01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. (NI) is an energy holding company whose subsidiaries provide natural gas, electricity and other services to approximately 3.8 million customers along a corridor from the Gulf Coast through the Midwest to New England.
Its three segments are Gas Distribution Operations, Gas Transmission and Storage Operations, and Electric Operations (Northern Indiana). For 2011, the company reported net income of $299.1 milliona, or $1.06 per basic share, compared with $282.6 million, or $1.02 per basic share, in 2010. Income from continuing operations was $303.8 million, or $1.08 per basic share.
Total gross revenues were $6,019.1 millionb and net revenues were $3,462.7 million. Gas Transmission and Storage Operations net revenue growth from new Marcellus-related growth projects was a key driver, offset by higher pension contributions and a $35.5 million environmental expense recorded in the fourth quarter. The balance sheet carries total consolidated indebtedness of $7,953.8 million at December 31, 2011, and the debt-to-capitalization ratio was 61.4% against covenant limits of 70% and 75%.
Credit ratings remain investment grade (BBB- at S&P and Fitch, Baa3 at Moody's), all with stable outlooks. Capital expenditures were $1,125.2 millionc in 2011, and the company projects a 2012 capital program of $1,400.0 million, funded through operating cash flow, equity and short-term debt.
Net cash from operating activities was $870.2 milliond. The company also reported an immaterial correction to prior-period financial statements and noted several open regulatory matters, including Indiana environmental compliance projects and a Pennsylvania NOV.
02—Key points
Key Highlights
- Net income of $299.1 million ($1.06 per basic share) in 2011, up from $282.6 million ($1.02) in 2010.
- Gross revenues of $6,019.1 million and net revenues of $3,462.7 million, with net revenues up $22.2 million year over year.
- Gas Transmission and Storage Operations net revenues rose $56.4 million on new growth projects tied to Marcellus and Utica Shale production.
- Total consolidated indebtedness of $7,953.8 million; debt-to-capitalization ratio of 61.4% versus covenant maximums of 70% and 75%.
- Credit ratings remain investment grade (BBB- S&P/Fitch, Baa3 Moody's) with stable outlooks, though a downgrade would move them below investment grade.
- Capital expenditures of $1,125.2 million in 2011, with a projected 2012 capital program of $1,400.0 million.
- Dividends of $0.92 per share paid in each of 2009, 2010 and 2011; a $0.23 quarterly dividend was declared in January 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, NiSource kept $0.05.
- Revenue$5.75B100.0%
- Cost of revenue−$2.30B40.1%
- Gross profit$3.45B59.9%
- Operating costs−$2.53B44.0%
- Operating income$914.4M15.9%
- Interest, other & tax−$615.3M10.7%
- Net income$299.1M5.2%
Where FY2011 revenue went
$5.75B- Operating costs: $2.53B, 44% of revenue
- Cost of revenue: $2.30B, 40% of revenue
- Net income: $299.1M, 5.2% of revenue
- Interest, other & tax: $615.3M, 11% of revenue
Kept 5.2% as net incomeNet income $299.1M · 5.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $5.75B$6.37B | −9.7% |
| Cost of Revenue | $2.30B$2.96B | −22.3% |
| Gross Profit | $3.45B$3.41B | +1.2% |
| Operating Expenses | $2.55B$2.53B | +0.7% |
| Operating Income | $914.40M$891.80M | +2.5% |
| Interest Expense | $376.80M$392.30M | −4.0% |
| Net Income | $299.10M$282.60M | +5.8% |
| EPS (Basic) | $1.06$1.02 | +3.9% |
| EPS (Diluted) | $1.03$1.01 | +2.0% |
| Shares Outstanding (Basic) | 280.44M277.80M | +1.0% |
| Shares Outstanding (Diluted) | 288.49M280.10M | +3.0% |
05—Questions
Frequently Asked Questions
What drove the increase in NiSource's 2011 income from continuing operations?
The filing cites higher Gas Transmission and Storage net revenues of $56.4 million from new growth projects, a $58.9 million decrease in depreciation and amortization from new Northern Indiana depreciation rates, and a $42.8 million smaller loss on early extinguishment of debt. These were partly offset by a $59.2 million increase in operation and maintenance expense, largely from additional pension contributions, and a higher effective tax rate of 35.0% versus 32.2%.
How much debt does NiSource carry, and is it within covenant limits?
Total consolidated indebtedness was $7,953.8 million at December 31, 2011. Long-term debt excluding amounts due within one year was $6,267.1 million. The debt-to-capitalization ratio was 61.4%, below the 70% covenant under the four-year revolving credit facility and the 75% covenant under the 2005 private placement note agreement.
What are the main risks to NiSource's credit rating and liquidity?
A downgrade by Standard & Poor's, Moody's or Fitch would result in a below-investment-grade rating. The filing says certain affiliate agreements have ratings triggers that would require about $21.0 million in additional collateral, and a downgrade could raise the cost and reduce the availability of capital needed for growth investments.
What is NiSource's outlook for capital spending in 2012?
The company projects a 2012 capital program and certain other investing activities of $1,400.0 million, which is $269.4 million higher than 2011. The increase is mainly for environmental tracker capital for FGD projects in Electric Operations and for integrity management and pipeline replacement at Gas Transmission and Storage. The program is expected to be funded through operating cash flow, equity and short-term debt.
Did NiSource restate its prior financial statements?
NiSource made correcting adjustments to its 2010 and 2009 financial statements and to selected quarterly data for 2011 and 2010. The company stated these corrections were not material individually or in aggregate. For 2010, the correcting adjustments reduced previously reported net income from $292.0 million to $282.6 million.
06—Continue