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NiSource Reports 2009 Earnings

MERRILLVILLE, Ind., Feb. 1 /PRNewswire-FirstCall/ --

  • Earnings results in line with guidance
  • Liquidity position strengthened
  • Financing needs addressed through 2011
  • Core business initiatives advance
  • 2010 earnings guidance of $1.10-$1.20 per share

NiSource Inc. (NYSE: NI) today announced net operating earnings (non-GAAP) of $295.3 million, or $1.07 per share, for the twelve months ended Dec. 31, 2009, compared to net operating earnings of $349.4 million, or $1.28 per share for 2008. NiSource's consolidated operating earnings (non-GAAP) for the twelve months ended Dec. 31, 2009 were $881.0 million, compared to $918.6 million in 2008.

On a GAAP basis, NiSource reported income from continuing operations for the twelve months ended Dec. 31, 2009, of $231.2 million, or $0.84 per share, compared with $370.6 million, or $1.35 per share in 2008. Operating income was $801.9 million for 2009 versus $918.7 million in the year-ago period. Schedules 1 and 2 of this news release contain a reconciliation of net operating earnings and operating earnings to GAAP.

For the three months ended Dec. 31, 2009, net operating earnings were $98.9 million (non-GAAP), or $0.35 per share, compared with $126.2 million, or $0.46 per share, for the same period in 2008. On a GAAP basis, income from continuing operations for the three months ended Dec. 31, 2009 was $88.5 million, or $0.32 per share, compared with $127.5 million, or $0.46 per share for the fourth quarter of 2008.

Notably, as reflected in the attached financial statements, year-over-year cash flows from operating activities increased by more than $1 billion. In addition, short-term borrowings at year end 2009 were more than $1 billion lower than at year end 2008.

"Our team's exceptional execution enabled NiSource to not only weather the storm during 2009, but to emerge as a stronger, more robust company," NiSource President and Chief Executive Officer Robert C. Skaggs, Jr. said. "Despite unprecedented dislocations in the financial markets and a very challenging economic environment - particularly in our Northern Indiana markets - our company's underlying business performance remained strong, our liquidity position improved significantly, and we produced tangible results from our core strategy to build shareholder value and deliver long-term, sustainable earnings growth.

The company noted that its net operating earnings for 2009 (non-GAAP) were solidly in line with the company's guidance range of $1.00 to $1.10 per share announced early last year. The results reflect increased net revenues in NiSource's Gas Distribution and Gas Transmission & Storage businesses, as well as the effects of open market debt repurchases and lower short-term interest rates. As anticipated, these improvements were more than offset by previously disclosed increased pension expense, reduced electric demand resulting from the economic downturn, and incremental interest expense related to the issuance of long-term debt under the company's liquidity plan.

Revenue improvements help offset economic impacts

Compared with 2008, NiSource's 2009 results reflected approximately $69.9 million in additional net revenues (excluding regulatory trackers) at NiSource's Gas Distribution unit, primarily attributable to regulatory initiatives. NiSource's Gas Transmission & Storage unit also delivered $56.2 million in increased net revenues (excluding regulatory trackers) resulting from growth projects, short-term transportation and storage services, and mineral rights leasing. These improvements helped to lessen impacts from the economic recession, which resulted in reduced industrial electric demand of approximately 17 percent compared to 2008 levels.

"Through our revenue growth initiatives, as well as aggressive cost management efforts across all our businesses, we mitigated a significant portion of the impacts of the economic recession," Skaggs said. "Our ability to deliver on our financial commitments in the face of a tough economy underscores the resilience of our core regulated businesses and is a testament to the team's disciplined execution of their business plans."

Financing needs addressed through 2011, investment-grade ratings affirmed

NiSource's financing and liquidity position continued to improve during the fourth quarter of 2009, as the company's finance subsidiary, NiSource Finance Corp., issued $500 million of senior unsecured notes on Dec. 4, 2009. Proceeds from the issuance will be used by NiSource to complete the refinancing of outstanding long-term debt scheduled to mature in 2010 and 2011. The company continues to maintain its $1.5 billion revolving credit facility that extends to July 2011.

NiSource's December debt issuance followed a decision by Moody's Investors Service to affirm the company's investment grade credit rating of Baa3 and raise its outlook to stable. Moody's cited the successful resolution of a variety of rate proceedings by NiSource's gas utilities and the management of the company's liquidity position as major influencing factors for raising NiSource's outlook to stable.

"We are pleased Moody's recognized the progress we have made in strengthening our liquidity position and advancing an aggressive business agenda," Skaggs said.

"As we entered 2009, we emphasized that maintaining adequate liquidity and managing our upcoming debt maturities were key near-term priorities for NiSource, and we outlined an aggressive and comprehensive plan to effectively address those challenges. Throughout the year, our business units and our finance team did an outstanding job of executing the plan - capital expenditure levels were recalibrated, operating expenses and working capital were managed aggressively, and debt refinancings of approximately $2 billion were completed. As a result of those and other efforts, NiSource entered 2010 with a significantly stronger liquidity profile, and with its long-term financing needs addressed through 2011."

Core business initiatives advance

During the fourth quarter, NiSource continued to advance core elements of its long-term business strategy, centering on expansion and commercial growth in its Gas Transmission and Storage business, regulatory and commercial initiatives at its utilities, and strong financial process and expense management across the corporation.

As noted above, NiSource's Gas Distribution Operations continued to deliver strong results during 2009 from a strategy of aligning infrastructure replacement and enhancement programs with a variety of regulatory and rate design initiatives. Highlights include:

  • Bay State Gas Co. received a favorable base rate case order from the Massachusetts Department of Public Utilities (DPU) on Oct. 30, 2009, authorizing an increase in annual base revenues of approximately $19 million, or 3.7 percent. The DPU also approved Bay State's revenue decoupling mechanism - the first of its kind in Massachusetts - as well as its proposed tracking mechanism to recover costs associated with the company's infrastructure replacement program.
  • Columbia Gas of Kentucky received Public Service Commission approval of a unanimous rate case settlement. The settlement provided for an overall annual increase in revenues of approximately $6 million, or 3.7 percent, while authorizing an increase to the monthly customer charge, the implementation of an accelerated main replacement program tracker, and the introduction of a residential energy efficiency program.
  • Columbia Gas of Virginia received Virginia State Corporation Commission approval of its Conservation and Ratemaking Efficiency (CARE) Plan for a three-year period (2010-2012). In addition to providing incentives for residential and small general services customers to actively pursue energy conservation measures, the CARE Plan establishes a decoupled rate mechanism. The plan became effective in January of this year.
  • Looking into 2010, Columbia Gas of Pennsylvania filed a base rate increase request on Jan. 28, with the Pennsylvania Public Utility Commission. In addition to proposing a new set of residential home energy efficiency programs and the implementation of a more progressive rate design, the company is seeking an increase in its base rates of approximately $32 million annually. New rates are expected to be placed into effect in the fourth quarter of 2010.
  • Northern Indiana Public Service Company (NIPSCO) also plans to file a natural gas rate case - the company's first since 1987 - as early as March of this year, with new rates anticipated to be effective in late 2010.

"Our gas distribution teams continue to build on their excellent track record of execution," Skaggs noted. "This ongoing progress is a testament to our commitment to building creative and collaborative regulatory and infrastructure investment solutions that benefit customers and ensure a safe and reliable distribution system."

