EXHIBIT No. 99.3
Unaudited Pro Forma Consolidated Statement of Financial Position As of September 30, 2004 (In Thousands)
Boardwalk Pipelines Acquisition Adjustments Notes Offerings Adjustments Boardwalk Pipelines Consolidated Pro Forma
Gulf South
Assets Current Assets: Cash and cash equivalents Receivables Inventories Other current assets Total current assets Property, Plant and Equipment: Natural gas transmission plant Other natural gas plant Less—Accumulated depreciation and amortization Property, plant and equipment, net Other Assets: Goodwill Gas stored underground Advances to affiliates, non-current Other Total other assets Total Assets Liabilities And Equity Current Liabilities: Payables Long-term debt due within one year Accrued liabilities Other current liabilities Total current liabilities Long-Term Debt Other liabilities Member’s Equity/Partners’ Capital Total Liabilities and Member’s Equity/Partners’ Capital 572,078 164,238 36,220 700,096 163,474 126,169 29,717 113,361 432,721 $ 1,213,489 898,371 144,310 112,436 930,245 — — — 10,903 10,903 $ 1,007,056 $ 90,123(b) — (112,436)(c) 202,559(b) — — — — — 207,959 $ — — — — — — — — — — 1,560,572 308,548 36,220 1,832,900 163,474 126,169 29,717 124,264 443,624 $ 2,428,504 $ 19,880 29,943 13,676 17,173 80,672 $ 2,455 55,357 3,782 4,314 65,908 $ 5,400(a) $ — — — 5,400 — — — — — $ 27,735 85,300 17,458 21,487 151,980
$
38,962 — 37,394 9,606 85,962 531,061 71,061 525,405
$
31,997 — 31,331 6,401 69,729 — 4,145 933,182
$
— — — — — — 5,400(a) 202,559(e)
$
— — — — — 575,000(d) — (575,000)(e)
$
70,959 — 68,725 16,007 155,691 1,106,061 80,606 1,086,146
$ 1,213,489
$ 1,007,056
$
207,959
$
—
$ 2,428,504
Unaudited Pro Forma Consolidated Statement of Operations For the Nine Months Ended September 30, 2004 (In Thousands)
Notes Offerings Adjustments Boardwalk Pipelines Consolidated Pro Forma
Boardwalk Pipelines
Gulf South
Acquisition Adjustments
Operating Revenues: Gas transportation Gas storage Other Total operating revenues Operating Costs and Expenses: Operation and maintenance Administrative and general Depreciation and amortization Taxes other than income taxes Total operating costs and expenses Operating Income Other Deductions (Income): Interest expense, net Interest income from affiliates Miscellaneous other deductions (income) Total other deductions Income before income taxes Charge-in-lieu of income taxes Net Income Total other comprehensive income Comprehensive income
$ 177,351 $ 146,121 4,719 15,357 2,448 9,337 184,518 170,815 32,239 38,491 25,225 13,566 109,521 74,997 22,285 (118) (515) 21,652 53,345 21,301 32,044 — $ 32,044 76,078 25,353 27,046 5,271 133,748 37,067 226 — 4,843 5,069 31,998 — 31,998 1,012 $ 33,010
$
— — — — — — (1,246)(f) — (1,246) 1,246 — — — — 1,246 13,148(g) (11,902) — $ (11,092)
$
— — — — — — — — — — 22,791(h) — — 22,791 (22,791) (9,014)(i) (13,777) — $ (13,777)
$
323,472 20,076 11,785 355,333 108,317 63,844 51,025 18,837 242,023 113,310 45,302 (118) 4,328 49,512 63,798 25,435 38,363 1,012 $ 39,375
Unaudited Pro Forma Consolidated Statement of Operations For the Nine Months Ended September 30, 2003 (In Thousands)
Boardwalk Pipelines Inception– September 30, 2003 $ 65,903 900 1,169 67,972 14,181 17,199 12,309 6,067 49,756 18,216
Texas Gas January 1, 2003 – May 16, 2003 Operating Revenues: Gas transportation Gas storage Other Total operating revenues Operating Costs and Expenses: Operation and maintenance Administrative and general Depreciation and amortization Taxes other than income taxes Total operating costs and expenses Operating Income Other Deductions (Income): Interest expense, net Interest income from affiliates Miscellaneous other deductions (income) Total other deductions Income before income taxes Charge-in-lieu of income taxes Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle Net income Total other comprehensive income Comprehensive income $ 111,622 814 1,011 113,447 16,097 13,642 16,092 6,077 51,908 61,539
