Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NISOURCE INC.

Quantitative and Qualitative Disclosures about Market Risk are reported in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NISOURCE INC.

IndexPage
Report of Independent Registered Public Accounting Firm42
Statements of Consolidated Income44
Statements of Consolidated Comprehensive Income45
Consolidated Balance Sheets46
Statements of Consolidated Cash Flows48
Statements of Consolidated Long-Term Debt49
Statements of Consolidated Common Stockholders’ Equity51
Notes to Consolidated Financial Statements53
Schedule II106

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of NiSource Inc.:

We have audited the accompanying consolidated balance sheets and statements of consolidated long-term debt of NiSource Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, common stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the NiSource Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 22 to the consolidated financial statements, on July 1, 2015 the Company completed the spin-off of its subsidiary Columbia Pipeline Group, Inc.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 18, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 18, 2016

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of NiSource Inc.:

We have audited the internal control over financial reporting of NiSource Inc. and subsidiaries (the "Company") as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015, of the Company and our report dated February 18, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph relating to the Company’s spin-off of its subsidiary Columbia Pipeline Group, Inc. on July 1, 2015.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 18, 2016

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED INCOME

Year Ended December 31, (in millions, except per share amounts)201520142013
Net Revenues
Gas Distribution$2,081.9$2,597.8$2,226.3
Gas Transportation969.8987.4820.0
Electric1,572.91,672.01,563.4
Other27.215.215.7
Gross Revenues4,651.85,272.44,625.4
Cost of Sales (excluding depreciation and amortization)1,643.72,372.91,963.0
Total Net Revenues3,008.12,899.52,662.4
Operating Expenses
Operation and maintenance1,426.11,367.31,254.4
Depreciation and amortization524.4486.9470.4
Loss on sale of assets and impairments, net1.63.01.1
Other taxes256.1253.2238.4
Total Operating Expenses2,208.22,110.41,964.3
Operating Income799.9789.1698.1
Other Income (Deductions)
Interest expense, net(380.2)(379.5)(375.3)
Other, net17.413.46.8
Loss on early extinguishment of long-term debt(97.2)——
Total Other Deductions(460.0)(366.1)(368.5)
Income from Continuing Operations before Income Taxes339.9423.0329.6
Income Taxes141.3166.8108.6
Income from Continuing Operations198.6256.2221.0
Income from Discontinued Operations - net of taxes103.5273.8276.2
Gain on Disposition of Discontinued Operations - net of taxes——34.9
Net Income$302.1$530.0$532.1
Less: Net income attributable to noncontrolling interest15.6——
Net Income attributable to NiSource$286.5$530.0$532.1
Amounts attributable to NiSource:
Income from continuing operations$198.6$256.2$221.0
Income from discontinued operations87.9273.8311.1
Net Income attributable to NiSource$286.5$530.0$532.1
Basic Earnings Per Share
Continuing operations$0.63$0.81$0.71
Discontinued operations0.270.870.99
Basic Earnings Per Share$0.90$1.68$1.70
Diluted Earnings Per Share
Continuing operations$0.63$0.81$0.71
Discontinued operations0.270.860.99
Diluted Earnings Per Share$0.90$1.67$1.70
Basic Average Common Shares Outstanding317.7315.1312.4
Diluted Average Common Shares319.8316.6313.6

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

Year Ended December 31, (in millions, net of taxes)201520142013
Net Income$302.1$530.0$532.1
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities(1)(0.8)0.6(2.9)
Net unrealized gain (loss) on cash flow hedges(2)(7.8)2.22.8
Unrecognized pension and OPEB benefit (costs)(3)(2.4)(9.8)22.0
Total other comprehensive income (loss)(11.0)(7.0)21.9
Total Comprehensive Income$291.1$523.0$554.0
Less: Comprehensive income attributable to noncontrolling interest15.6——
Comprehensive Income attributable to NiSource$275.5$523.0$554.0

(1) Net unrealized gain (loss) on available-for-sale securities, net of $0.4 million tax benefit, $0.3 million tax expense and $1.5 million tax benefit in 2015, 2014 and 2013, respectively.

(2) Net unrealized gain on derivatives qualifying as cash flow hedges, net of $4.8 million tax benefit, and $1.5 million and $1.8 million tax expense in 2015, 2014 and 2013, respectively.

(3) Unrecognized pension and OPEB benefit (costs), net of $4.6 million and $2.5 million tax benefit, and $14.3 million tax expense in 2015, 2014 and 2013, respectively.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

CONSOLIDATED BALANCE SHEETS

(in millions)December 31, 2015December 31, 2014
ASSETS
Property, Plant and Equipment
Utility plant$18,946.9$17,668.4
Accumulated depreciation and amortization(6,853.4)(6,629.5)
Net utility plant12,093.511,038.9
Other property, at cost, less accumulated depreciation18.018.5
Net Property, Plant and Equipment12,111.511,057.4
Investments and Other Assets
Unconsolidated affiliates6.98.3
Other investments187.7204.8
Total Investments and Other Assets194.6213.1
Current Assets
Cash and cash equivalents15.524.9
Restricted cash29.724.9
Accounts receivable (less reserve of $20.3 and $24.9, respectively)660.0920.8
Gas inventory343.5440.3
Underrecovered gas costs34.832.0
Materials and supplies, at average cost86.881.1
Electric production fuel, at average cost106.364.8
Exchange gas receivable21.028.3
Assets of discontinued operations—283.4
Regulatory assets172.1187.4
Prepayments and other107.5106.5
Total Current Assets1,577.22,194.4
Other Assets
Regulatory assets1,599.81,544.5
Goodwill1,690.71,690.7
Intangible assets253.7264.7
Assets of discontinued operations—7,546.0
Deferred charges and other65.079.0
Total Other Assets3,609.211,124.9
Total Assets$17,492.5$24,589.8

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)December 31, 2015December 31, 2014
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stockholders’ Equity
Common stock - $0.01 par value, 400,000,000 shares authorized; 319,110,083 and 316,037,421 shares outstanding, respectively$3.2$3.2
Additional paid-in capital5,078.04,787.6
Retained earnings (deficit)(1,123.3)1,494.0
Accumulated other comprehensive loss(35.1)(50.6)
Treasury stock(79.3)(58.9)
Total Common Stockholders’ Equity3,843.56,175.3
Long-term debt, excluding amounts due within one year5,948.58,151.5
Total Capitalization9,792.014,326.8
Current Liabilities
Current portion of long-term debt433.7266.6
Short-term borrowings567.41,576.9
Accounts payable433.4610.1
Customer deposits and credits316.3280.9
Taxes accrued183.5169.2
Interest accrued129.0140.7
Overrecovered gas and fuel costs148.145.6
Exchange gas payable62.3101.5
Deferred revenue6.63.4
Regulatory liabilities83.361.1
Accrued liability for postretirement and postemployment benefits4.95.3
Liabilities of discontinued operations0.3369.0
Legal and environmental37.622.7
Accrued compensation and employee benefits136.4166.8
Other accruals114.7144.5
Total Current Liabilities2,657.53,964.3
Other Liabilities and Deferred Credits
Deferred income taxes2,365.32,165.8
Deferred investment tax credits14.817.1
Deferred credits90.7100.9
Accrued liability for postretirement and postemployment benefits759.7733.9
Liabilities of discontinued operations—1,558.4
Regulatory liabilities1,350.41,379.6
Asset retirement obligations254.0136.2
Other noncurrent liabilities208.1206.8
Total Other Liabilities and Deferred Credits5,043.06,298.7
Commitments and Contingencies (Refer to Note 18, "Other Commitments and Contingencies")——
Total Capitalization and Liabilities$17,492.5$24,589.8

