Vectren 2013 Annual Report Download - page 86

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Along with the Company’s wholly owned subsidiary, Miller Pipeline LLC, Minnesota Limited is included in the Infrastructure
Services operating segment.
The Company accounted for the cash acquisition in accordance with FASB authoritative guidance for business combinations,
which requires the Company to recognize the assets acquired and the liabilities assumed, measured at their fair values as of the
date of acquisition.
The cash paid at acquisition, net of cash acquired, was $83.4 million. For the period from April 1, 2011 through December 31,
2011, Minnesota Limited contributed approximately $116.5 million and $9.4 million to the Company's revenue and net income,
respectively.
The following table presents the Company's unaudited proforma results of operations for the year ended December 31, 2011 as
if the acquisition had occurred on January 1, 2011.
(In millions, except per share data) 2011
Total operating revenues $ 2,346.3
Net income $ 141.4
Basic earnings per share $ 1.73
Diluted earnings per share $ 1.73
In addition to the incremental revenues and expenses recorded by Minnesota Limited during this period, the proforma financial
data contain several adjustments including the following: recording the additional amortization expense from the identifiable
intangible assets; adjusting the estimated tax provision of the proforma combined results; and adjusting for the issuance of
short-term debt to facilitate the acquisition. The Company prepared the proforma financial information for the combined entities
for comparative purposes only, and it may not be indicative of what actual results would have been if the acquisition had taken
place on the proforma date or of future results.
Concurrent with the purchase agreement, the Company executed a lease arrangement at fair value for the Minnesota Limited
corporate headquarters, which is owned by a member of the Minnesota Limited management team and certain family
members. The lease obligates the Company to pay approximately $83,333 per month for ten years along with certain executory
costs for taxes and other operating expenses. In 2013, $1.5 million of leasehold improvements were made to the facility.
Pursuant to FASB guidance, the Company accounts for the obligation as an operating lease, expensing the lease payments and
executory costs as incurred.
6. Sale of Retail Gas Marketing Operations
On December 31, 2011, the Company sold its retail gas marketing operations performed through Vectren Source, receiving cash
proceeds of approximately $84.3 million, excluding minor working capital adjustments. The sale, net of transaction costs,
resulted in a pre-tax gain of approximately $25.4 million, which is included in Other operating expenses in the Consolidated
Statements of Income. VEDO continues doing business with the third party purchaser of Vectren Source. This third party
continues to sell natural gas directly to customers in VEDO’s service territory, and VEDO purchases receivables and natural gas
from the third party. Vectren Source was a component of the Energy Marketing operating segment.
7. Investment in ProLiance Holdings, LLC
The Company has an investment in ProLiance, a nonutility affiliate of Vectren and Citizens Energy Group (Citizens). On June
18, 2013, ProLiance exited the natural gas marketing business through the disposition of certain of the net assets, along with
the long-term pipeline and storage commitments, of its energy marketing business, ProLiance Energy, LLC (ProLiance Energy),
to a subsidiary of Energy Transfer Partners, ETC Marketing, Ltd (ETC). ProLiance Energy provided services to a broad range of
municipalities, utilities, industrial operations, schools, and healthcare institutions located throughout the Midwest and Southeast
United States. ProLiance Energy’s customers included, among others, Vectren’s Indiana utilities as well as Citizens’
utilities. Consistent with its ownership percentage, Vectren is allocated 61 percent of ProLiance’s profits and losses; however,