NiSource's Gas Transmission & Storage (NGT&S) Operations continue to capture growth opportunities leveraging NiSource's strategically positioned pipeline and storage assets. A number of NGT&S' new growth projects are designed to support increasing Marcellus Shale production, while the company also has continued to grow and adapt its system to provide critical transportation and storage services to markets across its high-demand service territory. Some examples include:

  • In April, storage gas injections began for the Ohio Storage Expansion Project, which increases NGT&S market-area storage capacity by 6.7 billion cubic feet and enhances delivery from two Ohio storage fields. In March, the Federal Energy Regulatory Commission (FERC) issued a certificate authorizing market-based rates for the project - the first time Columbia Gas Transmission has received such authority in connection with the expansion of an existing, traditionally cost-based, storage facility.
  • In August, NGT&S placed in service its Appalachian Expansion Project, which leverages the company's existing infrastructure to provide approximately 100,000 dekatherms per day of new transportation to three key Appalachian producers.
  • Including the Appalachian Expansion Project, NGT&S advanced growth projects representing more than $155 million in investment in the Marcellus Shale region during 2009, with potential to provide market access for approximately 700,000 dekatherms per day of new natural gas supplies.

"With our strategic NGT&S footprint, our system capabilities and our disciplined expansion investment strategy, NiSource is capitalizing on the unprecedented producer investment in the Marcellus region, as well as additional new storage and transportation business opportunities across our system," Skaggs said.

NiSource's Electric Operations also continued to make progress on an aggressive regulatory and business agenda, despite pressures caused by the economic downturn.

  • NIPSCO took steps during 2009 to advance a number of key initiatives designed to improve operating reliability and customer service, and to establish a platform for long-term earnings growth.
  • During 2009, NIPSCO teams continued to advance the company's 2008 electric rate case. Parties to the case completed the briefing process last month, and the Indiana Utility Regulatory Commission (IURC) is expected to issue an order in the case during the first half of this year.
  • As previously announced, NIPSCO intends to file a subsequent electric base rate case during 2010. The filing will include the effect of increased pension expense, as well as demand levels based on more recent operating experience, among other items. New rates from this case are expected to be effective in 2011.

"Without question, 2009 was a challenging year for NIPSCO," Skaggs noted. "The company's earnings were impacted by a significant increase in pension expense, as well as materially lower industrial demand as a result of the economic recession. Looking forward, we have a solid regulatory and business plan for 2010 to restore NIPSCO's earnings base and position it to grow in the future. Executing that plan is a key priority for NiSource this year."

Strategic focus continues in 2010

Looking forward to 2010, Skaggs said NiSource will continue to aggressively focus on its core business strategy of synchronizing infrastructure investment with appropriate regulatory and commercial activities.

"Our key business priorities for this year are to advance the next wave of Marcellus Shale growth projects in our NGT&S business, continue to execute our infrastructure replacement programs and related regulatory initiatives in the Gas Distribution segment, and complete the NIPSCO repositioning process," Skaggs said.

In terms of financial performance, Skaggs said NiSource expects its earnings to grow by 3 to 5 percent on a long-term basis. For 2010, net operating earnings (non-GAAP) are projected to fall within a range of $1.10 to $1.20 per share. There will likely be differences between net operating earnings and GAAP earnings for matters including, but not limited to, weather, restructuring costs and accounting changes. NiSource is not able to estimate the impact of such items on GAAP earnings and, as such, is not providing earnings guidance on a GAAP basis.

Skaggs said that the company's outlook assumes a gradual and modest pace of economic recovery across the markets served by its utilities, continuing the trend experienced during the latter half of 2009. He also indicated that, in light of NiSource's improved liquidity position and its deep inventory of investment opportunities, the company is projecting a capital expenditure level of approximately $900 million for 2010, an increase of approximately $100 million, or 12.5 percent, over its 2009 program.

"Although the landscape we face today is much more stable, and less treacherous, than the one we encountered a year ago, 2010 will present its share of challenges," Skaggs said. "As we face those challenges and continue the basic work of building and growing NiSource, I am convinced we do so as a stronger company - one with a business plan that is compelling, balanced and tested."

Full Year 2009 Operating Earnings - Segment Results (non-GAAP)

NiSource's consolidated operating earnings (non-GAAP) for the year ended Dec. 31, 2009, were $881.0 million, compared to $918.6 million in 2008. Refer to Schedule 2 for the items included in 2009 and 2008 GAAP operating income but excluded from operating earnings.

Operating earnings for NiSource's business segments for the full year ended Dec. 31, 2009 are discussed below.

Gas Distribution Operations reported operating earnings of $329.3 million, slightly above $328.2 million of operating earnings in 2008. As noted above, net revenues, excluding the impact of regulatory and tax trackers, increased $69.9 million, primarily attributable to regulatory and service programs including impacts from rate cases at various utilities, partially offset by decreased customer usage and lower off-system sales revenues.

Operating expenses, excluding trackers, were $68.8 million higher than the comparable period, reflecting higher employee and administrative costs, depreciation costs and uncollectible accounts. The higher employee and administrative costs were primarily due to increases in pension expense of $31.8 million, net of the deferral of pension costs for Columbia Gas of Ohio.

Gas Transmission and Storage Operations reported operating earnings of $408.8 million versus operating earnings of $376.7 million in 2008. The increase resulted primarily from increased net revenues of $56.2 million, excluding regulatory trackers, primarily attributable to increases in firm capacity reservation fees from growth projects such as the Eastern Market Expansion and the Ohio Storage Expansion, as well as for new Appalachian supply contracts, increases in shorter term transportation and storage services, and mineral rights leasing revenues.

Equity earnings increased by $3.7 million primarily resulting from increased earnings from Millennium Pipeline in its first full year of service, despite an $8.1 million reduction in equity earnings resulting from interest rate hedges related to Millennium's decision to delay permanent financing until 2010.

Operating expenses increased by $27.8 million, excluding trackers, due to higher capacity lease costs, employee and administrative costs, outside services, maintenance costs, and environmental expenses. In addition, 2008 operating expenses were favorably impacted by the reduction of legal reserves.

Electric Operations reported operating earnings of $162.4 million for 2009, compared with $220.2 million in 2008. Lower net revenues and higher operating expenses both contributed to the lower operating earnings. Excluding regulatory trackers, net revenue decreased by $17.1 million primarily from lower industrial usage, off-system sales, emission allowance sales and Sugar Creek revenues from capacity sales into the PJM Interconnection, partially offset by lower non-recoverable purchased power costs.

Operating expenses increased by $40.7 million, excluding trackers, due primarily to higher pension expense of $42.6 million, other employee and administrative costs, and higher electric generation and maintenance expenses, partially offset by lower property taxes, environmental expenses and depreciation. The decrease in depreciation expense is due primarily to the impact of an $8.3 million adjustment recorded by NIPSCO during the second quarter of 2008.

Other Operations reported an operating earnings loss of $4.6 million for 2009 compared to operating earnings of $1.6 million for 2008. Last year's operating earnings results include earnings from the unregulated natural gas marketing business. Operating earnings this year no longer include results from that business. See discussion below under Discontinued Operations (GAAP). Other Operation's operating earnings for 2009 include results from the NiSource Development companies such as low income housing properties and Lake Erie Land, NiSource Energy Technology, Primary Energy, and Columbia Network Services.

