on Columbia Gulf's mainline. The project is currently in the final phase that is expected to add additional capacity of approximately 45,000 Dth/day by November 1, 2000. Discussions with FERC The transmission and storage subsidiaries have been in confidential discussions with the staff of the FERC to resolve a previously disclosed regulatory issue. In late October 2000, the FERC issued an order approving a settlement between FERC staff and the transmission subsidiaries resolving all regulatory issues. The financial impact on earnings of this settlement was recorded in the third quarter of 2000. Throughput Columbia Transmission's throughput consists of transportation and storage services for local distribution companies and other customers within its market area, which covers fifteen northeastern, mid-Atlantic, mid-western, and southern states and the District of Columbia. Throughput for Columbia Gulf reflects mainline transportation services from Rayne, Louisiana to Leach, Kentucky and short-haul transportation services from the Gulf of Mexico to Rayne, Louisiana. Throughput for the transmission and storage segment totaled 204.7 Bcf and 877.6 Bcf for the third quarter and first nine months of 2000, respectively. The third quarter reflected a decrease of 10.8 Bcf from the same period in 1999 primarily due to reduced demand from natural gas fired electric generation facilities as a result of cooler than normal summer weather. For the year-to-date period, throughput decreased 17.5 Bcf from the 1999 period due largely to the effect of warmer weather early in the year combined with decreased third quarter requirements attributable to cooler summer weather and lower offshore throughput. Operating Revenues Total operating revenues were $187.1 million for the third quarter of 2000, an increase of $12.5 million over the same period last year due primarily to higher demand revenues from increased transportation services. For the first nine months of 2000, operating revenues were $620.7 million, an increase of $10 million over the same period last year reflecting increased transportation revenues. The increase in transportation 21 22 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) TRANSMISSION AND STORAGE OPERATIONS (CONTINUED) revenues was partially offset by lower revenues from the sale of Columbia Transmission's storage base gas. Operating Income Third quarter 2000 operating income of $61.3 million, increased $5.9 million over the same period in 1999 due largely to higher operating revenues together with lower labor and benefits costs attributable to Columbia Transmission's VIRP that was implemented in the first quarter of 2000. Tempering these improvements were costs recorded for a previously disclosed regulatory issue related to certain prior transactions. For the first nine months of 2000, operating income was $252.1 million, a decrease of $3.4 million from the same period in 1999. This decrease is primarily due to a gain on a Columbia Transmission producer settlement recorded in 1999 and expense recorded in the third quarter of 2000 for the regulatory issue mentioned above, partially offset by lower labor and benefits costs due to the implementation of the VIRP and higher revenues. 22 23 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) DISTRIBUTION OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, ------------------------ ------------------------ 2000 1999 2000 1999 -------- -------- -------- -------- (millions) NET REVENUES Sales revenues $ 150.5 $ 120.1 $ 992.1 $1,283.9 Less: Cost of gas sold 68.7 43.0 614.6 865.0 -------- -------- -------- -------- Net Sales Revenues 81.8 77.1 377.5 418.9 -------- -------- -------- -------- Transportation revenues 46.3 47.8 242.1 221.5 Less: Associated gas costs 1.5 5.2 19.8 24.1 -------- -------- -------- -------- Net Transportation Revenues 44.8 42.6 222.3 197.4 -------- -------- -------- -------- Net Revenues 126.6 119.7 599.8 616.3 -------- -------- -------- -------- OPERATING EXPENSES Operation and maintenance 89.9 89.6 320.0 299.2 Depreciation 9.2 11.5 42.3 64.6 Other taxes 15.2 17.3 87.6 104.4 -------- -------- -------- -------- Total Operating Expenses 114.3 118.4 449.9 468.2 -------- -------- -------- -------- OPERATING INCOME $ 12.3 $ 1.3 $ 149.9 $ 148.1 ======== ======== ======== ======== THROUGHPUT (Bcf) Sales Residential 7.7 7.7 81.3 92.3 Commercial 3.2 2.9 29.1 30.9 Industrial and other 0.8 0.6 2.8 2.2 -------- -------- -------- -------- Total Sales 11.7 11.2 113.2 125.4 Transportation 60.5 65.8 260.3 250.6 -------- -------- -------- -------- Total Throughput 72.2 77.0 373.5 376.0 Off-System Sales 1.2 1.6 10.7 167.1 -------- -------- -------- -------- Total Sold and Transported 73.4 78.6 384.2 543.1 ======== ======== ======== ======== SOURCES OF GAS FOR THROUGHPUT (Bcf) Sources of Gas Sold Spot market* 77.1 96.1 217.0 239.0 Producers 2.3 4.7 8.5 9.4 Storage withdrawals (injections) (35.0) (33.2) (22.5) (7.6) Other (31.5) (54.8) (79.1) 51.7 -------- -------- -------- -------- Total Sources of Gas Sold 12.9 12.8 123.9 292.5 Gas received for delivery to customers 60.5 65.8 260.3 250.6 -------- -------- -------- -------- Total Sources 73.4 78.6 384.2 543.1 ======== ======== ======== ========
* Reflects volumes under purchase contracts of less than one year. 23 24 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) DISTRIBUTION OPERATIONS (CONTINUED) Market Conditions Weather in Columbia's market area for its distribution subsidiaries (Distribution) for the first nine months of 2000 was 9% warmer than normal and one percent warmer than the same period in 1999. As a result, Distribution's weather-sensitive deliveries for the first nine months of 2000 were down 20 Bcf from the same period last year. Regulatory Matters In April 1999, Columbia Gas of Kentucky, Inc. (Columbia of Kentucky) filed an application with the Kentucky Public Service Commission (KPSC), seeking approval to initiate a residential and small commercial transportation program. In late January 2000, the KPSC approved Columbia of Kentucky's application, but did not renew Columbia of Kentucky's gas cost incentive program. Columbia of Kentucky filed for rehearing of the order during the first quarter. On May 19, 2000, the KPSC issued an order affirming its original decision to deny continuation of the gas cost incentive program originally approved in 1996. As an alternative, an incentive sharing mechanism was approved that allows Columbia of Kentucky to retain 25% of annual off-system sales over the term of the pilot program. Additionally, Columbia of Kentucky will remain responsible for mitigating transition capacity costs through the utilization of non-traditional revenues. Columbia of Kentucky began customer enrollment in the pilot program in September 2000, for gas deliveries beginning November 1, 2000. The program is scheduled to run through 2004. FERC Order 637 The FERC issued Order 637 on February 9, 2000. The order sets forth revisions to FERC regulations governing short-term natural gas transportation services and policies governing the regulation of interstate natural gas pipelines. Among other things, the order lifts the price cap for short-term capacity release by pipeline customers for an experimental period ending September 1, 2002. Currently, negotiations between the pipelines, shippers and the FERC are expected to begin this fall and may continue for months. Columbia's Distribution companies are currently in the process of evaluating the potential changes and impact Order 637 may have on operations; however, it is not anticipated that implementation of Order 637 will have a material impact on Columbia's consolidated results. Throughput During the third quarter of 2000, total volumes sold and transported of 73.4 Bcf decreased 5.2 Bcf from the same period last year. The decline primarily reflected reduced natural gas requirements by electric generation facilities as a result of cooler summer weather partially offset by customer growth. For the first nine months of 2000, total throughput sold and transported of 384.2 Bcf decreased 158.9 Bcf from the first nine months of 1999. The decline largely reflected a decrease in off-system sales, which are typically low-margin and represent sales outside of Distribution's traditional market, and warmer weather during the heating season. Tempering this decrease was higher industrial demand reflecting an increase in steel production. Off-system sales volumes for the first nine months of 2000 were 10.7 Bcf compared to 167.1 Bcf in 1999. The higher off-system sales in 1999 were due to additional opportunities available, particularly during the first quarter. Net Revenues Net revenues for the three months ended September 30, 2000, were $126.6 million, an increase of $6.9 million over the same period last year. The increase in revenues resulted primarily from the positive impact of the 1997 Ohio regulatory settlement. 24 25 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) DISTRIBUTION OPERATIONS (CONTINUED) For the first nine months of 2000, net revenues were $599.8 million, down $16.5 million from the same period last year primarily due to warmer weather in 2000. Operating Income Operating income for the three months ended September 30, 2000 of $12.3 million increased $11 million from that in the same period in 1999, primarily due to higher revenues and lower labor and benefits costs related to the implementation of the VIRP earlier this year. The improvement from lower labor and benefits expense was largely offset by higher other operation and maintenance costs. Also reducing operating expense was lower gross receipts taxes. For the nine months ended September 30, 2000, operating income of $149.9 million increased $1.8 million from the same period last year. The decrease in net revenues was more than offset by an $18.3 million reduction in operating expenses. Depreciation expense declined $22.3 million primarily as a result of recording the terms of the 1999 Columbia of Ohio regulatory settlement. Other taxes decreased $16.8 million primarily due to a decrease in gross receipts and property taxes. Operation and maintenance expense in the nine months ending September 30, 2000, increased $20.8 million over the same period in 1999, reflecting higher expense for outside services together with a general increase in other costs. 25 26 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) EXPLORATION AND PRODUCTION OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- ----------------------- 2000 1999 2000 1999 ------- ------- ------- ------- (millions) OPERATING REVENUES Gas revenues $ 34.9 $ 32.4 $ 118.7 $ 86.2 Other revenues 5.0 3.4 14.0 11.6 ------- ------- ------- ------- Total Operating Revenues 39.9 35.8 132.7 97.8 ------- ------- ------- ------- OPERATING EXPENSES Operation and maintenance 15.2 13.7 46.5 40.0 Depreciation and depletion 5.9 7.7 25.3 25.9 Other taxes 3.3 2.8 9.6 7.8 ------- ------- ------- ------- Total Operating Expenses 24.4 24.2 81.4 73.7 ------- ------- ------- ------- OPERATING INCOME $ 15.5 $ 11.6 $ 51.3 $ 24.1 ======= ======= ======= ======= GAS PRODUCTION STATISTICS Production (Bcf) U.S 12.4 13.2 39.4 34.0 Canada -- -- 0.1 0.1 ------- ------- ------- ------- Total 12.4 13.2 39.5 34.1 ======= ======= ======= ======= Average Price ($ per Mcf) U.S 2.72 2.39 2.95 2.49 Canada 4.22 2.07 3.33 2.35 OIL AND LIQUIDS PRODUCTION STATISTICS Production (000 Bbls) U.S 71 44 164 130 Canada 3 2 8 7 ------- ------- ------- ------- Total 74 46 172 137 ======= ======= ======= ======= Average Price ($ per Bbl) U.S 20.70 16.25 23.92 13.07 Canada 30.00 20.01 29.55 16.70
