Vectren 2012 Annual Report Download - page 35

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Executive Summary of Consolidated Results of Operations
In this discussion and analysis, the Company analyzes contributions to consolidated earnings and earnings per share from its
Utility Group and Nonutility Group separately since each operates independently requiring distinct competencies and business
strategies, offers different energy and energy related products and services, and experiences different opportunities and risks.
The Utility Group generates revenue primarily from the delivery of natural gas and electric service to its customers. The primary
source of cash flow for the Utility Group results from the collection of customer bills and the payment for goods and services
procured for the delivery of gas and electric services. The activities of, and revenues and cash flows generated by, the
Nonutility Group are closely linked to the utility industry, and the results of those operations are generally impacted by factors
similar to those impacting the overall utility industry. In addition, there are other operations, referred to herein as Corporate and
Other, that include unallocated corporate expenses such as advertising and charitable contributions, among other activities.
The Company has in place a disclosure committee that consists of senior management as well as financial management. The
committee is actively involved in the preparation and review of the Company’s SEC filings.
Net income and earnings per share, in total and by group, for the years ended December 31, 2012, 2011, and 2010 follow:
Year Ended December 31,
(In millions, except per share data) 2012 2011 2010
Net income $ 159.0 $ 141.6 $ 133.7
Attributed to:
Utility Group $ 138.0 $ 122.9 $ 123.9
Nonutility Group 21.7 23.8 9.8
Corporate & Other (0.7) (5.1) —
Basic earnings per share $ 1.94 $ 1.73 $ 1.65
Attributed to:
Utility Group $ 1.68 $ 1.50 $ 1.53
Nonutility Group 0.26 0.29 0.12
Corporate & Other — (0.06) —
Utility Group
Gas utility services
The gas utility segment earned $60.0 million during the year ended December 31, 2012, compared to earnings of $52.5 million
in 2011 and $53.7 million in 2010. The increased earnings in 2012 reflect revenues and the deferral for future recovery of some
operating expenses from regulatory orders allowing for recovery of and accounting for infrastructure replacement activities in
Ohio. Year-over-year, interest expense was also favorably impacted by financing transactions completed in late 2011 and early
2012. In 2011, increased operating expenses associated with planned maintenance activities, environmental remediation
efforts, and a brief work stoppage related to bargaining unit labor negotiations unfavorably impacted earnings compared to
2010.
Electric utility services
The electric operations earned $68.0 million during 2012, compared to $65.0 million in 2011 and $60.9 million in 2010. Results
in 2012 and 2011 were positively impacted by new electric base rates implemented on May 3, 2011. In addition, lower interest
costs associated with refinancing activity favorably impacted results in 2012. These increased results in 2012 were somewhat
offset by lower small customer margin from conservation initiatives net of lost margin recovery. The increased earnings in 2011
driven by the base rate increase, compared to 2010, were offset somewhat by summer weather that, while warmer than normal,
was cooler than the extreme summer temperatures in 2010. Earnings in 2011 were also reduced by increased power supply
operating expenses associated with planned electric generating maintenance activities.