NiSource (NI)

Q4 2011 Earnings Call

February 01, 2012 9:00 am ET


Glen L. Kettering - Senior Vice President of Corporate Affairs

Robert C. Skaggs - Chief Executive Officer, President and Director

Stephen P. Smith - Chief Financial Officer and Executive Vice President


Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Stephen J. Maresca - Morgan Stanley, Research Division

Ashar Khan

Faisel Khan - Citigroup Inc, Research Division

Carl L. Kirst - BMO Capital Markets U.S.

Yves Siegel - Crédit Suisse AG, Research Division

James L. Dobson - Wunderlich Securities Inc., Research Division

Andrew Levi - Caris & Company, Inc., Research Division

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Bryan Joseph Spratt - Miller Howard Investments, Inc.

Josh Golden



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 NiSource Earnings Conference Call. My name is Carissa, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the presentation over to your host for today's conference, Mr. Glen Kettering, Senior Vice President of Corporate Affairs. Please proceed.

Glen L. Kettering

Thank you, Carissa, and good morning, everyone. On behalf of NiSource, I'd like to welcome you to our quarterly analyst call. Joining me this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hulen, Managing Director of Investor Relations.

As you know, the focus of today's call is to review our financial performance for the fourth quarter and full year of 2011 and to provide a business update. We'll then open the call to your questions.

At times during the call, we'll refer to the supplemental slides available on our website at I'd like to remind all of you that some of the statements made on this conference call will be forward-looking.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings.

And now, I'd like to turn the call over to Bob Skaggs.

Robert C. Skaggs

Thanks, Glen. Good morning, and thanks for joining us. For today's agenda, we'll review a few 2011 highlights that demonstrate the continued strength of NiSource's business strategy and our commitment to building shareholder value. We'll then spend some time discussing each of our 3 business units' performance. And before opening the line to your questions, we'll discuss our 2012 financial outlook and our strategic priorities.

Starting on Slide 3 in the supplemental deck, as we noted in this morning's earnings release, for NiSource, 2011 was a year of significant achievement, groundbreaking performance and industry-leading growth in delivering shareholder value. For the fifth year in a row, the NiSource team met its financial commitments. Specifically, in 2011, we delivered earnings of $1.35 per share non-GAAP at the top of our guidance range for the year and, I would add, right on top of the consensus estimate for the year.

We also delivered 40% total shareholder return, significantly outperforming the broader market in utility indices for the third consecutive year. In fact, NiSource's 2011 performance ranked first among all companies in the Dow Jones Utility Index.

Driving this consistent increase in value is our balanced strategy of executing on stakeholder-focused commercial and regulatory initiatives, paired with disciplined and accretive capital investments.

In 2011, those capital investments exceeded $1.1 billion. In a few moments, I'll provide a high-level overview of our $1.4 billion 2012 capital program. This record-high program is a testament to our deep inventory of investment opportunities across each of our core business units and our solid financial foundation. I would suggest that the primary takeaway for 2011 is that the NiSource team has once again demonstrated its commitment, focus and solid execution, which has positioned us to step up our game a notch or 2 in 2012 as we continue to create value for our customers, investors and other key stakeholders.

With that backdrop, let's now take a closer look at our 2011 results, starting with our financial highlights on Slide 4.

As you can see, we delivered 2011 net operating earnings non-GAAP of about $378 million or $1.35 per share, compared to $1.22 per share in 2010. And our operating earnings for the year increased from about $915 million in 2010 to over $961 million. As I suggested earlier, these results reflect the core strength of our business plan, the focus of our team as well as continued signs of resilience in some of our key markets.

On a GAAP basis, our net operating earnings per share for the year were $1.08. As noted on Schedules 1 and 2 to our earnings release, the most significant GAAP to non-GAAP reconciling item was the $54 million call premium on our successful $250 million debt tender offer, which was completed in the fourth quarter.

Turning to our individual business unit results, let's start in Indiana with our electric business as summarized on Slide 5. For the year, NIPSCO electric reported operating earnings of $203 million compared to $217 million in 2010. Revenues were down about $0.5 million primarily due to decreased residential and commercial margins and lower environmental cost recovery. Operating expenses were up about $13 million primarily due to higher employee and administrative expenses and outside service costs.

By far, the most significant highlight for the year was the settlement of NIPSCO's landmark electric rate case and the approval of that settlement by the Indiana Utility Regulatory Commission, or IURC, in December.

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