Notes to Consolidated Financial Statements
Note 9 Segment Information
We generate nearly all our operating revenues through the sale, distribution, transportation and storage of natural gas. Our operating segments comprise revenue-generating components of our company for which we produce separate financial information internally that we regularly use to make operating decisions and assess performance. Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. We manage our businesses through four operating segments — distribution operations, retail energy operations, wholesale services and energy investments and a nonoperating corporate segment.
Our distribution operations segment is the largest component of our business and includes natural gas local distribution utilities in six states — Florida, Georgia, Maryland, New Jersey, Tennessee and Virginia. These utilities construct, manage, and maintain intrastate natural gas pipelines and distribution facilities. Although the operations of our distribution operations segment are geographically dispersed, the operating subsidiaries within the distribution operations segment are regulated utilities, with rates determined by individual state regulatory commissions. These natural gas distribution utilities have similar economic and risk characteristics.
We are also involved in several related and complementary businesses. Our retail energy operations segment includes retail natural gasmarketing to end-use customers primarily in Georgia. Our wholesale services segment includes natural gas assetmanagement and related logistics activities for each of our utilities as well as for nonaffiliated companies, natural gas storage arbitrage and related activities. Our energy investments segment includes a number of aggregated businesses that are related and complementary to our primary business. The most significant is the development and operation of high-deliverability natural gas storage assets. Our corporate segment includes intercompany eliminations and aggregated subsidiaries that are not significant enough on a standalone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments.
We evaluate segment performance based primarily on the non- GAAP measure of EBIT, which includes the effects of corporate expense allocations. EBIT is a non-GAAP measure that includes operating income and other income and expenses. Items we do not include in EBIT are financing costs, including interest and debt expense and income taxes, each of which we evaluate on a consolidated level. We believe EBIT is a useful measurement of our performance because it provides information that can be used to evaluate the effectiveness of our businesses from an operational perspective, exclusive of the costs to finance those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency of those operations.
You should not consider EBIT an alternative to, or a more meaningful indicator of, our operating performance than operating income or net income as determined in accordance with GAAP. In addition, our EBIT may not be comparable to a similarly titled measure of another company. The reconciliations of EBIT to operating income, earnings before income taxes and net income for 2009, 2008 and 2007 are presented below.
In millions Operating income Other income EBIT Interest expense Earnings before income taxes Income taxes Net income
Summarized income statement, statements of financial position and capital expenditure information by segment as of and for the years ended December 31, 2009, 2008 and 2007 is shown in the following tables.
In millions 2009 Operating revenues from external parties Intercompany revenues(1) Operating expenses Operating income (loss) Other income (expense) Identifiable and total assets Goodwill Capital expenditures
In millions 2008 Operating revenues from external parties Intercompany revenues(1) Operating expenses Operating income (loss) Other income Identifiable and total assets Goodwill Capital expenditures
In millions 2007 Operating revenues from external parties Intercompany revenues(1) Operating expenses Operating income (loss) Other income Identifiable and total assets Goodwill Capital expenditures (1) Intercompany revenues – Wholesale services records its energy marketing and risk management revenues on a net basis and its total operating revenues include intercompany revenues of $425 million in 2009, $982 million in 2008 and $638 million in 2007.
