Dominion Power 2000 Annual Report Download - page 48

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Notes to Consolidated Financial Statements (continued)
are reclassified from other comprehensive income, the impact on
earnings should generally be offset by the recognition of the
hedged transactions.
The Company will record after-tax charges to net income of
approximately $1 million and other comprehensive income of
approximately $180 million in the first quarter of 2001 for the initial
adoption of SFAS No. 133. These adjustments will be recognized as
of January 1, 2001 as the cumulative effect of a change in account-
ing principle.
The Derivatives Implementation Group (DIG), a group sponsored
by the FASB, continues to develop interpretive guidance. The DIG
has not yet concluded on certain issues that could ultimately
impact the application of the standard.
Note 5 Acquisitions and Divestitures
Consolidated Natural Gas Company
On January 28, 2000, Dominion acquired all of the outstanding
shares of CNG common stock for a purchase price of $6.4 billion,
consisting of approximately 87 million shares of Dominion common
stock valued at $3.5 billion and approximately $2.9 billion in cash.
Dominion has accounted for the acquisition of CNG’s operations
that are not subject to cost-based rate regulation, primarily its oil
and gas exploration and production operations, using the purchase
method of accounting. For CNG’s interstate pipeline and local gas
distribution businesses that are subject to cost-based rate regula-
tion, Dominion has accounted for the acquisition in accordance
with SFAS No. 71.
The purchase price has been allocated to assets acquired and
liabilities assumed based on the estimated fair value of those
assets and liabilities as of the date of the acquisition. Such allo-
cation was based on the Company’s evaluations. The excess of
the purchase price over the fair value of CNG’s operations not
subject to cost-based rate regulation and the historical carrying
value of CNG’s operations subject to cost of service rate regulation
resulted in goodwill of $3.5 billion. The goodwill is being amortized
on a straight-line basis over the weighted average useful lives
of CNG’s gas utility plant and equipment, a period approximating
40 years. As of December 31, 2000, $77 million of amortization
associated with the goodwill had been recognized. The results
of operations of CNG for the period January 28, 2000 through
December 31, 2000 are included in the accompanying consolidated
financial statements.
Initially, the allocation of the purchase price included estimated
values for amounts expected to be realized from the sale of Virginia
Natural Gas (VNG) and CNG International, which were classified as
Net assets held for sale. In addition, the allocation of the purchase
price provided for recognition of liabilities associated with change
of control payments triggered by the acquisition of CNG under cer-
tain employment contracts ($31 million) and seismic licensing
agreements ($26 million).
The Company has made adjustments during 2000 to the alloca-
tion of the purchase price for changes in preliminary assumptions
and analyses based on receipt of additional information, to reflect
the following:
•actuarial valuations of CNG’s pension and other postretirement
benefit plan obligations and related plan assets; and
•actual proceeds realized from the disposition of VNG and CNG
International’s Argentine investments.
Net assets held for sale at December 31, 2000 included the
unsold portion of CNG International, which is primarily its equity
investment in Australian energy activities. The December 31, 2000
consolidated balance sheet includes $73 million representing the
carrying amount of CNG International, which includes the effects
of $12 million of interest and $4 million of operating losses
capitalized during the post-acquisition period.
The following unaudited pro forma combined results of opera-
tions for the years ended December 31, 2000 and 1999 have been
prepared assuming the acquisition of CNG had occurred at the
beginning of each period. The pro forma results are provided for
information only. The results are not necessarily indicative of the
actual results that would have been realized had the acquisition
occurred on the indicated date, nor are they necessarily indicative
of future results of operations of the combined companies.
Year ended December 31, 2000 1999
(millions, except per share amounts) As Reported Pro Forma As Reported Pro Forma
Consolidated Results
Revenue $9,260 $9,627 $5,520 $8,390
Income before
extraordinary item and
cumulative effect of a change
in accounting principle $ 415 $ 475 $ 552 $ 546
Net income $ 436 $ 496 $ 297 $ 291
Earnings per share — basic:
Income before
extraordinary item and
cumulative effect of a change
in accounting principle $ 1.76 $ 1.99 $ 2.88 $ 2.29
Net income $ 1.85 $ 2.08 $ 1.55 $ 1.22
Average shares — basic 235.2 238.9 191.4 238.4
Earnings per share — diluted:
Income before extraordinary item
and cumulative effect of a change
in accounting principle $ 1.76 $ 1.98 $ 2.81 $ 2.22
Net income $ 1.85 $ 2.07 $ 1.48 $ 1.15
Average shares — diluted 235.9 240.0 191.4 238.4