A glance at NiSource’s second quarter earnings tells a lot aboutwhy it’s looking to Columbia for help. While Columbia won praisefrom analysts for beating second quarter earnings expectations witha 15% jump in net income to $26.1 million, or 32 cents per share,it’s hostile suitor NiSource struggled and fell short of WallStreet expectations by $0.03/share, reporting a 22% drop in netincome to $22.9 million or $0.18/share, from $29.5, or $0.24/sharein 2Q98.

NiSource attributed the decline to the “seasonal nature ofearnings” from its recent acquisitions, salt cavern storageoperator TPC Corp. and Bay State Gas, a New England gasdistribution company serving 312,000 customers in Massachusetts,New Hampshire and Maine. “The acquisitions of Bay State Gas and TPCprovide opportunities for NiSource to expand geographically intogrowing gas markets and expand our overall marketing capabilities,while continuing to enhance shareholder value,” said CEO Gary L.Neale. “Both companies are expected to contribute solid earningsgrowth. However, the heating sensitive nature of these gasbusinesses will result in some shift of earnings from the secondand third quarter to the first and fourth quarter. As a result,future first- and fourth-quarter results will be stronger and thesecond and third quarter results somewhat weaker when compared tohistorical performance of the company.”

NiSource turned its focus to its year-to-date performance, inwhich basic earnings per share were 80 cents, a 10% increase fromthe same period a year ago. Net income for the six-month period was$99.5 million, an increase of $9.3 million from 2Q98. However, the1999 and 1998 six-month periods are not directly comparable becauseof the acquisitions of Bay State and TPC in early 1999.

NiSource also suffered a minor setback on its federal litigationagainst Columbia this week when the U.S. District Court for theDistrict of Delaware denied its motion for expedited discovery. Thecivil suit charges Columbia’s board and management with making”false and misleading” statements that are “intended to unfairlydisparage” any potential merger transaction between the companies.NiSource claims those statements have deprived CG shareholders ofhaving a “meaningful opportunity to consider” the tender offer andseeks a court order allowing it to “depose the investment bankerswho prepared [Columbia’s] analysis as well as a number ofindividual directors who apparently made statements relying onthese calculations,” according to the court. With its motion forexpedited discovery, NiSource was seeking to speed up the process.The court, however, still has not decided Columbia’s motion todismiss the complaint.

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