26 27 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) EXPLORATION AND PRODUCTION OPERATIONS (CONTINUED) Drilling Activity Columbia Resources participated in 79 gross (72.5 net) wells during the third quarter of 2000 with a success rate of 80%, adding 17.1 net Bcfe of reserves. During the same period in 1999, Columbia Resources completed 92 gross (84.3 net) wells with an 87% success rate, adding reserves of 30.9 net Bcfe. Columbia Resources' drilling activity in the first nine months of 2000 resulted in the discovery of 32.7 net Bcfe of gas and oil reserves compared to 45.6 Bcfe in the same period in 1999. Through September 30, 2000, Columbia Resources participated in 161 gross (144.5 net) wells with a success rate of 80% compared to 163 gross (144.6 net) wells with a success rate of 83% in the first nine months of 1999. Forward Sale of Natural Gas On August 24, 2000, Columbia Resources entered into an agreement with Mahonia II Limited, whereby Columbia Resources agreed to sell 111.7 Bcf of natural gas to Mahonia for the period August 2000 through July 2005. This forward sale, at an average commodity price of $3.48 per Mcf exclusive of the basis differential, provided $246.4 million in cash proceeds, net of expenses. Volumes Gas production of 12.4 Bcf in the third quarter of 2000 decreased 800,000 Mcf, or 6%, from last year's third quarter. For the nine months ended September 30, 2000, gas production increased 5.4 Bcf from the same period last year to 39.5 Bcf principally due to new wells coming on line. Operating Revenues Operating revenues for the three months ended September 30, 2000 of $39.9 million increased $4.1 million or 11% over the third quarter of 1999 due to higher sales prices. Gas prices increased $0.33 per Mcf to $2.72 per Mcf compared to the third quarter of 1999. Approximately 97% of Columbia Resources' third quarter 2000 natural gas production was hedged or committed through fixed price contracts at an average price of $2.99 per Mcf. Operating revenues for the first nine months of 2000 were $132.7 million, compared to $97.8 million for the same period in 1999. A $0.46 per Mcf increase in Columbia Resources' natural gas sales price, along with the increase in gas production, contributed to the improvement in operating revenues. Approximately 74% of Columbia Resources' natural gas production for the first nine months of 2000 was hedged or committed through fixed price contracts at an average price of $3.04 per Mcf. Operating Income For the three months ended September 30, 2000, operating income of $15.5 million increased $3.9 million over last year's third quarter as the increase in operating revenues was partially offset by a $200,000 increase in operating expenses. Operating income of $51.3 million for the first nine months of 2000 increased $27.2 million over the same period in 1999 as the $34.9 million increase in operating revenues was partially offset by an increase of $7.7 million in operating expenses. Operation and maintenance expenses were up due to the acquisition of the Wiser Oil Company's production assets in the second quarter of 1999, while other taxes increased reflecting higher revenues. 27 28 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) POWER GENERATION AND OTHER OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, -------------------- -------------------- 2000 1999 2000 1999 ----- ----- ----- ----- (millions) OPERATING REVENUES Gas revenues $ 8.1 $ 1.7 $25.9 $ 4.6 Power generation revenues 1.9 2.5 6.7 6.0 LNG revenues -- 2.6 3.8 6.8 Other revenues 0.2 0.1 2.3 0.4 ----- ----- ----- ----- Total Operating Revenues 10.2 6.9 38.7 17.8 ----- ----- ----- ----- OPERATING EXPENSES Products purchased 5.9 -- 19.5 0.3 Operation and maintenance 19.8 5.8 33.0 18.2 Depreciation -- 0.1 0.2 0.3 Other taxes 0.3 0.1 0.5 0.3 ----- ----- ----- ----- Total Operating Expenses 26.0 6.0 53.2 19.1 ----- ----- ----- ----- OPERATING INCOME (LOSS) $(15.8) $ 0.9 $(14.5) $(1.3) ===== ===== ===== =====
28 29 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) POWER GENERATION AND OTHER OPERATIONS Telecommunications Network In 1999, Columbia Transmission Communications Corporation (Transcom), a wholly-owned subsidiary of Columbia, began the construction of its telecommunications network along the Washington, D.C. to New York City corridor. As reported in Columbia's 1999 Form 10-K, Transcom anticipated the completion of the 260-mile D.C. to New York fiber optics link in the first half of 2000. However, as a result of certain matters as discussed in Part II Legal Proceedings, Item 1-I.C and other unrelated matters, the project has been delayed. Sale of Columbia Electric In October 2000, Columbia Electric agreed to sell its interests in four power generation plants to a partnership between Delta Power Company and John Hancock Life Insurance Company. These facilities include the Gregory Power Project in Corpus Christi, Texas; a cogeneration facility in Rumford, Maine; and two combined-cycle facilities, one located near Pedericktown, New Jersey and the other near Vineland, New Jersey. These projects are qualifying facilities under the Public Utility Regulatory Policies Act (PURPA). Also in October, Columbia entered into an agreement to sell the remainder of Columbia Electric to Orion Power Holdings, Inc. This transaction is expected to close by mid-December 2000, subject to approval under the Hart-Scott-Rodino Act. The sale of Columbia Electric and its operations is expected to result in an improvement to Columbia's consolidated fourth quarter results of approximately $89 million after-tax. Operating Revenues Operating revenues for the 2000 third quarter of $10.2 million increased $3.3 million over same period last year reflecting gas sales for long-term sales contracts assumed by Columbia Service Partners, Inc. that were formerly the responsibility of Columbia Energy Services' wholesale operations, which were sold effective year end 1999. The increase in revenues attributable to gas sales was largely offset by gas purchased costs reflected in products purchased expense. Operating revenues for the first nine months of 2000 increased $20.9 million to $38.7 million primarily due to improved gas sales as mentioned above and the cogeneration contract restructuring in the second quarter of 2000. Operating Income (Loss) Power Generation and Other Operations reported an operating loss $15.8 million and $14.5 million in the third quarter of 2000 and first nine months of 2000, respectively. This compares to operating income of $900,000 and an operating loss of $1.3 million in the same periods last year. The increase in operating revenues was more than offset by higher operation and maintenance expense primarily due to employee-related payments resulting from the achievement of specific objectives in the development of cogeneration projects by Columbia Electric and start-up costs related to the telecommunications business. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is reported on page 18 of the Management's Discussion and Analysis under "Market Risk Exposure." 29 30 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Item 1. Legal Proceedings No new reportable matters have arisen and there have been no material developments in any legal proceedings reported in Columbia's Annual Report on Form 10-K for the year ended December 31, 1999 or the Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, except as follows: I. Other A. Canada Southern Petroleum Ltd. v. Columbia Gas Development of Canada Ltd. (C.A. No. 9001-03466, Court of Queen's Bench, Alberta, Canada, filed March 7, 1990). The plaintiffs assert, among other things, that the defendant working interest owners, including Columbia Gas Development of Canada Ltd. (Columbia Canada) and various Amoco affiliates, breached an alleged fiduciary duty to ensure the earliest feasible marketing of gas from the Kotaneelee field (Yukon Territory, Canada). The plaintiffs seek, among other remedies, the return of the defendants' interests in the Kotaneelee field to the plaintiffs, a declaration that such interests are held in trust for the plaintiffs and an order requiring the defendants to promptly market Kotaneelee gas or assessing damages. In November 1993, the plaintiffs amended their Amended Statement of Claim to include allegations that the balance in the Carried Interest Account (an account for operating costs, which are recoverable, by working interest owners) which is in excess of the balance as of November 1988 should be reduced to zero. Columbia, on behalf of Columbia Canada, consented to the amendment in consideration of the plaintiffs' acknowledgment that approximately $63 million was properly charged to the account. However, Columbia and Columbia Canada continue to dispute the claim to the extent that the claim challenges expenditures incurred since November 1988, including expenditures made after Columbia Canada was sold to Anderson Exploration Ltd. (Anderson) effective December 31, 1991. A trial commenced in the third quarter of 1996 in the Court of Queen's Bench. Following multiple lengthy adjournments, the parties have concluded presenting their witnesses and evidence. The plaintiffs have submitted their written argument and defendant's written argument is due in August. The trial is expected to conclude by the end of 2000. Management continues to believe that its defenses are meritorious, and that the risk of any material liability to Columbia is de minimis. Pursuant to an Indemnification Agreement regarding the Kotaneelee Litigation entered into when Columbia Canada was sold to Anderson, Columbia agreed to indemnify and hold Anderson harmless for losses due to this litigation arising out of actions occurring prior to December 31, 1991. As a result of the 1997 upgrading of Columbia's long-term debt, an escrow account that provides security for the indemnification obligation and is now funded by a letter of credit was reduced to approximately $35,835,000 (Cdn). B. Columbia Gas Transmission Corp. v. Consolidation Coal Co., et al., U.S.D.C. W.D. Pa., C.A. No. 99-2071. On December 21, 1999 Columbia Transmission filed a complaint against Consolidation Coal Co. and McElroy Coal Co. (collectively, Consol), seeking declaratory and permanent injunctive relief enjoining Consol from pursuing its current plan to conduct longwall mining through Columbia Transmission's Victory Storage Field in northern West Virginia. The complaint was served on April 10, 2000. Consol's current plans to longwall mine through the Victory Storage Field would destroy certain infrastructure of Victory Storage Field, including all of Columbia Transmission's storage wells in the path of the mining. The parties are holding discussions concerning resolution of this matter. On April 28, 2000, Consol filed a Motion to Dismiss, which is currently pending before the Court. In addition, discovery initiated by Columbia Transmission is on hold pending the court's ruling on Consol's Motion to Dismiss. - C. Transcom. On March 17, April 11 and April 21, 2000, one of Columbia's subsidiaries, Columbia Transmission Communications Corporation (Transcom) received directives from the Philadelphia District of the U.S. Army Corps of Engineers (Philadelphia District) and an administrative order from The Pennsylvania Department of Environmental Protection (PA DEP) addressing alleged violations of federal 30 31 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS (CONTINUED) and state laws resulting from construction activities associated with Transcom's laying fiber optic cable along portions of a route between Washington, D.C. and New York City. The order and directives required Transcom to largely cease construction activities. On September 18, 2000, Transcom entered into a voluntary settlement agreement with the Philadelphia District under which Transcom contributed $1.2 million to the Pennsylvania chapter of the Nature Conservancy and the Philadelphia District lifted its directives. Transcom is continuing discussions with the PA DEP, the Maryland Department of the Environment (MDE) and the Baltimore District of the U.S. Army Corps of Engineers (Baltimore District) which agencies, to date, have not assessed any penalties. As a result of the voluntary agreement with the Philadelphia District and communications with the PA DEP, the MDE and the Baltimore District, certain work in Pennsylvania and Maryland is now ongoing. However, certain other work cannot proceed until the PA DEP administrative order is lifted or new or modified permits are received. Transcom cannot predict when or if the PA DEP order precluding certain construction activities will be lifted, the effect of the ongoing discussions on the completion schedule for the project, nor the nature or amount of total remedies that may be sought in connection with the foregoing construction activities. D. NiSource Related Litigation. During the course of NiSource's tender offer for Columbia, Columbia shareholders filed five class action lawsuits, which were later consolidated into a single action in the Delaware Chancery Court, and an action in federal court. NiSource also commenced two lawsuits in Chancery Court and one action in federal court. Taken together, the Chancery Court's actions alleged that Columbia and its directors acted improperly by not negotiating with NiSource, by implementing a share repurchase program, by adopting change in control agreements with Columbia executive officers and by failing to elect the number of directors prescribed in Columbia's certificate of incorporation. The federal court actions alleged that Columbia and its directors had violated federal securities laws in their statements in response to NiSource's tender offer. The claim relating to the number of directors was dismissed. In October 1999, NiSource and Columbia agreed to stay all litigation between them pending the outcome of certain meetings between Columbia and NiSource. Following the execution of the merger agreement, NiSource dismissed with prejudice all of its claims. In September 2000, shareholder plaintiffs and Columbia executed a Settlement Agreement and Stipulation of Dismissal. This agreement has been mailed to all shareholders of record. On November 14, 2000, the Chancery Court is scheduled to hold a hearing to consider approval of the Settlement Agreement and Stipulation of Dismissal. Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None 31 32 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Reference is made below to those exhibits that have previously been filed with the Commission. Exhibits so referred to are incorporated by reference.
