-----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, OB85MdfYwMjCk4pCNCwAfTgo4nIIUNV6ntYnTS71G6RU1v/EsQgycTFVkK3iqypz VV/FtUIgl3PkM4CVnEXGLw== 0000916641-00-000324.txt : 20000324 0000916641-00-000324.hdr.sgml : 20000324 ACCESSION NUMBER: 0000916641-00-000324 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000128 ITEM INFORMATION: FILED AS OF DATE: 20000323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINION RESOURCES INC /VA/ CENTRAL INDEX KEY: 0000715957 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 541229715 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-08489 FILM NUMBER: 576969 BUSINESS ADDRESS: STREET 1: 120 TREDEGAR STREET STREET 2: P O BOX 26532 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8048192000 MAIL ADDRESS: STREET 1: P O BOX 26532 STREET 2: 901 EAST BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23261 8-K/A 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 28, 2000 ---------------- Dominion Resources, Inc. ------------------------ (Exact name of registrant as specified in its charter) Virginia 1-8489 54-1229715 (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 120 Tredegar Street, Richmond, Virginia 23219 - --------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (804) 819-2000 -------------- -------------------------------------------------- (Former name or former address if changed since last report.) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Business Acquired. The audited financial statements of the business acquired, Consolidated Natural Gas Company (CNG), for the fiscal year ended December 31, 1999, together with the report of independent auditors, were incorporated by reference in the Dominion Resources Inc. (Dominion or DRI) Form 8-K, File No. 1-8489 filed February 1, 2000. The financial statements were incorporated from CNG's Form 8-K, File No. 1-3196, filed January 27, 2000. (b) Pro forma financial information. The Unaudited Pro Forma Combined Consolidated Financial Statements of Dominion and CNG (the "Pro Forma Financial Statements"), which are Exhibits to this filing, illustrate the pro forma effect of the merger between Dominion and CNG (the "Merger") accounted for as a purchase business combination. The Unaudited Pro Forma Combined Consolidated Balance Sheet has been prepared as if such transactions occurred on December 31, 1999; the Unaudited Pro Forma Combined Condensed Consolidated Statement of Income from continuing operations has been prepared as if such transactions occurred as of January 1, 1999. The Pro Forma Financial Statements reflect Dominion having acquired 100% of the outstanding common shares of CNG in exchange for 87.4 million shares of Dominion common stock, valued at $3.5 billion, and cash of $2.8 billion. A final determination of required purchase accounting adjustments has not been completed; accordingly, the purchase accounting adjustments made in connection with the development of the Pro Forma Financial Statements are preliminary and have been made solely for purposes of developing the pro forma combined financial information. The significant adjustments to the pro forma financial position reflect (i) the debt incurred to finance the transaction, (ii) the excess fair value of the pension plan assets over CNG's pension obligations recorded as part of the purchase price allocation, and (iii) the common stock issued and repurchased to consummate the Merger. Management believes that the pro forma adjustments and the underlying assumptions reasonably present the significant pro forma effects of the Merger. Upon completion of post-merger restructuring activities, the actual financial position and results of operations of the combined entity will differ, perhaps significantly, from the pro forma amounts reflected herein because of changes in operating results between the dates of the pro forma financial information and the date on which the purchase accounting adjustments are finalized. The Pro Forma Financial Statements are not necessarily indicative of actual operating results or financial position had the transactions occurred as of the dates indicated above, nor do they purport to indicate operating results or financial position which may be attained in the future. The pro forma adjustments do not reflect any potential operating efficiencies or cost savings which Dominion believes are achievable with respect to the combined companies. (c) Exhibits 99 Dominion and its subsidiary companies unaudited pro forma combined consolidated financial statements and related footnotes for the year end December 31, 1999 (filed herewith). 2 SIGNATURES 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. DOMINION RESOURCES, INC. Registrant /s/James L. Trueheart -------------------- James L. Trueheart Group Vice President and Controller (Principal Accounting Officer) Date: March 24, 2000 3 EX-99 2 UNAUDITED PRO FORMA COMBINED EXHIBIT 99 DOMINION RESOURCES, INC. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME FROM CONTINUING OPERATIONS Year Ended December 31, 1999 (in millions -- except per share amounts)
