Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Registration Statement File No: 333-33896
On May 19, 2000, NiSource issued the Interim Report For the Three
Months Ended March 31, 2000 to NiSource shareholders. The text of the
interim report is set forth below.
TEXT OF INTERIM REPORT
MAY 19, 2000
[NiSource logo]
The Premier Competitor . . .
[Regional map of the United States depicting assets and service
territories of NiSource and Columbia]
The Premier Market
*This merger, subject to shareholder and regulatory approval,
is expected to be completed by the end of 2000.
NISOURCE/COLUMBIA MERGER CREATES POWERFUL PLATFORM FOR GROWTH
Dear Shareholder:
We are very pleased to report that NiSource reached a definitive
merger agreement with Columbia Energy Group (NYSE: CG) during the
first quarter, moving us a giant step closer to fulfilling our
strategic vision of transforming your company into a competitive,
super-regional energy powerhouse. Columbia's operating companies
engage in all phases of the natural gas business, including
exploration and production, transmission, storage and distribution
and, along with NiSource's gas and electric assets, will create a
strong platform for growth.
The merger will produce the nation's second-largest gas company, with
operations stretching from the Gulf of Mexico to the Northeast,
accessing 30 percent of the U.S. population and 40 percent of the
nation's energy demand. Our market-driven merger will be
geographically positioned to profit from the 60 percent growth rate
projected for U.S. natural gas consumption by 2020 using new
technologies.
We also are excited about the growing momentum in our progress toward
seeking and obtaining the required state, federal and shareholder
approvals. In one of Columbia's key operating states, the Public
Utilities Commission of Ohio (PUCO) on May 2 authorized a letter to
the Federal Securities and Exchange Commission stating that the merger
will not adversely affect Ohio's interests.
With merger financing firmly in place, and Columbia shareholder
interest now expected to exceed the maximum 30 percent stock offer,
there is no requirement for further equity financing after the merger
is closed. We are convinced that this merger offers the opportunity
to create significant shareholder value with lower risk and higher
returns. This is a merger of two financially strong, low-risk
companies focused on a growth market. NiSource and Columbia are
committed to completing a seamless integration of the two companies
and are working together to create a framework for expediting the
process once the merger is approved.
During the first quarter, your company reported basic earnings per
common share of 64 cents on net income of $79.6 million, a 3.2 percent
increase from first-quarter 1999 basic earnings of 62 cents per share
on net income of $76.6 million.
Results for the two periods ended March 31 are not directly comparable
since this year's report includes three NiSource subsidiaries acquired
during 1999. NiSource established its New England presence when it
acquired Bay State Gas Company in February 1999. The natural gas
marketing, asset organization and natural gas storage units of
EnergyUSA-TPC and Market Hub Partners were also acquired in 1999. All
operations record a significant portion of their revenues during the
winter heating season.
Our first-quarter earnings improved despite winter weather in the
Midwest that was the warmest on record at 15 percent warmer than
normal and 11 percent warmer than the same period in 1999, which
negatively impacted our earnings by approximately 8 cents per share.
The first-quarter results reflect the success of our strategy of
expanding NiSource markets and services through our acquisitions of
Bay State and EnergyUSA-TPC and Market Hub Partners, as well as
continued customer growth at our other business units and our ongoing
initiatives to improve efficiencies.
Thank you for your continued support of the NiSource/Columbia merger
through your favorable vote at our annual shareholders meeting June 1.
/s/ Gary L. Neale
Gary L. Neale, Chairman,
President and Chief Executive Officer
May 10, 2000
[NiSource logo]
[Columbia logo]
BOARD DECLARES DIVIDEND
The Board of Directors, on March 28, declared a quarterly common share
dividend payment of:
$.27 per share
payable on:
May 19, 2000
to shareholders of record at the close of the business day on:
April 28, 2000
Enclosed is your quarterly dividend check. Enrollment information for
electronic deposit of dividends is contained on the reverse side of
the check stub. Dividend Reinvestment Plan information and account
maintenance is located in the top right hand corner of the stub.
