Note 10 - Segment Information

6 Months Ended

Jun. 30, 2013

Segment Reporting Disclosure [Text Block]

Segment Reporting Disclosure [Text Block]

Note 10 - Segment Information

Our operating segments comprise revenue-generating components of our company for which we produce separate financial information internally that we regularly use to make operating decisions and assess performance. Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. We manage our businesses through five operating segments - distribution operations, retail operations, wholesale services, midstream operations, cargo shipping and other, a non-operating segment.

Our distribution operations segment is the largest component of our business and includes natural gas local distribution utilities in seven states - Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee and Maryland. These utilities construct, manage and maintain intrastate natural gas pipelines and distribution facilities. Although the operations of our distribution operations segment are geographically dispersed, the operating subsidiaries within the distribution operations segment are regulated utilities, with rates determined by individual state regulatory commissions. These natural gas distribution utilities have similar economic and risk characteristics.

We are also involved in several related and complementary businesses. Our retail operations segment includes retail natural gas marketing to end-use customers primarily in Georgia, as well as various businesses that market retail energy-related products and services to residential and small business customers primarily in Illinois, such as warranty protection solutions to customers and customer move connection services for other utilities. Our wholesale services segment includes natural gas asset management and related logistics activities for each of our utilities, except Nicor Gas, as well as for nonaffiliated companies, natural gas storage arbitrage and related activities. Our midstream operations segment includes our non-utility storage and pipeline operations, including the development and operation of high-deliverability natural gas storage assets.

Our cargo shipping segment transports containerized freight between Florida, the eastern coast of Canada, the Bahamas and the Caribbean region. Our cargo shipping segment also includes amounts related to cargo insurance coverage sold to our customers and other third parties. Our cargo shipping segment’s vessels are under foreign registry, and its containers are considered instruments of international trade. Although the majority of its long-lived assets are foreign owned and its revenues are derived from foreign operations, the functional currency is generally the United States dollar. Our cargo shipping segment also includes an equity investment in Triton, a cargo container leasing business. Profits and losses are generally allocated to investors’ capital accounts in proportion to their capital contributions. Our investment in Triton is accounted for under the equity method, and our share of earnings is reported within other income in our unaudited Condensed Consolidated Statements of Income.

Our other segment includes intercompany eliminations and aggregated subsidiaries that are individually not significant enough to be reportable.

We evaluate segment performance using the non-GAAP measure of EBIT that includes operating income, other income and expenses, and equity investment income. Items we do not include in EBIT are income taxes and financing costs, including interest and debt expense, each of which we evaluate on a consolidated basis. We believe EBIT is a useful measurement of our performance because it provides information that can be used to evaluate the effectiveness of our businesses from an operational perspective, exclusive of the costs to finance those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency of those operations.

You should not consider EBIT an alternative to, or a more meaningful indicator of, our operating performance than operating income or net income as determined in accordance with GAAP. In addition, our EBIT may not be comparable to a similarly titled measure of another company. The reconciliations of EBIT to operating income, earnings before income taxes and net income for the periods presented are as follows:

	Three months ended June 30,				Six months ended June 30,
In millions	2013		2012		2013		2012
Operating income	$	122	$	91	$	421	$	353
Other income		7		9		12		13
EBIT		129		100		433		366
Interest expense		46		45		92		92
Earnings before income taxes		83		55		341		274
Income taxes		33		20		127		100
Net income	$	50	$	35	$	214	$	174

Information by segment on our Statements of Financial Position as of December 31, 2012, is as follows:

In millions	Identifiable and total assets (1)			Goodwill
Distribution operations	$	11,320		$	1,640
Retail operations		511			122
Wholesale services		1,218			-
Midstream operations		720			14
Cargo shipping		464			61
Other (2)		(92	)		-
Consolidated	$	14,141		$	1,837

(1) Identifiable assets are those assets used in each segment’s operations.

(2) The assets of our other segment consist primarily of cash and cash equivalents and PP&E, and reflect the effect of intercompany eliminations.

Summarized Statements of Income, Statements of Financial Position and capital expenditure information by segment as of and for the periods presented are shown in the following tables.