DRI CNG Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ------------- ----------- ----------- --------- OPERATING REVENUES AND INCOME Domestic electric utility service $ 4,274 $ 4,274 Consolidated Natural Gas $ 3,074 3,074 Other 1,246 1,246 ------------- ------------- ----------------- ----------- Total operating revenues and income 5,520 3,074 - 8,594 ------------- ------------- ----------------- ----------- OPERATING EXPENSES Fuel, net 996 996 Purchased power capacity, net 809 809 Purchased gas 912 912 Liquids, capacity and other products purchased 280 280 Other operation and maintenance 1,384 773 $3 (D,E,O) 2,160 Depreciation, depletion & amortization 716 379 64 (M,O) 1,159 Other taxes 304 197 501 ------------- ------------- ----------------- ----------- Total operating expenses 4,209 2,541 67 6,817 ------------- ------------- ----------------- ----------- Income from Operations 1,311 533 (67) 1,777 ------------- ------------- ----------------- ----------- OTHER INCOME AND EXPENSES Merger Expenses (213) 213 (N) - Other 91 15 (18) (I,O) 88 ------------- -------------- ----------------- ---------- Total other income 91 (198) 195 88 ------------- -------------- ----------------- ---------- Income before fixed charges, income taxes 1,402 335 128 1,865 FIXED CHARGES Interest charges 507 124 266 (A) 897 Distributions-preferred securities & preferred stock 67 67 ------------- ------------- ----------------- ---------- Total fixed charges 574 124 266 964 ------------- ------------- ----------------- ---------- Income before provision for income taxes and minority interests 828 211 (138) 901 Provision for income taxes 259 74 63 (G,M,N,O) 396 Minority interests 18 18 ------------- ------------- ---------------- ---------- INCOME FROM CONTINUING OPERATIONS $ 551 $ 137 ($201) $ 487 ============= ============= ================ ========== Average Number of Shares Outstanding 191.4 95.8 (41.3) (B,C) 245.9 ============= ============= ================ ========== EARNINGS PER SHARE (basic) $ 2.88 $ 1.43 $ 1.98 ============= ============= ========== EARNINGS PER SHARE (diluted) $ 2.81 $ 1.42 $ 1.98 ============= ============= ==========
1 DOMINION RESOURCES, INC. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET December 31, 1999 (in millions)
DRI CNG Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- --------- ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 280 $ 94 $ 374 Accounts receivable, net 933 527 (8)(K) 1,452 Materials and supplies Plant and general 143 20 163 Fossil fuel 111 111 Gas stored 86 86 Mortgage loans in warehouse 119 119 Commodity contract assets 362 362 Net assets held for sale 372 372 Other 244 339 583 ----------- ---------- --------- --------- 2,192 1,438 (8) 3,622 ----------- ---------- --------- --------- INVESTMENTS Loans receivable, net 2,034 2,034 Other investments 2,183 354 2,537 ----------- ---------- --------- --------- 4,217 354 - 4,571 ----------- ---------- --------- --------- PROPERTY, PLANT AND EQUIPMENT Net utility and other plant 9,831 2,689 - 12,520 Net exploration and production properties 933 1,538 ($99)(F,O) 2,372 Acquisition adjustment 3,497 (L) 3,497 ----------- ---------- --------- --------- 10,764 4,227 3,398 18,389 ----------- ---------- --------- --------- DEFERRED CHARGES AND OTHER ASSETS Regulatory assets 221 219 80 (E) 520 Other 353 297 1,115 (D,H) 1,765 ----------- ---------- --------- --------- 574 516 1,195 2,285 ----------- ---------- --------- --------- TOTAL ASSETS $ 17,747 $ 6,535 $ 4,585 $ 28,867 =========== ========== ========= =========
2 DOMINION RESOURCES, INC. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET December 31, 1999 (in millions)
DRI CNG Pro Forma Pro Forma As Reported As Reported Adjustments Combined ----------- ----------- ----------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY -------------------- CURRENT LIABILITIES Securities due within one year $536 $ 536 Short-term debt 870 $686 $ 4,260 (A) 5,816 Accounts payable 711 335 45 (H) 1,091 Commodity contract liabilities 347 347 Accrued taxes 89 134 223 Other 446 198 99 (J) 743 ------------ --------------- ----------- ---------- 2,999 1,353 4,404 8,756 ------------ --------------- ----------- ---------- LONG-TERM DEBT 6,936 1,764 (20) (I) 8,680 ------------ --------------- ----------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Deferred income taxes 1,699 808 360 (G,O) 2,867 Investment tax credits 146 20 166 Other 222 214 84 (E) 520 ------------ --------------- ----------- ---------- 2,067 1,042 444 3,553 ------------ --------------- ----------- ---------- Total