NiSource Inc. 10-Q: Natural Gas Inventory Valuation

Ticker: NI · Form: 10-Q · Filed: Oct 30, 2024 · CIK: 1111711

Sentiment: neutral

Topics: 10-Q, accounting, natural-gas, inventory-valuation

TL;DR

NiSource's 10-Q shows $0.0M LIFO inventory variance as of 9/30/24, using LIFO/weighted-average for gas storage.

AI Summary

NiSource Inc. filed its 10-Q for the period ending September 30, 2024. The company utilizes both LIFO and weighted-average cost methodologies for valuing natural gas in storage. For interim periods, variances in LIFO layers are expected to be replenished by year-end. As of September 30, 2024, the LIFO basis exceeded the replacement cost of stored gas by $0.0 million.

Why It Matters

This filing details NiSource's accounting methods for natural gas inventory, which can impact reported costs and profitability, especially given seasonal fluctuations.

Risk Assessment

Risk Level: low — The filing primarily discusses accounting methodologies for inventory valuation with no immediate negative financial indicators.

Key Numbers

Key Players & Entities

FAQ

What accounting methodologies does NiSource use for natural gas in storage?

NiSource uses both the LIFO inventory methodology and the weighted-average cost methodology to value natural gas in storage.

How are interim variances in LIFO layers handled?

For interim periods, NiSource expects these variances to be replenished by year-end due to seasonality requirements.

What was the LIFO basis excess over replacement cost as of September 30, 2024?

The LIFO basis exceeded the cost of replacing the current portion of stored gas by $0.0 million as of September 30, 2024.

What was the LIFO basis excess over replacement cost as of December 31, 2023?

The LIFO basis exceeded the cost of replacing the current portion of stored gas by zero as of December 31, 2023.

Where are interim LIFO variances recorded on the balance sheet?

The difference in the cost of replacing the current portion of stored gas compared to the amount stated on a LIFO basis is recorded within 'Prepayments and other' on the Condensed Consolidated Balance Sheets.

Filing Stats: 4,588 words · 18 min read · ~15 pages · Grade level 8.3 · Accepted 2024-10-30 06:36:09

Key Financial Figures

Filing Documents

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements - unaudited

Item 1. Financial Statements - unaudited Condensed Statements of Consolidated Income (unaudited) 8 Condensed Statements of Consolidated Comprehensive Income (unaudited) 9 Condensed Consolidated Balance Sheets (unaudited) 10 Condensed Statements of Consolidated Cash Flows (unaudited) 12 Condensed Statements of Consolidated Equity (unaudited) 14 Notes to Condensed Consolidated Financial Statements (unaudited) 17

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 40

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 63

Controls and Procedures

Item 4. Controls and Procedures 63

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 64

Risk Factors

Item 1A. Risk Factors 64

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 64

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 64

Other Information

Item 5. Other Information 64

Exhibits

Item 6. Exhibits 66 Signature 67 2 DEFINED TERMS The following is a list of frequently used abbreviations or acronyms that are found in this report: NiSource Subsidiaries and Affiliates (not exhaustive) Columbia of Kentucky Columbia Gas of Kentucky, Inc. Columbia of Maryland Columbia Gas of Maryland, Inc. Columbia of Ohio Columbia Gas of Ohio, Inc. Columbia of Pennsylvania Columbia Gas of Pennsylvania, Inc. Columbia of Virginia Columbia Gas of Virginia, Inc. NIPSCO Northern Indiana Public Service Company LLC NIPSCO Holdings I NIPSCO Holdings I LLC NIPSCO Holdings II NIPSCO Holdings II LLC NiSource ("we," "us" or "our") NiSource Inc. Rosewater Rosewater Wind Generation LLC and its wholly owned subsidiary, Rosewater Wind Farm LLC Indiana Crossroads Wind Indiana Crossroads Wind Generation LLC and its wholly owned subsidiary, Indiana Crossroads Wind Farm LLC Indiana Crossroads Solar Indiana Crossroads Solar Generation LLC and its wholly owned subsidiary, Meadow Lake Solar Park LLC Dunns Bridge I Dunn's Bridge I Solar Generation LLC and its wholly owned subsidiary, Dunns Bridge Solar Center, LLC Dunns Bridge II Dunn's Bridge II Solar Generation LLC Gibson Gibson Solar Generation LLC Fairbanks Fairbanks Solar Generation LLC Cavalry Cavalry Solar Generation LLC Abbreviations and Other AFUDC Allowance for funds used during construction AOCI Accumulated Other Comprehensive Income (Loss) ASC Accounting Standards Codification ASU Accounting Standards Update ATM At-the-market BIP BIP Blue Buyer L.L.C BIP Blue Buyer VCOC L.L.C BIP Blue Buyer VCOC L.L.C., a Delaware limited liability company and also an affiliate of Blackstone Blackstone Blackstone Infrastructure Partners L.P BTA Build-transfer agreement CCRs Coal Combustion Residuals CEP Ohio Capital Expenditure Program CERCLA Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund) CODM Chief Operating Decision Maker Columbia Op