Other Items

Interest expense increased by $24.1 million due to incremental interest expense associated with the issuance of $700 million of long-term debt in May of 2008, $600 million of long-term debt in March of 2009 and the $385 million two-year term loan issued in April of 2009, partially offset by the open market debt repurchase of $100 million in January 2009, the $250.6 million tender offer debt repurchase in April 2009 and lower short-term interest rates. Other-net was a loss of $1.4 million in 2009 compared to income of $0.9 million for 2008 as a result of lower interest income. The effective tax rate of net operating earnings was 38.6 percent compared to 35.8 percent for the same period last year. The tax rate is higher in 2009 versus last year due to deferred income tax adjustments related primarily to state income tax apportionment changes and an increase in tax expense related to AFUDC equity.

Fourth Quarter 2009 Operating Earnings - Segment Results (non-GAAP)

NiSource's consolidated fourth-quarter 2009 operating earnings (non-GAAP) were $258.5 million, compared to $297.9 million for the same period in 2008. Refer to Schedule 2 for the items included in 2009 and 2008 GAAP operating income but excluded from operating earnings.

Operating earnings for NiSource's business segments for the fourth quarter ended Dec. 31, 2009, are discussed below.

Gas Distribution Operations reported operating earnings of $114.5 million versus operating earnings of $134.6 million in the fourth quarter of 2008. Net revenues, excluding the impact of regulatory and tax trackers, increased $3.9 million, primarily attributable to regulatory and service programs including impacts from rate cases at various utilities, partially offset by lower customer usage.

Operating expenses, excluding trackers, were $24.0 million higher than the comparable period, reflecting an increase in employee and administrative costs, which includes higher pension expense, along with higher uncollectible receivables and higher depreciation costs. After deferring pension costs for Columbia Gas of Ohio, pension expense increased $7.9 million for Gas Distribution Operations for the quarter.

Gas Transmission and Storage Operations reported operating earnings of $116.6 million, essentially flat with operating earnings of $116.5 million in the fourth quarter of 2008. Net revenues, excluding the impact of regulatory and tax trackers, increased $19.2 million, primarily attributable to increases in firm capacity reservation fees for growth projects including the Eastern Market Expansion and the Ohio Storage Expansion, as well as for new Appalachian supply contracts, and increased shorter term transportation and storage services.

Equity earnings increased by $1.1 million due to increased earnings from Millennium.

Operating expenses increased $20.2 million, excluding trackers, due primarily to higher maintenance costs, including expenditures for the Integrity Management Program. In addition, 2008 operating expenses were favorably impacted by the reduction of legal reserves.

Electric Operations reported operating earnings of $35.6 million versus operating earnings of $47.9 million from the same quarter last year. Net revenues, excluding regulatory trackers, were $0.3 million lower than last year. Increased commercial and industrial usage was more than offset by lower Sugar Creek revenues from capacity sales into the PJM Interconnection and lower sales of emission allowances.

Operating expenses increased by $12.0 million, excluding trackers, due primarily to higher pension expense of $10.8 million and other employee and administrative expenses.

Other Operations reported an operating earnings loss of $1.7 million in the fourth quarter of 2009, compared with operating earnings of $0.8 million in the prior year. Last year's operating results include earnings from the unregulated natural gas marketing business. Operating earnings this year no longer include results from that business. See discussion below under Discontinued Operations (GAAP). Other Operation's operating earnings for 2009 include results from the NiSource Development companies such as low income housing properties and Lake Erie Land, NiSource Energy Technology, Primary Energy, and Columbia Network Services.

Other Items

Interest expense decreased by $2.7 million in the fourth quarter of 2009 compared to the same period last year due to lower short-term borrowings and short-term interest rates coupled with the debt repurchases during 2009, partially offset by the new debt issuances during 2009. Other-net was $0.8 million compared to a loss of $2.9 million last year due to increased AFUDC equity earnings, partially offset by lower interest income. The effective tax rate of net operating earnings for the fourth quarter of 2009 was 38.5 percent compared to 34.8 percent for the same period last year. The tax rate is higher in 2009 versus last year due to deferred income tax adjustments related primarily to state income tax apportionment changes.

Income from Continuing Operations (GAAP)

On a GAAP basis, NiSource reported income from continuing operations for the twelve months ended Dec. 31, 2009, of $231.2 million, or $0.84 per share, compared with $370.6 million, or $1.35 per share in 2008.

On a GAAP basis, income from continuing operations for the three months ended Dec. 31, 2009 was $88.5 million, or $0.32 per share, compared with $127.5 million, or $0.46 per share for the fourth quarter of 2008.

Discontinued Operations

During the second and third quarters of 2009, NiSource was pursuing the sale of its unregulated natural gas marketing business. In both periods, net assets for the business were accounted for as assets and liabilities held for sale and discontinued operations, and as such, the results of operations and cash flows were classified as discontinued operations for all periods presented. In the fourth quarter, it was determined the sale of NiSource's unregulated natural gas marketing business was no longer probable. As such, the assets and liabilities were reclassified to assets held and used at Dec. 31, 2009, and the results of the business are now included within continuing operations (GAAP).

In the first quarter of 2008, NiSource began accounting for the operations of Northern Utilities, Granite State Gas and Whiting Clean Energy as discontinued operations. All three businesses were disposed of during 2008. For the twelve months ended Dec. 31, 2008, NiSource recorded an after-tax loss of $108.1 million ($0.39 per share) for the disposition of these operations. All results of operations for these businesses are classified as net income from discontinued operations. In addition, NiSource recorded an accrual related to the Tawney lawsuit in West Virginia which was settled during the fourth quarter of 2008.

About NiSource

NiSource Inc. (NYSE: NI), based in Merrillville, Ind., is a Fortune 500 company engaged in natural gas transmission, storage and distribution, as well as electric generation, transmission and distribution. NiSource operating companies deliver energy to 3.7 million customers located within the high-demand energy corridor stretching from the Gulf Coast through the Midwest to New England. Information about NiSource and its subsidiaries is available via the Internet at www.nisource.com. NI-F

Forward-Looking Statements

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the intent, belief or current expectations of NiSource and its management. Although NiSource believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Readers are cautioned that the forward-looking statements in this presentation are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: weather; fluctuations in supply and demand for energy commodities; growth opportunities for NiSource's businesses; increased competition in deregulated energy markets; the success of regulatory and commercial initiatives; dealings with third parties over whom NiSource has no control; the effectiveness of NiSource's restructured outsourcing agreement; actual operating experience of NiSource's assets; the regulatory process; regulatory and legislative changes; the impact of potential new environmental laws or regulations; the results of material litigation; changes in pension funding requirements; changes in general economic, capital and commodity market conditions; and counterparty credit risk, many of which are risks beyond the control of NiSource. In addition, the relative contributions to profitability by each segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time. NiSource expressly disclaims a duty to update any of the forward-looking statements contained in this release.


