Eversource 2010 Annual Report Download - page 43

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related combined
notes included in this Annual Report on Form 10-K. References in this Annual Report to "NU," the "Company," "we," "us" and "our"
refer to Northeast Utilities and its consolidated subsidiaries. All per share amounts are reported on a diluted basis.
Refer to the Glossary of Terms included in this Annual Report on Form 10-K for abbreviations and acronyms used throughout the
combined notes to the consolidated financial statements.
The only common equity securities that are publicly traded are common shares of NU. The earnings and EPS of each business
discussed below do not represent a direct legal interest in the assets and liabilities allocated to such business but rather represent a
direct interest in our assets and liabilities as a whole. EPS by business is a financial measure not recognized under GAAP that is
calculated by dividing the net income or loss attributable to controlling interests of each business by the weighted average diluted NU
common shares outstanding for the period. We use this non-GAAP financial measure to evaluate earnings results and to provide
details of earnings results and guidance by business. We believe that this measurement is useful to investors to evaluate the actual
and projected financial performance and contribution of our businesses. This non-GAAP financial measure should not be considered
as an alternative to our consolidated diluted EPS determined in accordance with GAAP as an indicator of operating performance.
The discussion below also includes non-GAAP financial measures referencing our 2010 earnings and EPS excluding expenses related
to NU's proposed merger with NSTAR and certain non-recurring benefits from the settlement of tax issues as well as our 2008 earnings
and EPS excluding a significant charge resulting from the settlement of litigation. We use these non-GAAP financial measures to more
fully compare and explain the 2010, 2009 and 2008 results without including the impact of these non-recurring items. Due to the nature
and significance of these items on Net Income, management believes that this non-GAAP presentation is more representative of our
performance and provides additional and useful information to readers of this report in analyzing historical and future performance.
These non-GAAP financial measures should not be considered as alternatives to reported Net Income Attributable to Controlling
Interests or EPS determined in accordance with GAAP as indicators of operating performance.
Reconciliations of the above non-GAAP financial measures to the most directly comparable GAAP measures of consolidated diluted
EPS and Net Income Attributable to Controlling Interests are included under "Financial Condition and Business Analysis-Overview-
Consolidated" and "Financial Condition and Business Analysis-Future Outlook" in Management's Discussion and Analysis, herein. All
forward-looking information for 2011 and thereafter provided in this Management’s Discussion and Analysis assumes we will operate on
a stand-alone basis, excluding the impacts of the proposed merger with NSTAR, unless otherwise indicated.
Financial Condition and Business Analysis
Proposed Merger with NSTAR:
On October 18, 2010, we and NSTAR announced that each company's Board of Trustees unanimously approved a Merger Agreement
(the "agreement") to create a combined company that will be called Northeast Utilities. The transaction was structured as a merger of
equals in a tax-free exchange. The post-transaction company will provide electric and natural gas energy delivery service to
approximately 3.5 million electric and natural gas customers through six regulated electric and natural gas utilities in Connecticut,
Massachusetts and New Hampshire, representing over half of all the customers in New England.
Under the terms of the agreement, NSTAR shareholders would receive 1.312 NU common shares for each NSTAR common share that
they own (the "exchange ratio"). The exchange ratio was structured to result in a no premium merger based on the average closing
share price of each company's common shares for the 20 trading days preceding the announcement. Based on the number of NU
common shares and NSTAR common shares estimated to be outstanding immediately prior to the closing of the merger, upon such
closing, NU shareholders will own approximately 56 percent of the post-transaction company and former NSTAR shareholders will own
approximately 44 percent of the post-transaction company. It is anticipated that we would issue approximately 137 million common
shares to the NSTAR shareholders as a result of the merger.
Subject to the conditions in the agreement, our first quarterly dividend per common share declared after the completion of the merger
will be increased to an amount that is equivalent, after adjusting for the exchange ratio, to NSTAR's last quarterly dividend paid prior to
the closing. Based on the last quarterly dividend paid by NSTAR, and assuming there are no changes to such dividend prior to the
closing of the merger, this anticipated amount would be approximately $0.325 per share, or approximately $1.30 per share on an
annualized basis.
Completion of the merger is subject to various customary conditions, including, among others, approval by holders of two-thirds of the
outstanding common shares of each company and receipt of all required regulatory approvals. The companies anticipate that the
regulatory approvals can be obtained to permit the merger to close in the second half of 2011. Special meetings of shareholders of
both companies to approve the merger are scheduled for March 4, 2011. On November 24, 2010, NU and NSTAR filed a joint petition
requesting Massachusetts DPU approval of their proposed merger by May 15, 2011. On January 5, 2011, a public hearing and
procedural conference were held before the DPU. The schedule has subsequently been suspended pending a decision on the
appropriate standard of review for the merger. On January 4, 2011, we received approval from the FCC, and on February 10, 2011, the
applicable Hart-Scott-Rodino waiting period expired. On January 7, 2011, NU and NSTAR filed an application with the FERC,
requesting approval of the merger by May 10, 2011.