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E. Supplemental Executive Retirement and Other Plans
NU has maintained a Supplemental Executive Retirement Plan (SERP)
since 1987. The SERP provides its participants, who are executives of NU,
with benefits that would have been provided to them under NU’s retire-
ment plan if certain Internal Revenue Code and other limitations were
not imposed. The SERP liability of $22.1 million and $20.1 million at
December 31, 2003 and 2002, respectively, represents NU’s actuarially-
determined obligation under the SERP. During 2003, 2002, and 2001,
$3.9 million, $3.8 million, and $4 million, respectively, was expensed
related to the SERP. The SERP is the only NU retirement plan for which a
minimum pension liability has been recorded. Recording this minimum
pension liability resulted in a reduction of $0.8 million to accumulated
other comprehensive income at December 31, 2003. For information
regarding the SERP investments, see Note 8, “Fair Value of Financial
Instruments,” to the consolidated financial statements.
NU maintains a plan for retirement and other benefits for certain current
and past company officers. The actuarially-determined liability for this
plan was $35.5 million and $32.2 million at December 31, 2003 and 2002,
respectively. During 2003, 2002, and 2001, $6.3 million, $7.8 million, and
$3.2 million, respectively, was expensed related to this plan.
5. Goodwill and Other Intangible Assets
Effective January 1, 2002, NU adopted SFAS No. 142, “Goodwill and
Other Intangible Assets,” which ended the amortization of goodwill and
certain intangible assets with indefinite useful lives. SFAS No. 142 also
requires that goodwill and intangible assets deemed to have indefinite
useful lives be reviewed for impairment at least annually by applying a
fair value-based test. NU selected October 1 as the annual goodwill
impairment testing date. Goodwill impairment is deemed to exist if the
net book value of a reporting unit exceeds its estimated fair value and if
the implied fair value of goodwill based on the estimated fair value of the
reporting unit is less than the carrying amount. Excluding adjustments to
the purchase price allocation related to the acquisition of Woods Electrical
Co., Inc. (Woods Electrical) and Woods Network, there were no impairments
or adjustments to the goodwill balances during 2003. The adjustments
primarily related to the reclassification between goodwill and intangible
assets. In July 2002, NU Enterprises acquired certain assets and assumed
certain liabilities of Woods Electrical, an electrical services company, and
Woods Network, a network products and service company.
NU’s reporting units that maintain goodwill are generally consistent with
the operating segments underlying the reportable segments identified in
Note 12, “Segment Information,” to the consolidated financial statements.
Consistent with the way management reviews the operating results of its
reporting units, NU’s reporting units under the NU Enterprises reportable
segment include: 1) the merchant energy business line reporting unit,
and 2) the energy services business line reporting unit. The merchant
energy business line reporting unit is comprised of the operations of
Select Energy, NGC and the generation operations of HWP, while the
energy services business line reporting unit is comprised of the opera-
tions of SESI, NGS and Woods Network. As a result, NU’s reporting units
that maintain goodwill are as follows: Yankee Gas, which is classified
under the Utility Group — gas reportable segment; the merchant energy
business line reporting unit; and the energy services business line
reporting unit, both of which are classified under the NU Enterprises
reportable segment. The goodwill balances of these reporting units are
included in the table herein.
NU has completed its impairment analyses as of October 1, 2003, for all
reporting units that maintain goodwill and has determined that no
impairment exists. In completing these analyses, the fair values of the
reporting units were estimated using both discounted cash flow
methodologies and an analysis of comparable companies or transactions.
At December 31, 2003, NU maintained $319.9 million of goodwill that
is no longer being amortized, $14.4 million of identifiable intangible
assets subject to amortization and $8.5 million of intangible assets not
subject to amortization. At December 31, 2002, NU maintained $321
million of goodwill that is no longer being amortized, $18.1 million of
identifiable intangible assets subject to amortization and $6.8 million of
intangible assets not subject to amortization. A summary of NU’s goodwill
balances at December 31, 2003 and 2002, by reportable segment and
reporting unit is as follows:
At December 31,
(Millions of Dollars) 2003 2002
Utility Group — Gas:
Yankee Gas $287.6 $287.6
NU Enterprises:
Energy Services Business Line 29.1 30.2
Merchant Energy Business Line 3.2 3.2
Totals $319.9 $321.0
The goodwill recorded related to the acquisition of Yankee Gas is not
being recovered from the customers of Yankee Gas.
At December 31, 2003 and December 31, 2002, NU’s intangible assets
and related accumulated amortization consisted of the following:
At December 31, 2003
Gross Accumulated Net
(Millions of Dollars) Balance Amortization Balance
Intangible assets subject
to amortization:
Exclusivity agreement $17.7 $ 7.2 $10.5
Customer list 6.6 2.7 3.9
Customer backlog,
employment related
agreements and other 0.1 0.1 —
Totals $24.4 $10.0 $14.4
Intangible assets not
subject to amortization:
Customer relationships $ 5.2
Tradenames 3.3
Totals $ 8.5
At December 31, 2002
Gross Accumulated Net
(Millions of Dollars) Balance Amortization Balance
Intangible assets subject
to amortization:
Exclusivity agreement $17.7 $4.6 $13.1
Customer list 6.6 1.7 4.9
Customer backlog,
employment related
agreements and other 0.1 — 0.1
Totals $24.4 $6.3 $18.1
Intangible assets not
subject to amortization:
Customer relationships $ 3.8
Tradenames 3.0
Totals $ 6.8