<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: February 1, 2000
DYNEGY INC.
- ------------------------------------------------------------------------------
(Exact Name of Registrant As Specified In Its Charter)
Illinois 1-11156 74-2928353
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
1000 Louisiana, Suite 5800
Houston, Texas 77002
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(Address of Principal Executive Offices)
Registrant's Telephone Number:
(713) 507-6400
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ITEM 7: FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS
- ------ ------------------------------------------------------------------
(a) FINANCIAL STATEMENTS - N/A
(b) PRO-FORMA FINANCIAL INFORMATION - ATTACHED
(c) EXHIBITS - N/A
2
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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 hereunto duly authorized.
By: /s/ Lisa Q. Metts
--------------------------------
Lisa Q. Metts
Vice President
DATE: February 29, 2000
3
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet and statements of
operations (the "statements") are presented to give effect to the merger between
Dynegy and Illinova. The preparation of the statements required management of
Dynegy and Illinova to develop estimates and make assumptions that affected the
pro forma financial position and results of operations contained therein. Actual
results could differ from those estimates. The pro forma information was
prepared based on the following assumptions:
. For reporting purposes, the statements assume that Dynegy is the acquiring
company.
. Dynegy accounted for the transaction as a purchase for financial reporting
purposes.
. The statements are based on the historical consolidated financial
statements of Dynegy and Illinova under the assumptions and adjustments set
forth in the accompanying notes to the pro forma statements.
. The pro forma balance sheet dated September 30, 1999 assumes the merger and
the sale of the Clinton nuclear facility were both consummated on September
30, 1999, and adjusts Illinova's quasi-reorganization from a plant closure
and decommissioning presentation to an asset sale presentation (including
the impact of the power purchase agreement with the purchaser of the
Clinton nuclear facility). This statement also assumes that certain
qualifying facilities were sold effective September 30, 1999.
. The statements for the year ended December 31, 1998, and for the nine-month
period ended September 30, 1999, assume the merger, Illinova's quasi-
reorganization, the sale of the Clinton nuclear facility and the sale of
certain qualifying facilities were all consummated on January 1, 1998.
. The statements assume the goodwill resulting from the merger will be
amortized over a forty-year period. We have considered the technology,
industry and financial considerations that we deemed relevant impacting
this decision and have concluded that there is no persuasive evidence
indicating that a material portion of the value creation resulting from the
combination will dissipate over a shorter period than forty years.
. We have not reflected any revenue enhancements or cost savings in the
statements. However, the combination of the two companies is estimated to
create annual pre-tax revenue enhancements and cost savings ranging from
$125 million to $165 million. Approximately two-thirds of the total annual
synergies are attributable to revenue enhancement opportunities with the
remaining one-third of the total annual synergies attributable to cost
savings. A significant portion of these annual revenue enhancements and
cost savings is estimated to be realized in the first year of combined
operations.
. The allocation of the purchase price is based upon certain assumptions,
valuations and other studies that have not been finalized. The respective
management of Dynegy and Illinova are continuing to assess the strategic
nature and fit of certain assets and operations of the combined entity in
order to identify opportunities to monetize its investment in non-strategic
operations. Further, the respective managements are assessing the long-term
direction it will take relative to the combined company's human resource
initiatives. Finally, Dynegy management continues to assess financial
exposure to litigation, environmental, regulatory and other similar
contingencies acquired as part of the merger. Consequently, the
determination and allocation of purchase price as presented in the
statements is considered preliminary.
. The statements assume that zero percent of Dynegy Holding's public
shareholders elected a cash payment of $16.50 in exchange for their stake
in Dynegy Holding. Shareholders that made elections for cash may not have
received what they elected because the amount of cash to be paid in the
merger was fixed. If you were a public shareholder of Dynegy Holding, for
each 100 shares of Dynegy Holding common stock for which you elected to
receive cash, you received cash consideration with respect to no less than
63 shares of Dynegy common stock and no more than 84 shares of Dynegy
Holding common stock.
