01—Abstract
Summary
Summary of the 10-K filed February 22, 2017. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. (NI) reported higher 2016 income from continuing operations of $328.1 milliona, or $1.02 per basic share, compared with $198.6 million, or $0.63 per basic share, in 2015.
The increase was driven mainly by higher operating income ($858.2 millionb versus $799.9 million) and the absence of the $97.2 million loss on early extinguishment of long-term debt recorded in 2015 as part of the Separation of Columbia Pipeline Group. Total net revenues rose to $3,102.3 million from $3,008.1 million, while gross revenues declined to $4,492.5 million from $4,651.8 million, reflecting lower gas costs and warmer weather. Gas Distribution Operations and Electric Operations generated substantially all operating income, with segment operating income of $574.0 million and $291.4 million, respectively.
Capital investment remained a central focus. NiSource invested approximately $1.5 billionc in capital expenditures in 2016 and projects $1.6 billion to $1.7 billion for 2017, and it continues to execute on an estimated $30 billion in total projected long-term regulated utility infrastructure investments. Net available liquidity declined to $683.7 million at year-end 2016 from $1,179.4 million a year earlier, as short-term borrowings rose to $1,488.0 million.
Total consolidated indebtedness was $7,909.3 milliond, and the debt-to-capitalization ratio stood at 66%, within the 70% and 75% covenant limits. Net cash from continuing operating activities fell to $804.1 million from $1,163.4 million. The filing also highlights regulatory and environmental risk.
NIPSCO plans to retire the Bailly Generating Station Units 7 and 8 by May 31, 2018, and two units at R.M. Schahfer by the end of 2023, with $22.1 million of plant retirement-related charges recorded in the fourth quarter of 2016.
Management estimates capital compliance costs of approximately $230 million for CCR rules and $170 million for ELG rules. The company also reported a federal NOL carryforward deferred tax asset of $600.9 million, and its quarterly common dividend was declared at $0.175 per share for February 2017.
02—Key points
Key Highlights
- Income from continuing operations rose to $328.1 million ($1.02 per basic share) in 2016, up from $198.6 million ($0.63 per basic share) in 2015.
- Operating income increased to $858.2 million from $799.9 million, led by Gas Distribution Operations ($574.0 million) and Electric Operations ($291.4 million).
- Capital expenditures were about $1.5 billion in 2016 and are projected at $1.6 billion to $1.7 billion for 2017, within an estimated $30 billion long-term infrastructure program.
- Net available liquidity fell to $683.7 million at December 31, 2016 from $1,179.4 million, while short-term borrowings increased to $1,488.0 million.
- Total consolidated indebtedness was $7,909.3 million; the debt-to-capitalization ratio was 66%, below the 70% and 75% covenant maximums.
- NIPSCO plans to retire Bailly Units 7 and 8 by May 31, 2018 and two Schahfer units by 2023, with $22.1 million of retirement-related charges recorded in Q4 2016.
- Net cash from continuing operating activities decreased to $804.1 million from $1,163.4 million, reflecting changes in weather, gas prices and regulatory recovery.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, NiSource kept $0.07.
- Revenue$4.49B100.0%
- Cost of revenue$-00.0%
- Gross profit$4.49B100.0%
- Operating costs−$3.63B80.7%
- Operating income$866.1M19.3%
- Interest, other & tax−$534.6M11.9%
- Net income$331.5M7.4%
Where FY2016 revenue went
$4.49B- Operating costs: $2.24B, 50% of revenue
- Cost of revenue: $1.39B, 31% of revenue
- Net income: $331.5M, 7.4% of revenue
- Interest, other & tax: $534.6M, 12% of revenue
Kept 7.4% as net incomeNet income $331.5M · 7.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 22, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $4.49B$4.65B | −3.4% |
| Cost of Revenue | $1.39B$1.64B | −15.4% |
| Gross Profit | $4.49B$4.65B | −3.4% |
| Operating Expenses | $3.63B$3.85B | −5.9% |
| Operating Income | $866.10M$799.90M | +8.3% |
| Interest Expense | $349.50M$380.20M | −8.1% |
| Net Income | $331.50M$286.50M | +15.7% |
| EPS (Basic) | $1.03$0.90 | +14.4% |
| EPS (Diluted) | $1.02$0.90 | +13.3% |
| Shares Outstanding (Basic) | 321.81M317.75M | +1.3% |
| Shares Outstanding (Diluted) | 323.52M319.84M | +1.2% |
05—Questions
Frequently Asked Questions
Why did NiSource's income from continuing operations increase in 2016?
Income from continuing operations rose to $328.1 million from $198.6 million, driven primarily by higher operating income and the absence of the $97.2 million loss on early extinguishment of long-term debt recorded in 2015 in connection with the Separation. Operating income increased on higher net revenues from rate programs and electric transmission investments, partly offset by higher operating expenses.
How much is NiSource investing in infrastructure?
NiSource invested approximately $1.5 billion in capital expenditures in 2016 and expects to invest about $1.6 billion to $1.7 billion in 2017. It continues to execute on an estimated $30 billion in total projected long-term regulated utility infrastructure investments.
Is NiSource's liquidity and debt position a concern?
Net available liquidity declined to $683.7 million from $1,179.4 million, and short-term borrowings rose to $1,488.0 million, largely from commercial paper. Total consolidated indebtedness was $7,909.3 million, and the debt-to-capitalization ratio was 66%, below the covenant limits of 70% and 75%. Management believes adequate capital is available for 2017 and beyond.
What are the main regulatory and environmental risks?
NIPSCO's 2016 Integrated Resource Plan calls for retiring coal units, which could require significant future capital expenditures and charges to earnings. The filing estimates approximately $230 million of CCR compliance costs and approximately $170 million of ELG compliance costs, with recovery sought from the IURC. Future GHG and CPP rules could also materially affect results.
Will NiSource continue paying dividends?
The Board declared a quarterly common dividend of $0.175 per share on January 27, 2017, payable February 17, 2017. The Board currently intends to continue regular quarterly dividends, but the timing and amount depend on subsidiary earnings, financial condition, cash requirements and regulatory restrictions, and there is no assurance of future payments.
06—Continue