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS

Year Ended December 31, (in millions)201520142013
Operating Activities
Net Income$302.1$530.0$532.1
Adjustments to Reconcile Net Income to Net Cash from Continuing Operations:
Loss on early extinguishment of debt97.2——
Depreciation and amortization524.4486.9470.4
Net changes in price risk management assets and liabilities3.72.62.6
Deferred income taxes and investment tax credits135.3161.4118.4
Deferred revenue7.2(0.1)0.6
Stock compensation expense and 401(k) profit sharing contribution50.766.048.5
Loss on sale of assets and impairment, net1.63.01.1
Income (loss) from unconsolidated affiliates0.60.80.5
Gain on disposition of discontinued operations - net of taxes——(34.9)
Income from discontinued operations - net of taxes(103.5)(273.8)(276.2)
Amortization of discount/premium on debt8.710.09.4
AFUDC equity(11.5)(10.7)(11.7)
Changes in Assets and Liabilities:
Accounts receivable262.2(42.8)(97.3)
Income tax receivable(0.6)2.3101.5
Inventories46.9(115.9)(13.1)
Accounts payable(190.5)29.962.3
Customer deposits and credits35.529.8(8.2)
Taxes accrued8.74.59.0
Interest accrued(11.6)4.33.8
Overrecovered gas and fuel costs99.627.98.6
Exchange gas receivable/payable(31.7)(43.9)21.5
Other accruals(55.1)4.41.8
Prepayments and other current assets0.7(4.5)(8.3)
Regulatory assets/liabilities(17.6)(255.6)436.5
Postretirement and postemployment benefits25.6136.0(435.8)
Deferred credits(10.1)9.17.8
Deferred charges and other noncurrent assets5.23.910.5
Other noncurrent liabilities(20.3)(4.3)6.4
Net Operating Activities from Continuing Operations1,163.4761.2967.8
Net Operating Activities from Discontinued Operations293.4558.4469.0
Net Cash Flows from Operating Activities1,456.81,319.61,436.8
Investing Activities
Capital expenditures(1,360.7)(1,282.5)(1,205.1)
Proceeds from disposition of assets4.54.72.7
Restricted cash withdrawals (deposits)(4.8)(17.1)38.7
Cash contributions from CPG3,798.2——
Other investing activities(62.2)(18.6)(58.7)
Net Investing Activities from (used for) Continuing Operations2,375.0(1,313.5)(1,222.4)
Net Investing Activities used for Discontinued Operations(430.1)(803.1)(669.0)
Net Cash Flows from (used for) Investing Activities1,944.9(2,116.6)(1,891.4)
Financing Activities
Cash of CPG at Separation(136.8)——
Issuance of long-term debt—748.41,307.6
Repayments of long-term debt and capital lease obligations(2,092.2)(521.0)(510.9)
Premium and other debt related costs(93.5)(8.7)(3.2)
Change in short-term borrowings, net(936.4)878.1(78.1)
Issuance of common stock22.530.343.7
Acquisition of treasury stock(20.4)(10.2)(8.1)
Dividends paid - common stock(263.4)(321.3)(305.9)
Net Financing Activities from (used for) Continuing Operations(3,520.2)795.6445.1
Net Financing Activities from Discontinued Operations108.6——
Net Cash Flows from (used for) Financing Activities(3,411.6)795.6445.1
Change in cash and cash equivalents from continuing operations18.2243.3190.5
Change in cash and cash equivalents used for discontinued operations(28.1)(244.7)(200.0)
Change in cash included in discontinued operations0.5(0.2)0.4
Cash and cash equivalents at beginning of period24.926.535.6
Cash and Cash Equivalents at End of Period$15.5$24.9$26.5

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED LONG-TERM DEBT

As of December 31, (in millions)20152014
Columbia of Massachusetts:
Medium-term notes -
Interest rates between 6.26% and 6.43% with a weighted average interest rate of 6.30% and maturities between December 15, 2025 and February 15, 2028$40.0$40.0
Unamortized issuance costs and discount on long-term debt(3.0)(3.3)
Total long-term debt of Columbia of Massachusetts37.036.7
Columbia of Ohio:
Capital lease obligations138.696.4
Total long-term debt of Columbia of Ohio138.696.4
Capital Markets:
Senior Notes - 6.78%, due December 1, 20273.03.0
Medium-term notes -
Issued at interest rates between 7.82% and 7.99%, with a weighted average interest rate of 7.92% and various maturities between March 27, 2017 and May 5, 2027106.0106.0
Unamortized issuance costs and discount on long-term debt(0.7)(0.8)
Total long-term debt of Capital Markets108.3108.2
NiSource Corporate Services:
Capital lease obligations -
Interest rate of 5.586% due December 31, 2016—0.5
Interest rate of 3.264% due October 31, 20191.92.0
Interest rate of 2.156% due November 30, 20190.4—
Total long-term debt of NiSource Corporate Services2.32.5
NiSource Development Company:
NDC Douglas Properties - Notes Payable -
Interest rate of 5.56% due July 1, 20412.12.1
Total long-term debt of NiSource Development Company2.12.1

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED LONG-TERM DEBT

As of December 31, (in millions)20152014
NiSource Finance:
Long-term notes -
10.75% - due March 15, 2016—201.5
Variable rate - due April 15, 2016—325.0
5.41% - due November 28, 2016—90.0
Variable rate - due August 18, 2017—750.0
5.25% - due September 15, 2017210.4450.0
6.40% - due March 15, 2018476.0800.0
6.80% - due January 15, 2019500.0500.0
5.45% - due September 15, 2020550.0550.0
4.45% - due December 1, 202163.6250.0
6.125% - due March 1, 2022500.0500.0
3.85% - due February 15, 2023250.0250.0
5.89% - due November 28, 2025265.0265.0
6.25% - due December 15, 2040250.0250.0
5.95% - due June 15, 2041400.0400.0
5.80% - due February 1, 2042250.0250.0
5.25% - due February 15, 2043500.0500.0
4.80% - due February 15, 2044750.0750.0
5.65% - due February 1, 2045500.0500.0
Unamortized issuance costs and discount on long-term debt(41.4)(49.6)
Total long-term debt of NiSource Finance5,423.67,531.9
NIPSCO:
Capital lease obligations -
Interest rate of 3.95% due June 30, 202245.552.8
Pollution control bonds -
Reoffered interest rates between 5.70% and 5.85%, with a weighted average interest rate of 5.76% and various maturities between July 1, 2017 and April 1, 201996.0226.0
Medium-term notes -
Issued at interest rates between 7.02% and 7.69%, with a weighted average interest rate of 7.57% and various maturities between June 12, 2017 and August 4, 202795.595.5
Unamortized issuance costs and discount on long-term debt(0.4)(0.6)
Total long-term debt of NIPSCO236.6373.7
Total Long-Term Debt, Excluding Amount due within One Year$5,948.5$8,151.5

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS’ EQUITY

(in millions)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total
Balance as of January 1, 2013$3.1$(40.5)$4,597.6$1,059.6$(65.5)$5,554.3
Comprehensive Income (Loss):
Net Income———532.1—532.1
Other comprehensive income (loss), net of tax————21.921.9
Dividends:
Common stock ($0.98 per share)———(306.2)—(306.2)
Treasury stock acquired—(8.1)———(8.1)
Issued:
Common stock issuance0.1————0.1
Employee stock purchase plan——2.9——2.9
Long-term incentive plan——43.8——43.8
401(k) and profit sharing issuance——37.8——37.8
Dividend reinvestment plan——8.0——8.0
Balance as of December 31, 2013$3.2$(48.6)$4,690.1$1,285.5$(43.6)$5,886.6
Comprehensive Income (Loss):
Net Income———530.0—530.0
Other comprehensive income (loss), net of tax————(7.0)(7.0)
Dividends:
Common stock ($1.02 per share)———(321.5)—(321.5)
Treasury stock acquired—(10.3)———(10.3)
Issued:
Employee stock purchase plan——4.2——4.2
Long-term incentive plan——40.2——40.2
401(k) and profit sharing issuance——45.3——45.3
Dividend reinvestment plan——7.8——7.8
Balance as of December 31, 2014$3.2$(58.9)$4,787.6$1,494.0$(50.6)$6,175.3

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NISOURCE INC.

STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS’ EQUITY

(in millions)Common StockTreasury StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income/(Loss)Total
Balance as of December 31, 2014$3.2$(58.9)$4,787.6$1,494.0$(50.6)$6,175.3
Comprehensive Income (Loss):
Net Income attributable to NiSource———286.5—286.5
Other comprehensive income (loss), net of tax————(11.0)(11.0)
Allocation of AOCI to noncontrolling interest(2)————2.02.0
Dividends:
Common stock ($0.83 per share)———(263.5)—(263.5)
Distribution of CPG stock to shareholders (Note 3)———(2,640.3)24.5(2,615.8)
Treasury stock acquired—(20.4)———(20.4)
Issued:
Employee stock purchase plan——5.1——5.1
Long-term incentive plan——4.2——4.2
401(k) and profit sharing issuance——46.7——46.7
Dividend reinvestment plan——7.3——7.3
Sale of interest in Columbia OpCo to CPPL(1)(2)——227.1——227.1
Balance as of December 31, 2015$3.2$(79.3)$5,078.0$(1,123.3)$(35.1)$3,843.5

(1)Represents the purchase of an additional 8.4% limited partner interest in Columbia OpCo by an affiliate of CPG, recorded at the historical carrying value of Columbia OpCo's net assets after giving effect to the $1,168.4 million equity contribution from CPPL's IPO completed on February 11, 2015.

(2)This transaction, which occurred prior to the Separation, was distributed through retained earnings as part of the Separation on July 1, 2015.

Shares (in thousands)Common SharesTreasury SharesOutstanding Shares
Balance January 1, 2013312,291(2,010)310,281
Treasury stock acquired(297)(297)
Issued:
Employee stock purchase plan102—102
Long-term incentive plan2,037—2,037
Dividend reinvestment272—272
Retirement savings plan1,281—1,281
Balance December 31, 2013315,983(2,307)313,676
Treasury stock acquired(292)(292)
Issued:
Employee stock purchase plan113—113
Long-term incentive plan1,125—1,125
Dividend reinvestment206—206
Retirement savings plan1,209—1,209
Balance December 31, 2014318,636(2,599)316,037
Treasury stock acquired(472)(472)
Issued:
Employee stock purchase plan203—203
Long-term incentive plan1,423—1,423
Dividend reinvestment275—275
Retirement savings plan1,644—1,644
Balance December 31, 2015322,181(3,071)319,110

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

1.Nature of Operations and Summary of Significant Accounting Policies

A. Company Structure and Principles of Consolidation. NiSource, a Delaware corporation, is an energy holding company whose subsidiaries are fully regulated natural gas and electric utility companies serving approximately 3.9 million customers in seven states. NiSource generates substantially all of its operating income through these rate-regulated businesses.

The consolidated financial statements include the accounts of NiSource and its majority-owned subsidiaries after the elimination of all intercompany accounts and transactions. Investments for which at least a 20% interest is owned, certain joint ventures and limited partnership interests of more than 3% are accounted for under the equity method. Except where noted above and in the event where NiSource has significant influence, investments with less than a 20% interest are accounted for under the cost method. NiSource also consolidates variable interest entities for which NiSource is the primary beneficiary.

On July 1, 2015, NiSource completed the Separation. CPG's operations consisted of all of NiSource's Columbia Pipeline Group Operations segment prior to the Separation. Following the Separation, NiSource retained no ownership interest in CPG.

The results of operations and cash flows for the former Columbia Pipeline Group Operations segment have been reported as discontinued operations for all periods presented. Additionally, the assets and liabilities of the former Columbia Pipeline Group Operations segment were reclassified as assets and liabilities of discontinued operations for all prior periods. See Note 3, "Discontinued Operations," for additional information.

B. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

C. Cash, Cash Equivalents, and Restricted Cash. NiSource considers all investments with original maturities of three months or less to be cash equivalents. NiSource reports amounts deposited in brokerage accounts for margin requirements as restricted cash. In addition, NiSource has amounts deposited in trust to satisfy requirements for the provision of various property, liability, workers compensation, and long-term disability insurance, which is classified as restricted cash and disclosed as an investing cash flow on the Statements of Consolidated Cash Flows.

Restricted cash was $29.7 million and $24.9 million as of December 31, 2015 and 2014, respectively. The increase in restricted cash was primarily a result of higher margin requirements due to open derivative contracts.

D. Accounts Receivable and Unbilled Revenue. Accounts receivable on the Consolidated Balance Sheets includes both billed and unbilled amounts as NiSource believes that total accounts receivable is a more meaningful presentation, given the factors which impact both billed and unbilled accounts receivable. Unbilled revenue is based on estimated amounts of electric energy or natural gas delivered but not yet billed to its customers. Unbilled amounts of accounts receivable relate to a portion of a customer’s consumption of gas or electricity from the date of the last cycle billing date through the last day of the month (balance sheet date). Factors taken into consideration when estimating unbilled revenue include historical usage, customer rates and weather. Accounts receivable fluctuates from year to year depending in large part on weather impacts and price volatility. NiSource’s accounts receivable on the Consolidated Balance Sheets includes unbilled revenue, less reserves, in the amounts of $237.1 million and $340.5 million for the years ended December 31, 2015 and 2014, respectively. The reserve for uncollectible receivables is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable. The Company determined the reserve based on historical experience and in consideration of current market conditions. Account balances are charged against the allowance when it is anticipated the receivable will not be recovered.

E. Investments in Debt and Equity Securities. NiSource’s investments in debt and equity securities are carried at fair value and are designated as available-for-sale. These investments are included within “Other investments” on the Consolidated Balance Sheets. Unrealized gains and losses, net of deferred income taxes, are reflected as accumulated other comprehensive income (loss). These investments are monitored for other than temporary declines in market value. Realized gains and losses and permanent impairments are reflected in the Statements of Consolidated Income. No material impairment charges were recorded for the years ended December 31, 2015, 2014 and 2013.

F. Basis of Accounting for Rate-Regulated Subsidiaries. Rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

to recover the costs of providing the regulated service and it is probable that such rates can be charged and collected. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the Consolidated Balance Sheets and are recognized in income as the related amounts are included in customer rates and recovered from or refunded to customers.

In the event that regulation significantly changes the opportunity for NiSource to recover its costs in the future, all or a portion of NiSource’s regulated operations may no longer meet the criteria for regulatory accounting. In such an event, a write-down of all or a portion of NiSource’s existing regulatory assets and liabilities could result. If transition cost recovery was approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts. If unable to continue to apply the provisions of regulatory accounting, NiSource would be required to apply the provisions of ASC 980-20, Discontinuation of Rate-Regulated Accounting. In management’s opinion, NiSource’s regulated subsidiaries will be subject to regulatory accounting for the foreseeable future. Refer to Note 7, "Regulatory Matters," for additional information.