If you are reinvesting your common share dividends in our automatic
dividend reinvestment and share purchase plan, no dividend check is
enclosed.
[Bar Chart depicting Three Months Basic Earnings Five-year Comparison
per Share]
1996 ....... $0.54
1997 ....... $0.59
1998 ....... $0.49
1999 ....... $0.62
2000 ....... $0.64
SHAREHOLDER INFORMATION
Shareholders with questions about NiSource Inc. or those seeking
information concerning their individual holdings can telephone toll
free:
Local Calling Area 219-853-5700
Toll Free 800-348-6466
Corporate Office 801 East 86th Avenue
Merrillville, Indiana 46410
Internet: www.nisource.com
<TABLE>
<CAPTION>
NISOURCE INC. - CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three Months Ended March 31, Twelve Months Ended March 31,
(dollars in thousands, except per share amounts) 2000 1999 2000 1999
---------- ---------- ---------- --------
Operating revenues:
<S> <C> <C> <C> <C>
Gas . . . . . . . . . . . . . . . . . . . . . . . $ 726,822 $ 553,896 $1,826,376 $1,364,755
Electric . . . . . . . . . . . . . . . . . . . . 255,578 264,442 1,112,174 1,368,130
Water . . . . . . . . . . . . . . . . . . . . . . 22,913 20,869 100,427 87,139
Products & Services . . . . . . . . . . . . . . . 62,236 52,368 281,573 224,985
---------- ---------- ---------- ----------
1,067,549 891,575 3,320,550 3,045,009
---------- ---------- ---------- ----------
Cost of sales:
Gas costs . . . . . . . . . . . . . . . . . . . . 518,905 379,590 1,326,773 1,010,021
Fuel for electric generation and
power purchased . . . . . . . . . . . . . . . . . 65,733 80,348 306,294 597,416
Products & Services . . . . . . . . . . . . . . . 34,803 25,589 151,898 110,047
---------- ---------- ---------- ----------
619,441 485,527 1,784,965 1,717,484
---------- ---------- ---------- ----------
Operating margin:
Gas . . . . . . . . . . . . . . . . . . . . . . . 207,917 174,306 499,603 354,734
Electric . . . . . . . . . . . . . . . . . . . . 189,845 184,094 805,880 770,714
Water . . . . . . . . . . . . . . . . . . . . . . 22,913 20,869 100,427 87,139
Products & Services . . . . . . . . . . . . . . . 27,433 26,779 129,675 114,938
---------- ---------- ---------- ----------
448,108 406,048 1,535,585 1,327,525
---------- ---------- ---------- ----------
Other operating expenses and taxes . . . . . . . . 269,200 250,196 1,050,993 867,281
---------- ---------- ---------- ----------
Operating Income . . . . . . . . . . . . . . . . . 178,908 155,852 484,592 460,244
---------- ---------- ---------- ----------
Other income (deductions) . . . . . . . . . . . . . (51,408) (34,371) (227,711) (137,080)
---------- ---------- ---------- ----------
Income before income taxes . . . . . . . . . . . . 127,500 121,481 256,881 323,164
---------- ---------- ---------- ----------
Income taxes . . . . . . . . . . . . . . . . . . . 47,884 44,922 93,410 113,441
---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . $ 79,616 $ 76,559 $ 163,471 $ 209,723
========== ========== ========== ==========
Average common shares outstanding - basic . . . . . 124,304,233 122,646,186 124,750,826 120,475,670
=========== =========== =========== ===========
Basic earnings per average common share . . . . . . $ 0.64 $ 0.62 $ 1.31 $ 1.74
========== ========== =========== ===========
Diluted earnings per average common share . . . . . $ 0.62 $ 0.62 $ 1.29 $ 1.72
========== ========== =========== ===========
Electric sales (megawatt hours) . . . . . . . . . . 4,327,730 4,813,032 17,893,677 26,843,736
=========== =========== =========== ===========
Gas deliveries (dekatherms 000's):
Gas sales . . . . . . . . . . . . . . . . . . . . 181,094 159,466 521,433 451,132
Gas transport and transmission . . . . . . . . . 69,386 75,050 246,790 232,741
---------- ---------- ---------- ----------
Total gas delivered . . . . . . . . . . . . . . . . 250,480 234,516 768,223 683,873
=========== =========== =========== ===========
Water sales (millions of gallons) . . . . . . . . . 10,092 9,313 43,809 41,513
=========== =========== =========== ===========
Prior year's total operating results are not directly comparable due to the purchase of Bay State Gas Company in
February 1999 and TPC Corporation in April 1999.