                                   NiSource Inc.
                   Consolidated Net Operating Earnings (Non - GAAP)
                                   (unaudited)

                                        Three Months         Twelve Months
                                     Ended December 31,    Ended December 31,
                                     ------------------    ------------------
    (in millions, except per
     share amounts)                     2009       2008      2009       2008
    -------------------------------------------------------------------------
    Net Revenues
      Gas Distribution                 $841.1   $1,460.6  $3,296.2   $5,163.2
      Gas Transportation and Storage    340.8      322.3   1,239.5    1,132.4
      Electric                          309.9      305.1   1,244.6    1,362.3
      Other                               9.7      285.0      54.4    1,218.3
    -------------------------------------------------------------------------
      Gross Revenues                  1,501.5    2,373.0   5,834.7    8,876.2
      Cost of Sales (excluding
       depreciation and
       amortization)                    585.1    1,469.9   2,495.1    5,633.3
    -------------------------------------------------------------------------
    Total Net Revenues                  916.4      903.1   3,339.6    3,242.9
    -------------------------------------------------------------------------
    Operating Expenses
      Operation and maintenance         371.5      319.1   1,358.2    1,245.2
      Operation and 
       maintenance - trackers            72.2       66.1     247.2      216.9
      Depreciation and amortization     146.3      141.4     580.3      560.9
      Depreciation and
       amortization -trackers             2.4        1.4       8.6        6.1
      Other taxes                        49.6       50.3     199.1      209.8
      Other taxes - trackers             22.3       32.2      81.2       97.7
    -------------------------------------------------------------------------
    Total Operating Expenses            664.3      610.5   2,474.6    2,336.6
    -------------------------------------------------------------------------
    Equity Earnings in Unconsolidated 
      Affiliates                          6.4        5.3      16.0       12.3
    -------------------------------------------------------------------------
    Operating Earnings                  258.5      297.9     881.0      918.6
    -------------------------------------------------------------------------
    Other Income (Deductions)
      Interest expense, net             (98.6)    (101.3)   (399.0)    (374.9)
      Other, net                          0.8       (2.9)     (1.4)       0.9
    -------------------------------------------------------------------------
    Total Other Income (Deductions)     (97.8)    (104.2)   (400.4)    (374.0)
    -------------------------------------------------------------------------
    Operating Earnings 
     From Continuing Operations
      Before Income Taxes               160.7      193.7     480.6      544.6
    Income Taxes                         61.8       67.5     185.3      195.2
    -------------------------------------------------------------------------
    Net Operating Earnings
     from Continuing Operations          98.9      126.2     295.3      349.4
    -------------------------------------------------------------------------
    GAAP Adjustment                     (10.4)       1.3     (64.1)      21.2
    -------------------------------------------------------------------------
    GAAP Income from 
     Continuing Operations              $88.5     $127.5    $231.2     $370.6
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic Net Operating
     Earnings Per Share from
     Continuing Operations               0.35       0.46      1.07       1.28
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    GAAP Basic Earnings Per
     Share from Continuing Operations    0.32       0.46      0.84       1.35
    -------------------------------------------------------------------------
    Basic Average Common 
     Shares Outstanding                 276.0      274.0     275.1      274.0
    -------------------------------------------------------------------------


                                 NiSource Inc.
                      Segment Operating Earnings (Non-GAAP)

    ------------------------------------------------------------------------
                                         Three Months        Twelve Months
                                            Ended               Ended
                                         December 31,         December 31,
    Gas Distribution Operations         --------------      --------------
    (in millions)                       2009      2008      2009      2008
    ------------------------------------------------------------------------
    Net Revenues
      Sales Revenues                 $1,006.4  $1,627.7   $3,902.4  $5,732.5
      Less: Cost of gas sold            548.1   1,167.4    2,293.0   4,197.9
    ------------------------------------------------------------------------
    Net Revenues                        458.3     460.3    1,609.4   1,534.6
    ------------------------------------------------------------------------
    Operating Expenses
      Operation and maintenance         182.9     162.2      680.7     629.9
      Operation and maintenance -
       trackers                          56.3      52.3      187.3     165.9
      Depreciation and amortization      61.9      57.6      248.1     228.8
      Other taxes                        20.4      21.4       82.8      84.1
      Other taxes - trackers             22.3      32.2       81.2      97.7
    -----------------
    Total Operating
     Expenses                           343.8     325.7    1,280.1   1,206.4
    ------------------------------------------------------------------------
    Operating Earnings                 $114.5    $134.6     $329.3    $328.2
    ------------------------------------------------------------------------
    GAAP Adjustment                       0.1      12.6       (1.5)      7.9
    ------------------------------------------------------------------------
    GAAP Operating Income              $114.6    $147.2     $327.8    $336.1
    ========================================================================



    ------------------------------------------------------------------------
                                         Three Months        Twelve Months
    Gas Transmission and                    Ended                Ended 
     Storage Operations                   December 31,        December 31, 
                                        ---------------      ---------------
    (in millions)                        2009      2008       2009      2008
    ------------------------------------------------------------------------
    Net Revenues
      Transportation revenues          $207.3    $191.1     $724.6    $682.5
      Storage revenues                   48.4      44.2      190.8     178.9
      Other revenues                      1.9       1.4       15.3       3.9
    ------------------------------------------------------------------------
    Net Operating Revenues              257.6     236.7      930.7     865.3
    ------------------------------------------------------------------------
    Operating Expenses
    Operation and maintenance            88.2      69.5      306.2     281.7
    Operation and maintenance -
     trackers                            14.2      12.5       54.3      45.1
    Depreciation and amortization        31.4      29.8      121.5     117.6
    Other taxes                          13.6      13.7       55.9      56.5
    ------------------------------------------------------------------------
    Total Operating Expenses            147.4     125.5      537.9     500.9

    Equity Earnings in Unconsolidated
     Affiliates                           6.4       5.3       16.0      12.3

    Operating Earnings                 $116.6    $116.5     $408.8    $376.7
    ========================================================================
    GAAP Adjustment                      (0.5)    (11.8)     (20.3)     (7.0)
    ------------------------------------------------------------------------
    GAAP Operating Income              $116.1    $104.7     $388.5    $369.7
    ========================================================================


                                NiSource Inc.
                    Segment Operating Earnings (Non-GAAP)

    ------------------------------------------------------------------------
                                          Three Months      Twelve Months    
    Electric Operations                 Ended December 31, Ended December 31,
                                        ------------------ ------------------
    (in millions)                        2009      2008      2009      2008
    ------------------------------------------------------------------------
    Net Revenues 
      Sales revenues                   $313.2    $306.7   $1,252.8  $1,368.0
      Less: Cost of sales               112.7     107.3      456.5     556.8

    Net Revenues                        200.5     199.4      796.3     811.2

    Operating Expenses 
      Operation and maintenance          98.4      85.8      371.9     318.8
       Operation and maintenance -
       trackers                           1.7       1.3        5.6       5.9
      Depreciation and amortization      49.6      50.7      197.0     203.5
      Depreciation and amortization -
       trackers                           2.4       1.4        8.6       6.1
      Other taxes                        12.8      12.3       50.8      56.7

    Total Operating Expenses            164.9     151.5      633.9     591.0
    ------------------------------------------------------------------------
    Operating Earnings                  $35.6     $47.9     $162.4    $220.2
    ========================================================================
    GAAP Adjustment                      (2.7)      0.8      (45.7)     (1.0)
    ------------------------------------------------------------------------
    GAAP Operating Income               $32.9     $48.7     $116.7    $219.2
    ========================================================================
     


    ------------------------------------------------------------------------
                                        Three Months         Twelve Months   
     Other Operations                 Ended December 31,   Ended December 31,
                                      ------------------  -------------------
    (in millions)                       2009      2008       2009       2008
    ------------------------------------------------------------------------
    Net Revenues 
      Products and services revenue      $2.0    $271.1       $8.2   $1,171.7