liabilities 12,002 4,159 4,828 20,989 ------------ --------------- ----------- ---------- MINORITY INTEREST 99 99 ------------ --------------- ----------- ---------- OBLIGATED MANDITORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS 385 385 ------------ --------------- ----------- ---------- PREFERRED STOCK: Subject to mandatory redemption Not subject to mandatory redemption 509 509 ------------ --------------- ----------- ---------- COMMON SHAREHOLDERS' EQUITY Common stock 3,561 264 1,849 (B,C,L) 5,674 Retained earnings 1,190 1,545 (1,525) (L,O) 1,210 Accumulated other comprehensive income (15) (15) Other paid in capital 16 567 (567) (L) 16 ------------ --------------- ----------- ---------- 4,752 2,376 (243) 6,885 ------------ --------------- ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,747 $6,535 $ 4,585 $28,867 ============ =============== =========== ==========
3 Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements The Unaudited Pro Forma Combined Consolidated Financial Statements do not reflect the non-recurring costs associated with integrating the operations of the two companies, nor any of the anticipated recurring savings arising from the integration. Costs of integration will result in significant non-recurring charges to the combined results of operations in 2000 as a result of the consummation of the Merger; however, the actual amount of such charges cannot be determined until the transition plan relating to the integration of operations is completed. Merger Financing A. To reflect the issuance of $3.3 billion, (6.05 percent) commercial paper of Dominion and $1 billion, (6.19 percent) privately placed money market notes prior to the Merger. The fees associated with this debt will be approximately $7 million and the annual interest expense will be approximately $259 million. Dominion anticipates refinancing these amounts with long-term debt, preferred, and/or convertible securities along with the proceeds from the divestiture (see note P) of other non-core assets. Exchange of Shares and Cash B. To reflect the issuance of 87.4 million shares of Dominion common stock valued at $3.5 billion and the cash distribution of $2.9 billion in exchange for the outstanding shares of CNG at closing. Stock Repurchases C. To reflect the repurchase of 32.9 million shares of Dominion common stock for $1.4 billion which was the first step in the Merger treated as a reorganization. Purchase Adjustments D. To reflect the excess of plan assets of $1.1 billion over projected benefit obligations related to CNG's pension plans. The Income Statement also reflects the impact ($21 million increase in expense) resulting from the recognition of prepaid pension cost. E. To reflect the excess of the projected benefit obligation of $84 million over plan assets related to CNG's other postretirement benefit plans and corresponding regulatory assets of $80 million. The Income Statement also reflects the impact ( $10 million decrease in expenses) resulting from the recognition of the excess of the other postretirement benefit obligation over the fair value of plan assets. F. To reflect a reduction in value of CNG's non-regulated oil and gas exploration and production properties based on current market valuation ($129 million). G. To reflect the deferred income taxes of $350 million related to the purchase price allocated to CNG's assets and liabilities. The estimated provision for income taxes related to the pro forma adjustments are based on an assumed combined federal and state income tax rate of 38 percent. H. To record direct costs of the Merger (including fees of financial advisors, legal counsel and independent auditors) estimated to be $70 million, consisting of $45 million associated with contractual termination benefits and $25 million relating to deferred merger costs. I. To reflect the fair value of CNG's long-term debt associated with its exploration and production properties which results in a $20 million reduction in its carrying value as of January 28, 2000 (or the closing). Annual amortization of this purchase accounting debt discount would be approximately $2 million. 4 Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements (Continued) J. To reflect liabilities of $26 million associated with seismic relicensing fees for oil and gas exploration and production. Also reflects a liability of $73 million for the fair value of financial contracts entered into by CNG to mitigate exposure to volatility in oil and gas prices. K. To reflect an increase of approximately $8 million in bad debt reserves due to a change in collections policy and related reserve policy. L. To eliminate Dominion's investment in CNG of $6.4 billion (see note B) against CNG's common shareholders' equity of $2.4 billion and record the gross acquisition adjustment of $4 billion.