The statements and the notes thereto should be read in conjunction with the
historical consolidated financial statements and related notes of Dynegy and
Illinova, which have been incorporated herein by reference. These statements
were prepared in accordance with rules and regulations established by the
Securities and Exchange Commission and are not necessarily reflective of the
actual or future results of operations or financial position of the combined
company.
1
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<TABLE>
<CAPTION>
DYNEGY INC.
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1999
---------------------------------------------------------------------------------
Historical PRO FORMA
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Dynegy ILLINOVA ADJUSTMENTS CLINTON (F) COMBINED
---------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
(in millions)
CURRENT ASSETS:
Cash and cash equivalents $ 28.3 $ 55.0 $ --- $ --- $ 83.3
Accounts receivable, net 1,952.8 456.2 --- (13.3) 2,395.7
Inventories 296.3 98.0 --- (0.6) 393.7
Assets from risk-management activities 414.6 17.3 (1.0)(h) --- 430.9
Prepayments and other assets 52.0 45.6 40.5 (g) (1.9) 136.2
-------- -------- --------- -------- ---------
2,744.0 672.1 39.5 (15.8) 3,439.8
-------- -------- --------- -------- ---------
PROPERTY PLANT AND EQUIPMENT, NET 2,143.2 4,488.1 (117.5)(g) 6,513.8
-------- -------- --------- --------- ---------
OTHER ASSETS:
Investment in unconsolidated affiliates 570.7 269.5 (192.2)(g) (n) --- 648.0
Assets from risk-management activities 400.7 --- --- --- 400.7
Transition period cost recovery --- 452.4 --- (115.9) 336.5
Nuclear fuel assets --- 1.4 --- (1.4) ---
Goodwill and other intangibles, net 357.8 --- 797.6 (a) (g) (n) --- 1,155.4
Other assets 198.1 307.9 --- (143.0) 363.0
-------- -------- --------- ------- ---------
1,527.3 1,031.2 605.4 (260.3) 2,903.6
-------- -------- --------- ------- ---------
TOTAL ASSETS $6,414.5 $6,191.4 $ 527.4 $(276.1) $12,857.2
======== ======== ========= ======= =========
CURRENT LIABILITIES:
Accounts payable $1,858.5 $ 211.8 $ --- $ (83.3) $ 1,987.0
Accrued liabilities 189.2 336.2 84.5 (a) (l) (58.9) 551.0
Liabilities from risk-management activities 373.3 19.0 (20.0)(h) --- 372.3
Notes payable --- 387.1 --- --- 387.1
Current portion of long-term debt 42.5 236.4 --- --- 278.9
-------- -------- --------- ------- ---------
2,463.5 1,190.5 64.5 (142.2) 3,576.3
LONG-TERM DEBT 1,416.4 2,118.6 531.6 (b) (c) (g) 139.4 4,206.0
OTHER LIABILITIES:
Liabilities from risk-management activities 314.6 --- --- --- 314.6
Deferred income taxes 313.7 898.7 10.2 (m) 61.9 1,284.5
Decommissioning liability --- 520.2 --- (495.2) 25.0
Other long-term liabilities 447.4 233.9 91.9 (a) 71.8 845.0
-------- -------- --------- ------- ---------
TOTAL LIABILITIES 4,955.6 4,961.9 698.2 (364.3) 10,251.4
-------- -------- --------- ------- ---------
COMPANY OBLIGATED PREFERRED SECURITIES OF
SUBSIDIARY TRUST 200.0 239.9 --- --- 439.9
STOCKHOLDERS' EQUITY:
Preferred stock 75.4 --- (10.7)(b) (d) --- 64.7
Class A common stock 1.6 --- 1,217.5(a)(c)(d)(e) --- 1,219.1
Class B common stock --- --- 648.1(b) --- 648.1
Additional paid-in capital 965.5 1,113.7 (2,167.4)(a)(c)(d)(e) 88.2 ---
Other comprehensive income --- 1.2 (1.2)(a) --- ---
Retained earnings (deficit) 234.0 13.0 (13.0)(e)(h)(l) --- 234.0
Less: treasury stock (17.6) (138.3) 155.9(e) --- ---
-------- -------- --------- ------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,258.9 989.6 (170.8) 88.2 2,165.9
-------- -------- --------- ------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,414.5 $6,191.4 $ 527.4 $(276.1) $12,857.2
======== ======== ========= ======= =========
</TABLE>
See Notes to Unaudited Pro forma Condensed Combined Financial Statements.