       Less:
        Cost of products purchased          -     265.2          -   1,144.2
     
    Net Revenues                          2.0       5.9        8.2      27.5

    Operating Expenses
      Operation and maintenance           3.0       3.3       10.0      18.2
      Depreciation and amortization       0.5       0.6        2.0       2.4
      Other  taxes                        0.2       1.2        0.8       5.3
    ------------------------------------------------------------------------
    Total Operating Expenses              3.7       5.1       12.8      25.9
    ------------------------------------------------------------------------
    Operating Earnings (Loss)           $(1.7)     $0.8      $(4.6)     $1.6
    ========================================================================
    GAAP Adjustment                      (6.9)     (0.1)      (9.9)      0.4
    ------------------------------------------------------------------------
    GAAP Operating Income (Loss)        $(8.6)     $0.7     $(14.5)     $2.0
    ========================================================================



    ------------------------------------------------------------------------
                                          Three Months       Twelve Months
     Corporate                         Ended December 31,  Ended December 31, 
                                       ------------------  ------------------
    (in millions)                        2009     2008        2009      2008
    ------------------------------------------------------------------------
    Operating Earnings (Loss)           $(6.5)    $(1.9)    $(14.9)    $(8.1)
    ========================================================================
    GAAP Adjustment                      (1.0)     (0.1)      (1.7)     (0.2)
    ------------------------------------------------------------------------
    GAAP Operating Income (Loss)        $(7.5)    $(2.0)    $(16.6)    $(8.3)
    ========================================================================


                                      NiSource Inc.
                         Segment Volumes and Statistical Data

                             Three Months           Twelve Months
                          Ended December 31,      Ended December 31,
    Gas Distribution      ------------------      ------------------
     Operations             2009     2008         2009        2008
    ----------------------------------------------------------------
    Sales and
     Transportation (MMDth)
      Residential           83.5     91.6        265.2        278.0
      Commercial            51.1     53.0        169.4        174.2
      Industrial            89.7     88.4        335.9        373.2
      Off System            15.0     19.8         59.7         96.8
      Other                  0.2      0.2          0.8          1.0
    ---------------------------------------------------------------
    Total                  239.5    253.0        831.0        923.2
    ---------------------------------------------------------------
    Weather Adjustment       1.1     (9.8)         1.4         (7.6)
    ---------------------------------------------------------------
    Sales and 
     Transportation 
     Volumes - Excluding 
     Weather               240.6    243.2        832.4        915.6
    ===============================================================
    Heating Degree Days    2,031    2,184        5,624        5,771
    Normal Heating Degree 
     Days                  2,037    2,037        5,633        5,664
    % Colder (Warmer) 
     than Normal               0%       7%           0%           2%

    Customers
      Residential                            3,032,597    3,037,504
      Commercial                               279,144      280,195
      Industrial                                 7,895        8,003
      Other                                         79           76
    ----------------------------------------------------------------
    Total                                    3,319,715    3,325,778
    ----------------------------------------------------------------


                              
    Gas Transmission and      Three Months         Twelve Months
     Storage Operations    Ended December 31,    Ended December 31,
                           ------------------    -------------------
                           2009     2008        2009        2008
    ----------------------------------------------------------------

    Throughput (MMDth)
    Columbia Transmission  292.9    292.6      1,029.8      1,000.0
    Columbia Gulf          185.7    230.9        894.1        989.3
    Columbia Pipeline 
     Deep Water                -        -            -          0.9
    Crossroads Gas Pipeline  7.9      8.8         33.9         36.3
    Intrasegment 
     eliminations         (122.8)  (140.0)      (566.4)      (538.0)
    ----------------------------------------------------------------
    Total                  363.7    392.3      1,391.4      1,488.5
    ----------------------------------------------------------------


                                   NiSource Inc.
                  Segment Volumes and Statistical Data (continued)

    ------------------------------------------------------------------------
                                    Three Months            Twelve Months   
    Electric Operations           Ended December 31,      Ended December 31,
                                  ------------------     -------------------
                                   2009      2008         2009        2008
    ------------------------------------------------------------------------
    Sales (Gigawatt Hours)
      Residential                  795.9     813.2      3,241.4      3,345.9
      Commercial                   926.3     936.1      3,833.9      3,915.8
      Industrial                 1,967.5   2,011.4      7,690.9      9,305.4
      Wholesale                    215.4     186.4        600.6        737.2
      Other                         46.5      36.1        158.9        138.2
    ------------------------------------------------------------------------
    Total                        3,951.6   3,983.2     15,525.7     17,442.5
    ------------------------------------------------------------------------
    Weather Adjustment              (3.1)    (16.1)       343.4         81.8
    ------------------------------------------------------------------------
    Sales Volumes Excluding 
     Weather impacts             3,948.5   3,967.1     15,869.1     17,524.3
    ========================================================================
    Cooling Degree Days                                     515          716
    Normal Cooling Degree Days                              814          814
    % Warmer (Colder) than
     Normal                                                 (37%)        (12%)

     Electric Customers
      Residential                                       400,016      400,640
      Commercial                                         53,617       53,438
      Industrial                                          2,441        2,484
      Wholesale                                              15            9
      Other                                                 746          754
    ------------------------------------------------------------------------
    Total                                               456,835      457,325
    ------------------------------------------------------------------------


                                     NiSource Inc.
             Schedule 1 - Reconciliation of Net Operating Earnings to GAAP

    ---------------------------------------------------------------------
                                      Three Months        Twelve Months
                                    Ended December 31,  Ended December 31,
     (in millions, except per       ------------------   -----------------
      share amounts)                   2009      2008      2009      2008
    ---------------------------------------------------------------------
    Net Operating Earnings from 
     Continuing Operations (Non-GAAP) $98.9    $126.2    $295.3    $349.4
    ---------------------------------------------------------------------
    Items excluded from 
     operating earnings:
      Net Revenues:
        Weather - compared to normal   (0.7)     13.9     (23.2)      2.8
        Revenue adjustment              0.8         -      (8.2)        -
        Unregulated natural gas
         marketing business            10.5         -      23.2         -

      Operating Expenses: 
        Restructuring                  (0.6)        -     (25.2)        -
        Transition charges 
         (IBM Agreement)               (0.1)     (2.2)     (3.5)     (7.8)
        Legal reserve                  (3.0)        -     (10.0)        -
        Unregulated natural gas 
         marketing business            (4.6)        -     (13.0)        -
        Medical expense adjustment out 
         of period                        -         -         -      12.7
        Gain/Loss on sale of assets and
         asset impairments            (13.3)    (10.3)    (19.2)     (7.6)
    ---------------------------------------------------------------------
        Total items excluded from 
         operating earnings           (11.0)      1.4     (79.1)      0.1
    ---------------------------------------------------------------------
    Loss on early extinguishment of
     debt                              (6.9)        -      (4.5)        -
    ---------------------------------------------------------------------

    Other Income -Gain on sale of JOF     -         -         -      16.7

    Interest Expense -Reserve for
     Interest Rate Swaps                  -       0.7         -      (4.8)

    Income Taxes -Massachusetts Tax 
     Law change                           -       1.4         -      14.9

