01—Abstract
Summary
Summary of the 10-K filed February 18, 2015. 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.
For 2014, the company reported income from continuing operations of $530.7 milliona, or $1.68 per basic share, versus $490.9 million, or $1.57 per basic share, in 2013. Net income was $530.0 million, and gross revenues rose to $6,470.6 million from $5,657.3 million, while net revenues were $4,246.4 million, a $404.6 million increase. Growth was driven mainly by Gas Distribution Operations and Columbia Pipeline Group Operations, with capital expenditures of approximately $2.2 billion in 2014 and a projected $2.4 billion for 2015.
The most significant strategic development is the Proposed Separation of the natural gas pipeline business into a stand-alone company, Columbia Pipeline Group, Inc. (CPG), expected in mid-2015 but subject to conditions and not assured. In addition, Columbia Pipeline Partners LP completed an IPO on February 11, 2015, raising $1,170.0 millionb in net proceeds, with NiSource consolidating the partnership while it remains a subsidiary. Total consolidated indebtedness was $9,999.4 million at December 31, 2014, and the debt-to-capitalization ratio was 62%, within the 70% covenant limit.
Key risks cited include leverage, credit rating sensitivity (all ratings remain investment grade, with S&P and Fitch noting a downgrade would fall below investment grade), weather and regulatory rate proceedings, environmental compliance costs, and uncertainty around completing the separation on the contemplated timeline and tax-free terms. The quarterly dividend was $0.26c per share, declared January 30, 2015.
02—Key points
Key Highlights
- Income from continuing operations rose to $530.7 million ($1.68 per basic share) in 2014 from $490.9 million ($1.57 per basic share) in 2013.
- Net revenues increased $404.6 million to $4,246.4 million, led by Gas Distribution Operations (+$197.1 million) and Columbia Pipeline Group Operations (+$167.5 million).
- Proposed Separation of Columbia Pipeline Group, Inc. into a stand-alone public company is expected in mid-2015, subject to conditions and no assurance of completion.
- Columbia Pipeline Partners LP completed its IPO on February 11, 2015, with net proceeds of $1,170.0 million; NiSource retains the general partner and incentive distribution rights.
- Total consolidated indebtedness was $9,999.4 million at December 31, 2014, with a debt-to-capitalization ratio of 62% against a 70% covenant maximum.
- Capital expenditures were approximately $2.2 billion in 2014 and are projected at approximately $2.4 billion for 2015.
- Quarterly common dividend declared at $0.26 per share on January 30, 2015, following $1.02 per share paid in 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, NiSource kept $0.10.
- Revenue$5.27B100.0%
- Cost of revenue−$2.37B45.0%
- Gross profit$2.90B55.0%
- Operating costs−$2.11B40.0%
- Operating income$789.1M15.0%
- Interest, other & tax−$259.1M4.9%
- Net income$530.0M10.1%
Where FY2014 revenue went
$5.27B- Cost of revenue: $2.37B, 45% of revenue
- Operating costs: $2.11B, 40% of revenue
- Net income: $530.0M, 10% of revenue
- Interest, other & tax: $259.1M, 4.9% of revenue
Kept 10% as net incomeNet income $530.0M · 10%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 18, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $5.27B$4.63B | +14.0% |
| Cost of Revenue | $2.37B$1.96B | +20.9% |
| Gross Profit | $2.90B$2.66B | +8.9% |
| Operating Expenses | $2.11B$1.96B | +7.4% |
| Operating Income | $789.10M$698.10M | +13.0% |
| Interest Expense | $379.50M$375.30M | +1.1% |
| Net Income | $530.00M$532.10M | −0.4% |
| EPS (Basic) | $1.68$1.70 | −1.2% |
| EPS (Diluted) | $1.67$1.70 | −1.8% |
| Shares Outstanding (Basic) | 315.12M312.40M | +0.9% |
| Shares Outstanding (Diluted) | 316.64M313.65M | +1.0% |
05—Questions
Frequently Asked Questions
How did NiSource's earnings change in 2014?
Income from continuing operations was $530.7 million, or $1.68 per basic share, compared with $490.9 million, or $1.57 per basic share, in 2013. Net income was $530.0 million, compared with $532.1 million in 2013, which included a $34.9 million gain on disposition of discontinued operations.
What is the Proposed Separation and when is it expected?
NiSource plans to separate its natural gas pipeline and related businesses into a stand-alone public company, Columbia Pipeline Group, Inc. (CPG). NiSource stockholders would retain their NiSource shares and receive a pro rata distribution of CPG shares, expected to be tax-free. It is expected to occur in mid-2015, but the filing states there is no assurance it will be completed in that timeframe or at all.
What are the main credit risks for investors?
NiSource had $9,999.4 million of consolidated indebtedness at year-end 2014. Its ratings are investment grade, but the filing notes that a downgrade by Standard & Poor's or Fitch would result in a below-investment-grade rating. Certain agreements with ratings triggers could require approximately $39.3 million in collateral if ratings fall below specified levels.
How much capital does NiSource plan to invest?
Capital expenditures were approximately $2.2 billion in 2014, and the company projects approximately $2.4 billion for 2015, with the Columbia Pipeline Group Operations segment expected to see the largest increase, at $1,058.7 million in projected 2015 spending.
What did the Columbia Pipeline Partners IPO mean for NiSource?
On February 11, 2015, Columbia Pipeline Partners LP sold 53.8 million common units, representing 53.5% of its outstanding limited partnership interests, and received $1,170.0 million in net proceeds. NiSource, through CPG, retains the general partner, subordinated units and incentive distribution rights, and the partnership's operations will be consolidated while it remains a subsidiary.
06—Continue