Three months ended June 30, 2013

In millions	Distributionoperations		Retail operations		Wholesale services		Midstream operations			Cargo shipping			Other and intercompany eliminations (4)			Consolidated
Operating revenues from external parties	$	615	$	165	$	21	$	15		$	88		$	-		$	904
Intercompany revenues (1)		43		-		-		-			-			(43	)		-
Total operating revenues		658		165		21		15			88			(43	)		904
Operating expenses
Cost of goods sold		266		115		10		4			54			(42	)		407
Operation and maintenance		159		32		10		6			30			(4	)		233
Depreciation and amortization		90		5		1		4			5			4			109
Taxes other than income taxes		38		1		-		2			2			1			44
Total operating expenses		553		153		21		16			91			(41	)		793
Gain on sale of Compass Energy		-		-		11		-			-			-			11
Operating income (loss)		105		12		11		(1	)		(3	)		(2	)		122
Other income		4		-		-		1			2			-			7
EBIT	$	109	$	12	$	11	$	-		$	(1	)	$	(2	)	$	129
Capital expenditures	$	158	$	3	$	-	$	4		$	2		$	3		$	170

Three months ended June 30, 2012

In millions	Distribution operations		Retail operations		Wholesale services			Midstream operations		Cargo shipping			Other and intercompany eliminations (4)			Consolidated
Operating revenues from external parties	$	449	$	136	$	7		$	18	$	80		$	(4	)	$	686
Intercompany revenues (1)		41		-		-			-		-			(41	)		-
Total operating revenues		490		136		7			18		80			(45	)		686
Operating expenses
Cost of goods sold		131		93		4			7		51			(46	)		240
Operation and maintenance		152		25		11			4		26			-			218
Depreciation and amortization		86		3		-			4		6			3			102
Taxes other than income taxes		25		1		1			2		1			2			32
Nicor merger expenses (2)		-		-		-			-		-			3			3
Total operating expenses		394		122		16			17		84			(38	)		595
Operating income (loss)		96		14		(9	)		1		(4	)		(7	)		91
Other income		4		-		-			1		3			1			9
EBIT	$	100	$	14	$	(9	)	$	2	$	(1	)	$	(6	)	$	100
Capital expenditures	$	146	$	2	$	-		$	17	$	1		$	13		$	179

In millions	Distributionoperations		Retail operations		Wholesale services		Midstream operations		Cargo shipping			Other and intercompany eliminations (4)			Consolidated
Operating revenues from external parties	$	1,879	$	467	$	60	$	39	$	175		$	(7	)	$	2,613
Intercompany revenues (1)		98		-		-		-		-			(98	)		-
Total operating revenues		1,977		467		60		39		175			(105	)		2,613
Operating expenses
Cost of goods sold		1,031		310		20		16		107			(104	)		1,380
Operation and maintenance		344		63		23		12		58			(8	)		492
Depreciation and amortization		180		10		1		8		10			7			216
Taxes other than income taxes		102		2		1		3		3			4			115
Total operating expenses		1,657		385		45		39		178			(101	)		2,203
Gain on sale of Compass Energy		-		-		11		-		-			-			11
Operating income (loss)		320		82		26		-		(3	)		(4	)		421
Other income		7		-		-		2		4			(1	)		12
EBIT	$	327	$	82	$	26	$	2	$	1		$	(5	)	$	433
Identifiable and total assets (3)	$	11,166	$	641	$	1,008	$	715	$	462		$	(197	)	$	13,795
Goodwill	$	1,640	$	168	$	-	$	14	$	61		$	-		$	1,883
Capital expenditures	$	295	$	4	$	-	$	8	$	3		$	8		$	318

Six months ended June 30, 2012

In millions	Distribution operations		Retail operations		Wholesale services		Midstream operations		Cargo shipping			Other and intercompany eliminations (4)			Consolidated
Operating revenues from external parties	$	1,443	$	399	$	71	$	34	$	164		$	(21	)	$	2,090
Intercompany revenues (1)		87		-		-		-		-			(87	)		-
Total operating revenues		1,530		399		71		34		164			(108	)		2,090
Operating expenses
Cost of goods sold		660		259		34		12		101			(107	)		959
Operation and maintenance		325		57		24		9		54			(6	)		463
Depreciation and amortization		174		7		1		6		12			6			206
Taxes other than income taxes		82		2		2		3		3			4			96
Nicor merger expenses (2)		-		-		-		-		-			13			13
Total operating expenses		1,241		325		61		30		170			(90	)		1,737
Operating income (loss)		289		74		10		4		(6	)		(18	)		353
Other income		5		-		-		1		6			1			13
EBIT	$	294	$	74	$	10	$	5	$	-		$	(17	)	$	366
Identifiable and total assets (3)	$	10,784	$	452	$	895	$	685	$	471		$	(58	)	$	13,229
Goodwill	$	1,586	$	124	$	2	$	16	$	77		$	8		$	1,813
Capital expenditures	$	268	$	4	$	-	$	59	$	1		$	18		$	350

(1) Intercompany revenues - wholesale services records its energy marketing and risk management revenues on a net basis and its total operating revenues include intercompany revenues of $103 million and $243 million for the three and six months ended June 30, 2013 and $49 million and $137 million for the three and six months ended June 30, 2012.

(2) Transaction expenses associated with the Nicor merger are shown separately to better compare year-over-year results.

(3) Identifiable assets are those used in each segment’s operations.

(4) The assets of our other segment consist primarily of cash and cash equivalents and PP&E, and reflect the effect of intercompany eliminations.