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS NiSource Inc. Condensed Statements of Consolidated Income (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in millions, except per share amounts) 2024 2023 2024 2023 Operating Revenues Customer revenues $ 1,046.1 $ 1,002.6 $ 3,743.2 $ 3,965.9 Other revenues 30.2 24.8 124.1 117.5 Total Operating Revenues 1,076.3 1,027.4 3,867.3 4,083.4 Operating Expenses Cost of energy 165.9 181.3 755.6 1,198.3 Operation and maintenance 357.4 341.2 1,093.5 1,101.9 Depreciation and amortization 269.5 210.9 765.1 650.9 Loss on impairment of assets — — 2.9 — Loss (gain) on sale of assets, net ( 0.5 ) ( 0.2 ) 1.1 ( 0.5 ) Other taxes 65.7 61.2 210.4 199.9 Total Operating Expenses 858.0 794.4 2,828.6 3,150.5 Operating Income 218.3 233.0 1,038.7 932.9 Other Income (Deductions) Interest expense, net ( 134.6 ) ( 129.2 ) ( 380.2 ) ( 348.6 ) Other, net 29.2 ( 1.6 ) 51.4 1.9 Total Other Deductions, Net ( 105.4 ) ( 130.8 ) ( 328.8 ) ( 346.7 ) Income before Income Taxes 112.9 102.2 709.9 586.2 Income Taxes 15.9 3.8 109.5 103.7 Net Income 97.0 98.4 600.4 482.5 Net income attributable to noncontrolling interest 11.3 13.3 63.9 5.6 Net Income Attributable to NiSource 85.7 85.1 536.5 476.9 Preferred dividends — ( 8.1 ) ( 6.7 ) ( 34.6 ) Preferred redemption premium — — ( 14.0 ) ( 6.2 ) Net Income Available to Common Shareholders $ 85.7 $ 77.0 $ 515.8 $ 436.1 Earnings Per Share Basic Earnings Per Share $ 0.19 $ 0.19 $ 1.15 $ 1.05 Diluted Earnings Per Share $ 0.19 $ 0.17 $ 1.14 $ 0.98 Basic Average Common Shares Outstanding 451.9 413.5 449.4 413.2 Diluted Average Common Shares 454.5 448.3 451.4 447.4 The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements. 8 Table of Contents