Exhibit Number ------ 10-CQ $50,000,000 Amended and Restated Credit Agreement dated October 11, 2000, among Columbia Energy Group and certain banks party thereto and Citibank, N.A. as Administrative and Syndication Agent. 10-CR $850,000,000 Amended and Restated Credit Agreement dated October 11, 2000, among Columbia Energy Group and certain banks party thereto and Citibank, N.A. as Administrative and Syndication Agent. 12* Statements of Ratio of Earnings to Fixed Charges 27* Financial Data Schedule
* Filed herewith The following reports on Form 8-K were filed during the third quarter of 2000.
Financial Item Statements Reported Included Date of Event Date Filed -------- ---------- ------------------- ----------------------- 5 Yes ** July 14, 2000 July 14, 2000
** Summary of Financial and Operational data for the three months ended June 30, 2000. 32 33 SIGNATURE Pursuant to the requirements 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. Columbia Energy Group --------------------------- (Registrant) Date: October 26, 2000 By: /s/ Jeffrey W. Grossman ---------------------------- Jeffrey W. Grossman Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer) 33 EX-10.CQ 2 w41722ex10-cq.txt $50,000,000 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10-CQ U.S. $50,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 11, 2000 among COLUMBIA ENERGY GROUP, as Borrower, and THE LENDERS NAMED HEREIN, as Lenders, and SALOMON SMITH BARNEY INC., as Arranger and Book Manager, and CITIBANK, N.A., as Administrative and Syndication Agent, and THE CHASE MANHATTAN BANK AND FIRST UNION NATIONAL BANK, as Documentation Agents, and BANK ONE, N.A., THE BANK OF NOVA SCOTIA, PNC BANK, NATIONAL ASSOCIATION as Managing Agents and CREDIT AGRICOLE INDOSUEZ AND DEUTSCHE BANK AG NEW YORK BRANCH as Co-Agents 2 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 11, 2000 This AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment and Restatement") among COLUMBIA ENERGY GROUP, a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "Lenders"), SALOMON SMITH BARNEY INC., as arranger and book manager ("Arranger"), and CITIBANK, N.A. ("Citibank"), as administrative and syndication agent (the "Agent") for the Lenders, evidences the agreement of the parties as follows: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders and the Agent have entered into a Five-Year $900,000,000 Credit Agreement dated as of March 11, 1998 (the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment and Restatement have the same meanings as specified in the Credit Agreement. (2) The Borrower and the Lenders have agreed to amend the Credit Agreement as hereinafter set forth and to restate the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendments specified below. Amendments to Credit Agreement. The Credit Agreement, effective as of the date hereof and, subject to the satisfaction of the conditions precedent set forth in Section 3.02, is hereby amended as follows: Section 1.01 is hereby amended by amending in full the proviso clause appearing at the end of the definition of "Tangible Net Worth" to read "provided, however, that notwithstanding the foregoing exclusions, (A) regulatory assets recorded on the Consolidated balance sheet of the Borrower and its Subsidiaries, and (B) any acquisition goodwill which may appear on the Consolidated balance sheet of the Borrower and its Subsidiaries resulting from the NiSource Merger shall not be excluded for purposes of determining Tangible Net Worth." Section 1.01 is hereby amended by amending in full certain existing definitions therein as set forth below and adding new definitions thereto to read as follows: "364-Day Credit Agreement" means the Third Amended and Restated 364-Day Credit Agreement dated as of October 11, 2000 among the Borrower, the Agent and the lenders named therein. "Arranger" means Salomon Smith Barney Inc., as arranger and book manager of the syndicate of Initial Lenders hereunder. "Information Memorandum" means the information memorandum dated September 2000 used by the Arranger in connection with the syndication of the Revolving Credit Commitments. "Letter of Credit Facility" means $50,000,000, as such amount may be reduced pursuant to Section 2.05. "NiSource Merger" means a series of mergers, as a result of which the Borrower will become a wholly-owned subsidiary of NiSource, Inc., an Indiana corporation ("NiSource"), as contemplated under the terms of the NiSource Merger Agreement. 3 "NiSource Merger Agreement" means a Merger Agreement dated as of February 27, 2000 (as amended, amended and restated or otherwise modified to the date hereof) between the Borrower and NiSource. "Termination Date" means the earlier of October 9, 2002 and the date of termination in whole of the Revolving Credit Commitments pursuant to Section 2.05 or 6.01. The chart contained in the definition of "Applicable Margin " in Section 1.01 is amended in full to read as set forth on Exhibit A hereto. Section 2.01(b) is amended by deleting the dollar amounts "$127,500,000," "$100,000" and "$10,000" in the seventh, twelfth and thirteenth lines thereof, respectively, and substituting the dollar amount "$0" therefor. Section 2.01(c) is amended by (i) deleting the dollar amount "$300,000,000" in the fifth line thereof and substituting the dollar amount "$50,000,000" therefor, and (ii) deleting the dollar amount "$100,000,000" in the ninth line thereof and substituting the dollar amount "$50,000,000" therefor. Section 2.09 is amended by adding a new Section 2.09(g) to read as follows: "(g) Utilization Fee. With respect to every day on which the sum of all outstanding Advances is greater than 25% of the aggregate amount of the Revolving Credit Commitments, the Borrower agrees to pay to the Agent for the account of each Lender a utilization fee based on the daily aggregate amount of such Lender's Revolving Credit Commitment, calculated on a daily basis and payable quarterly in arrears at a rate per annum equal at all times to the percentage set forth in the applicable column of Exhibit A hereto." Section 3.01(a) is amended by deleting the reference to "December 31, 1996" and substituting "December 31, 1999" therefor. Section 4.01(e) is amended by (i) deleting the reference to "December 31, 1996" in each place in which it appears and substituting "December 31, 1999" therefor, (ii) deleting the reference to "September 30, 1997" in each place in which it appears and substituting "June 30, 2000" therefor, and (iii) deleting the word "nine" appearing in the six and eighth lines thereof and substituting "six" therefor. Section 5.02(b) is amended by adding the following proviso clause after the phrase "the Revolving Credit Commitments)" in the fifth line thereof to read "provided that the foregoing provisions of this Section 5.02(b) shall not be applicable to the NiSource Merger, and further". Section 6.01(h) is amended by adding the following proviso clause after the word "Borrower" in the last line thereof to read "; provided, however, that the foregoing provisions of this Section 6.01(h) shall not be applicable to the NiSource Merger". The Revolving Credit Commitments are amended in full to read as set forth on Schedule I hereto. Notwithstanding any other provision of the Credit Agreement no Revolving Credit Advances may be made under Section 2.01(a). Conditions of Effectiveness. This Amendment and Restatement shall become effective as of the date first above written when, and only when, the Agent shall have received counterparts of this Amendment and Restatement executed by the Borrower and all of the Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Amendment and Restatement, and when the Agent shall have additionally received all of the following documents, each such document (unless otherwise specified) dated the date of receipt thereof 4 by the Agent (unless otherwise specified) and (except for the Revolving Credit Notes) in sufficient copies for each Lender, in form and substance satisfactory to the Agent (unless otherwise specified): The new Revolving Credit Notes issued in connection with this Amendment and Restatement to the order of each of the Lenders that has a Commitment in a different amount from that with respect to the Credit Agreement. Certified copies of (i) the resolutions of the Board of Directors of the Borrower approving (or authorizing the transactions encompassed by) this Amendment and Restatement and (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment and Restatement. A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Amendment and Restatement and the other documents to be delivered hereunder. A favorable opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Borrower, in substantially the form of Exhibit B hereto. A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. A certificate signed by a duly authorized officer of the Borrower stating that: The representations and warranties contained in Section 4.01 of the Credit Agreement and in Section 3 hereof are correct on and as of the date of such certificate as though made on and as of such date; and No event has occurred and is continuing that constitutes a Default. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: The execution, delivery and performance by the Borrower of this Amendment and Restatement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Borrower's charter or by-laws or (ii) any law or any contractual restriction binding on or affecting the Borrower, except where such contravention would not be reasonably likely to have a Material Adverse Effect. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery or performance by the Borrower of this Amendment and Restatement, except where the Borrower's failure to receive, take or make such authorization, approval, action, notice or filing would not have a Material Adverse Effect. This Amendment and Restatement has been duly executed and delivered by the Borrower. This Amendment and Restatement is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and general principles of equity. Reference to and Effect on the Credit Agreement. On and after the effectiveness of this Amendment and Restatement, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended and restated by this Amendment and Restatement; provided, however, that the word "hereafter" appearing in the definition of "Material Subsidiaries" in Section 1.01 shall refer to the period after March 11, 1998. 