Eversource 2012 Annual Report Download - page 90

77
For the Years Ended December 31,
(Pro forma amounts in millions, except per share amounts)
2012
2011
Operating Revenues
$
7,004
$
7,361
Net Income Attributable to Controlling Interest
630
689
Basic EPS
2.00
2.20
Diluted EPS
1.99
2.19
Pro forma net income does not include potential cost savings associated with the merger. Pro forma net income also excludes certain
non-recurring merger costs and costs related to the Connecticut and Massachusetts settlement agreements described below, with the
following aggregate after-tax impacts:

 For the Years Ended December 31,
(Millions of Dollars) 2012 2011
Transaction and Other Costs
$ 32 $ 19
Settlement Agreement Impacts
60

-
Total After-Tax Non-Recurring Costs Excluded from

Pro Forma Net Income Attributable to Controlling Interest

$
92
$
19
Regulatory Approvals: On February 15, 2012, NU and NSTAR reached comprehensive settlement agreements with the Massachusetts
Attorney General and the DOER related to the merger. The Attorney General settlement agreement covered a variety of rate-making
and rate design issues, including a base distribution rate freeze through 2015 for NSTAR Electric, NSTAR Gas and WMECO and $15
million, $3 million and $3 million in the form of rate credits to their respective customers. The settlement agreement reached with the
DOER covered the same rate-making and rate design issues as the Attorney General's settlement agreement, as well as a variety of
matters impacting the advancement of Massachusetts clean energy policy established by the Green Communities Act and Global
Warming Solutions Act. On April 4, 2012, the DPU approved the settlement agreements and the merger of NU and NSTAR.
On March 13, 2012, NU and NSTAR reached a comprehensive settlement agreement with both the Connecticut Attorney General and
the Connecticut Office of Consumer Counsel related to the merger. The settlement agreement covered a variety of matters, including a
$25 million rate credit to CL&P customers, a CL&P base distribution rate freeze until December 1, 2014, and the establishment of a $15
million fund for energy efficiency and other initiatives to be disbursed at the direction of the DEEP. In the agreement, CL&P agreed to
forego rate recovery of $40 million of the deferred storm restoration costs associated with restoration activities following Tropical Storm
Irene and the October 2011 snowstorm. On April 2, 2012, the PURA approved the settlement agreement and the merger of NU and
NSTAR.
The pre-tax financial impacts of the Connecticut and Massachusetts settlement agreements that were recognized by NU, CL&P,
NSTAR Electric, and WMECO are summarized as follows:
(Millions of Dollars)
NU
CL&P
NSTAR Electric
WMECO
Customer Rate Credits
$
46
$
25
$
15
$
3
Storm Costs Deferral Reduction
40
40
-
-
Establishment of Energy Efficiency Fund
15
-
-
-
Total Pre-Tax Settlement Agreement Impacts
$
101
$
65
$
15
$
3

NSTAR Revenues and Net Income: The impact of NSTAR on NU's accompanying consolidated statement of income includes
operating revenues of $1,957.8 million and net income attributable to controlling interest of $182.9 million for the year ended
December 31, 2012.
Goodwill: In a business combination, the excess of the purchase price over the estimated fair values of the assets acquired and
liabilities assumed is recognized as goodwill. Goodwill is evaluated for impairment at least annually and more frequently if indicators of
impairment arise. In accordance with the accounting standards, if the fair value of a reporting unit is less than its carrying value
(including goodwill), the goodwill is tested for impairment. A loss is recognized if the implied fair value of a reporting unit's goodwill is
less than the carrying value of its goodwill. NU uses October 1st as the annual goodwill impairment testing date.
On April 10, 2012, upon consummation of the merger with NSTAR, NU recorded approximately $3.2 billion of goodwill. With the
completion of the NSTAR merger, NU reviewed its management structure and determined that the reporting units for the purpose of
testing goodwill for impairment are Electric Distribution, Electric Transmission and Natural Gas Distribution. NU's reporting units are
consistent with the operating segments underlying the reportable segments identified in Note 21, "Segment Information," to the
consolidated financial statements. Accordingly, the goodwill resulting from the NSTAR merger has been allocated to the Electric
Distribution, Electric Transmission and Natural Gas Distribution reporting units based on the estimated fair values of the reporting units
as of the merger date.
As of December 31, 2011, the only reporting unit that maintained goodwill was the natural gas reportable segment, related to the
acquisition of the parent of Yankee Gas in 2000. This goodwill is recorded at Yankee Gas. The goodwill balance at Yankee Gas as of
December 31, 2012 and 2011 was $0.3 billion.