The gross acquisition adjustment is allocated to CNG's assets and liabilities as follows: - ---------------------------------------------------------------------------------------- Debit Credit ------- ------ Gross acquisition adjustment (millions) $3,997 ------ Other deferred charges-prepaid pension cost(D) $1,140 Net Exploration & production properties (F) 129 Long-term debt (I) 20 Accounts receivable,net (K) 8 Other deferred credits & other liabilities-(E) 4 OPEB obligation Other deferred credits & other liabilities-(J) 99 seismic license fee and financial contracts Accounts payable-merger costs (H) 45 Other deferred charges-merger costs (H) 25 Deferred income taxes (G) 350 --- ------ Net reduction to acquisition adjustment $ 500 ------ Net acquisition adjustment $3,497 ------
M. To reflect the amortization of the acquisition adjustment using the straight line method over forty years (annual amortization expense of $88 million) and the amortization of oil and gas exploration and production properties over a ten year period (annual amortization of $13 million). CNG's Pre-Merger Expenses N. Shareholder approval of the Merger constituted a change of control as defined in the CNG stock incentive plans. Accordingly, the vesting of stock options and certain other stock awards was accelerated pursuant to the provisions of the plans and/or award agreements. Also, the change of control effectively granted limited stock appreciation rights to holders of vested stock options and certain other stock awards. Specifically, the plan and/or award agreements permitted the holder to elect, during the period from July 1, 1999 through August 29, 1999, to receive a cash payment in exchange for surrendering vested stock options and awards. This provision covered outstanding vested stock options granted since 1989 to approximately 700 employees. The amount to be paid to the holders was based on the value determined under the associated plans, which considered the option exercise price, award value, and the change of control price as defined in the plans. Based on the value of the vested options and awards expected to be surrendered and cashed out, CNG recognized a charge to Other Income and Expenses for the quarter ended June 30, 1999 of $153.5 million. 5 Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements (Continued) During 1999, CNG also recorded charges to Other Income and Expenses for other direct incremental merger costs, including fees of financial advisors, legal counsel , costs related to certain executive employment agreements and other costs. These charges totaled $59.2 million for the twelve months ended December 31, 1999. The $212.7 million of nonrecurring charges and the related $67 million tax benefit recognized by CNG during 1999 have been excluded from the Pro Forma Combined Consolidated Income Statement. Change in Accounting Method O. Since Dominion's entry into the oil and gas exploration and production business in 1987, Dominion's activities have been directed primarily to low-risk drilling and acquisitions of producing reserves. With the nature of these activities and the minimal amounts spent on exploration activities, Dominion followed the successful efforts method of accounting. Based on the nature and size of CNG's oil and gas exploration and production activities, management intends to follow the full cost method of accounting for its oil and gas exploration and production activities. The following reflects the effect of adoption of the full cost method of accounting on the Pro Forma Financial Statements:
Debit Credit ----- ------- (millions) ---------- Balance Sheet Net exploration and production properties $ 30 Deferred income taxes $ 10 Retained earnings 20 Income Statement Other operation & maintenance expenses $ 8 Depreciation, depletion & amortization 11 ------- Provision for income taxes $ 1 Other income 16 ----- ------- Net income effect $ 2 -------
6 Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements (Continued) Disposition of Assets P. As part of the Securities and Exchange Commission (SEC) Order under the PUHCA of 1935 approving the Merger, Dominion must divest itself of Dominion Capital, its financial services subsidiary. Although a formal plan for diverstiture has not been adopted, the SEC allowed three years for this to be accomplished. During the Merger approval process, Dominion and CNG also agreed to divest Virginia Natural Gas, Inc. (VNG), CNG's local gas distribution subsidiary located in Virginia Beach, Virginia. Dominion has one year after the Merger is completed (January 28, 2000) to sell VNG to a third party. If the sale of VNG is not completed within one year, VNG will be spun off as an independent company with the common stock distributed to Dominion shareholders. Both deadlines are subject to reasonable extensions, which may be granted by regulatory authorities. During 1999, Dominion Energy, a subsidiary of Dominion, agreed to the sale of its Latin American interests to Duke Energy. As a result of the change in Dominion's foreign investment strategy, CNG has begun accepting bids for the sale of its foreign assets. The unaudited pro forma combined consolidated financial statements do not reflect any adjustments for the above stated anticipated divestitures. 7 -----END PRIVACY-ENHANCED MESSAGE-----