2
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<TABLE>
<CAPTION>
DYNEGY INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Nine-Months Ended September 30, 1999
--------------------------------------------------------------------------------
Historical PRO FORMA
----------------------------- --------------------------------------------------
Dynegy ILLINOVA ADJUSTMENTS CLINTON (F) COMBINED
-------------- ------------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
(in millions, except per share data)
Revenues $10,790.7 $1,928.5 $(117.5)(g) $ (16.4) $12,585.3
Cost of sales 10,386.0 1,381.9 (95.3)(g)(h) (137.4) 11,535.2
--------- -------- ------- --------- ---------
OPERATING MARGIN 404.7 546.6 (22.2) 121.0 1,050.1
Depreciation 96.3 145.3 11.3(g) --- 252.9
General and administrative expenses 150.2 146.2 (12.7)(g)(i)(l) --- 283.7
--------- -------- ------- -------- ---------
OPERATING INCOME 158.2 255.1 (20.8) 121.0 513.5
Equity in earnings of unconsolidated affiliates 60.1 6.9 (9.1)(g) --- 57.9
Other income, net 29.8 22.4 (0.2)(g) --- 52.0
Minority interest in income of subsidiaries (12.5) (14.4) --- --- (26.9)
Interest expense (59.4) (137.5) (34.2)(g)(j) 21.6 (209.5)
Other expenses, net (18.6) --- --- (0.1) (18.7)
--------- -------- ------- --------- ---------
INCOME BEFORE INCOME TAXES 157.6 132.5 (64.3) 142.5 368.3
Income tax provision 50.9 55.9 (18.1)(m) 57.0 145.7
--------- -------- ------- -------- ---------
NET INCOME $ 106.7 $ 76.6 $ (46.2) $ 85.5 $ 222.6
========= ======== ======= ======== =========
EARNINGS PER SHARE: PRO FORMA
Net Income (Loss) $ 106.7 $ 76.6 $ 222.6
Plus: Carrying amount over consideration
paid for redeemed preferred stock of a
subsidiary --- 1.5 ---
Less: preferred stock dividends (0.3) --- (19.7)
--------- -------- ---------
Net Income (Loss) applicable to common
stockholders $ 106.4 $ 78.1 $ 202.9
========= ======== =========
Basic Earnings (Loss) Per Share $ 0.69 $ 1.12 $ 1.48
========= ======== =========
Diluted Earnings Per Share $ 0.64 $ 1.12 $ 1.45
========= ======== =========
Basic Shares Outstanding 153.9 69.9 136.8
========= ======== =========
Diluted Shares Outstanding 166.7 69.9 140.4
========= ======== =========
</TABLE>
See Notes to Unaudited Pro forma Condensed Combined Financial Statements.