G. Utility Plant and Other Property and Related Depreciation and Maintenance. Property, plant and equipment (principally utility plant) is stated at cost. The rate-regulated subsidiaries record depreciation using composite rates on a straight-line basis over the remaining service lives of the electric, gas and common properties as approved by the appropriate regulators.

The weighted average depreciation provisions for utility plant, as a percentage of the original cost, for the periods ended December 31, 2015, 2014 and 2013 were as follows:

201520142013
Electric Operations3.1%3.0%3.2%
Gas Distribution Operations2.0%2.1%2.1%

For rate-regulated companies, AFUDC is capitalized on all classes of property except organization costs, land, autos, office equipment, tools and other general property purchases. The allowance is applied to construction costs for that period of time between the date of the expenditure and the date on which such project is placed in service. The pre-tax rate for AFUDC was 4.7% in 2015, 4.5% in 2014 and 4.1% in 2013.

Generally, NiSource’s subsidiaries follow the practice of charging maintenance and repairs, including the cost of removal of minor items of property, to expense as incurred. When regulated property that represents a retired unit is replaced or removed, the cost of such property is credited to utility plant, and such cost, net of salvage, is charged to the accumulated provision for depreciation in accordance with composite depreciation.

H. Carrying Charges and Deferred Depreciation. NIPSCO has capitalized debt-based carrying charges and deferred depreciation related to Sugar Creek in accordance with the February 18, 2008 Order of the IURC. The deferral of Sugar Creek debt-based carrying charges and the deferral of depreciation ceased in December 2011 and deferred balances are being amortized over five years beginning January 2012. As of December 31, 2015, the remaining balance to be amortized is $14.3 million. An additional $13.9 million is deferred for consideration in NIPSCO's current electric base rate case. Management believes this amount is probable of recovery through future rates.

In 2005, the PUCO authorized Columbia of Ohio to revise its depreciation accrual rates for the period beginning January 1, 2005. The revised depreciation rates are now higher than those which would have been utilized if Columbia of Ohio were not subject to regulation. The amount of depreciation that would have been recorded for 2005 through 2015 had Columbia of Ohio not been subject to rate regulation is a combined $559.8 million, $66.4 million less than the $626.2 million reflected in rates. The regulatory asset was $65.3 million and $72.3 million as of December 31, 2015 and 2014, respectively. The amount of depreciation that would have been recorded for 2015 had Columbia of Ohio not been subject to rate regulation is $74.7 million, $7.0 million less than the $81.7 million reflected in rates.

Columbia of Ohio has PUCO approval to defer depreciation associated with its IRP and capital expenditure program. As of December 31, 2015, depreciation of $38.5 million was deferred for the programs. Recovery of the IRP depreciation is approved annually through the IRP rider (see Note 7, "Regulatory Matters"). The equivalent of annual depreciation expense, based on the average life of the related assets, is included in the calculation of the rider approved by the PUCO and billed to customers. Deferred

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

depreciation expense is recognized as the rider is billed to customers. The recovery mechanism for depreciation associated with the capital expenditure program will be addressed in a separate proceeding.

I. Amortization of Software Costs. External and internal costs associated with computer software developed for internal use are capitalized. Capitalization of such costs commences upon the completion of the preliminary stage of each project. Once the installed software is ready for its intended use, such capitalized costs are amortized on a straight-line basis generally over a period of five years. NiSource amortized $41.1 million in 2015, $33.7 million in 2014 and $31.3 million in 2013 related to software costs. NiSource’s unamortized software balance was $167.1 million and $162.3 million at December 31, 2015 and 2014, respectively.

J. Goodwill and Other Intangible Assets. NiSource has $1,690.7 million in goodwill. Substantially all goodwill relates to the excess of cost over the fair value of the net assets acquired in the Columbia acquisition on November 1, 2000. In addition, NiSource has other intangible assets consisting primarily of franchise rights apart from goodwill that were identified as part of the purchase price allocations associated with the acquisition of Columbia of Massachusetts, a wholly-owned subsidiary of NiSource, which is being amortized on a straight-line basis over forty years from the date of acquisition. See Note 5, "Goodwill and Other Intangible Assets," for additional information.

K. Long-lived Assets. NiSource’s Consolidated Balance Sheets contain significant long-lived assets other than goodwill

and intangible assets discussed above. As a result, NiSource assesses the carrying amount and potential earnings of these assets whenever events or changes in circumstances indicate that the carrying value could be impaired. There were no significant impairments for the years ended December 31, 2015, 2014 and 2013.

L. Revenue Recognition. Revenue is recorded as products and services are delivered. Utility revenues are billed to customers monthly on a cycle basis. Revenues are recorded on the accrual basis and include estimates for electricity and gas delivered but not billed.

M. Earnings Per Share. Basic EPS is computed by dividing net income attributable to NiSource by the weighted-average number of shares of common stock outstanding for the period. The weighted average shares outstanding for diluted EPS include the incremental effects of the various long-term incentive compensation plans.

The numerator in calculating both basic and diluted EPS for each year is reported net income attributable to NiSource. The computation of diluted average common shares follows:

Diluted Average Common Shares Computation201520142013
Denominator (thousands)
Basic average common shares outstanding317,746315,120312,402
Dilutive potential common shares
Nonqualified stock options—680
Shares contingently issuable under employee stock plans(1)—1,066708
Shares restricted under stock plans(1)2,090444456
Diluted Average Common Shares319,836316,636313,646

(1) Change due to Separation-related adjustments, see Note 13, "Share-Based Compensation."

N. Estimated Rate Refunds. Certain rate-regulated subsidiaries collect revenues subject to refund pending final determination in rate proceedings. In connection with such revenues, estimated rate refund liabilities are recorded which reflect management’s current judgment of the ultimate outcomes of the proceedings. No provisions are made when, in the opinion of management, the facts and circumstances preclude a reasonable estimate of the outcome.

O. Accounts Receivable Transfer Program. Certain of NiSource’s subsidiaries have agreements with third parties to sell certain accounts receivable without recourse. These transfers of accounts receivable are accounted for as secured borrowings. The entire gross receivables balance remains on the December 31, 2015 and 2014 Consolidated Balance Sheets and short-term debt is recorded in the amount of proceeds received from the purchasers involved in the transactions. Fees associated with the securitization transactions are recorded as interest expense. Refer to Note 17, "Transfers of Financial Assets," for further information.

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

P. Fuel Adjustment Clause. NIPSCO defers most differences between fuel and power purchase costs and the recovery of such costs in revenue, and adjusts future billings for such deferrals on a basis consistent with applicable state-approved tariff provisions.

Q. Gas Cost Adjustment Clause. All of NiSource’s Gas Distribution Operations subsidiaries defer most differences between gas purchase costs and the recovery of such costs in revenues, and adjust future billings for such deferrals on a basis consistent with applicable state-approved tariff provisions.

R. Gas Inventory. Both the LIFO inventory methodology and the weighted average cost methodology are used to value natural gas in storage, as approved by regulators for each of NiSource’s regulated subsidiaries. Inventory valued using LIFO was $50.2 million and $55.1 million at December 31, 2015, and 2014, respectively. Based on the average cost of gas using the LIFO method, the estimated replacement cost of gas in storage was less than the stated LIFO cost by $27.2 million and $15.8 million at December 31, 2015 and 2014, respectively. Inventory valued using the weighted average cost methodology was $293.3 million at December 31, 2015 and $385.2 million at December 31, 2014.