Adjustments $ — — — — — — (4,077)(j) — (4,077) 4,077 $
Boardwalk Pipelines Pro Forma 177,525 1,714 2,180 181,419 30,278 30,841 24,324 12,144 97,587 83,832 $
Gulf South 139,132 14,656 2,803 156,591 72,661 28,961 23,167 4,935 129,724 26,867
Acquisition Adjustments $ — — — — — — 2,633(f) — 2,633 (2,633)
Notes Offerings Adjustment s $ — — — — — — — — — —
Boardwalk Pipelines Consolidated Pro Forma $ 316,657 16,370 4,983 338,010 102,939 59,802 50,124 17,079 229,944 108,066
7,392 (1,965) (749) 4,678 56,861 22,387 34,474
11,515 (3) — 11,512 6,704 2,904 3,800
2,367(k),(l) 1,965(l) — 4,332 (255) (101) (154)
21,274 (3) (749) 20,522 63,310 25,190 38,120
(776) — 1,149 373 26,494 — 26,494
— — — — (2,633) 9,437(g) (12,070)
22,791(h) — — 22,791 (22,791) (9,014)(i) (13,777)
43,289 (3) 400 43,686 64,380 25,613 38,767
— 34,474 — $ 34,474
— 3,800 — $3,800
— (154) — $ (154)
— 38,120 — $38,120
663 27,157 295 $ 27,452
— (12,070) — $ (12,070)
— (13,777) — $ (13,777)
663 39,430 295 $39,725
Unaudited Pro Forma Consolidated Statement of Operations For the Year Ended December 31, 2003 (In Thousands)
Texas Gas January 1, 2003 – May 16, 2003 Operating Revenues: Gas transportation Gas storage Other Total operating revenues Operating Costs and Expenses: Operation and maintenance Administrative and general Depreciation and amortization Taxes other than income taxes Total operating costs and expenses Operating Income Other Deductions (Income): Interest expense, net Interest income from affiliates Miscellaneous other deductions (income) Total other deductions Income before income taxes Charge-in-lieu of income taxes Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle Net income Total other comprehensive loss Comprehensive income $ 111,622 814 1,011 113,447 16,097 13,642 16,092 6,077 51,908 61,539 Boardwalk Pipelines Inception– December 31, 2003 $ 138,693 2,435 1,732 142,860 25,430 29,646 20,544 10,690 86,310 56,550 Notes Offerings Adjustment s $ — — — — — — — — — — Boardwalk Pipelines Consolidated Pro Forma $ 439,359 24,012 4,675 468,046 157,350 87,160 66,959 23,392 334,861 133,185
Adjustments $ — — — — — — (4,077)(j) — (4,077) 4,077
Boardwalk Pipelines Pro Forma $ 250,315 3,249 2,743 256,307 41,527 43,288 32,559 16,767 134,141 122,166
Gulf South $ 189,044 20,763 1,932 211,739 115,823 43,872 31,061 6,625 197,381 14,358
Acquisition Adjustments $ — — — — — — 3,339(f) — 3,339 (3,339)
7,392 (1,965) (749) 4,678 56,861 22,387
19,368 (21) (352) 18,995 37,555 15,104
2,367(k)(l) 1,965(l) — 4,332 (255) (101)
29,127 (21) (1,101) 28,005 94,161 37,390
(707) — 1,021 314 14,044 —
— — — — (3,339) 4,234(g)
30,388(h) — — (30,388) (30,388) (12,018)(i)
58,808 (21) (80) 58,707 74,478 29,606
34,474
22,451
(154)
56,771
14,044
(7,573)
(18,370)
44,872
— 34,474 — $34,474
— 22,451 — $22,451
— (154) — $ (154)
— 56,771 — $ 56,771
663 14,707 (935) $ 13,772 $
— (7,573) — (7,573)
— (18,370) — $ (18,370)
663 45,535 (935) $ 44,600
