01—Abstract
Summary
Summary of the 10-K filed February 20, 2018. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. is an energy holding company whose subsidiaries are fully regulated natural gas and electric utilities serving approximately 3.9 million customers in seven states.
For 2017, total operating revenues were $4,874.6 milliona, up from $4,492.5 million in 2016, and operating income was $910.6 million versus $858.2 million. Income from continuing operations fell to $128.6 million, or $0.39 per diluted share, from $328.1 million, or $1.01 per diluted share, in 2016. The decline was driven primarily by a $161.1 million charge to tax expense from the TCJA and a $111.5 million loss on early extinguishment of long-term debt, partially offset by higher operating income.
The company reports that its Gas Distribution and Electric Operations segments generated substantially all operating income from rate-regulated businesses. Management cites approximately $1.7 billionb of 2017 cash capital expenditures, a planned $1.7 to $1.8 billion for 2018, and an estimated $30 billion in total projected long-term regulated utility infrastructure investments. Net available liquidity was $998.9 million at year-end 2017, and total consolidated indebtedness was $9,002.2 million.
The debt-to-capitalization ratio was 67.6%, below the 70% covenant under the revolving credit facility and the 75% covenant under a 2005 private placement note agreement. Investors should note several items: the TCJA is expected to reduce cash collections from customers and to require pass-backs of approximately $1.5 billionc of excess deferred taxes, NIPSCO's electric generation strategy calls for retiring Bailly Units 7 and 8 by May 31, 2018, and NIPSCO has a pending gas base rate request seeking a revenue increase of $117.9 million with an order expected in the second half of 2018. The Board declared a quarterly dividend of $0.195 per share payable February 20, 2018.
02—Key points
Key Highlights
- Total operating revenues rose to $4,874.6 million in 2017 from $4,492.5 million in 2016, and operating income increased to $910.6 million from $858.2 million.
- Income from continuing operations declined to $128.6 million ($0.39 per basic share) from $328.1 million ($1.02 per basic share), primarily due to a $161.1 million TCJA-related tax charge and a $111.5 million loss on early extinguishment of debt.
- Cash capital expenditures were approximately $1.7 billion in 2017, with $1.7 to $1.8 billion projected for 2018 and an estimated $30 billion in total projected long-term regulated utility infrastructure investments.
- Net available liquidity was $998.9 million at December 31, 2017, up from $683.7 million a year earlier, and the debt-to-capitalization ratio was 67.6%, versus covenant maximums of 70% and 75%.
- Approximately $1.5 billion of excess deferred taxes related to the TCJA are recorded as noncurrent regulatory liabilities and are expected to be passed back to customers over time.
- NIPSCO plans to retire Bailly Generating Station Units 7 and 8 by May 31, 2018, and the company expects to retire 50 percent of its coal-fired generating fleet by the end of 2023.
- Quarterly common dividends totaled $0.70 per share in 2017, and the Board declared a $0.195 quarterly dividend in January 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, NiSource kept $0.03.
- Revenue$4.87B100.0%
- Cost of revenue$-00.0%
- Gross profit$4.87B100.0%
- Operating costs−$3.95B81.1%
- Operating income$921.2M18.9%
- Interest, other & tax−$792.7M16.3%
- Net income$128.5M2.6%
Where FY2017 revenue went
$4.87B- Operating costs: $2.43B, 50% of revenue
- Cost of revenue: $1.52B, 31% of revenue
- Interest, other & tax: $792.7M, 16% of revenue
- Net income: $128.5M, 2.6% of revenue
Kept 2.6% as net incomeNet income $128.5M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 20, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $4.87B$4.49B | +8.5% |
| Cost of Revenue | $1.52B$1.39B | +9.2% |
| Gross Profit | $4.87B$4.49B | +8.5% |
| Operating Expenses | $3.95B$3.63B | +9.0% |
| Operating Income | $921.20M$866.10M | +6.4% |
| Interest Expense | $353.20M$349.50M | +1.1% |
| Net Income | $128.50M$331.50M | −61.2% |
| EPS (Basic) | $0.39$1.03 | −62.1% |
| EPS (Diluted) | $0.39$1.02 | −61.8% |
| Shares Outstanding (Basic) | 329.39M321.81M | +2.4% |
| Shares Outstanding (Diluted) | 330.76M323.52M | +2.2% |
05—Questions
Frequently Asked Questions
Why did income from continuing operations fall in 2017 despite higher operating income?
Income from continuing operations was $128.6 million in 2017 versus $328.1 million in 2016. The filing attributes the decline primarily to a $161.1 million charge to tax expense from implementing the TCJA and a $111.5 million loss on early extinguishment of long-term debt, partially offset by increased operating income of $52.4 million.
How does the TCJA affect NiSource's cash flows and rates?
The filing states that the lower federal corporate tax rate is expected to reduce amounts billed to customers through rates, resulting in lower cash collections from operating activities. Approximately $1.5 billion of excess deferred taxes must be passed back to customers, with the pass-back period for part of the balance to be determined by state commissions. The company is still working to estimate the revenue impact.
What is NiSource's capital investment plan?
NiSource invested approximately $1.7 billion in cash capital expenditures in 2017 and expects to invest $1.7 to $1.8 billion in 2018. The company continues to execute on an estimated $30 billion in total projected long-term regulated utility infrastructure investments, focused on modernization, safety, reliability and electric transmission.
What is the status of NiSource's debt and credit ratings?
Total consolidated indebtedness was $9,002.2 million at December 31, 2017, and the debt-to-capitalization ratio was 67.6%. Ratings were stable at the end of 2017, with NiSource rated BBB+ by S&P, Baa2 by Moody's and BBB by Fitch. Certain subsidiary agreements contain ratings triggers that would require approximately $46.1 million of additional collateral if ratings fell below investment grade.
What regulatory actions are pending that could affect future earnings?
NIPSCO's gas base rate case, which seeks an annual revenue increase of $117.9 million including tax reform impacts, is pending with an order expected in the second half of 2018. Columbia of Massachusetts' 2018 GSEP filing awaits a Massachusetts DPU order expected in the second quarter of 2018, and NIPSCO's Bailly Units 7 and 8 retirement is scheduled for completion by May 31, 2018.
06—Continue