</TABLE>
NOTE TO CONDENSED CONSOLIDATED STATEMENT OF INCOME: Results of the
interim periods are not necessarily indicative of the results for any
12-month period due to the seasonal nature of NiSource Inc.'s
business.
TO THE BOARD OF DIRECTORS OF NISOURCE INC.: We have audited, in
accordance with auditing standards generally accepted in the United
States, the consolidated balance sheets of NiSource Inc. and
subsidiaries as of March 31, 2000 and December 31, 1999, and the
related consolidated statements of income, common shareholders' equity
and cash flows for the three- and 12-month periods ended March 31,
2000 and 1999 (not presented herein) and, in our report dated May 2,
2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated statement of income for the
three- and 12-month periods ended March 31, 2000 and 1999, is fairly
stated, in all material respects, in relation to the consolidated
financial statements from which it has been derived.
Chicago, Illinois Arthur Andersen LLP
May 2, 2000
This Condensed Consolidated Statement of Income and the report are
not, under any circumstances, to be construed as an offer to sell, or
as a solicitation of an offer to buy, securities of NiSource Inc.
This report contains certain forward-looking statements
within the meaning of the federal securities laws; these
forward-looking statements are subject to various risks and
uncertainties. The factors that could cause actual results
to differ materially from the projections, forecasts,
estimates and expectations discussed herein may include
factors that are beyond the companies' ability to control or
estimate precisely, such as estimates of actions of the
federal and state regulators. Other factors include, but
are not limited to, actions in the financial markets,
weather conditions, economic conditions in the two
companies' service territories, fluctuations in energy-
related commodity prices, conversion activity, other
marketing efforts and other uncertainties. Other risk
factors are detailed from time to time in the two companies'
SEC reports. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak
only as of the date of this report. The companies do not
undertake any obligation to publicly release any revisions
to these forward-looking statements to reflect events or
circumstances after the date of the report.
In addition to other documents filed with the Securities and
Exchange Commission by the two companies, NiSource and the
new holding company have filed a registration statement,
which contains a joint proxy statement/prospectus for
NiSource and Columbia Energy Group. The final joint proxy
statement/prospectus, dated April 25, 2000, is available and
has been distributed to the companies' shareholders.
Investors and security holders are urged to read the joint
proxy statement/prospectus and any other relevant documents
filed with the SEC when they become available because they
will contain important information. Investors and security
holders can receive the joint proxy statement/prospectus and
other documents free of charge at the SEC's Web site,
www.sec.gov, from NiSource Investor Relations at 801 East
86th Avenue, Merrillville, Indiana 46410 or at its Web site,
www.nisource.com, or from Columbia Investor Relations at
13880 Dulles Corner Lane, Herndon, Virginia 20171 or at its
Web site, www.columbiaenergygroup.com.
Information concerning the identity of the participants in
the solicitation of proxies by the NiSource Inc. and
Columbia Energy Group boards of directors and their direct
or indirect interests, by security holdings or otherwise,
may be obtained from the secretary of NiSource Inc., or the
secretary of Columbia Energy Group, as the case may be, at
the addresses listed above.