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) NiSource Inc. Condensed Statements of Consolidated Comprehensive Income (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in millions, net of taxes) 2024 2023 2024 2023 Net Income $ 97.0 $ 98.4 $ 600.4 $ 482.5 Other comprehensive income: Net unrealized gain (loss) on available-for-sale debt securities (1) 3.5 ( 1.7 ) 3.2 ( 0.9 ) Reclassification adjustment for cash flow hedges (2) ( 0.1 ) ( 0.1 ) ( 0.3 ) ( 0.2 ) Unrecognized pension and OPEB benefit (3) 0.6 0.7 1.1 1.3 Total other comprehensive income (loss) 4.0 ( 1.1 ) 4.0 0.2 Comprehensive Income $ 101.0 $ 97.3 $ 604.4 $ 482.7 (1) Net unrealized gain (loss) on available-for-sale debt securities, net of $ 0.9 million tax expense and $ 0.4 million tax benefit in the third quarter of 2024 and 2023, respectively, and $ 0.8 million of tax expense and $ 0.2 million tax benefit for the nine months ended 2024 and 2023, respectively. (2) Reclassification adjustment for cash flow hedges, net of $ 0.1 million tax benefit and $ 0.0 million tax expense in the third quarter of 2024 and 2023, respectively, and $ 0.1 million of tax benefit and $ 0.1 million tax benefit for the nine months ended 2024 and 2023, respectively. (3) Unrecognized pension and OPEB benefit, net of $ 0.2 million of tax expense and $ 0.3 million tax expense in the third quarter of 2024 and 2023, respectively, and $ 0.4 million of tax expense and $ 0.5 million tax expense for the nine months ended 2024 and 2023, respectively. The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements. 9 Table of Contents

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) NiSource Inc. Condensed Consolidated Balance Sheets (unaudited) (in millions) September 30, 2024 December 31, 2023 ASSETS Property, Plant and Equipment Plant $ 33,453.8 $ 30,482.1 Accumulated depreciation and amortization ( 8,572.4 ) ( 8,207.2 ) Net Property, Plant and Equipment (1) 24,881.4 22,274.9 Investments and Other Assets Unconsolidated affiliates 6.5 5.3 Available-for-sale debt securities (amortized cost of $ 143.5 and $ 169.0 , allowance for credit losses of $ 0.2 and $ 0.6 , respectively) 137.9 159.1 Other investments 89.0 82.7 Total Investments and Other Assets 233.4 247.1 Current Assets Cash and cash equivalents 126.2 2,245.4 Restricted cash 32.6 35.7 Accounts receivable 589.7 884.9 Allowance for credit losses ( 17.7 ) ( 22.9 ) Accounts receivable, net 572.0 862.0 Gas storage 189.3 265.8 Materials and supplies, at average cost 167.1 172.1 Electric production fuel, at average cost 34.9 65.3 Exchange gas receivable 22.5 66.0 Regulatory assets 329.7 214.3 Deposits to renewable generation asset developer — 454.2 Prepayments and other 141.7 118.6 Total Current Assets (1) 1,616.0 4,499.4 Other Assets Regulatory assets 2,208.3 2,245.9 Goodwill 1,485.9 1,485.9 Deferred charges and other 403.1 324.0 Total Other Assets 4,097.3 4,055.8 Total Assets $ 30,828.1 $ 31,077.2 (1) Includes $ 1,335.3 million and $ 1,369.8 million at September 30, 2024 and December 31, 2023, respectively, of net property, plant and equipment assets and $ 52.9 million and $ 63.6 million at September 30, 2024 and December 31, 2023, respectively, of current assets of consolidated VIEs that may be used only to settle obligations of the consolidated VIEs. Refer to Note 4, "Noncontrolling Interests," for additional information. The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements. 10 Table of Contents

