Eversource 2008 Annual Report Download - page 84

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Discontinued Operations: NU’s consolidated statements of income for the years ended
December31, 2007 and 2006 present NGC, Mt. Tom, SESI, Woods Electrical and SECI
as discontinued operations. Under discontinued operations presentation, revenues and
expenses of the businesses classified as discontinued operations are classified in income
from discontinued operations on the accompanying consolidated statements of income.
Summarized financial information for the discontinued operations is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2008 2007 2006
Operating revenue $- $1.3 $180.7
Income before income taxes - 0.4 31.3
Gains from sale/disposition of
discontinued operations - 2.1 504.3
Income tax expense - 1.9 198.0
Net income - 0.6 337.6
In 2007, gains from sale/disposition of discontinued operations of $2.1 million primarily
relates to the favorable resolution of legal and contract issues from businesses sold of
$4.2 million, partially oset by charges related to the sale of the competitive genera-
tion business, including a $1.9 million charge resulting from a purchase price adjustment
from the sale of the competitive generation business recorded in the first quarter of
2007. The 2006 gains from sale/disposition of discontinued operations of $504.3 mil-
lion relates to the gain on the sale of NGC and Mt. Tom of $511.1 million and a $1.6 million
gain on the sale of the Massachusetts location of SECI, partially oset by an $8.4 million
loss on the sale of SESI. The sale of a portion of the former Woods Electrical had a de
minimis impact on earnings in 2006. In addition, in 2006, NU recorded a pre-tax loss on
the sale of SENY of $0.3 million, which is recorded as other operating expenses as part
of continuing operations on the accompanying consolidated statement of income.
Included in the 2007 income tax expense amount above is a $0.8 million charge
recognized to adjust the estimated income tax accrual for actual taxes paid on the gains
related to businesses sold in 2006.
No intercompany revenues were included in discontinued operations for the years
ended December 31, 2008 or 2007. For the year ended December 31, 2006, included
in discontinued operations are $161 million of intercompany revenues that are not
eliminated in consolidation due to the separate presentation of discontinued operations.
Of this amount, $160.7 million represents revenues on intercompany contracts between
the generation operations of NGC and Mt. Tom and Select Energy. NGC’s and Mt.
Tom’s revenues and earnings related to these contracts are included in discontinued
operations while Select Energy’s related expenses and losses are included in continuing
operations. Select Energy’s obligation to NGC and Mt. Tom ended at the time of
sale in 2006.
At December 31, 2008, NU did not have or expect to have significant ongoing
involvement or continuing cash flows with the entities presented in discontinued
operations.
15. Earnings Per Share
EPS is computed based upon the weighted average number of common shares
outstanding, excluding unallocated ESOP shares, during each year. Diluted EPS is
computed on the basis of the weighted average number of common shares outstanding
plus the potential dilutive eect if certain securities are converted into common stock.
In 2006, 2,500 options were excluded from the following table as these options were
antidilutive. In 2008 and 2007, there were no antidilutive options outstanding.
The following table sets forth the components of basic and diluted EPS:
(Millions of Dollars, except
share information) 2008 2007 2006
Income from continuing operations $260.8 $245.9 $132.9
Income from discontinued operations - 0.6 337.7
Net income $260.8 $246.5 $470.6
Basic common shares
outstanding (average) 155,531,846 154,759,727 153,767,527
Dilutive effect 467,394 544,634 379,142
Fully diluted common shares
outstanding (average) 155,999,240 155,304,361 154,146,669
Basic EPS:
Income from continuing operations $1.68 $1.59 $0.86
Income from discontinued operations - - 2.20
Net income $1.68 $1.59 $3.06
Fully Diluted EPS:
Income from continuing operations $1.67 $1.59 $0.86
Income from discontinued operations - - 2.19
Net income $1.67 $1.59 $3.05
RSUs are included in basic common shares outstanding when shares are both vested
and issued. The dilutive eect of RSUs granted but not issued is calculated using the
treasury stock method. Assumed proceeds of RSUs under the treasury stock method
consist of the remaining compensation cost to be recognized and a theoretical tax
benefit. The theoretical tax benefit is calculated as the tax impact of the intrinsic value
of the RSUs (the dierence between the market value of RSUs using the average market
price during the year and the grant date market value).
The dilutive eect of stock options is also calculated using the treasury stock method.
Assumed proceeds for stock options consist of remaining compensation cost to be
recognized, cash proceeds that would be received upon exercise, and a theoretical tax
benefit. The theoretical tax benefit is calculated as the tax impact of the intrinsic value
of the stock options (the dierence between the market value of the average stock
options outstanding for the year using the average market price and the grant price).
Allocated ESOP shares are included in basic common shares outstanding in the above
table.
16. Segment Information
Presentation: NU is organized between the regulated companies and NU Enterprises
businesses based on a combination of factors, including the characteristics of each
business’ products and services, the sources of operating revenues and expenses
and the regulatory environment in which each segment operates. Cash flows for
total investments in plant included in the segment information below are cash capital
expenditures that do not include amounts incurred but not paid, cost of removal,
AFUDC related to equity funds, and the capitalized portions of pension and PBOP
expense or income. Segment information for all years presented has been reclassified
to conform to the current period presentation, except as indicated.
The regulated companies segments, including the electric distribution and transmission
segments, as well as the gas distribution segment (Yankee Gas), represented
approximately 99 percent, 99 percent and 87 percent of NU’s total consolidated
revenues for the years ended December 31, 2008, 2007 and 2006, respectively.