3
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<TABLE>
<CAPTION>
DYNEGY INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Year Ended December 31, 1998
------------------------------------------------------------------------------------
Historical PRO FORMA
-------------------------------- ---------------------------------------------------
DYNEGY ILLINOVA ADJUSTMENTS CLINTON (F) COMBINED
--------------- ------------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
(in millions, except per share data)
Revenues $14,258.0 $ 2,430.6 $(150.0)(g) $ 1.7 $16,540.3
Cost of sales 13,829.3 2,076.3 (118.5)(g) (269.8) 15,517.3
--------- --------- ------- -------- ---------
OPERATING MARGIN 428.7 354.3 (31.5) 271.5 1,023.0
Depreciation 113.2 208.0 87.3(g)(k) (97.2) 311.3
General and administrative expenses 185.7 107.4 (2.4)(g)(i) --- 290.7
Severance charge 9.6 --- --- --- 9.6
--------- --------- ------- -------- ---------
OPERATING INCOME 120.2 38.9 (116.4) 368.7 411.4
Equity in earnings of unconsolidated 91.0 22.5 (13.3)(g) --- 100.2
affiliates
Other income, net 46.8 3.1 (1.0)(g) --- 48.9
Clinton impairment --- (2,666.9) --- 2,666.9 ---
Minority interest in income of subsidiaries (16.6) (19.8) --- --- (36.4)
Interest expense (75.0) (142.8) (46.6)(g)(j) (2.5) (266.9)
Other expenses, net (7.7) --- --- --- (7.7)
--------- --------- ------- -------- ---------
INCOME BEFORE INCOME TAXES 158.7 (2,765.0) (177.3) 3,033.1 249.5
Income tax provision 50.3 (1,185.5) (59.5)(m) 1,283.9 89.2
--------- --------- ------- -------- ---------
NET INCOME $ 108.4 $(1,579.5) $(117.8) $1,749.2 $ 160.3
========= ========= ======= ======== =========
EARNINGS PER SHARE: PRO FORMA
Net Income (Loss) $ 108.4 $(1,579.5) $ 160.3
Less: preferred stock dividends (0.4) --- (26.2)
--------- --------- ---------
Net Income (Loss) applicable to common
Stockholders $ 108.0 $(1,579.5) $ 134.1
========= ========= =========
Basic Earnings (Loss) Per Share $ 0.71 $ (22.04) $ 0.98
========= ========= =========
Diluted Earnings Per Share $ 0.66 $ n/a $ 0.95
========= ========== =========
Basic Shares Outstanding 151.6 71.7 136.8
========= ========= =========
Diluted Shares Outstanding 164.6 71.7 140.4
========= ========= =========
</TABLE>
See Notes to Unaudited Pro forma Condensed Combined Financial Statements.
4
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) To reflect the purchase price allocation to goodwill. The adjustments
include the step-up applied to Illinova's common stock, estimated merger
costs incurred and capitalized by Dynegy Holding and reserves related to
valuing certain contractual obligations to current market value and
recognition of certain other obligations, including the cost to register
certain shares issued in the transaction. The significant adjustments
comprising the purchase price allocated to goodwill are as follows (in
millions, except share prices):
Share price $ 23.913
Illinova common stock outstanding at September 30, 1999 69.939
---------
Fair value of stock issued 1,672.5
Less: Illinova's net equity at September 30, 1999 989.6
---------
Consideration in excess of Illinova's net book value 682.9
Reserves for contractual and other obligations 164.3
Merger costs 29.9
---------
Allocable purchase price 877.1
Less: other adjustments to goodwill (see note (g) and (n)) 79.5
---------
Goodwill value $ 797.6
=========
Concurrent with its decision to exit the Clinton nuclear facility,
Illinova effected a quasi-reorganization initially reflected in its
December 31, 1998 historical financial statements. In a quasi-
reorganization, a company restates its assets and liabilities to their
fair value, adopts accounting pronouncements issued but not yet adopted
and eliminates any remaining deficit in retained earnings by a transfer
from other paid-in-capital. As a result, we assumed that the fair values
assigned to Illinova's assets and liabilities as part of the quasi-
reorganization (as adjusted by pro forma entry (f)) remain materially
correct and therefore the entire purchase price in excess of Illinova's
historical net book value was allocated to goodwill. Dynegy continues to
review the carrying value of Illinova's assets and liabilities. The
ultimate purchase price allocated to Illinova's regulated and
unregulated assets and liabilities by Dynegy may vary from the Illinova
assigned values as a result of various factors, including market
movements through the date of the acquisition, differences in long-term
business plans and varying conclusions resulting from assessment of
factors impacting valuation decisions.