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) NiSource Inc. Condensed Consolidated Balance Sheets (unaudited) (continued) (in millions, except share amounts) September 30, 2024 December 31, 2023 CAPITALIZATION AND LIABILITIES Capitalization Stockholders' Equity Common stock - $ 0.01 par value, 750,000,000 shares authorized; 466,707,452 and 447,381,671 shares outstanding, respectively $ 4.7 $ 4.5 Preferred stock - $ 0.01 par value, 20,000,000 shares authorized; 0 and 40,000 shares outstanding, respectively — 486.1 Treasury stock ( 99.9 ) ( 99.9 ) Additional paid-in capital 9,404.7 8,879.5 Retained deficit ( 934.9 ) ( 967.0 ) Accumulated other comprehensive loss ( 29.6 ) ( 33.6 ) Total NiSource Stockholders' Equity 8,345.0 8,269.6 Noncontrolling interest in consolidated subsidiaries 1,983.8 1,866.7 Total Stockholders' Equity 10,328.8 10,136.3 Long-term debt, excluding amounts due within one year 12,086.3 11,055.5 Total Capitalization 22,415.1 21,191.8 Current Liabilities Current portion of long-term debt 1,271.2 23.8 Short-term borrowings 257.0 3,048.6 Accounts payable 614.6 749.4 Dividends payable - common stock 125.3 — Customer deposits and credits 261.6 294.4 Taxes accrued 134.7 166.2 Interest accrued 147.4 136.1 Exchange gas payable 56.1 50.5 Regulatory liabilities 151.7 278.6 Asset retirement obligations 74.9 72.5 Accrued compensation and employee benefits 239.3 227.6 Other accruals 151.7 217.4 Total Current Liabilities (1) 3,485.5 5,265.1 Other Liabilities Deferred income taxes 2,206.7 2,080.4 Accrued liability for postretirement and postemployment benefits 238.4 250.1 Regulatory liabilities 1,437.6 1,510.7 Asset retirement obligations 733.0 480.5 Other noncurrent liabilities and deferred credits 311.8 298.6 Total Other Liabilities (1) 4,927.5 4,620.3 Commitments and Contingencies (Refer to Note 15, "Other Commitments and Contingencies") Total Capitalization and Liabilities $ 30,828.1 $ 31,077.2 (1) Includes $ 5

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) NiSource Inc. Condensed Statements of Consolidated Cash Flows (unaudited) Nine Months Ended September 30, (in millions) 2024 2023 Operating Activities Net Income $ 600.4 $ 482.5 Adjustments to Reconcile Net Income to Net Cash from Operating Activities: Depreciation and amortization 765.1 650.9 Deferred income taxes and investment tax credits 109.1 102.1 Loss (gain) on sale of assets 1.1 ( 0.5 ) Payments for asset retirement obligations ( 55.0 ) ( 25.0 ) Other adjustments ( 14.9 ) 12.0 Changes in Assets and Liabilities: Components of working capital ( 85.8 ) 323.6 Regulatory assets/liabilities ( 35.6 ) 15.1 Deferred charges and other noncurrent assets ( 45.1 ) ( 11.8 ) Other noncurrent liabilities and deferred credits 2.4 ( 13.0 ) Net Cash Flows from Operating Activities 1,241.7 1,535.9 Investing Activities Capital expenditures ( 1,854.0 ) ( 1,885.6 ) Cost of removal ( 108.9 ) ( 118.7 ) Milestone payments to renewable generation asset developer ( 478.8 ) ( 486.7 ) Other investing activities 27.2 ( 12.3 ) Net Cash Flows used for Investing Activities ( 2,414.5 ) ( 2,503.3 ) Financing Activities Proceeds from issuance of long-term debt 2,229.6 1,488.7 Repayments of finance lease obligations ( 20.4 ) ( 24.1 ) Repayment of short term credit agreements ( 1,650.0 ) — Net change in commercial paper and other short-term borrowings ( 1,141.6 ) 457.8 Issuance of common stock, net of issuance costs 507.9 9.6 Redemption of preferred stock ( 486.1 ) ( 393.9 ) Preferred stock redemption premium ( 14.0 ) ( 6.2 ) Equity costs, premiums and other debt related costs ( 62.9 ) ( 19.3 ) Contributions from NIPSCO minority interest holders 99.5 — Distribution to NIPSCO minority interest holders ( 32.0 ) — Contributions from tax equity partners — 240.9 Distributions to tax equity partners ( 14.3 ) ( 12.0 ) Dividends paid - common stock ( 357.0 ) ( 310.1 ) Dividends paid - preferred stock

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) Supplemental Disclosures of Cash Flow Information Nine Months Ended September 30, (in millions) 2024 2023 Non-cash transactions: Capital expenditures included in current liabilities $ 348.0 $ 389.0 Dividends declared but not paid 125.3 111.9 Purchase contract liability — 16.4 The accompanying Notes to Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements. 13 Table of Contents