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA a) b) Reflects amounts received and liabilities assumed by Gulf South as part of a contract with a former affiliate which was terminated as part of the acquisition of Gulf South and included as a component of the preliminary purchase price allocation. The unaudited pro forma consolidated financial statements include adjustments based on the preliminary purchase price allocation for the Acquisition and further adjustments may be made based on the completion of final valuation and other studies. For purposes of this presentation, except for the item discussed in footnote a) above, the book value of Gulf South’s assets and liabilities as of September 30, 2004, are assumed to approximate fair value, with the exception of property, plant and equipment. Accordingly, the final value of the purchase price and its allocation may differ, perhaps significantly, from the amounts included in the accompanying pro forma consolidated financial statements. The values used in regards to the purchase price are: (in millions) Purchase Price Less: Gulf South Book Value Consideration in excess of book value Allocation to liabilities assumed Allocation to cash received Fees and expenses Working Capital adjustments Purchase price adjustment to property, plant and equipment, net c) d) e) $ 1,136 (933) 203 5 (5) 10 (10) 203
$
f)
g)
Reflects adjustment to reclassify components of property, plant and equipment to reset accumulated depreciation to zero as of the Acquisition date. Reflects the issuance by Boardwalk Pipelines of $300.0 million aggregate principal amount of the notes and the issuance by Gulf South of $275.0 million aggregate principal amount of the Gulf South Notes. Represents the difference in the purchase price of $1.136 billion to acquire Gulf South and the historical book equity of that entity as of September 30, 2004. The component of the purchase price financed by acquisition debt is reflected separately in the “Notes Offerings Adjustments” column. Reflects the pro forma depreciation and amortization expense adjustment for Gulf South’s property, plant and equipment based on the preliminary purchase price allocation. For purposes of calculating pro forma depreciation expense, we applied the straight-line method using estimated remaining useful lives for periods between 3 and 35 years to Boardwalk Pipelines’ new basis in such assets. Represents the income tax provision associated with certain pro forma adjustments, provided for at a 39.6% rate and a separate adjustment of $12.6 million for a charge-in-lieu of income taxes on Gulf South’s pre-tax book income reflecting the anticipated inter-company tax sharing arrangement. Reflects the interest expense as a result of the financing transactions associated with the Acquisition which is calculated as follows:
Nine Months Ended September 30, 2003 Nine Months Ended September 30, 2004 Year Ended December 31, 2003
h)
Interest on new borrowings: Boardwalk Pipelines 5.50% Notes due 2017 Gulf South 5.05% Notes due 2015 Total cash interest from the offering of the notes and the concurrent offering of the Gulf South Notes i) j)
$
12,375 10,416 22,791
$
12,375 10,416 22,791
$
16,500 13,888 30,388
$
$
$
k)
l)
Reflects pro forma income tax effect of the adjustments discussed in footnotes h), j) and k). Adjustment to historical depreciation expense based on the new basis in property, plant and equipment as a result of the Texas Gas acquisition in May 2003. For further discussion of the Texas Gas acquisition, see the Texas Gas 2003 financial statements included in the Annual Report on From 10-K and incorporated by reference in this offering memorandum. Adjustment to historical interest expense based upon the debt financing, net of debt retirements, incurred in conjunction with the Texas Gas acquisition in May 2003. For further discussion of the Texas Gas acquisition, see the Texas Gas 2003 financial statements included in the Annual Report on From 10-K and incorporated by reference in this offering memorandum. Re-characterization of interest paid to former affiliate to interest expense, net.