S. Accounting for Exchange and Balancing Arrangements of Natural Gas. NiSource’s Gas Distribution Operations segment enters into balancing and exchange arrangements of natural gas as part of its operations and off-system sales programs. NiSource records a receivable or payable for its respective cumulative gas imbalances as well as for any gas inventory borrowed or lent under a Gas Distributions Operations exchange agreement. These receivables and payables are recorded as “Exchange gas receivable” or “Exchange gas payable” on NiSource’s Consolidated Balance Sheets, as appropriate.

T. Accounting for Risk Management Activities. NiSource accounts for its derivatives and hedging activities in accordance with ASC 815. NiSource recognizes all derivatives as either assets or liabilities on the Consolidated Balance Sheets at fair value, unless such contracts are exempted as a normal purchase normal sale under the provisions of the standard. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and resulting designation. There were no material derivative assets or liabilities as of December 31, 2015 and 2014.

U. Income Taxes and Investment Tax Credits. NiSource records income taxes to recognize full interperiod tax allocations. Under the liability method, deferred income taxes are provided for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amount and the tax basis of existing assets and liabilities. Previously recorded investment tax credits of the regulated subsidiaries were deferred on the balance sheet and are being amortized to book income over the regulatory life of the related properties to conform to regulatory policy.

To the extent certain deferred income taxes of the regulated companies are recoverable or payable through future rates, regulatory assets and liabilities have been established. Regulatory assets for income taxes are primarily attributable to property related tax timing differences for which deferred taxes had not been provided in the past, when regulators did not recognize such taxes as costs in the ratemaking process. Regulatory liabilities for income taxes are primarily attributable to the regulated companies’ obligation to refund to ratepayers deferred income taxes provided at rates higher than the current federal income tax rate. Such amounts are credited to ratepayers using either the average rate assumption method or the reverse South Georgia method.

Pursuant to the U.S. Internal Revenue Code and relevant state taxing authorities, NiSource and its subsidiaries file consolidated income tax returns for federal and certain state jurisdictions. NiSource and its subsidiaries are parties to an agreement (the “Tax Allocation Agreement”) that provides for the allocation of consolidated tax liabilities. The Tax Allocation Agreement generally provides that each party is allocated an amount of tax similar to that which would be owed had the party been separately subject to tax. On June 30, 2015, in connection with the Separation, NiSource entered into an additional Tax Allocation Agreement with CPG to set forth their agreement with respect to tax matters for taxable periods prior to and including June 30, 2015.

V. Environmental Expenditures. NiSource accrues for costs associated with environmental remediation obligations when the incurrence of such costs is probable and the amounts can be reasonably estimated, regardless of when the expenditures are actually made. The undiscounted estimated future expenditures are based on currently enacted laws and regulations, existing technology and estimated site-specific costs where assumptions may be made about the nature and extent of site contamination, the extent of cleanup efforts, costs of alternative cleanup methods and other variables. The liability is adjusted as further information is discovered or circumstances change. The reserves for estimated environmental expenditures are recorded on the Consolidated Balance Sheets in “Legal and environmental” reserves for short-term portions of these liabilities and “Other noncurrent liabilities” for the respective long-term portions of these liabilities. Rate-regulated subsidiaries applying regulatory accounting establish

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

regulatory assets on the Consolidated Balance Sheets to the extent that future recovery of environmental remediation costs is probable through the regulatory process. Refer to Note 18, "Other Commitments and Contingencies," for further information.

W. Excise Taxes. NiSource accounts for excise taxes that are customer liabilities by separately stating on its invoices the tax to its customers and recording amounts invoiced as liabilities payable to the applicable taxing jurisdiction. These types of taxes, comprised largely of sales taxes collected, are presented on a net basis affecting neither revenues nor cost of sales. NiSource accounts for taxes for which it is liable by recording a liability for the expected tax with a corresponding charge to “Other taxes” expense.

2.Recent Accounting Pronouncements

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 makes limited amendments to the guidance in GAAP on the classification and measurement of financial instruments. The standard requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. Additionally, entities will have to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. NiSource is required to adopt ASU 2016-01 for periods beginning after December 15, 2017, including interim periods, with early adoption permitted for certain aspects of the standard. NiSource is currently evaluating the impact the adoption of ASU 2016-01 will have on its Consolidated Financial Statements or Notes to Consolidated Financial Statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires entities to present deferred tax assets and liabilities as noncurrent on the balance sheet. This ASU simplifies current guidance which requires entities to separately classify deferred tax assets and liabilities as current or noncurrent on the balance sheet. NiSource is required to adopt ASU 2015-17 for periods beginning after December 15, 2016, including interim periods, with early adoption permitted. NiSource adopted ASU 2015-17 as of December 31, 2015 for both current and prior periods. See Note 9, "Income Taxes," in the Notes to Consolidated Financial Statements for more information on the impact of adopting this standard.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 replaces the current lower of cost or market test with a lower of cost or net realizable value test. The new standard applies only to inventories for which cost is determined by methods other than LIFO and the retail inventory method. NiSource is required to adopt ASU 2015-11 for periods beginning after December 15, 2016, including interim periods, with early adoption permitted. NiSource is currently evaluating the impact the adoption of ASU 2015-11 will have on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date by one year for ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim periods. Companies are permitted to adopt ASU 2014-09 on the original effective date of the ASU. NiSource is currently evaluating the impact the adoption of ASU 2014-09 will have on its Consolidated Financial Statements or Notes to Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value (NAV) per Share (or its Equivalent). ASU 2015-07 eliminates the requirement to categorize investments measured at NAV in the fair value hierarchy table. Instead, an entity is required to include those investments as a reconciling line item so that the total fair value of investments in the footnote disclosure reconciles to the Consolidated Balance Sheets. NiSource is required to adopt ASU 2015-07 for periods beginning after December 15, 2015, including interim periods, and the guidance is to be applied retrospectively, with early adoption permitted. NiSource adopted ASU 2015-07 as of December 31, 2015. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 clarifies guidance on determining whether

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

a cloud computing arrangement contains a software license that should be accounted for as internal-use software. NiSource is required to adopt ASU 2015-05 for periods beginning after December 15, 2015, including interim periods, and the guidance is permitted to be applied either (1) prospectively to all agreements entered into or materially modified after the effective date or (2) retrospectively, with early adoption permitted. NiSource is currently evaluating the impact the adoption of ASU 2015-05 will have on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 changes the way entities present debt issuance costs in financial statements by presenting issuance costs on the balance sheet as a direct deduction from the related debt liability rather than as a deferred charge. Amortization of these costs will continue to be reported as interest expense. NiSource is required to adopt ASU 2015-03 for periods beginning after December 15, 2015, including interim periods, and the guidance is to be applied retrospectively with early adoption permitted. NiSource adopted ASU 2015-03 as of December 31, 2015. The adoption of this standard did not have a material impact on the Consolidated Financial Statements or Notes to Consolidated Financial Statements.

  1. Discontinued Operations

On July 1, 2015, NiSource completed the Separation through a special pro rata stock dividend, distributing one share of CPG common stock for every one share of NiSource common stock held by any NiSource stockholder on June 19, 2015, the record date. The Separation resulted in two stand-alone energy infrastructure companies: NiSource, a fully regulated natural gas and electric utilities company, and CPG, a natural gas pipeline, midstream and storage company. As a stand-alone company, on the date of the Separation, CPG's operations consisted of NiSource's Columbia Pipeline Group Operations segment prior to the Separation. Following the Separation, NiSource retained no ownership interest in CPG. On the date of the Separation, CPG consisted of approximately $9.2 billion of assets, $5.6 billion of liabilities and $3.6 billion of equity.