(b) To recognize the estimated $200 million cash infusion by Chevron, the
exchange of Chevron's 7,815,363 shares of Dynegy Holding Series A
Preferred Stock and the conversion of Chevron's 38,789,876 Dynegy common
stock shares into Class B common stock of Dynegy. The value of the Class
B common stock is calculated as follows (in millions, except share
numbers):
<TABLE>
<CAPTION>
<S> <C>
Historical cost basis of 7,815,363 shares of Series A Preferred Stock $ 75.4
Par value of 38,789,876 shares of Dynegy Holding common stock 0.4
Historical paid-in capital cost basis of 38,789,876 shares of
Dynegy Holding common stock 372.3
Assumed Chevron cash infusion (reduction of long-term debt) 200.0
--------
Class B common stock value $ 648.1
========
</TABLE>
(c) To recognize the re-purchase of an aggregate 64.9 million shares of
common stock (consisting of 32.45 million shares each from BG Holdings
and NOVA) at $16.50 per share. The pro ration assumed zero percent of
the identified Dynegy Holding public shareholders exercised their right
to a cash payment of $16.50 per share of Dynegy Holding common stock.
The value deducted from the par value common stock and paid-in capital
of Dynegy Holding is calculated as follows (in millions, except share
prices) :
5
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<TABLE>
<CAPTION>
<S> <C>
Share price $ 16.50
Aggregate BG Holdings and NOVA shares assumed exchanged for cash 64.91
--------
Cash distribution (increase in long-term debt) 1,071.0
Less: par value of aggregate shares assumed exchanged for cash 0.6
--------
Value deducted from paid-in capital $1,070.4
========
</TABLE>
(d) To recognize the exchange of the remaining Dynegy Holding common shares
owned by BG Holdings and NOVA, aggregating 12.7 million Dynegy Holding
common shares, for shares of Dynegy Series A preferred stock shares
pursuant to the terms of the merger agreement (in millions, except share
prices).
Aggregate average cost basis of remaining BG Holdings
and Nova common shares $ 5.11
Assumed remaining common stock shares held by BG Holdings
and NOVA 12.66
-------
Value classified as Series A Preferred Stock 64.7
Value deducted from par value common stock 0.1
-------
Value deducted from paid-in capital $ 64.6
=======
(e) To reflect the reclassification of the net remaining common stock, paid-
in-capital and treasury stock values to Class A common stock due to
Dynegy's common stock being without a par value.
(f) To recognize the impact of the sale of the Clinton nuclear facility to
AmerGen. The year-end and interim Illinova historical financial
statements were prepared based on the expectation of plant closure as of
August 31, 1999. The pro forma adjustment reflects the impact on the
merged company's financial position resulting from the Purchase and Sale
Agreement executed by Illinova and AmerGen dated June 30, 1999. In
addition, the pro forma adjustments eliminate items of income and
expense (principally operation and maintenance expense) related to the
facility and incurred by Illinova during 1998 and 1999 based on the
assumption that the facility was sold on January 1, 1998.
(g) To recognize the estimated financial impact of the sale of certain
qualifying facilities by Dynegy Holding pursuant to requirements
mandated by the Public Utility Regulatory Polices Act of 1978.
(h) To eliminate the effect of Illinova's adoption of Statement of
Accounting Standard No. 133, "Accounting for Derivative Instruments and
Hedging Activities" in order to standardize accounting policies of the
merged company.
(i) To recognize the elimination of compensation expense related to the
vesting of certain stock options held by Dynegy Holdings employees
pursuant to the acceleration of vesting terms contained in the Merger
Agreement.
(j) To adjust historical interest expense to reflect the cost of the
increased indebtedness resulting from consummation of the merger. The
pro forma statements assume a 7 percent per annum interest rate on the
indebtedness incurred to consummate the merger under the terms
contemplated herein. A one-eighth percent variance from the assumed rate
would alter pre-tax interest expense by approximately $1.2 million per
annum. The pro forma statements do not include an estimate of costs
associated with the merger financing as such costs are not considered
material to Dynegy's pro forma financial position or pro forma results
of operations.
(k) To adjust historical depreciation and amortization expense for the
preliminary purchase price allocation reflected herein. Additionally,
depreciation expense for the year ended December 31, 1998, was increased
to reflect the additional amortization that would have been incurred on
the fossil fuel facilities had the quasi-reorganization occurred
effective January 1, 1998.
6
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(l) To recognize the estimated pro forma merger expenses incurred (and
expensed) by Illinova.
(m) To recognize the estimated pro forma tax provision on the combined pro
forma adjustments.
(n) To adjust the historical cost of certain Illinova assets to estimated
fair market value.
7