5 The Credit Agreement, as specifically amended and restated by this Amendment and Restatement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Amendment and Restatement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. Costs, Expenses, Etc. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and Restatement and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement. The Agent agrees to request as promptly as practicable from (a) Lenders whose Revolving Credit Notes are being replaced pursuant to this Amendment and Restatement as of the date hereof, and (b) Lenders who shall have ceased to be parties to the Credit Agreement as of the date hereof, the return of their old Revolving Credit Notes. The Agent agrees to release any new Revolving Credit Note payable to a Lender only upon the return of the old Revolving Credit Note payable to such Lender. Execution in Counterparts. This Amendment and Restatement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment and Restatement by telecopier shall be effective as delivery of an original executed counterpart of this Amendment and Restatement. Governing Law. This Amendment and Restatement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be executed by their respective officers thereunto duly authorized, as of the date first above written. COLUMBIA ENERGY GROUP By /s/ Michael W. O'Donnell ------------------------------ Name: Michael W. O'Donnell Title: Senior Vice President and Chief Financial Officer SALOMON SMITH BARNEY INC., as Arranger and Book Manager By /s/ Steven R. Veterin --------------------------- Name: Steven R. Veterin Title: Managing Director CITIBANK, N.A., as Administrative and Syndication Agent By /s/ Steven M. Baillie ------------------------------ Name: Steven M. Baillie Title: Attorney in Fact 6 Lenders CITIBANK, N.A. By /s/ Steven M. Baillie ------------------------------ Name: Steven M. Baillie Title: Attorney in Fact Amount of Commitment $5,000,000.00 THE CHASE MANHATTAN BANK By /s/ Steven Wood ------------------------------ Name: Steven Wood Title: Vice President Amount of Commitment $5,000,000.00 FIRST UNION NATIONAL BANK By /s/ Michael J. Kolosowsky ------------------------------ Name: Michael J. Kolosowsky Title: Vice President Amount of Commitment $5,000,000.00 THE BANK OF NOVA SCOTIA By /s/ P. C. B. Ashby ------------------------------ Name: P. C. B. Ashby Title: Senior Manager Loan Operations Amount of Commitment $3,800,000.00 BANK ONE, NA By /s/ George R. Schanz ------------------------------ Name: George R. Schanz Title: First Vice President Amount of Commitment $3,800,000.00 7 PNC BANK, NATIONAL ASSOCIATION By /s/ Brian M. Begg ------------------------------ Name: Brian M. Begg Title: Director Amount of Commitment $3,800,000.00 CREDIT AGRICOLE INDOSUEZ By /s/ Brian D. Knezeak ------------------------------ Name: Brian D. Knezeak Title: First Vice President By /s/ Michael Willis ------------------------------ Name: Michael Willis Title: Vice President Credit Analysis Amount of Commitment $2,800,000.00 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By /s/ Belinda J. Wheeler ------------------------------ Name: Belinda J. Wheeler Title: Vice President By /s/ Catherine Ruhland ------------------------------ Name: Catherine Ruhland Title: Vice President Amount of Commitment $2,800,000.00 ALL FIRST BANK By /s/ Stefan Hoenicke ------------------------------ Name: Stefan Hoenicke Title: Vice President Amount of Commitment $2,500,000.00 8 ARAB BANK, PLC By /s/ Samer Tamimi ------------------------------ Name: Samer Tamimi Title: Vice President Amount of Commitment $2,500,000.00 BANCA MONTE DEI PASCHI DI SIENA, S.p.A. By /s/ Giulio Natalicchi ------------------------------ Name: Giulio Natalicchi Title: Senior Vice President and General Manager By /s/ Brian Landy ------------------------------ Name: Brian Landy Title: Vice President Amount of Commitment $2,500,000.00 BANK OF MONTREAL By /s/ Ian M. Plester ---------------------------- Name: Ian M. Plester Title: Director Amount of Commitment $2,500,000.00 NATIONAL CITY BANK By /s/ William J. Whitley ---------------------------- Name: William J. Whitley Title: Senior Vice President Amount of Commitment $2,500,000.00 SUNTRUST BANK By /s/ Nancy R. Petrash -------------------------- Name: Nancy R. Petrash Title: Director Corporate and Investment Banking Amount of Commitment $2,500,000.00 9 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ Nicholas R. Battista ------------------------------ Name: Nicholas R. Battista Title: Vice President Amount of Commitment $2,000,000.00 UNION BANK OF CALIFORNIA By /s/ David M. Musicant ------------------------------ Name: David M. Musicant Title: Vice President Amount of Commitment $1,000,000.00 10 SCHEDULE I
- ---------------------------------------------------------------------------------------------- NAME OF INITIAL DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE AMOUNT OF LENDER COMMITMENT - ---------------------------------------------------------------------------------------------- Citibank, N.A. 2 Allen Center, 20th Floor 2 Allen Center, 20th $5,000,000 1200 Smith Street Floor Houston, TX 77002 1200 Smith Street Steve Baillie Houston, TX 77002 Tel: 713-654-2887 Steve Baillie Fax: 713-654-2849 Tel: 713-654-2887 Fax: 713-654-2849 - ---------------------------------------------------------------------------------------------- The Chase Manhattan 270 Park Avenue-21st Floor 270 Park Avenue-21st $5,000,000 Bank New York, NY 10017-2070 Floor Steve Wood New York, NY 10017-2070 Tel: 212-270-7056 Steve Wood Fax: 212-270-3897 Tel: 212-270-7056 Fax: 212-270-3897 - ---------------------------------------------------------------------------------------------- First Union National One First Union Center One First Union Center $5,000,000 Bank 301 South College Street 301 South College Street Charlotte, NC 28288-0735 Charlotte, NC 28209 Chanue Michael Chanue Michael Tel: 704-715-1195 Tel: 704-715-1195 Fax: 704-383-7999 Fax: 704-383-7999 - ---------------------------------------------------------------------------------------------- The Bank of Nova 600 Peachtree Street NE 600 Peachtree Street NE $3,800,000 Scotia Suite 2700 Suite 2700 Atlanta, GA 30308 Atlanta, GA 30308 Anthony Millington Anthony Millington Tel: 404-877-1579 Tel: 404-877-1579 Fax: 404-888-8998 Fax: 404-888-8998 - ---------------------------------------------------------------------------------------------- Bank One, NA 1 Bank One Plaza 1 Bank One Plaza $3,800,000 Mail Stop IL1 Suite 0363 Mail Stop IL1 Suite 0363 Kenneth Bauer Kenneth Bauer Tel: 312-732-6282 Tel: 312-732-6282 Fax: 312-732-3055 Fax: 312-732-3055 - ----------------------------------------------------------------------------------------------
11 - ---------------------------------------------------------------------------------------------- PNC Bank, National 1 PNC Plaza, 3rd Floor 1 PNC Plaza, 3rd Floor $3,800,000 Association 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, PA 15222-2707 Pittsburgh, PA 15222-2707 Brian Begg Brian Begg Tel: 412-762-3440 Tel: 412-762-3440 Fax: 412-705-3231 Fax: 412-705-3231 - ---------------------------------------------------------------------------------------------- Credit Agricole 600 Travis Street, 600 Travis Street, $2,800,000 Indosuez Suite 2340 Suite 2340 Houston, TX 77002 Houston, TX 77002 Brian Knezeak Brian Knezeak Tel: 713-223-7001 Tel: 713-223-7001 Fax: 713-223-7029 Fax: 713-223-7029 - ---------------------------------------------------------------------------------------------- Deutsche Banc AG 31 West 52nd Street 31 West 52nd Street $2,800,000 New York and/or New York, NY 10019 New York, NY 10019 Cayman Islands Joel Makowsky Joel Makowsky Branches Tel: 212-469-7896 Tel: 212-469-7896 Fax: 212-469-5711 Fax: 212-469-5711 - ---------------------------------------------------------------------------------------------- Allfirst Bank 25 S Charles St. 25 S Charles St. $2,500,000 Baltimore, MD 21201 Baltimore, MD 21201 Stefan Hoenicke Stefan Hoenicke Tel: 410-244-4208 Tel: 410-244-4208 Fax: 410-244-4239 Fax: 410-244-4239 - ---------------------------------------------------------------------------------------------- Arab Bank, PLC 520 Madison Ave., 520 Madison Ave., $2,500,000 2nd Floor 2nd Floor New York, NY 10022 New York, NY 10022 John C. Korthuis John C. Korthuis Tel: 212-715-9741 Tel: 212-715-9741 Fax: 212-593-4632 Fax: 212-593-4632 - ----------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------- NAME OF INITIAL DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE AMOUNT OF LENDER COMMITMENT - ---------------------------------------------------------------------------------------------- Banca Monte dei 55 East 59th Street 55 East 59th Street $2,500,000 Paschi di Siena New York, NY 10022-1112 New York, NY 10022-1112 S.p.A. Serge Sondak Serge Sondak Tel: 212-891-3600 Tel: 212-891-3600 Fax: 212-891-6144 Fax: 212-891-6144
12 - ---------------------------------------------------------------------------------------------- Bank of Montreal US Corporate Banking US Corporate Banking $2,500,000 430 Park Avenue 430 Park Avenue New York, NY 10022 New York, NY 10022 Bernard J. Silgardo Bernard J. Silgardo Tel: 212-605-1647 Tel: 212-605-1647 Fax: 212-605-1451 Fax: 212-605-1451 - ---------------------------------------------------------------------------------------------- National City Bank 155 East Broad Street 155 East Broad Street $2,500,000 Columbus, OH 43251-0033 Columbus, OH 43251-0033 William Whitley William Whitley Tel: 614-463-8543 Tel: 614-463-8543 Fax: 614-463-6770 Fax: 614-463-6770 - ---------------------------------------------------------------------------------------------- SunTrust Bank 1445 New York Ave, 1445 New York Ave, $2,500,000 NW 5th Fl. NW 5th Fl. Washington, D.C. 20005-2106 Washington, D.C. 20005-2106 Nancy Petrash Nancy Petrash Tel: 202-879-6432 Tel: 202-879-6432 Fax: 202-879-6137 Fax: 202-879-6137 - ---------------------------------------------------------------------------------------------- Bank of 1251 Avenue of the Americas 1251 Avenue of the Americas $2,000,000 Tokyo-Mitsubishi New York, NY 10020-1104 New York, NY 10020-1104 Trust Company William Rhodes William Rhodes Tel: 212-782-4580 Tel: 212-782-4580 Fax: 212-782-4979 Fax: 212-782-4979 - ---------------------------------------------------------------------------------------------- Union Bank of 445 S. Figueroa St., 445 S. Figueroa St., $1,000,000 California Suite 1500 Suite 1500 Los Angeles, CA 90071 Los Angeles, CA 90071 David Musicant, VP David Musicant, VP Tel: 213-236-5023 Tel: 213-236-5023 Fax: 213-236-4096 Fax: 213-236-4096 - ---------------------------------------------------------------------------------------------- Bank of America, N.A. MD2-600-06-13 MD2-600-06-13 $0 6610 Rockledge Drive, 6610 Rockledge Drive, 6th Floor 6th Floor Bethesda, MD 20817-1876 Bethesda, MD 20817-1876 Lawrence Saunders Lawrence Saunders Tel: 301-571-0704 Tel: 301-571-0704 Fax: 301-571-0719 Fax: 301-571-0719