The results of operations and cash flows for the former Columbia Pipeline Group Operations segment have been reported as discontinued operations for all periods presented. Additionally, the assets and liabilities of the former Columbia Pipeline Group Operations segment were reclassified as assets and liabilities of discontinued operations for all prior periods.

On September 1, 2013, NiSource sold the commercial and industrial natural gas portfolio of its unregulated natural gas marketing business. The sale included the physical contracts and associated financial hedges that comprise the portfolio, as well as the gas inventory and customer deposits of the business. For the year ended December 31, 2013, an after tax loss of $1.5 million was included in Gain on Disposition of Discontinued Operations, net of taxes in the Statements of Consolidated Income.

In January 2013, NiSource sold the service plan and leasing business lines of its Retail Services business. For the year ended December 31, 2013, an after tax gain of $36.4 million was included in Gain on Disposition of Discontinued Operations, net of taxes in the Statements of Consolidated Income.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Results from discontinued operations are provided in the following table. These results are primarily from NiSource's former Columbia Pipeline Group Operations segment.

Year Ended
December 31, 2015
(in millions)Columbia Pipeline Group OperationsCorporate and OtherTotal
Net Revenues
Transportation and storage revenues$561.4$—$561.4
Other revenues94.3—94.3
Total Sales Revenues655.7—655.7
Less: Cost of sales (excluding depreciation and amortization)0.2—0.2
Net Revenues655.5—655.5
Operating Expenses
Operation and maintenance375.8(1)—375.8
Depreciation and amortization66.4—66.4
Gain on sale of assets(13.6)—(13.6)
Other taxes38.0—38.0
Total Operating Expenses466.6—466.6
Equity Earnings in Unconsolidated Affiliates29.1—29.1
Operating Income from Discontinued Operations218.0—218.0
Other Income (Deductions)
Interest expense, net(37.1)—(37.1)
Other, net7.80.48.2
Total Other Income (Deductions)(29.3)0.4(28.9)
Income from Discontinued Operations before Income Taxes188.70.4189.1
Income Taxes84.70.985.6
Income (Loss) from Discontinued Operations - net of taxes$104.0$(0.5)$103.5

(1) Includes approximately $55.4 million of transaction costs related to the Separation.

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Year Ended
December 31, 2014
(in millions)Columbia Pipeline Group OperationsCorporate and OtherTotal
Net Revenues
Transportation and storage revenues$1,034.3$—$1,034.3
Other revenues312.9—312.9
Total Sales Revenues1,347.2—1,347.2
Less: Cost of sales (excluding depreciation and amortization)0.3—0.3
Net Revenues1,346.9—1,346.9
Operating Expenses
Operation and maintenance769.1(1)—769.1
Depreciation and amortization118.6—118.6
Gain on sale of assets(34.5)—(34.5)
Other taxes67.1—67.1
Total Operating Expenses920.3—920.3
Equity Earnings in Unconsolidated Affiliates46.6—46.6
Operating Income from Discontinued Operations473.2—473.2
Other Income (Deductions)
Interest expense, net(64.1)—(64.1)
Other, net8.9(1.0)7.9
Total Other Income (Deductions)(55.2)(1.0)(56.2)
Income (Loss) from Discontinued Operations before Income Taxes418.0(1.0)417.0
Income Taxes143.5(0.3)143.2
Income (Loss) from Discontinued Operations - net of taxes$274.5$(0.7)$273.8

(1) Includes approximately $23.7 million of transaction costs related to the Separation.

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Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Year Ended
December 31, 2013
(in millions)Columbia Pipeline Group OperationsCorporate and OtherTotal
Net Revenues
Transportation and storage revenues$971.1$—$971.1
Other revenues208.72.5211.2
Total Sales Revenues1,179.82.51,182.3
Less: Cost of sales (excluding depreciation and amortization)0.4—0.4
Net Revenues1,179.42.51,181.9
Operating Expenses
Operation and maintenance619.5—619.5
Depreciation and amortization106.9—106.9
Gain on sale of assets(18.6)—(18.6)
Other taxes62.2—62.2
Total Operating Expenses770.0—770.0
Equity Earnings in Unconsolidated Affiliates35.9—35.9
Operating Income from Discontinued Operations445.32.5447.8
Other Income (Deductions)
Interest expense, net(39.5)—(39.5)
Other, net17.49.126.5
Total Other Income (Deductions)(22.1)9.1(13.0)
Income from Discontinued Operations before Income Taxes423.211.6434.8
Income Taxes153.35.3158.6
Income from Discontinued Operations - net of taxes$269.9$6.3$276.2
Gain on Disposition of Discontinued Operations - net of taxes$—$34.9$34.9

CPG’s financing requirements prior to the private placement of senior notes on May 22, 2015 were satisfied through borrowings from NiSource Finance. Interest expense from discontinued operations primarily represents net interest charged to CPG from NiSource Finance, less AFUDC. Subsequent to May 22, 2015, interest expense from discontinued operations also includes interest incurred on CPG’s private placement of $2,750.0 million of senior notes.

Continuing Involvement

Natural gas transportation and storage services provided to NiSource by CPG were $147.6 million, $146.2 million and $147.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. Prior to July 1, 2015, these costs were eliminated in consolidation. Beginning July 1, 2015, these costs and associated cash flows represent third-party transactions with CPG and are not eliminated in consolidation, as such services have continued subsequent to the Separation and are expected to continue for the foreseeable future.

As a result of the Separation, NiSource and CPG entered into Transition Services Agreements (TSAs). NiSource expects the TSAs to terminate within 18 months from the date of the Separation. The TSAs set forth the terms and conditions for NiSource and CPG to provide certain transition services to one another. Under the TSAs, NiSource provides CPG certain information technology, financial and accounting, human resource and other specified services. For the period July 1, 2015 to December 31, 2015, the amounts NiSource billed CPG for these services were not significant.

There were no material assets and liabilities of discontinued operations on the Consolidated Balance Sheets at December 31, 2015.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

The assets and liabilities of discontinued operations on the Consolidated Balance Sheets at December 31, 2014 were:

December 31, 2014
(in millions)Columbia Pipeline Group Operations
Current Assets
Cash and cash equivalents$0.5
Accounts receivable, net149.3
Gas inventory4.8
Materials and supplies, at average cost24.9
Exchange gas receivable34.8
Regulatory assets6.1
Prepayments and other63.0
Total current assets$283.4
Noncurrent Assets
Net property, plant and equipment$4,959.7
Goodwill1,975.5
Unconsolidated affiliates444.3
Other investments5.6
Regulatory assets151.9
Deferred charges and other9.0
Total noncurrent assets$7,546.0

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

December 31, 2014
(in millions)Columbia Pipeline Group Operations
Current Liabilities
Accounts payable$60.5
Customer deposits and credits13.4
Taxes accrued106.9
Exchange gas payable34.7
Deferred revenue22.2
Regulatory liabilities1.3
Accrued liability for postretirement and postemployment benefits0.6
Legal and environmental1.5
Accrued capital expenditures61.1
Other accruals66.8
Total current liabilities$369.0
Noncurrent Liabilities
Deferred income taxes$1,214.3
Deferred investment tax credits0.2
Deferred credits0.2
Accrued liability for postretirement and postemployment benefits(1)(58.0)
Regulatory liabilities294.2
Asset retirement obligations23.2
Other noncurrent liabilities84.3
Total noncurrent liabilities$1,558.4

(1) Represents Columbia Pipeline Group segment's overfunded position in NiSource's net underfunded other postretirement plan.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

4.Property, Plant and Equipment

NiSource’s property, plant and equipment on the Consolidated Balance Sheets are classified as follows:

At December 31, (in millions)20152014
Property Plant and Equipment
Gas Distribution Utility(1)$10,620.4$9,753.9
Electric Utility(1)7,765.77,160.0
Common Utility107.2181.5
Construction Work in Process453.6573.0
Non-Utility and Other41.243.1
Total Property, Plant and Equipment$18,988.1$17,711.5
Accumulated Depreciation and Amortization
Gas Distribution Utility(1)$(3,029.0)$(2,922.7)
Electric Utility(1)(3,767.7)(3,596.5)
Common Utility(56.7)(110.3)
Non-Utility and Other(23.2)(24.6)
Total Accumulated Depreciation and Amortization$(6,876.6)$(6,654.1)
Net Property, Plant and Equipment$12,111.5$11,057.4

(1) NIPSCO’s common utility plant and associated accumulated depreciation and amortization are allocated between Gas Distribution Utility and Electric Utility Property, Plant and Equipment.