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) NiSource Inc. Condensed Statements of Consolidated Equity (unaudited) (in millions) Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest in Consolidated Subsidiaries Total Balance as of July 1, 2024 $ 4.5 $ — $ ( 99.9 ) $ 8,894.2 $ ( 896.2 ) $ ( 33.6 ) $ 1,950.6 $ 9,819.6 Comprehensive Income: Net income — — — — 85.7 — 11.3 97.0 Other comprehensive income, net of tax — — — — — 4.0 — 4.0 Dividends: Common stock ($ 0.265 per share) — — — — ( 124.4 ) — — ( 124.4 ) Noncontrolling Interests: Contributions from noncontrolling interests — — — — — — 39.8 39.8 Distributions to noncontrolling interests — — — — — — ( 17.9 ) ( 17.9 ) Stock issuances: Employee stock purchase plan — — — 1.7 — — — 1.7 Long-term incentive plan — — — 8.0 — — — 8.0 401(k) and profit sharing — — — 2.2 — — — 2.2 ATM program 0.2 — — 498.6 — — — 498.8 Balance as of September 30, 2024 $ 4.7 $ — $ ( 99.9 ) $ 9,404.7 $ ( 934.9 ) $ ( 29.6 ) $ 1,983.8 $ 10,328.8 (in millions) Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest in Consolidated Subsidiaries Total Balance as of January 1, 2024 $ 4.5 $ 486.1 $ ( 99.9 ) $ 8,879.5 $ ( 967.0 ) $ ( 33.6 ) $ 1,866.7 $ 10,136.3 Comprehensive Income: Net income — — — — 536.5 — 63.9 600.4 Other comprehensive income, net of tax — — — — — 4.0 — 4.0 Dividends: Common stock ($ 1.06 per share) — — — — ( 482.3 ) — — ( 482.3 ) Preferred stock (See Note 6) — — — — ( 8.1 ) — — ( 8.1 ) Noncontrolling Interests: Contributions from noncontrolling interests — — — — — — 99.5 99.5 Distributions to noncontrolling interests — — — — — — ( 46.3 ) ( 46.3 ) Stock issuances (redemptions): Series B and B-1 Preferred Stock Redemption — ( 486.1 ) — — — — — ( 486.1 ) Series B and B-1 Preferred stock redemption p

FINANCIAL STATEMENTS (continued)

ITEM 1. FINANCIAL STATEMENTS (continued) (in millions) Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest in Consolidated Subsidiaries Total Balance as of July 1, 2023 $ 4.2 $ 1,152.6 $ ( 99.9 ) $ 7,383.1 $ ( 1,173.8 ) $ ( 35.8 ) $ 341.0 $ 7,571.4 Comprehensive Income: Net income — — — — 85.1 — 13.3 98.4 Other comprehensive loss, net of tax — — — — — ( 1.1 ) — ( 1.1 ) Dividends: Common stock ($ 0.25 per share) — — — — ( 103.8 ) — — ( 103.8 ) Preferred stock (See Note 6) — — — — ( 8.1 ) — — ( 8.1 ) Noncontrolling Interests: Contributions from noncontrolling interests (1) — — — — — — 204.6 204.6 Distributions to noncontrolling interest — — — — — — ( 2.0 ) ( 2.0 ) Stock issuances: Employee stock purchase plan — — — 1.5 — — — 1.5 Long-term incentive plan — — — 6.0 — — — 6.0 401(k) and profit sharing — — — 2.4 — — — 2.4 Balance as of September 30, 2023 $ 4.2 $ 1,152.6 $ ( 99.9 ) $ 7,393.0 $ ( 1,200.6 ) $ ( 36.9 ) $ 556.9 $ 7,769.3 (1) Contributions from noncontrolling interest is net of transaction costs. (in millions) Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest in Consolidated Subsidiaries Total Balance as of January 1, 2023 $ 4.2 $ 1,546.5 $ ( 99.9 ) $ 7,375.3 $ ( 1,213.6 ) $ ( 37.1 ) $ 326.4 $ 7,901.8 Comprehensive Income: Net income — — — — 476.9 — 5.6 482.5 Other comprehensive income

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