01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. is an energy holding company whose subsidiaries provide natural gas, electricity and other products and services to approximately 3.8 million customers in a corridor running from the Gulf Coast through the Midwest to New England.
For 2009, the company reported gross revenues of $6,649.4 milliona (down from $8,879.0 million in 2008), net revenues of $3,331.4 million (up from $3,245.7 million), and income from continuing operations of $231.2 million, or $0.84 per basic share, versus $370.6 million, or $1.35 per share, in 2008. Net income was $217.7 million, or $0.79 per basic share, compared with $79.0 million in 2008. The 2009 decline in continuing income was driven mainly by a $102.3 million increase in employee and administrative expenses (including $84.8 million of higher pension expense), higher depreciation and interest expense, and a $41.0 million drop in Electric Operations net revenues, partly offset by higher Gas Distribution and Gas Transmission and Storage net revenues.
The filing highlights a heavy reliance on debt and a sizable litigation settlement. Total consolidated indebtedness was $6,787.4 millionb at December 31, 2009, and the debt-to-capitalization ratio was 58.3% against covenant maximums of 70% and 75%. The company's share of the Tawney royalty litigation settlement is up to $338.8 million, of which $277.3 million had been contributed to the settlement fund.
Liquidity improved in 2009 through a $295.7 millionc federal and state tax refund receivable, of which $263.5 million was received in October 2009, along with new long-term debt issuances. Pension plans were underfunded by $674.5 million and other postretirement plans by $444.7 million at year-end. Capital expenditures were $777.2 million in 2009, with projected 2010 capital spending of $900.4 million.
Credit ratings remain investment grade (BBB- at S&P and Fitch, Baa3 at Moody's). Management is scaling back unregulated natural gas marketing to focus on core rate-regulated businesses, which the filing says generate virtually 100%d of operating income. Several pending rate proceedings, including the Northern Indiana electric base rate case expected to be resolved in the first half of 2010, could affect future results.
02—Key points
Key Highlights
- Gross revenues fell to $6,649.4 million in 2009 from $8,879.0 million in 2008, while net revenues rose to $3,331.4 million from $3,245.7 million.
- Income from continuing operations was $231.2 million ($0.84 per basic share) versus $370.6 million ($1.35 per share) in 2008; net income was $217.7 million ($0.79 per share) versus $79.0 million.
- Total consolidated indebtedness was $6,787.4 million at December 31, 2009; the debt-to-capitalization ratio was 58.3% against covenant limits of 70% and 75%.
- NiSource's share of the Tawney royalty litigation settlement is up to $338.8 million, with $277.3 million contributed to the settlement fund as of December 31, 2009.
- A $295.7 million income tax receivable from a change in tax accounting method supported liquidity, with $263.5 million received in October 2009 and the balance expected by the end of the second quarter of 2010.
- Pension and other postretirement plans were underfunded by $674.5 million and $444.7 million, respectively, and 2010 contributions are expected to be about $161.0 million and $49.1 million.
- 2010 capital expenditures are projected at $900.4 million, up from $798.6 million in 2009, mainly for infrastructure replacement programs; the company is scaling back unregulated natural gas marketing to focus on core regulated businesses.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, NiSource kept $0.03.
- Revenue$6.65B100.0%
- Cost of revenue−$3.32B49.9%
- Gross profit$3.33B50.1%
- Operating costs−$2.53B38.1%
- Operating income$800.0M12.0%
- Interest, other & tax−$583.0M8.8%
- Net income$217.0M3.3%
Where FY2009 revenue went
$6.65B- Cost of revenue: $3.32B, 50% of revenue
- Operating costs: $2.53B, 38% of revenue
- Net income: $217.0M, 3.3% of revenue
- Interest, other & tax: $583.0M, 8.8% of revenue
Kept 3.3% as net incomeNet income $217.0M · 3.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $6.65B$8.88B | −25.1% |
| Cost of Revenue | $3.32B— | — |
| Gross Profit | $3.33B$3.25B | +2.7% |
| Operating Expenses | $2.55B$2.34B | +8.9% |
| Operating Income | $800.00M$919.00M | −12.9% |
| Interest Expense | $399.30M$380.00M | +5.1% |
| Net Income | $217.00M$79.00M | +174.7% |
| EPS (Basic) | $0.79$0.29 | +172.4% |
| EPS (Diluted) | $0.78$0.29 | +169.0% |
| Shares Outstanding (Basic) | 275.10M274.00M | +0.4% |
| Shares Outstanding (Diluted) | 275.80M275.40M | +0.1% |
05—Questions
Frequently Asked Questions
Why did income from continuing operations decline in 2009?
The filing attributes the decline mainly to a $102.3 million increase in employee and administrative expenses, including $84.8 million of higher pension expense, $22.0 million of higher depreciation, $19.3 million of higher interest expense and $41.0 million lower Electric Operations net revenues. These were partly offset by a $66.7 million increase in Gas Distribution Operations net revenues and a $65.4 million increase in Gas Transmission and Storage Operations net revenues.
How much debt does NiSource carry and is it within covenant limits?
Total consolidated indebtedness was $6,787.4 million at December 31, 2009. The debt-to-capitalization ratio was 58.3%, below the 70% covenant under the five-year revolving credit facility and the 75% covenant in the 2005 private placement. A downgrade below investment grade could increase collateral requirements and borrowing costs.
What is the status of the Tawney litigation?
A West Virginia Circuit Court approved a $380 million settlement, and NiSource's share of the settlement liability is up to $338.8 million. As of December 31, 2009, NiSource had contributed $277.3 million to the qualified settlement fund and $61.5 million of the maximum liability remained unpaid; the company has since contributed an additional $18.0 million, and the remaining letter of credit balance is sufficient to cover further payments.
What are the company's main growth plans?
NiSource's four-part platform emphasizes commercial and regulatory initiatives and growth in its gas transmission and storage business. Key projects include the Millennium Pipeline (capacity up to 525,400 Dth per day), the Majorsville, PA project (about $80 million, expected in service by the end of the third quarter of 2010), and the Cobb Compressor Station expansion (expected in service by May 2010). Gas Transmission and Storage Operations advanced more than $125 million of Marcellus Shale-related growth projects in 2009.
06—Continue