01—Abstract
Summary
Summary of the 10-K filed February 19, 2013. 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 in a corridor running 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. For 2012, income from continuing operations was $410.6 milliona, or $1.41 per basic share, up from $294.8 million, or $1.05 per basic share in 2011. Net income was $416.1 million, and total net revenues were $3,519.7 million, a $90.8 million increase over 2011.
Net revenue growth came mainly from Electric Operations (up $130.0 millionb after the electric rate case), partly offset by lower Gas Distribution net revenues ($53.6 million lower) and lower Gas Transmission and Storage net revenues ($5.2 million lower), the latter reflecting an $81.7 million Columbia Transmission customer settlement. The balance sheet carried total consolidated indebtedness of $8,103.2 million at December 31, 2012, and the debt-to-capitalization ratio was 59.3% against covenant maximums of 70% and 75%. Net cash from operating activities was $1,275.5 million.
Capital expenditures were $1,585.1 millionc in 2012, and management projects $1,813.1 million for 2013, led by Gas Transmission and Storage growth projects in the Marcellus and Utica shale areas and the Columbia Transmission modernization program of about $1.5 billion over five years. The company reported net available liquidity of approximately $974.4 million at year-end. Pension plans were underfunded by $631.0 million and other postretirement plans by $462.5 million.
Credit ratings remained investment grade: BBB- from Fitch and S&P, and Baa3 from Moody's, all with stable outlooks. The regular quarterly common dividend was raised in 2012 from $0.92 to $0.96d annualized, and a $0.24 quarterly dividend was declared in January 2013.
02—Key points
Key Highlights
- Income from continuing operations rose to $410.6 million ($1.41 per basic share) in 2012, from $294.8 million ($1.05) in 2011.
- Total net revenues were $3,519.7 million, up $90.8 million; Electric Operations net revenues rose $130.0 million on the electric rate case.
- Columbia Transmission customer settlement reduced Gas Transmission and Storage net revenues by $81.7 million, with a $50.0 million customer refund and FERC approval on January 24, 2013.
- Total consolidated indebtedness was $8,103.2 million; the debt-to-capitalization ratio was 59.3% versus covenant limits of 70% and 75%.
- Capital expenditures were $1,585.1 million in 2012, with $1,813.1 million projected for 2013, mainly for Gas Transmission and Storage growth and modernization.
- Pension and other postretirement plans were underfunded by $631.0 million and $462.5 million, respectively, at December 31, 2012.
- Dividends declared per share increased to $0.94 in 2012 from $0.92 in 2011, and the quarterly dividend was raised to $0.24 in January 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, NiSource kept $0.08.
- Revenue$5.03B100.0%
- Cost of revenue−$1.52B30.2%
- Gross profit$3.51B69.8%
- Operating costs−$2.47B49.2%
- Operating income$1.04B20.7%
- Interest, other & tax−$624.0M12.4%
- Net income$416.1M8.3%
Where FY2012 revenue went
$5.03B- Operating costs: $2.47B, 49% of revenue
- Cost of revenue: $1.52B, 30% of revenue
- Interest, other & tax: $624.0M, 12% of revenue
- Net income: $416.1M, 8.3% of revenue
Kept 8.3% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 19, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $5.03B$5.75B | −12.5% |
| Cost of Revenue | $1.52B$2.30B | −34.1% |
| Gross Profit | $3.51B$3.45B | +1.9% |
| Operating Expenses | $2.51B$2.55B | −1.6% |
| Operating Income | $1.04B$914.40M | +13.7% |
| Interest Expense | $418.30M$376.80M | +11.0% |
| Net Income | $416.10M$299.10M | +39.1% |
| EPS (Basic) | $1.43$1.06 | +34.9% |
| EPS (Diluted) | $1.39$1.03 | +35.0% |
| Shares Outstanding (Basic) | 291.93M280.44M | +4.1% |
| Shares Outstanding (Diluted) | 300.40M288.49M | +4.1% |
05—Questions
Frequently Asked Questions
How did NiSource's earnings change in 2012?
Income from continuing operations was $410.6 million, or $1.41 per basic share, compared with $294.8 million, or $1.05 per basic share, in 2011. Net income was $416.1 million, or $1.43 per basic share, including $5.5 million from discontinued operations. The increase was driven mainly by higher Electric Operations net revenues, lower loss on early extinguishment of debt ($53.9 million in 2011 with none in 2012), and higher equity earnings from Millennium, partly offset by $41.5 million of higher interest expense.
What is the outlook for capital spending and growth projects?
NiSource projects a 2013 capital program of $1,813.1 million, $228.0 million above 2012. Gas Transmission and Storage is planned at $697.6 million, including Marcellus and Utica shale growth projects such as Big Pine (about $160 million, expected in service by April 2013), West Side Expansion (about $200 million, expected by Q4 2014) and East Side Expansion (about $210 million, expected mid-2015). Columbia Transmission expects to invest approximately $1.5 billion over five years in its modernization program.
What are the main financial risks highlighted in the filing?
The filing cites total indebtedness of $8,103.2 million and the potential for a credit downgrade to raise borrowing costs and collateral requirements. Ratings-triggered agreements would require about $27.8 million of collateral on a downgrade below trigger levels. Other risks include reliance on regulatory rate recovery, weather sensitivity, commodity price exposure, and pension funding requirements, given underfunded pension and postretirement plans of $631.0 million and $462.5 million.
What legal and environmental matters are disclosed?
Columbia Transmission faces a PADEP Notice of Violation from April 2009 related to the Majorsville Operations Center, with a proposed settlement demand of $1 million, and the company cannot estimate the likelihood or cost of potential penalties. Two EPA Administrative Complaints issued June 29, 2012 carry an estimated penalty of $75,000, with a settlement expected in 2013. NiSource's environmental reserves were approximately $160.6 million at year-end 2012.
06—Continue