    Income Taxes - Tax Method change    1.7         -      (6.1)        -

    ---------------------------------------------------------------------
    Tax effect of above items and 
     other income tax adjustments       5.8      (2.2)     25.6      (5.7)
    ---------------------------------------------------------------------

    ---------------------------------------------------------------------
      Total items excluded from net
       operating earnings             (10.4)      1.3     (64.1)     21.2
    ---------------------------------------------------------------------

    ---------------------------------------------------------------------
    Reported Income from Continuing 
     Operations - GAAP                $88.5    $127.5    $231.2    $370.6
    =====================================================================

    ---------------------------------------------------------------------
    Basic Average Common Shares 
     Outstanding                      276.0     274.0     275.1     274.0
    ---------------------------------------------------------------------
    Basic Net Operating Earnings 
     Per Share from
     Continuing Operations ($)         0.35      0.46      1.07      1.28
    ---------------------------------------------------------------------
    Items excluded from net 
     operating earnings
     (after-tax)                      (0.03)        -     (0.23)     0.07
    ---------------------------------------------------------------------
    GAAP Basic Earnings Per Share 
     from Continuing
     Operations                        0.32      0.46      0.84      1.35
    ---------------------------------------------------------------------


                                     NiSource Inc.
      Schedule 2 -  Adjustments by Segment from Operating Earnings to GAAP
                             For Quarter ended December 31,

    2009 (in millions)
    ---------------------------------------------------------------------
                                 Gas
                             Transmission
                       Gas       and
                  Distribution Storage  Electric  Other  Corporate  Total
                 -------------------------------------------------- -----
    Operating Earnings
     (Loss)            $114.5   $116.6   $35.6   $(1.7)   $(6.5)    $258.5

    Net Revenues:
    Weather (compared to
     normal)             (1.0)       -     0.3       -        -       (0.7)
    Unregulated natural
     gas marketing
     business               -        -       -    11.5     (1.0)      10.5
    Revenue adjustment      -        -     0.8       -        -        0.8
                        --------------------------------------------------
    Total Impact - Net
     Revenues            (1.0)       -     1.1    11.5     (1.0)      10.6
    Operating Expenses
    Restructuring        (0.2)     0.1    (0.5)      -        -       (0.6)
    Transition charges   (0.1)       -       -       -        -       (0.1)
    Legal reserve           -        -    (3.0)      -        -       (3.0)
    Unregulated natural
     gas marketing
     business               -        -       -    (4.6)       -       (4.6)
    Gain/Loss on sale
     of assets and asset
     impairments          1.4     (0.6)   (0.3)  (13.8)       -      (13.3)
                       ---------------------------------------------------
    Total Impact -
     Operating Expenses   1.1     (0.5)   (3.8)  (18.4)       -      (21.6)
                       ---------------------------------------------------
    Total Impact -
     Operating Income
     (Loss)              $0.1    $(0.5)  $(2.7)  $(6.9)   $(1.0)    $(11.0)
                       ---------------------------------------------------
    Operating Income
     (Loss) -GAAP      $114.6   $116.1   $32.9   $(8.6)   $(7.5)    $247.5
                       ---------------------------------------------------




    2008 (in millions)
    ---------------------------------------------------------------------
                                 Gas
                             Transmission
                       Gas       and
                  Distribution Storage  Electric  Other  Corporate   Total
                 --------------------------------------------------  -----
    Operating Earnings
     (Loss)            $134.6   $116.5   $47.9    $0.8    $(1.9)    $297.9

    Net Revenues:
    Weather (compared
     to normal)          12.8        -     1.1       -        -       13.9
                       ---------------------------------------------------
    Total Impact -Net
     Revenues            12.8        -     1.1       -        -       13.9

    Operating Expenses
    Transition charges
     (IBM Agreement)     (1.4)    (0.4)   (0.4)      -        -       (2.2)
    Gain/(Loss) on
     sale of assets
     and asset
     impairments          1.2    (11.4)    0.1    (0.1)    (0.1)     (10.3)
                       ---------------------------------------------------
    Total Impact -O &
     M Expenses          (0.2)   (11.8)   (0.3)   (0.1)    (0.1)     (12.5)
                       ---------------------------------------------------
    Total Impact -
     Operating Income
     (Loss)             $12.6   $(11.8)   $0.8    $(0.1)   $(0.1)     $1.4
                       ---------------------------------------------------
    Operating Income
     (Loss) -GAAP      $147.2   $104.7   $48.7     $0.7    $(2.0)   $299.3
                       ---------------------------------------------------


                                       NiSource Inc.
           Schedule 2 - Adjustments by Segment from Operating Earnings to GAAP
                             For Twelve Months ended December 31,

    2009 (in millions)
    ----------------------------------------------------------------------
                                 Gas
                             Transmission
                       Gas       and
                  Distribution Storage  Electric  Other   Corporate  Total
                  -------------------------------------------------- -----
    Operating 
     Earnings
     (Loss)            $329.3   $408.8  $162.4    $(4.6)  $(14.9)   $881.0

    Net Revenues:
    Weather (compared
     to normal)            -         -   (23.2)       -        -     (23.2)
    Revenue sales
     adjustment            -         -    (8.2)       -        -      (8.2)
    Unregulated natural
     gas marketing
     business              -         -       -     24.8     (1.6)     23.2
                       ---------------------------------------------------
    Total Impact -Net
     Revenues              -         -   (31.4)    24.8     (1.6)     (8.2)

    Operating Expenses
    Restructuring       (1.6)    (19.9)   (3.7)       -        -     (25.2)
    Transition charges
     (IBM Agreement)    (1.3)     (1.8)   (0.3)       -     (0.1)     (3.5)
    Legal reserve          -         -   (10.0)       -        -     (10.0)
    Unregulated natural
     gas marketing
     business              -         -       -    (13.0)       -     (13.0)
    Gain/Loss on sale
     of assets and
     asset impairments   1.4       1.4    (0.3)   (21.7)       -     (19.2)
                       ---------------------------------------------------
    Total Impact -
     Operating 
     Expenses           (1.5)    (20.3)  (14.3)   (34.7)    (0.1)    (70.9)
                       ---------------------------------------------------
    Total Impact -
     Operating Income
     (Loss)            $(1.5)   $(20.3) $(45.7)   $(9.9)   $(1.7)   $(79.1)
                       ---------------------------------------------------
    Operating Income
     (Loss) - GAAP    $327.8    $388.5  $116.7   $(14.5)  $(16.6)   $801.9
                       ---------------------------------------------------



    2008 (in millions)
    ----------------------------------------------------------------------
                                 Gas
                             Transmission
                       Gas       and
                  Distribution Storage  Electric  Other   Corporate  Total
                  -------------------------------------------------- -----
    Operating 
     Earnings
     (Loss)           $328.2    $376.7  $220.2     $1.6    $(8.1)   $918.6

    Net Revenues:
    Weather (compared
     to normal)          8.1         -    (5.3)       -        -       2.8
                  --------------------------------------------------------
    Total Impact -Net
     Revenues            8.1         -    (5.3)       -        -       2.8