13 - ---------------------------------------------------------------------------------------------- Canadian Imperial 1600 Smith Street 1600 Smith Street $0 Bank of Commerce Suite 3000 Suite 3000 Houston, TX 77002 Houston, TX 77002 Billy H. Bauch Billy H. Bauch Tel: 713-650-2550 Tel: 713-650-2550 Fax: 713-650-7670 Fax: 713-650-7670 - ---------------------------------------------------------------------------------------------- Commerzbank AG, 2 World Financial Center 2 World Financial Center $0 New York Branch New York, NY 10281-1050 New York, NY 10281-1050 Barbara Stacks Barbara Stacks Tel: 212-266-7313 Tel: 212-266-7313 Fax: 212-266-7235 Fax: 212-266-7235 - ---------------------------------------------------------------------------------------------- Morgan Guaranty 60 Wall St. Nassau Bahamas Office $0 Trust Company of New New York, NY 10260 c/o J.P. Morgan York Jim Finch Services, Inc. Fax: 212-648-5014 Euro-Loan Servicing Unit 500 Stanton Christiana Road Newark, DE 19713 Telex: 177425 MBDEL UT Fax: 302-634-1094 - ---------------------------------------------------------------------------------------------- Societe Generale 1221 Avenue of the Americas 1221 Avenue of the $0 New York, NY 10020 Americas Gordon Eadon New York, NY 10020 Tel: 212-278-6880 Gordon Eadon Fax: 212-278-7987 Tel: 212-278-6880 Fax: 212-278-7987 - ----------------------------------------------------------------------------------------------
14 EXHIBIT A
- ---------------------------------------------------------------------------------------------------------------------------- Public Debt Rating Applicable Applicable Applicable Applicable Applicable Margin S&P/Moody's Margin for Margin for Margin Margin for for Utilization Base Rate Eurodollar Rate for CD Rate Facility Fee Advances Advances Advances Fee (25%) - ---------------------------------------------------------------------------------------------------------------------------- Level 1 0 .110% .255% .090% .25% AA-/AA3 or higher - ---------------------------------------------------------------------------------------------------------------------------- Level 2 0 .400% .540% .100% .25% A+/A/A-/A1/A2/A3 - ---------------------------------------------------------------------------------------------------------------------------- Level 3 0 .510% .650% .115% .25% BBB+/Baa1 - ---------------------------------------------------------------------------------------------------------------------------- Level 4 0 .610% .750% .140% .25% BBB/Baa2 - ---------------------------------------------------------------------------------------------------------------------------- Level 5 0 1.010% .850% .240% .25% BBB-/Baa3 or lower - ----------------------------------------------------------------------------------------------------------------------------
EX-10.CR 3 w41722ex10-cr.txt $850,000,000 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10-CR U.S. $850,000,000 THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT Dated as of October 11, 2000 among COLUMBIA ENERGY GROUP, as Borrower, and THE LENDERS NAMED HEREIN, as Lenders, and SALOMON SMITH BARNEY INC., as Arranger and Book Manager, and CITIBANK, N.A., as Administrative and Syndication Agent, and THE CHASE MANHATTAN BANK AND FIRST UNION NATIONAL BANK, as Documentation Agents, and BANK ONE, N.A., THE BANK OF NOVA SCOTIA, PNC BANK, NATIONAL ASSOCIATION, COMMERZBANK AG, NEW YORK BRANCH as Managing Agents 2 and CREDIT AGRICOLE INDOSUEZ AND DEUTSCHE BANK AG NEW YORK BRANCH as Co-Agents 3 THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT Dated as of October 11, 2000 This THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this "Amendment and Restatement") among COLUMBIA ENERGY GROUP, a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "Lenders"), and SALOMON SMITH BARNEY INC., as arranger and book manager ("Arranger and Book Manager"), and CITIBANK, N.A. ("Citibank"), as administrative and syndication agent (the "Agent") for the Lenders, evidences the agreement of the parties as follows: PRELIMINARY STATEMENTS: The Borrower, the Lenders and the Agent have entered into a Second Amended and Restated 364-Day Credit Agreement dated as of March 8, 2000 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment and Restatement have the same meanings as specified in the Credit Agreement. The Borrower and the Lenders have agreed to amend the Credit Agreement as hereinafter set forth and to restate the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendments specified below. Amendments to Credit Agreement. The Credit Agreement, effective as of the date hereof and, subject to the satisfaction of the conditions precedent set forth in Section 3.02, is hereby amended as follows: Section 1.01 is hereby amended by amending in full the proviso clause appearing at the end of the definition of "Tangible Net Worth" to read "provided, however, that notwithstanding the foregoing exclusions, (A) regulatory assets recorded on the Consolidated balance sheet of the Borrower and its Subsidiaries, and (B) any acquisition goodwill which may appear on the Consolidated balance sheet of the Borrower and its Subsidiaries resulting from the NiSource Merger shall not be excluded for purposes of determining Tangible Net Worth." Section 1.01 is hereby amended by (i) deleting the definitions of "Five-Year Credit Agreement," "Five-Year Loan Documents" and "Five-Year Notes," (ii) amending in full certain existing definitions appearing therein as set forth below, and (iii) adding new definitions thereto to read as follows: "Advance" means a Revolving Credit Advance and a Swing Line Advance. "Appropriate Lender" means, at any time, with respect to (a) the Revolving Credit Facility, a Lender that has a Revolving Credit Commitment with respect to such Facility at such time, and (b) the Swing Line Facility, a Swing Line Bank that has a Swing Line Commitment. "Borrowing" means a Revolving Credit Borrowing or a Swing Line Borrowing. "Facility" means the Revolving Credit Facility or the Swing Line Facility. 4 "Information Memorandum" means the information memorandum dated September 2000 used by the Arranger and Book Manager in connection with the syndication of the Revolving Credit Commitments. "Initial Swing Line Bank" means either Citibank or PNC Bank. "Lenders" means the Initial Lenders, the Initial Swing Line Bank and each Person that shall become a Party hereto pursuant to Section 8.07(a), (b) and (c). "NiSource Merger" means a series of mergers, as a result of which the Borrower will become a wholly owned subsidiary of NiSource, Inc., an Indiana corporation ("NiSource"), as contemplated under the terms of the NiSource Merger Agreement. "NiSource Merger Agreement" means a Merger Agreement dated as of February 27, 2000 (as amended, amended and restated or otherwise modified to the date hereof) between the Borrower and NiSource. "Note" means a Revolving Credit Note or a Swing Line Note. "Notice of Swing Line Borrowing" has the meaning specified in Section 2.02(f). "Pro Rata Share" of any amount means, with respect to any Lender or any Swing Line Bank, as the case may be, at any time, the product of such amount times, in the case of a Lender, a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time and the denominator of which is the aggregate amount of the Revolving Credit Commitments of all Lenders at such time, in the case of a Swing Line Bank, a fraction the numerator of which is the amount of such Swing Line Bank's Swing Line Commitment and the denominator of which is the aggregate amount of the Swing Line Commitments of all Swing Line Banks at such time. "Swing Line Advance" means an advance made by a Swing Line Bank pursuant to Section 2.01(b). "Swing Line Banks" means Citibank, PNC Bank and such other Lenders mutually acceptable to the Borrower and the Agent. "Swing Line Borrowing" means a Borrowing consisting of a Swing Line Advance made by a Swing Line Bank. "Swing Line Commitment" has the meaning specified in Section 2.01(b). "Swing Line Cost of Funds Advance" means a Swing Line Advance which shall bear interest, during such periods as such Swing Line Advance is a Swing Line Cost of Funds Advance, at a rate per annum equal, at all times during each Interest Period for such Swing Line Advance, to the sum of (i) the weighted average cost per annum of funds as reasonably determined by each Swing Line Bank making such Advance plus (ii) the greater of (a) 1.00% per annum or (b) two times the sum of (x) the Applicable Margin then in effect for Eurodollar Rate Advances plus (y) the applicable Margin then in effect for the Facility Fee. "Swing Line Facility" has the meaning specified in Section 2.01(b). 5 "Swing Line Note" means a promissory note of the Borrower payable to the order of a Swing Line Bank, in substantially the form of Exhibit AA hereto, evidencing the Swing Line Advances made by such Swing Line Bank. "Termination Date" means the earlier of (a) October 10, 2001 or, if extended pursuant to Section 2.16(a), the date that is 364 days after the Termination Date then in effect, and (b) the date of termination in whole of the Revolving Credit Commitments pursuant to Section 2.03 or 6.01. "Two-Year Credit Agreement" means the Amended and Restated Credit Agreement dated as of October 11, 2000 among the Borrower, the Agent and the lenders named therein. "Two-Year Loan Documents" means the Two-Year Credit Agreement and the Two-Year Notes. "Two-Year Notes" means each of the promissory notes of the Borrower executed pursuant to the Two-Year Credit Agreement. "Unused Revolving Credit Commitment" means, at any time, (a) the aggregate Revolving Credit Commitment at such time, minus (b) the sum, without duplication, of (i) the aggregate principal amount of all Revolving Credit Advances made by all Lenders and outstanding at such time, and (ii) the aggregate principal amount of all Swing Ling Advances outstanding at such time. The chart contained in the definition of "Applicable Margin" in Section 1.01 is amended in full to read as set forth on Exhibit A hereto. Section 2.01 is amended by (i) inserting a new section heading "The Advances" in the first line thereof, (ii) inserting "(a)" before the former heading "The Revolving Credit Advances" in the first line thereof, and (iii) adding a new subsection (b) thereto to read as follows: "(b) The Swing Line Advances. Each Swing Line Bank severally agrees, on the terms and conditions hereinafter set forth, to make Swing Line Advances to the Borrower from time to time on any Business Day from the Effective Date until the Termination Date in an aggregate amount which shall not exceed at any time outstanding the amount set opposite such Swing Line Bank's name on the signature pages hereof under the caption "Swing Line Commitments" (such amount being such Swing Line Bank's "Swing Line Commitment"); provided, however, that the aggregate amount of all Swing Line Advances outstanding at any time shall not exceed $127,500,000 (the "Swing Line Facility") and, provided further that no Swing Line Borrowing shall be made if, following the making of such Swing Line Borrowing, either (i) the Unused Revolving Credit Commitments of the Lenders shall be less than the aggregate unpaid principal amount of the Swing Line Advances or (ii) the aggregate amount of the Advances then outstanding would exceed the aggregate amount of the Revolving Credit Commitments of the Lenders. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $100,000 or an integral multiple of $10,000 in excess thereof and shall be made, at the determination of the Borrower, either (i) as a Base Rate Advance, (ii) as a Swing Line Cost of Funds Advance or (iii) as an Advance bearing interest as the Borrower and the Applicable Swing Line Bank shall otherwise agree. The 6 terms and conditions of the Swing Line Commitment of any Swing Line Bank and the Swing Line Advances made by any such Swing Line Bank (other than terms and conditions relating to the amount of the Swing Line Commitment, interest rate, tenor or term of any such Swing Line Advance) may be modified from the terms and conditions provided herein upon mutual agreement of the Borrower and such Swing Line Bank. Within the limits of the Swing Line Facility and within the limits referred to in this Section 2.01(b), the Borrower may borrow under this Section 2.01(b), repay pursuant to Section 2.04(b) or prepay pursuant to Section 2.09 and reborrow under this Section 2.01(b)." Section 2.02 is amended by adding a new subsection (f) at the end thereof to read as follows: "(f) Each Swing Line Borrowing shall be made on notice, given not later than 2:00 P.M. (New York City time), or such later time as agreed to by the Borrower and the applicable Swing Line Bank, on the date of the proposed Swing Line Borrowing, by the Borrower to the applicable Swing Line Bank and the Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be by telephone, confirmed immediately in writing, or tested telex or telecopier, specifying therein the requested (i) date of such Swing Line Borrowing, (ii) amount of such Swing Line Borrowing and (iii) maturity of such Swing Line Borrowing (which maturity shall be no later than the tenth day after the requested date of such Borrowing). The applicable Swing Line Bank will make the amount of each Swing Line Advance available to the Agent at the Agent's Account, in same day funds or make such amount available to the Borrower as agreed between such applicable Swing Line Bank and the Borrower. Upon written demand to the Agent (who shall promptly notify each other Lender) by any Swing Line Bank with an outstanding Swing Line Advance, each other Lender shall purchase from such Swing Line Bank, and such Swing Line Bank shall sell and assign to each such other Lender, such other Lender's Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Agent for the account of such Swing Line Bank, by deposit to the Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender unconditionally agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank that made such Advance, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by a Swing Line Bank to any other Lender of a portion of a Swing Line Advance, such Swing Line Bank represents and warrants to such other Lender that such Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents, the Borrower or any of its Subsidiaries. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Agent, such Lender agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Swing Line Bank until the date such amount is paid to the Agent, at the Federal Funds Rate. If such Lender shall pay to the Agent such amount for the account of such Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing 7 Line Advance made by such Swing Line Bank shall be reduced by such amount on such Business Day. The obligation of each other Lender to purchase a pro-rata share of any Swing Line Bank's Swing Line Advances is absolute and unconditional notwithstanding the occurrence of any circumstances, including, without limitation, any Event of Default, set-off or deduction by the Borrower or its Subsidiaries." Section 2.04 is amended by (i) inserting a new section heading "Repayment of Advances" in the first line thereof, (ii) inserting "(a)" before the former heading "Repayment of Revolving Credit Advances" in the first line thereof, and (iii) adding a new subsection (b) thereto to read as follows: "(b) Repayment of Swing Line Advances. The Borrower shall repay to each Lender that has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made by each of them (together with interest thereon) on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the tenth day after the requested date of such Borrowing) and the Termination Date." Section 2.07(e) is amended by deleting the figure "33 1/3%" in the second line thereof and substituting "25%" therefor. Section 2.09 is amended in full to read as follows: "Section 2.09. Prepayments of Advances. Optional. The Borrower may, upon (i) at least three Business Days' notice, in the case of a Eurodollar Rate Advance or CD Rate Advance, (ii) at least one Business Day's notice, in the case of a Base Rate Advance, and (iii) same day notice, in the case of a Swing Line Advance, in each case to the Agent, stating the proposed date and aggregate principal amount of the prepayment, and, if such notice is given, the Borrower shall, prepay the outstanding principal amount of such Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof (or, in the case of Swing Line Advances, the full amount of any such Swing Line Advance); provided, however, that, following each partial prepayment of any Eurodollar Rate Advance, the remaining outstanding amount of such Advance shall be at least $10,000,000 and (y) in the event of any such prepayment of a Eurodollar Rate Advance or CD Rate Advance other than on the last day of the Interest Period therefor, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). (b) Mandatory. The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings and the Swing Line Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Revolving Credit Advances and (y) the Swing Line Advances then outstanding exceeds (B) the Revolving Credit Facility on such Business Day. (i) Prepayments made pursuant to this subsection (b) shall be, first, applied to prepay Swing Line Advances then outstanding until such Advances are paid in full and, second, applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full. 8 (ii) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. If any payment required to be made under this Section 2.09(b) on account of Eurodollar Rate Advances or CD Rate Advances would be made other than on the last day of the applicable Interest Period therefor, the Borrower may, in lieu of prepaying such Advance, deposit the amount of such payment in the Cash Collateral Account until the last day of the applicable Interest Period at which time such payment shall be made." Section 2.16(b) is hereby deleted in its entirety. Section 3.01(a) is amended by deleting the reference to "December 31, 1998" and substituting "December 31, 1999" therefor. Section 3.01(h) is amended in full to read as follows: "(h) The Agent shall have received, on or before the Effective Date, the following, each dated such day, in form and substance satisfactory to the Agent and (except for the Revolving Credit Notes and the Swing Line Notes) in sufficient copies for each Lender: The Revolving Credit Notes to the order of the Lenders and the Swing Line Notes to the order of the Swing Line Banks, respectively." Section 4.01(e) is amended by (i) deleting the reference to "December 31, 1998" in each place in which it appears and substituting "December 31, 1999" therefor, (ii) deleting the reference to "September 30, 1999" in each place in which it appears and substituting "June 30, 2000" therefor, and (iii) deleting the word "nine" in the sixth and eighth lines thereof and substituting "six" therefor. Section 5.02(b) is amended by adding the following proviso clause after the phrase "the Revolving Credit Commitments)" in the fifth line thereof to read "provided that the foregoing provisions of this Section 5.02(b) shall not be applicable to the NiSource Merger, and further." Section 6.01(h) is amended by adding the following proviso clause after the word "Borrower" in the last line thereof to read "; provided, however, that the foregoing provisions of this Section 6.01(h) shall not be applicable to the NiSource Merger." The Commitments are amended in full to read as set forth on Schedule I hereto. Conditions of Effectiveness. This Amendment and Restatement shall become effective as of the date first above written when, and only when, the Agent shall have received counterparts of this Amendment and Restatement executed by the Borrower and all of the Lenders that have a Commitment greater than $0 on Schedule I or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Amendment and Restatement, and when the Agent shall have additionally received all of the following documents, each such document (unless otherwise specified) dated the date of receipt thereof by the Agent (unless otherwise specified) and (except for the Revolving Credit Notes and the Swing Line Notes) in sufficient copies for each Lender, in form and substance satisfactory to the Agent (unless otherwise specified): The new Revolving Credit Notes and the Swing Line Notes issued in connection with this Amendment and Restatement to the order of each of the Lenders that has a Commitment in a different amount from that with respect to the Credit Agreement. 