5.Goodwill and Other Intangible Assets

The following presents NiSource's goodwill balance allocated by segment as of December 31, 2015:

(in millions)Gas Distribution OperationsElectric OperationsCorporate and OtherTotal
Goodwill$1,690.7$—$—$1,690.7

Goodwill previously allocated to the former Columbia Pipeline Group Operations segment was disposed of in conjunction with the Separation. For prior periods, such balances are presented within "Assets of discontinued operations" on the Consolidated Balance Sheets. There were no other changes to the goodwill balance during 2015.

NiSource's intangible assets, apart from goodwill, consist of franchise rights, which were identified as part of the purchase price allocations associated with the acquisition in February 1999 of Columbia of Massachusetts. These amounts were $253.7 million and $264.7 million, net of accumulated amortization of $188.5 million and $177.5 million, at December 31, 2015 and 2014, respectively and are being amortized over forty years from the date of acquisition. NiSource recorded amortization expense of $11.0 million in 2015, 2014, and 2013 related to its intangible assets. NiSource expects amortization expense to be $11.0 million per year for 2016-2020.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

6.Asset Retirement Obligations

Changes in NiSource’s liability for asset retirement obligations for the years 2015 and 2014 are presented in the table below:

(in millions)20152014
Beginning Balance$136.2$148.1
Accretion recorded as a regulatory asset/liability8.68.2
Additions6.50.3
Settlements(7.0)(2.2)
Change in estimated cash flows (1)109.7(18.2)
Ending Balance$254.0$136.2

(1)The change in estimated cash flows for 2015 is primarily attributable to estimated costs associated with the EPA's final rule for regulation of CCRs and changes to cost estimates for certain solid waste management units. See Note 18, "Other Commitments and Contingencies," for additional information on CCRs. The change in estimated cash flows for 2014 is primarily attributed to changes in estimated costs and settlement timing for electric generating stations and to retire pipeline.

NiSource has recognized asset retirement obligations associated with various legal obligations including costs to remove and dispose of certain construction materials located within many of NiSource’s facilities, certain costs to retire pipeline, removal costs for certain underground storage tanks, removal of certain pipelines known to contain PCB contamination, closure costs for certain sites including ash ponds, solid waste management units and a landfill, as well as some other nominal asset retirement obligations. NiSource has a significant obligation associated with the decommissioning of its two hydro facilities located in Indiana. These hydro facilities have an indeterminate life, and no asset retirement obligation has been recorded.

Certain costs of removal that have been, and continue to be, included in depreciation rates and collected in the service rates of the rate-regulated subsidiaries are classified as Regulatory liabilities on the Consolidated Balance Sheets.

7.Regulatory Matters

Regulatory Assets and Liabilities

NiSource follows the accounting and reporting requirements of ASC Topic 980, which provides that regulated entities account for and report assets and liabilities consistent with the economic effect of regulatory rate-making procedures if the rates established are designed to recover the costs of providing the regulated service and it is probable that such rates can be charged and collected. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income or expense are deferred on the balance sheet and are recognized in the income statement as the related amounts are included in customer rates and recovered from or refunded to customers.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Regulatory assets were comprised of the following items:

At December 31, (in millions)20152014
Assets
Unrecognized pension benefit and other postretirement benefit costs (see Note 10)$928.7$910.3
Other postretirement costs47.046.7
Environmental costs (see Note 18-C)62.265.9
Regulatory effects of accounting for income taxes (see Note 1-U)234.1231.8
Underrecovered gas costs (see Note 1-P and 1-Q)34.832.0
Depreciation (see Note 1-H)124.5116.4
Uncollectible accounts receivable deferred for future recovery17.026.1
Post-in-service carrying charges107.287.8
EERM operation and maintenance and depreciation deferral48.131.1
Sugar Creek carrying charges and deferred depreciation (see Note 1-H)28.242.5
DSM Program35.637.9
Other139.3135.4
Total Assets$1,806.7$1,763.9
Less amounts included as Underrecovered gas cost(34.8)(32.0)
Total Regulatory Assets reflected in Current Regulatory Assets and Other Regulatory Assets$1,771.9$1,731.9

Regulatory liabilities were comprised of the following items:

At December 31, (in millions)20152014
Liabilities
Overrecovered gas and fuel costs (see Notes 1-P and 1-Q)$148.1$45.6
Cost of removal (see Note 6)1,261.51,287.0
Regulatory effects of accounting for income taxes (see Note 1-U)34.242.3
Unrecognized pension benefit and other postretirement benefit costs (see Note 10)8.110.1
Other postretirement costs38.831.9
Other91.169.4
Total Liabilities$1,581.8$1,486.3
Less amounts included as Overrecovered gas and fuel cost(148.1)(45.6)
Total Regulatory Liabilities reflected in Current Regulatory Liabilities and Other Regulatory Liabilities and Other Removal Costs$1,433.7$1,440.7

Regulatory assets, including underrecovered gas and fuel cost, of approximately $1,668.7 million as of December 31, 2015 are not earning a return on investment. Regulatory assets of approximately $1,544.0 million include expenses that are recovered as components of the cost of service and are covered by regulatory orders. These costs are recovered over a remaining life of up to 41 years. Regulatory assets of approximately $262.7 million at December 31, 2015, require specific rate action.

As noted below, regulatory assets for which costs have been incurred or accrued are included (or expected to be included, for costs incurred subsequent to the most recently approved rate case) in certain companies’ rate base, thereby providing a return on invested costs. Certain regulatory assets do not result from cash expenditures and therefore do not represent investments included in rate base or have offsetting liabilities that reduce rate base.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Assets:

Unrecognized pension benefit and other postretirement benefit costs – In 2007, NiSource adopted certain updates of ASC 715 which required, among other things, the recognition in other comprehensive income or loss of the actuarial gains or losses and the prior service costs or credits that arise during the period but that are not immediately recognized as components of net periodic benefit costs. Certain subsidiaries defer the costs as a regulatory asset in accordance with regulatory orders or as a result of regulatory precedent, to be recovered through base rates.

Other postretirement costs – Primarily comprised of costs approved through rate orders to be collected through future base rates, revenue riders or tracking mechanisms.

Environmental costs – Includes certain recoverable costs of investigating, testing, remediating and other costs related to gas plant sites, disposal sites or other sites onto which material may have migrated. Certain companies defer the costs as a regulatory asset in accordance with regulatory orders, to be recovered in future base rates, billing riders or tracking mechanisms.

Regulatory effects of accounting for income taxes – Represents the deferral and under collection of deferred taxes in the rate making process. In prior years, NiSource has lowered customer rates in certain jurisdictions for the benefits of accelerated tax deductions. Amounts are expensed for financial reporting purposes as NiSource recovers deferred taxes in the rate making process.