    Operating Expenses
    Transition charges
     (IBM Agreement)    (4.8)     (1.5)   (1.2)     (0.1)   (0.2)     (7.8)
    Medical expense
     adjustment out of
     period              4.4       2.5     5.5       0.1     0.2      12.7
    Gain/(Loss) on
     sale of assets and
     asset impairments   0.2      (8.0)      -       0.4    (0.2)     (7.6)
                  --------------------------------------------------------
    Total Impact - 
     O & M Expenses     (0.2)     (7.0)    4.3       0.4    (0.2)     (2.7)
                  --------------------------------------------------------
    Total Impact -
     Operating Income
     (Loss)             $7.9     $(7.0)  $(1.0)     $0.4    $(0.2)     $0.1
                   --------------------------------------------------------
    Operating Income
     (Loss) -GAAP     $336.1    $369.7  $219.2      $2.0    $(8.3)   $918.7
                   --------------------------------------------------------


                                    NiSource Inc.
                       Consolidated Income Statements (GAAP)
                                    (unaudited)
                                            
                              Three Months                Twelve Months
                            Ended December 31,          Ended December 31,
    (in millions, except    -----------------------------------------------
     per share amounts)     2009            2008         2009        2008
    -----------------------------------------------------------------------
    Net Revenues
      Gas Distribution     $840.1        $1,473.4      $3,296.2    $5,171.3
      Gas Transportation 
       and Storage          340.8           322.3       1,239.5     1,132.4
      Electric              311.0           306.2       1,213.2     1,357.0
      Other                 192.8           285.0         900.5     1,218.3
    -----------------------------------------------------------------------
    Gross Revenues        1,684.7         2,386.9       6,649.4     8,879.0
      Cost of Sales 
       (excluding
       depreciation and
       amortization)        757.7         1,469.9       3,318.0     5,633.3
    -----------------------------------------------------------------------
    Total Net Revenues      927.0           917.0       3,331.4     3,245.7
    -----------------------------------------------------------------------
    Operating Expenses
      Operation and 
       maintenance          451.1           387.3       1,653.4     1,457.2
      Depreciation and
       amortization         148.6           142.8         589.0       567.0
      Impairment and
       (gain)/loss on sale of
       assets, net           13.3            10.4          19.2         7.6
      Other taxes            72.9            82.5         283.9       307.5
    -----------------------------------------------------------------------
    Total Operating 
     Expenses               685.9           623.0       2,545.5     2,339.3
    -----------------------------------------------------------------------
    Equity Earnings in
     Unconsolidated
     Affiliates               6.4             5.3          16.0        12.3
    -----------------------------------------------------------------------
    Operating Income        247.5           299.3         801.9       918.7
    -----------------------------------------------------------------------
    Other Income 
     (Deductions)
      Interest expense, 
       net                  (98.6)         (100.6)       (399.0)     (379.7)
      Loss on early
       extinguishment of 
       long-term debt        (6.9)              -          (4.5)          -
      Other, net              0.8            (2.9)         (1.4)       17.6
    -----------------------------------------------------------------------
    Total Other Income
     (Deductions)          (104.7)         (103.5)       (404.9)     (362.1)
    -----------------------------------------------------------------------
    Income From 
     Continuing
     Operations Before 
     Income Taxes           142.8           195.8         397.0       556.6
    Income Taxes             54.3            68.3         165.8       186.0
    -----------------------------------------------------------------------
    Income from Continuing
     Operations              88.5           127.5         231.2       370.6
    -----------------------------------------------------------------------
    Income (Loss) from
     Discontinued Operations
     -net of taxes            1.0            38.4         (10.7)     (183.4)
    Loss on Disposition of
     Discontinued Operations
     -net of taxes              -            (3.9)         (2.8)     (108.2)
    -----------------------------------------------------------------------
    Net Income              $89.5          $162.0        $217.7       $79.0
    =======================================================================
    Basic Earnings 
     Per Share 
      Continuing 
       operations           $0.32           $0.46         $0.84       $1.35
      Discontinued 
       operations               -            0.13         (0.05)      (1.06) 
    -----------------------------------------------------------------------
    Basic Earnings Per 
     Share                  $0.32           $0.59         $0.79       $0.29
    -----------------------------------------------------------------------
    Diluted Earnings Per
     Share
      Continuing 
       operations           $0.32           $0.46         $0.84       $1.35
      Discontinued 
       operations               -            0.13         (0.05)      (1.06)

    Diluted Earnings Per
     Share                  $0.32           $0.59         $0.79       $0.29
    -----------------------------------------------------------------------
    Dividends Declared Per
     Common Share           $0.23           $0.23         $0.92       $0.92
    -----------------------------------------------------------------------

    Basic Average Common
     Shares Outstanding     276.0           274.0         275.1       274.0
    Diluted Average Common
     Shares                 276.8           275.5         275.8       275.4
    -----------------------------------------------------------------------


                                       NiSource Inc.
                                Consolidated Balance Sheets
                                        (unaudited)
                                                  December 31,  December 31,
    (in millions)                                        2009          2008
    -------------                                        ----          ----

    ASSETS
    Property, Plant and Equipment
      Utility Plant                                 $18,946.1     $18,356.8
      Accumulated depreciation and amortization      (8,353.7)     (8,080.8)
    -----------------------------------              --------      --------
      Net utility plant                              10,592.4      10,276.0
    -----------------------------------              --------      --------
      Other property, at cost, less
       accumulated depreciation                          91.5         112.7
    -----------------------------------              --------      --------
    Net Property, Plant and Equipment                10,683.9      10,388.7
    -----------------------------------              --------      --------

    Investments and Other Assets
      Assets of discontinued operations
       and assets held for sale                          18.7          45.5
      Unconsolidated affiliates                         165.8          86.8
      Other investments                                 129.2         117.9
    -----------------------------------              --------      --------
    Total Investments and Other Assets                  313.7         250.2
    ----------------------------------                  -----         -----

    Current Assets
      Cash and cash equivalents                          16.4          20.6
      Restricted cash                                   174.7         286.6
      Accounts receivable (less reserve of
       $39.6 and $43.9, respectively)                   808.6       1,143.2
      Income tax receivable                              24.9             -
      Gas inventory                                     384.8         511.8
      Underrecovered gas and fuel costs                  40.2         180.2
      Materials and supplies, at average
       cost                                             102.3          95.1
      Electric production fuel, at average
       cost                                              59.9          63.8
      Price risk management assets                      173.3         150.4
      Exchange gas receivable                            72.5         393.8
      Regulatory assets                                 238.3         314.9
      Assets of discontinued operations
       and assets held for sale                           2.2           1.0
      Prepayments and other                             125.5         249.1
    -----------------------------------              --------      --------
    Total Current Assets                              2,223.6       3,410.5
    -----------------------------------              --------      --------

    Other Assets
      Price risk management assets                      237.6         200.7
      Regulatory assets                               1,644.1       1,640.4
      Goodwill                                        3,677.3       3,677.3
      Intangible assets                                 319.6         330.6
      Postretirement and postemployment
       benefits assets                                   19.8          10.3
      Deferred charges and other                        152.1         123.5
    -----------------------------------              --------      --------
    Total Other Assets                                6,050.5       5,982.8
    -----------------------------------              --------      --------
    Total Assets                                    $19,271.7     $20,032.2
    ===================================             =========     =========


                                   NiSource Inc.
                  Consolidated Balance Sheets (continued)
                                 (unaudited)
                                                                           
                                                  December 31,  December 31,
    (in millions, except share amounts)                  2009          2008
    ----------------------------------                   ----          ----