9 Certified copies of (i) the resolutions of the Board of Directors of the Borrower approving (or authorizing the transactions encompassed by) this Amendment and Restatement and (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment and Restatement. A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Amendment and Restatement and the other documents to be delivered hereunder. A favorable opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Borrower, in substantially the form of Exhibit B hereto. A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. A certificate signed by a duly authorized officer of the Borrower stating that: The representations and warranties contained in Section 4.01 of the Credit Agreement and in Section 3 hereof are correct on and as of the date of such certificate as though made on and as of such date; and No event has occurred and is continuing that constitutes a Default. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: The execution, delivery and performance by the Borrower of this Amendment and Restatement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Borrower's charter or by-laws or (ii) any law or any contractual restriction binding on or affecting the Borrower, except where such contravention would not be reasonably likely to have a Material Adverse Effect. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery or performance by the Borrower of this Amendment and Restatement, except where the Borrower's failure to receive, take or make such authorization, approval, action, notice or filing would not have a Material Adverse Effect. This Amendment and Restatement has been duly executed and delivered by the Borrower. This Amendment and Restatement is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and general principles of equity. Reference to and Effect on the Credit Agreement. On and after the effectiveness of this Amendment and Restatement, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended and restated by this Amendment and Restatement; provided, however, that the word "hereafter" appearing in the definition of "Material Subsidiaries" in Section 1.01 shall refer to the period after March 11, 1998. Each Lender on Schedule I with a Commitment of "$0" shall cease to be a party to the Credit Agreement. The Credit Agreement, as specifically amended and restated by this Amendment and Restatement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. 10 The execution, delivery and effectiveness of this Amendment and Restatement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. Costs, Expenses, Etc. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and Restatement and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement. The Agent agrees to request as promptly as practicable from (a) Lenders whose Revolving Credit Notes or the Swing Line Notes, as the case may be, are being replaced pursuant to this Amendment and Restatement as of the date hereof, and (b) Lenders who shall have ceased to be parties to the Credit Agreement as of the date hereof, the return of their old Revolving Credit Notes or the Swing Line Notes, as the case may be. The Agent agrees to release any new Revolving Credit Note or the Swing Line Notes, as the case may be, payable to a Lender only upon the return of the old Revolving Credit Note or the Swing Line Notes, as the case may be, payable to such Lender. Execution in Counterparts. This Amendment and Restatement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment and Restatement by telecopier shall be effective as delivery of an original executed counterpart of this Amendment and Restatement. Governing Law. This Amendment and Restatement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be executed by their respective officers thereunto duly authorized, as of the date first above written. COLUMBIA ENERGY GROUP By /s/ Michael W. O'Donnell ------------------------ Name: Michael W. O'Donnell Title: Senior Vice President and Chief Financial Officer SALOMON SMITH BARNEY INC., as Arranger and Book Manager By /s/ Steven R. Veterin --------------------- Name: Steven R. Veterin Title: Managing Director CITIBANK, N.A., as Administrative and Syndication Agent By /s/ Steven M. Baillie --------------------- Name: Steven M. Baillie Title: Attorney in Fact 11 Lenders CITIBANK, N.A. By /s/ Steven M. Baillie --------------------- Name: Steven M. Baillie Title: Attorney in Fact Amount of Revolving Credit Commitment $75,000,000.00 Amount of Swing-line Commitment $127,500,000.00 THE CHASE MANHATTAN BANK By /s/ Steven Wood --------------- Name: Steven Wood Title: Vice President Amount of Revolving Credit Commitment $75,000,000.00 FIRST UNION NATIONAL BANK By /s/ Michael J. Kolosowsky ------------------------- Name: Michael J. Kolosowsky Title: Vice President Amount of Revolving Credit Commitment $75,000,000.00 THE BANK OF NOVA SCOTIA By /s/ P. C. B. Ashby ------------------ Name: P. C. B. Ashby Title: Senior Manager Loan Operations Amount of Revolving Credit Commitment $62,500,000.00 12 BANK ONE, NA By /s/ George R. Schanz -------------------- Name: George R. Schanz Title: First Vice President Amount of Revolving Credit Commitment $62,500,000.00 COMMERZBANK AG, NEW YORK BRANCH By /s/ Timothy Chin ---------------- Name: Timothy Chin Title: Vice President By /s/ Andrew Kjoller ------------------ Name: Andrew Kjoller Title: Assistant Vice President Amount of Revolving Credit Commitment $62,500,000.00 PNC BANK, NATIONAL ASSOCIATION By /s/ Brian M. Begg ----------------- Name: Brian M. Begg Title: Director Amount of Revolving Credit Commitment $62,500,000.00 Amount of Swing-line Commitment $127,500,000.00 CREDIT AGRICOLE INDOSUEZ By /s/ Brian D. Knezeak -------------------- Name: Brian D. Knezeak Title: First Vice President By /s/ Michael Willis ------------------ Name: Michael Willis Title: Vice President Credit Analysis Amount of Revolving Credit Commitment $50,000,000.00 13 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By /s/ Belinda J. Wheeler ---------------------- Name: Belinda J. Wheeler Title: Vice President By /s/ Catherine Ruhland --------------------- Name: Catherine Ruhland Title: Vice President Amount of Revolving Credit Commitment $50,000,000.00 ALL FIRST BANK By /s/ Stefan Hoenicke ------------------- Name: Stefan Hoenicke Title: Vice President Amount of Revolving Credit Commitment $37,500,000.00 ARAB BANK, PLC By /s/ Samer Tamimi ---------------- Name: Samer Tamimi Title: Vice President Amount of Revolving Credit Commitment $37,500,000.00 BANCA MONTE DEI PASCHI DI SIENA S.p.A. By /s/ Giulio Natalicchi ------------------------ Name: Giulio Natalicchi Title: Senior Vice President and General Manager By /s/ Brian Landy --------------- Name: Brian Landy Title: Vice President Amount of Revolving Credit Commitment $37,500,000.00 14 BANK OF MONTREAL By /s/ Ian M. Plester ------------------ Name: Ian M. Plester Title: Director Amount of Revolving Credit Commitment $37,500,000.00 NATIONAL CITY BANK By /s/ William J. Whitley ------------------------ Name: William J. Whitley Title: Senior Vice President Amount of Revolving Credit Commitment $37,500,000.00 SUNTRUST BANK By /s/ Nancy R. Petrash -------------------- Name: Nancy R. Petrash Title: Director Corporate and Investment Banking Amount of Revolving Credit Commitment $37,500,000.00 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ Nicholas R. Battista ------------------------ Name: Nicholas R. Battista Title: Vice President Amount of Revolving Credit Commitment $28,000,000.00 UNION BANK OF CALIFORNIA By /s/ David M. Musicant --------------------- Name: David M. Musicant Title: Vice President Amount of Revolving Credit Commitment $22,000,000.00 15
SCHEDULE I - ------------------------------------------------------------------------------------------------------------------------------------ AMOUNT OF AMOUNT OF SWING NAME OF INITIAL LENDER DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE COMMITMENT LINE COMMITMENT - ------------------------------------------------------------------------------------------------------------------------------------ Citibank, N.A. 2 Allen Center, 20th Floor 2 Allen Center, 20th Floor $75,000,000 $127,500,000 1200 Smith Street 1200 Smith Street Houston, TX 77002 Houston, TX 77002 Steve Baillie Steve Baillie Tel: 713-654-2887 Tel: 713-654-2887 Fax: 713-654-2849 Fax: 713-654-2849 - ------------------------------------------------------------------------------------------------------------------------------------ The Chase Manhattan Bank 270 Park Avenue-21st Floor 270 Park Avenue-21st Floor $75,000,000 $0 New York, NY 10017-2070 New York, NY 10017-2070 Steve Wood Steve Wood Tel: 212-270-7056 Tel: 212-270-7056 Fax: 212-270-3897 Fax: 212-270-3897 - ------------------------------------------------------------------------------------------------------------------------------------ First Union National Bank One First Union Center One First Union Center $75,000,000 $0 301 South College Street 301 South College Street Charlotte, NC 28288-0735 Charlotte, NC 28288- 0735 Chanue Michael Chanue Michael Tel: 704-715-1195 Tel: 704-715-1195 Fax: 704-383-7999 Fax: 704-383-7999 - ------------------------------------------------------------------------------------------------------------------------------------ The Bank of Nova Scotia 600 Peachtree Street NE 600 Peachtree Street NE $62,500,000 $0 Suite 2700 Suite 2700 Atlanta, GA 30308 Atlanta, GA 30308 Anthony Millington Anthony Millington Tel: 404-877-1579 Tel: 404-877-1579 Fax: 404-888-8998 Fax: 404-888-8998 - ------------------------------------------------------------------------------------------------------------------------------------ Bank One, NA 1 Bank One Plaza 1 Bank One Plaza $62,500,000 $0 Mail Stop IL1 Suite 0363 Mail Stop IL1 Suite 0363 Kenneth Bauer Kenneth Bauer Tel: 312-732-6282 Tel: 312-732-6282 Fax: 312-732-3055 Fax: 312-732-3055 - ------------------------------------------------------------------------------------------------------------------------------------
16
