Vectren 2012 Annual Report Download - page 36

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34
Other utility operations
In 2012, earnings from other utility operations were $10.0 million, compared to $5.4 million in 2011 and $9.3 million in
2010. Differences in the Utility Group's effective tax rate among the periods presented resulted in the lower earnings in 2011.
The higher income tax rate in 2011 was driven by the revaluation of Utility Group deferred income taxes related to the fourth
quarter 2011 sale of Vectren Source, a nonutility retail energy marketer, which resulted in a charge to Utility Group income taxes
of approximately $2.8 million. 2011 also includes a $1.4 million unfavorable tax adjustment.
Nonutility Group
In 2012, Nonutility Group earnings were $21.7 million, compared to earnings of $23.8 million in 2011 and $9.8 million in 2010.
Results over these periods were favorably impacted by the March 31, 2011 acquisition of Minnesota Limited and significantly
higher demand for pipeline construction and repair. Weakness in coal prices in 2012 and lower natural gas prices over the last
several years have negatively impacted results from the Company's commodity driven coal and wholesale gas marketing
operations. However, losses incurred by energy marketer, ProLiance, narrowed in 2012 compared to 2011, due primarily to
lower demand costs for pipeline storage and transportation. Nonutility Group results were impacted by a gain on the sale of
retail natural gas marketer, Vectren Source, on December 31, 2011, totaling $15.2 million after tax. After tax charges related to
legacy investments totaled $2.2 million, $9.2 million, and $6.9 million in 2012, 2011, and 2010, respectively.
Corporate & Other
The results in corporate and other during 2011 primarily reflect a contribution to the Vectren Foundation, a 501(c)(3) charitable
organization, totaling $6.0 million, or $3.9 million after tax. The contribution is reflected in Other operating expenses in the
consolidated financial statements.
Dividends
Dividends declared for the year ended December 31, 2012 were $1.405 per share, compared to $1.385 per share in 2011 and
$1.365 per share in 2010. In November 2012, the Company’s board of directors increased its quarterly dividend to $0.355 per
share from $0.350 per share. The increase marks the 53rd consecutive year Vectren and predecessor companies’ have
increased annual dividends paid.
Use of Non-GAAP Performance Measures and Per Share Measures
Per share earnings contributions of the Utility Group, Nonutility Group, and Corporate and Other are presented and are non-
GAAP measures. Such per share amounts are based on the earnings contribution of each group included in Vectren’s
consolidated results divided by Vectren’s basic average shares outstanding during the period. The earnings per share of the
groups do not represent a direct legal interest in the assets and liabilities allocated to the groups, but rather represent a direct
equity interest in Vectren Corporation's assets and liabilities as a whole. These non-GAAP measures are used by management
to evaluate the performance of individual businesses. In addition, other items giving rise to period over period variances, such
as weather, are presented on an after tax and per share basis. These amounts are calculated at a statutory tax rate divided by
Vectren’s basic average shares outstanding during the period. Accordingly, management believes these measures are useful to
investors in understanding each business’ contribution to consolidated earnings per share and in analyzing consolidated period
to period changes and the potential for earnings per share contributions in future periods. Reconciliations of the non-GAAP
measures to their most closely related GAAP measure of consolidated earnings per share are included throughout this
discussion and analysis. The non-GAAP financial measures disclosed by the Company should not be considered a substitute
for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance
with GAAP.
Detailed Discussion of Results of Operations
Following is a more detailed discussion of the results of operations of the Company’s Utility and Nonutility operations. The
detailed results of operations for these groups are presented and analyzed before the reclassification and elimination of certain
intersegment transactions necessary to consolidate those results into the Company’s Consolidated Statements of Income.