    CAPITALIZATION AND LIABILITIES
    Capitalization
    Common Stockholders' Equity
      Common stock - $0.01 par value, 
       400,000,000 shares authorized; 
       276,638,021 and 274,261,799 
       shares issued and outstanding,
       respectively                                      $2.8          $2.7
                                 
      Additional paid-in capital                      4,057.6       4,020.3
      Retained earnings                                 865.5         901.1
      Accumulated other comprehensive Loss              (45.9)       (172.0)
      Treasury stock                                    (25.9)        (23.3)
    -----------------------------------              --------      --------
    Total Common Stockholders' Equity                 4,854.1       4,728.8
    Long-term debt, excluding amounts 
     due within one year                              5,987.5       5,943.9
    -----------------------------------              --------      --------
    Total Capitalization                             10,841.6      10,672.7
    -----------------------------------              --------      --------
    Current Liabilities
      Current portion of long-term debt                 696.9         469.3
      Short-term borrowings                             103.0       1,163.5
      Accounts payable                                  502.1         693.9
      Dividends declared                                  0.2             -
      Customer deposits and accounts 
       receivable credit balances                       301.2         275.9
      Taxes accrued                                     212.9         206.5
      Interest accrued                                  125.4         120.1
      Overrecovered gas and fuel costs                  220.4          35.9
      Price risk management liabilities                 190.1         286.5
      Exchange gas payable                              222.2         555.5
      Deferred revenue                                   27.3          14.7
      Regulatory liabilities                             43.8          40.4
      Accrued liability for postretirement 
       and postemployment benefits                        7.6           6.4
      Liabilities of discontinued operations 
       and liabilities held for sale                      1.7           0.9
      Legal and environmental reserves                  146.1         375.1
      Other accruals                                    310.3         338.8
    -----------------------------------              --------      --------
    Total Current Liabilities                         3,111.2       4,583.4
    -----------------------------------              --------      --------
    Other Liabilities and Deferred 
     Credits
      Price risk management liabilities                 170.2         188.5
      Deferred income taxes                           2,018.2       1,549.8
      Deferred investment tax credits                    39.6          46.1
      Deferred credits                                   72.4          76.7
      Deferred revenue                                    8.5           6.2
      Accrued liability for postretirement 
       and postemployment benefits                    1,150.2       1,238.5
      Liabilities of discontinued 
       operations and liabilities held for sale          10.2           4.4
      Regulatory liabilities and 
       other removal costs                            1,558.8       1,386.1
      Asset retirement obligations                      138.2         126.0
      Other noncurrent liabilities                      152.6         153.8
    -----------------------------------              --------      --------
    Total Other Liabilities and 
     Deferred Credits                                 5,318.9       4,776.1
    ------------------------------------             --------      --------
    Commitments and Contingencies                           -             -
    ------------------------------------             --------      --------
    Total Capitalization and Liabilities            $19,271.7     $20,032.2
    ====================================            =========     =========


                                NiSource Inc.
                    Statements of Consolidated Cash Flows
                                 (unaudited)

    Twelve Months Ended December 31, (in millions)            2009      2008
    ------------------------------------------------------------------------
    Operating Activities
      Net Income                                             217.7      79.0
      Adjustments to Reconcile Net Income to Net Cash
       from Continuing Operations:
        Loss on Early Extinguishment of Debt                   4.5         -
        Depreciation and Amortization                        589.0     567.0
        Net Changes in Price Risk Management
         Assets and Liabilities                               (9.1)     25.7
        Deferred Income Taxes and Investment
         Tax Credits                                         378.2     137.8
        Deferred Revenue                                       4.3     (24.0)
        Stock Compensation Expense                             9.6       9.5
        Gain (Loss) on Sale of Assets                         (3.6)      4.3
        Loss on Impairment of Assets                          22.8       3.3
        Income from Unconsolidated Affiliates                (15.1)    (25.3)
        Loss on Disposition of Discontinued
         Operations -Net of Taxes                              2.8     108.2
        Loss from Discontinued Operations -
         Net of Taxes                                         10.7     183.4
        Amortization of Discount/Premium on Debt              13.0       7.7
        AFUDC Equity                                          (5.4)     (5.4)
      Changes in Assets and Liabilities:
        Accounts Receivable                                  258.9    (202.4)
        Income tax receivable                                (24.9)        -
        Inventories                                          128.7     (82.4)
        Accounts Payable                                    (191.5)    (30.0)
        Customer Deposits and Accounts
         Receivable Credit Balances                           25.3      42.3
        Taxes Accrued                                        116.2     (89.7)
        Interest Accrued                                       5.3      20.8
        Overrecovered Gas and Fuel Costs                     324.4       3.6
        Exchange Gas Receivable/Payable                      (10.0)    (71.9)
        Other Accruals                                        (3.6)     16.3
        Prepayments and Other Current Assets                  24.2     (27.5)
        Regulatory Assets/Liabilities                        105.2     (91.8)
        Postretirement and Postemployment Benefits           (49.1)     (9.2)
        Deferred Credits                                       6.2      36.3
        Deferred Charges and Other NonCurrent Assets         (21.9)     38.7
        Other Non Current Liabilities                         (7.6)    (36.5)
      ----------------------------------------------------------------------
      Net Operating Activities from
       Continuing Operations                               1,905.2     587.8
      Net Operating Activities used for
       Discontinued Operations                              (254.5)     (2.5)
      ----------------------------------------------------------------------
      Net Cash Flows from Operating Activities             1,650.7     585.3
      ----------------------------------------------------------------------
      
    Investing Activities
    --------------------
        Capital Expenditures                                (777.2)   (970.2)
        Sugar Creek Purchase                                     -    (329.7)
        Insurance Recoveries                                  62.7      46.7
        Proceeds from Disposition of Assets                    5.7      47.8
        Restricted Cash                                      111.9    (228.8)
        Distributions from or (contributions
         to) equity investments                              (23.5)    (39.2)
        Other Investing Activities                           (42.0)    (38.1)
        --------------------------------------------------------------------
      Net Investing Activities used for
       Continuing Operations                                (662.4) (1,511.5)
      Net Investing Activities from
       Discontinued Operations                                 7.6     397.2
      ----------------------------------------------------------------------
      Net Cash Flows used for Investing Activities          (654.8) (1,114.3)
      ----------------------------------------------------------------------

    Financing Activities
    --------------------
        Issuance of Long-Term Debt                         1,460.0     959.3
        Retirement of Long-Term Debt                      (1,169.8)    (40.6)
        Repurchase of Long-Term Debt                             -    (254.0)
        Change in Short-Term Debt - Net                   (1,060.5)    102.5
        Issuance of Common Stock                              26.1       1.3
        Acquisition of Treasury Stock                         (2.6)        -
        Dividends Paid - Common Stock                       (253.3)   (252.4)
      ----------------------------------------------------------------------
      Net Cash Flows used for Financing Activities        (1,000.1)    516.1
      ----------------------------------------------------------------------

      Change in cash and cash equivalents from
       continuing operations                                 242.7    (407.6)
      Cash (contributions to) receipts from
       discontinued operations                              (246.9)    393.6
      Cash and cash equivalents at
       beginning of period                                    20.6      34.6
      ----------------------------------------------------------------------
      Cash and Cash Equivalents at End of Period              16.4      20.6
      ======================================================================

SOURCE NiSource Inc.

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