- ------------------------------------------------------------------------------------------------------------------------------------ Commerzbank AG, 2 World Financial Center 2 World Financial Center $62,500,000 $0 New York Branch New York, NY 10281-1050 New York, NY 10281-1050 Barbara Stacks Barbara Stacks Tel: 212-266-7313 Tel: 212-266-7313 Fax: 212-266-7235 Fax: 212-266-7235 - ------------------------------------------------------------------------------------------------------------------------------------ PNC Bank, National Association 1 PNC Plaza, 3rd Floor 1 PNC Plaza, 3rd Floor $62,500,000 $127,500,000 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, PA 15222-2707 Pittsburgh, PA 15222-2707 Brian Begg Brian Begg Tel: 412-762-3440 Tel: 412-762-3440 Fax: 412-705-3231 Fax: 412-705-3231 - ------------------------------------------------------------------------------------------------------------------------------------ Credit Agricole Indosuez 600 Travis Street, Suite 2340 600 Travis Street, Suite 2340 $50,000,000 $0 Houston, TX 77002 Houston, TX 77002 Brian Knezeak Brian Knezeak Tel: 713-223-7001 Tel: 713-223-7001 Fax: 713-223-7029 Fax: 713-223-7029 - ------------------------------------------------------------------------------------------------------------------------------------ Deutsche Bank AG New York 31 West 52nd Street 31 West 52nd Street $50,000,000 $0 and/or Cayman Islands Branches New York, NY 10019 New York, NY 10019 Joel Makowsky Joel Makowsky Tel: 212-469-7896 Tel: 212-469-7896 Fax: 212-469-5711 Fax: 212-469-5711 - ------------------------------------------------------------------------------------------------------------------------------------ Allfirst Bank 25 S Charles St. 25 S Charles St. $37,500,000 $0 Baltimore, MD 21201 Baltimore, MD 21201 Stefan Hoenicke Stefan Hoenicke Tel: 410-244-4208 Tel: 410-244-4208 Fax: 410-244-4239 Fax: 410-244-4239 - ------------------------------------------------------------------------------------------------------------------------------------ Arab Bank, PLC 520 Madison Ave., 2nd Floor 520 Madison Ave., 2nd Floor $37,500,000 $0 New York, NY 10022 New York, NY 10022 John C.Korthuis John C.Korthuis Tel: 212-715-9741 Tel: 212-715-9741 Fax: 212-593-4632 Fax: 212-593-4632 - ------------------------------------------------------------------------------------------------------------------------------------
17
- ------------------------------------------------------------------------------------------------------------------------------------ Banca Monte dei Paschi di 55 East 59th Street 55 East 59th Street $37,500,000 $0 Siena S.p.A. New York, NY 10022-1112 New York, NY 10022-1112 Serge Sondak Serge Sondak Tel: 212-891-3600 Tel: 212-891-3600 Fax: 212-891-6144 Fax: 212-891-6144 - ------------------------------------------------------------------------------------------------------------------------------------ Bank of Montreal US Corporate Banking US Corporate Banking $37,500,000 $0 430 Park Avenue 430 Park Avenue New York, NY 10022 New York, NY 10022 Bernard J. Silgardo Bernard J. Silgardo Tel: 212-605-1647 Tel: 212-605-1647 Fax: 212-605-1451 Fax: 212-605-1451 - ------------------------------------------------------------------------------------------------------------------------------------ National City Bank 155 East Broad Street 155 East Broad Street $37,500,000 $0 Columbus, OH 43251-0033 Columbus, OH 43251-0033 William Whitley William Whitley Tel: 614-463-8543 Tel: 614-463-8543 Fax: 614-463-6770 Fax: 614-463-6770 - ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Bank 1445 New York Ave, NW 5th Fl. 1445 New York Ave, NW 5th Fl. $37,500,000 $0 Washington, D.C. 20005-2106 Washington, D.C. 20005-2106 Nancy Petrash Nancy Petrash Tel: 202-879-6432 Tel: 202-879-6432 Fax: 202-879-6137 Fax: 202-879-6137 - ------------------------------------------------------------------------------------------------------------------------------------ Bank of Tokyo-Mitsubishi Trust 1251 Avenue of the Americas 1251 Avenue of the Americas $28,000,000 $0 Company New York, NY 10020-1104 New York, NY 10020-1104 William Rhodes William Rhodes Tel: 212-782-4580 Tel: 212-782-4580 Fax: 212-782-4979 Fax: 212-782-4979 - ------------------------------------------------------------------------------------------------------------------------------------ Union Bank of California 445 S. Figueroa St., 445 S. Figueroa St., $22,000,000 $0 Suite 1500 Suite 1500 Los Angeles, CA 90071 Los Angeles, CA 90071 David Musicant, VP David Musicant, VP Tel: 213-236-5023 Tel: 213-236-5023 Fax: 213-236-4096 Fax: 213-236-4096 - ------------------------------------------------------------------------------------------------------------------------------------
18 - ------------------------------------------------------------------------------------------------------------------------------------ Bank of America, N.A. MD2-600-06-13 MD2-600-06-13 $0 $0 6610 Rockledge Drive, 6th Floor 6610 Rockledge Drive, 6th Floor Bethesda, MD 20817-1876 Bethesda, MD 20817-1876 Lawrence Saunders Lawrence Saunders Tel: 301-571-0704 Tel: 301-571-0704 Fax: 301-571-0719 Fax: 301-571-0719 - ------------------------------------------------------------------------------------------------------------------------------------
19 EXHIBIT A
- ------------------------------------------------------------------------------------------------------------------------------------ Applicable Margin Applicable Margin For Applicable Margin Applicable Applicable Margin Public Debt Rating for Eurodollar Rate for CD Rate Margin for for Utilization Fee S&P/Moody's Base Rate Advances Advances Advances Facility Fee (25%) - ------------------------------------------------------------------------------------------------------------------------------------ Level 1 0 .125% .255% .075% .250% AA-/AA3 or higher - ------------------------------------------------------------------------------------------------------------------------------------ Level 2 0 .415% .540% .085% .250% A+/A/A-/A1/A2/A3 - ------------------------------------------------------------------------------------------------------------------------------------ Level 3 0 .525% .650% .100% .250% BBB+/Baa1 - ------------------------------------------------------------------------------------------------------------------------------------ Level 4 0 .625% .750% .125% .250% BBB/Baa2 - ------------------------------------------------------------------------------------------------------------------------------------ Level 5 0 1.025% .850% .225% .250% BBB-/Baa3 or lower - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT AA - FORM OF SWING LINE PROMISSORY NOTE U.S.$_______________ Dated: -----_________, ____ FOR VALUE RECEIVED, the undersigned, Columbia Energy Group, a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office on the earlier of the maturity date for any Swing Line Advance or the Termination Date (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Swing Line Commitment in figures] or, if less, the aggregate principal amount of the Swing Line Advances made by the Lender to the Borrower pursuant to the Third Amended and Restated 364-Day Credit Agreement dated as of October 11, 2000 among the Borrower, the Lender and certain other lenders parties thereto, and Citibank, N.A., as Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on the earlier of such maturity date or the Termination Date as the case may be. The Borrower promises to pay interest on the unpaid principal amount of each Swing Line Advance from the date of such Swing Line Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citibank, N.A., as Agent, at 2 Penn's Way, Suite 200, New Castle, DE 19720, Attn: Pia Saenganan, in same day funds. Each Swing Line Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] This Promissory Note is one of the Swing Line Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Swing Line Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any 20 time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Swing Line Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. The Borrower hereby waives presentment, demand, protest and notice of any kind except as is expressly set forth in the Credit Agreement. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. COLUMBIA ENERGY GROUP By: ________________________________ Title: ADVANCES AND PAYMENTS OF PRINCIPAL
- ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT OF DATE AMOUNT OF MATURITY PRINCIPAL PAID UNPAID PRINCIPAL NOTATION ADVANCE DATE OR PREPAID BALANCE MADE BY - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
21 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
EX-12 4 w41722ex12.txt STATEMENTS OF RATIO OF EARNINGS TO FIXED CHARGES 1
Exhibit 12 COLUMBIA ENERGY GROUP AND SUBSIDIARIES Statements of Ratio of Earnings to Fixed Charges ($ in millions) Twelve Months Twelve Months Ended September 30, Ended December 31, ------------------- ------------------ 2000 1999 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- ---- ---- Consolidated Income (Loss) from Continuing Operations before Income Taxes 636.7 490.5 565.9 461.1 397.0 325.8 (650.5) Adjustments: Interest during construction (2.0) (3.0) (2.8) (2.1) (3.0) (1.1) (20.2) Distributed (Undistributed) equity income (7.1) (3.0) (5.8) (0.4) 3.6 1.5 (7.9) Fixed charges* 206.8 164.3 183.8 163.3 180.5 183.7 1,061.3 ------- ------- ------- ------- ------- ------- ------- Earnings Available 834.4 648.8 741.1 621.9 578.1 509.9 382.7 ------- ------- ------- ------- ------- ------- ------- Fixed Charges: Interest on long-term and short-term debt 158.9 146.3 152.9 145.4 145.6 150.8 987.2 Other interest 31.7 1.9 14.9 1.4 15.2 13.5 53.6 Portion of rentals representing interest 16.2 16.1 16.0 16.5 19.7 19.4 20.5 ------- ------- ------- ------- ------- ------- ------- Total Fixed Charges 206.8 164.3 183.8 163.3 180.5 183.7 1,061.3** ------- ------- ------- ------- ------- ------- ------- Ratio of Earnings to Fixed Charges 4.03 3.95 4.03 3.81 3.20 2.78 N/A (a) ======= ======= ======= ======= ======= ======= =======
Prior periods have been restated to reflect discontinued operations. (a) To achieve a one-to-one coverage, the Corporation would need an additional $678.6 million of earnings for the twelve months ended December 31, 1995. * Amounts for the twelve months ended December 31, 1995 through December 31, 1999 have been restated to conform to 2000 presentation. ** This amount includes interest expense of $982.9 million including the write-off of unamortized discounts on debentures recorded in 1995. EX-27 5 w41722ex27.txt FINANCIAL DATA SCHEDULE
OPUR1 3-MOS 9-MOS DEC-31-2000 DEC-31-2000 JUL-1-2000 JAN-1-2000 SEP-30-2000 SEP-30-2000 PER-BOOK PER-BOOK 4,350,900 4,350,900 807,800 807,800 1,151,400 1,151,400 225,900 225,900 351,600 351,600 6,887,600 6,887,600 800 800 1,605,600 1,605,600 522,800 522,800 1,996,400 1,996,400 0 0 0 0 1,951,300 1,951,300 0 0 0 0 521,200 521,200 400 400 0 0 2,900 2,900 0 0 2,939,900 2,939,900 6,887,600 6,887,600 549,300 2,678,500 (6,500) 89,500 517,400 2,295,300 517,400 2,295,300 31,900 383,200 4,500 14,700 36,400 397,900 42,100 116,700 (9,700) 166,800 0 0 (9,700) 166,800 18,400 53,500 34,400 103,900 (151,700) 548,300 (0.12) 2.02 (0.12) 2.01
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