Underrecovered gas and fuel costs – Represents the difference between the costs of gas and fuel and the recovery of such costs in revenue, and is used to adjust future billings for such deferrals on a basis consistent with applicable state-approved tariff provisions. Recovery of these costs is achieved through tracking mechanisms.

Depreciation – Primarily relates to the difference between the depreciation expense recorded by Columbia of Ohio due to a regulatory order and the depreciation expense recorded in accordance with GAAP. The regulatory asset is currently being amortized over the life of the assets. Also included is depreciation associated with the Columbia of Ohio IRP and capital expenditure program. Recovery of these costs is achieved through base rates and rider mechanisms. Refer to Note 1-H for more information.

Uncollectible accounts receivable deferred for future recovery – Represents the difference between certain uncollectible expenses and the recovery of such costs to be collected through cost tracking mechanisms per regulatory orders.

Post-in-service carrying charges – Columbia of Ohio has approval from the PUCO by regulatory order to defer debt-based post-in-service carrying charges as a regulatory asset for future recovery. As such, Columbia of Ohio defers a debt-based carrying charge on eligible property, plant and equipment from the time it is placed into utility service until recovery of the property, plant and equipment is included in customer rates in base rates or through a rider mechanism. Inclusion in customer rates generally occurs when Columbia of Ohio files its next rate proceeding following the in-service date of the property, plant and equipment.

EERM operation and maintenance and depreciation deferral – NIPSCO obtained approval from the IURC to recover certain environmental related costs including operation and maintenance and depreciation expense once the environmental facilities become operational. Recovery of these costs will continue until such assets are included in rate base through an electric base rate case. The EERM deferred charges represent expenses that will be recovered from customers through an annual EERM Cost Tracker which authorizes the collection of deferred balances over a twelve month period.

Sugar Creek carrying charges and deferred depreciation – The IURC approved the deferral of debt-based carrying charges and the deferral of depreciation expense for the Sugar Creek assets. NIPSCO continued to defer such amounts until new electric rates were approved and implemented on December 27, 2011. Balances are being amortized over five years beginning January 2012. As of December 31, 2015, the remaining unamortized balance is $14.3 million. An additional $13.9 million is deferred for consideration in NIPSCO's current electric base rate case. Management believes this amount is probable of recovery through future rates.

DSM Program - Represents costs associated with Gas Distribution Operations and Electric Operations companies' energy efficiency and conservation programs. Costs are recovered through tracking mechanisms.

Liabilities:

Overrecovered gas and fuel costs – Represents the difference between the cost of gas and fuel and the recovery of such costs in revenues, and is the basis to adjust future billings for such recoveries on a basis consistent with applicable state-approved tariff provisions. Refunding of these revenues is achieved through tracking mechanisms.

NISOURCE INC.

Notes to Consolidated Financial Statements

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

Cost of removal – Represents anticipated costs of removal that have been, and continue to be, included in depreciation rates and collected in customer rates of the rate-regulated subsidiaries for future costs to be incurred.

Regulatory effects of accounting for income taxes – Represents amounts owed to customers for deferred taxes collected at a higher rate than the current statutory rates and liabilities associated with accelerated tax deductions owed to customers that are established during the rate making process.

Unrecognized pension benefit and other postretirement benefit costs – In 2007, NiSource adopted certain updates of ASC 715 which required, among other things, the recognition in other comprehensive income or loss of the actuarial gains or losses and the prior service costs or credits that arise during the period but that are not immediately recognized as components of net periodic benefit costs. Certain subsidiaries defer the costs as a regulatory liability in accordance with regulatory orders or as a result of regulatory precedent, to be refunded through base rates.

Other postretirement costs – Primarily represents cash contributions in excess of postretirement benefit expense that is deferred as a regulatory liability by certain subsidiaries in accordance with regulatory orders.

Gas Distribution Operations Regulatory Matters

Significant Rate Developments. On April 30, 2013, Indiana Governor Pence signed Senate Enrolled Act 560, the TDSIC statute, into law. Among other provisions, this legislation provides for cost recovery outside of a base rate proceeding for new or replacement electric and gas transmission, distribution, and storage projects that a public utility undertakes for the purposes of safety, reliability, system modernization, or economic development. Provisions of the TDSIC statute require that, among other things, requests for recovery include a seven-year plan of eligible investments. Once the plan is approved by the IURC, 80 percent of eligible costs can be recovered using a periodic rate adjustment mechanism. The cost recovery mechanism is referred to as a TDSIC mechanism. Recoverable costs include a return on, and of, the investment, including AFUDC, post-in-service carrying charges, operation and maintenance expenses, depreciation, and property taxes. The remaining 20 percent of recoverable costs are to be deferred for future recovery in the public utility’s next general rate case. The periodic rate adjustment mechanism is capped at an annual increase of no more than two percent of total retail revenues. On April 30, 2014, the IURC issued an order approving NIPSCO's gas TDSIC seven-year plan. On May 29, 2014, the NIPSCO Industrial Group filed a Notice of Appeal with the Indiana Court of Appeals in response to the IURC's April 30, 2014 ruling. Subsequently, the NIPSCO Industrial Group filed a Voluntary Notice of Dismissal, which was granted with prejudice. On January 28, 2015, the IURC issued an order approving NIPSCO's gas TDSIC-1 and a revised gas TDSIC seven-year plan of eligible investments for a total of approximately $840 million with the IURC. On August 31, 2015, NIPSCO filed TDSIC-3 which included an updated seven-year plan of approximately $817 million with the IURC. An order is expected in the first quarter of 2016.

On November 28, 2012, the PUCO approved Columbia of Ohio’s application to extend its Infrastructure Replacement Program for an additional five years, allowing Columbia of Ohio to continue to invest and recover on its accelerated main replacements. On November 25, 2014, Columbia of Ohio filed a Notice of Intent to file an application to adjust rates associated with its IRP and DSM Riders. Columbia of Ohio filed its Application on February 27, 2015, and requested authority to increase revenues by $24.7 million. On March 26, 2015, PUCO Staff filed Comments recommending that the PUCO approve Columbia of Ohio’s application in full. On April 22, 2015, the PUCO issued an Order that approved Columbia of Ohio's application. New rates went into effect on May 1, 2015. Now in the third year of the extended program, Columbia of Ohio filed a Notice of Intent on November 25, 2015 to file an application to adjust rates associated with its IRP and DSM Riders. The Notice of Intent states that Columbia of Ohio will file an Application by February 28, 2016, in which it will request authority to increase revenues by up to $33.2 million.

On September 12, 2014, Columbia of Ohio filed an application that seeks authority to establish a regulatory asset and defer, for accounting and financial reporting purposes, the expenditures to be incurred in implementing Columbia of Ohio’s Pipeline Safety Program. Columbia of Ohio requested authority to defer Pipeline Safety Program costs of up to $15.0 million annually. By Order dated December 17, 2014, the PUCO approved Columbia of Ohio’s application, approving a deferral of up to $15.0 million annually. As of December 31, 2015, Columbia of Ohio has deferred $11.6 million related to the program.

On December 24, 2012, Columbia of Ohio filed an application for authority to continue its capital expenditure program in 2013 and succeeding years, and for the authority to defer the related post-in-service carrying charges, depreciation expense, and property taxes on the assets of the capital expenditure program placed into service. As of December 31, 2015, Columbia of Ohio has deferred $57.6 million related to the program.

NISOURCE INC.

Notes to Consolidated Financial Statements

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