NorthWestern Reports First Quarter 2012 Financial Results

Reports earnings per share of 88 cents for quarter

Reaffirms guidance for 2012 of $2.35 - $2.50 per fully diluted share

Announced a quarterly dividend of 3 7 cents per share, payable June 30, 2012

Apr 25, 2012, 06:00 ET from NorthWestern Corporation

SIOUX FALLS, S.D., April 25, 2012 /PRNewswire/ -- NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) reported financial results for the quarter ended March 31, 2012.  Net income was $32.0 million, or $.88 per fully diluted share, for the quarter ended March 31, 2012, compared with net income of $32.6 million, or $.89 per fully diluted share, for the quarter ended March 31, 2011.  Gross margin declined $5.5 million for the quarter ended March 31, 2012, compared with the first quarter of 2011, due primarily to mild winter weather that caused an approximately $8.2 million reduction in gross margin but this was largely offset by increased Dave Gates Generating Station ("DGGS") related revenues of $4.5 million, including approximately $2.7 million that had been deferred in prior periods pending outcome of allocation uncertainty in Montana.  This was based on a March 2012 decision by the Montana Public Service Commission ("MPSC") approving total project costs and establishing final rates for DGGS.  In addition, operating expenses and interest expense were lower than the same period in 2011.

"Despite the significantly milder heating season, we provided stable earnings in the first quarter of 2012," said Bob Rowe, President and CEO. "In addition, we made progress in advancing electric supply investments by beginning construction on both the Spion Kop 40 MW wind project in Montana and the 60 MW natural gas peaking facility near Aberdeen, SD." 

Summary Financial Results

The following table reconciles the primary changes from the first quarter 2012 results compared with the same period in 2011:

Three Months Ended

Pre-tax

Net

EPS

($millions, except EPS)

Income

Income(1)

 Diluted

2011 reported

$41.8

$32.6

$        0.89

Gross Margin

Electric retail volumes

(4.2)

(2.6)

(0.07)

Natural gas retail volumes

(4.0)

(2.5)

(0.07)

Montana property tax tracker

(1.3)

(0.8)

(0.02)

Gas production

(0.7)

(0.4)

(0.01)

Operating expenses recovered in energy supply trackers

(0.3)

(0.2)

(0.01)

DGGS

4.5

2.8

0.08

South Dakota natural gas rate increase

0.6

0.4

0.01

Other

(0.1)

(0.1)

-

Subtotal - Gross Margin

(5.5)

(3.4)

(0.09)

OG&A Expense

Operating and maintenance

1.8

1.1

0.03

Operating expenses recovered in energy supply trackers

0.3

0.2

0.01

Other

(0.3)

(0.2)

(0.01)

Subtotal - OG&A Expense

1.8

1.1

0.03

Other

Depreciation expense

(1.1)

(0.7)

(0.02)

Property and other taxes

1.7

1.0

0.03

Interest Expense

1.2

0.7

0.02

Other Income

0.2

0.1

-

Items related to income tax

Flow-through repairs deductions

1.6

0.04

Flow-through of state bonus depreciation deduction

(1.2)

(0.03)

Recognition of state NOL benefit/valuation allowance release

(0.8)

(0.02)

State income tax & other, net

1.1

0.03

All other, net

0.0

0.1

$ -

Total EPS impact of above items

(0.01)

2012 reported

$40.1

$32.0

$ 0.88

(1) Income Tax Benefit (Expense) calculation on reconciling items assumes normal effective tax rate of 38.5%.

 For more information see www.northwesternenergy.com/documents/investor/Q112.pdf

Significant Drivers

Gross Margin

Consolidated gross margin for the first quarter of 2012 was $170.7 million compared with $176.2 million for same period of 2011.  The decrease in gross margin was due primarily to a decrease in electric and natural gas volumes caused by warmer winter weather, a decrease in the Montana property taxes included in a tracker compared with the same period of 2011, a decrease in production margin from lower market prices and a reduction in revenues of operating expenses recovered in monthly supply trackers.  These reductions to margin were offset by an increase in DGGS related revenues, including approximately $2.7 million that the Company had deferred in previous periods, pending the outcome of allocation uncertainty in Montana, and an increase in South Dakota natural gas rates.

Operating, General and Administrative Expenses

Consolidated operating, general and administrative expenses were $65.6 million for the quarter ended March 31, 2012 as compared with $67.4 million during the same period of 2011.  The decrease in operating, general and administrative expenses was primarily due to the timing of line maintenance compared with the same period of 2011, which we expect to be higher for the remainder of the year.

Property and Other Taxes

Consolidated property and other taxes were $23.7 million for the quarter ended March 31, 2012 as compared with $25.4 million during the same period of 2011.  This decrease was due primarily to lower actual 2011 property taxes than our initial estimate based on assessed property valuations and mill levy increases in Montana, offset in part by plant additions.  We estimate property taxes throughout each year and update to the actual expense when we receive our Montana property tax bills in November.

Interest Expense

Consolidated interest expense was $16.0 million for the quarter ended March 31, 2012 as compared with $17.1 million during the same period of 2011.  The decrease was primarily due to lower interest rates on debt outstanding.

Income Tax Expense

Consolidated income tax expense in the first quarter of 2012 was $8.0 million as compared with $9.2 million in same period of 2011.  The effective tax rate for the three months ended March 31, 2012 was 20% as compared with 22% for the same period of 2011.  The reduction in income tax expense was primarily due to lower taxable income and higher repairs tax deductions.  The effective tax rate differs from the federal statutory tax rate of 35% primarily due to repairs and state tax bonus depreciation deductions.

The following table summarizes the significant differences from the Federal statutory rate, which result in reduced income tax expense:

Quarter Ended March 31,

(in millions)

2012

2011

Income Before Income Taxes

$

40.1

$

41.8

Income tax calculated at 35% federal statutory rate

(14.0)

(14.6)

Permanent or flow through adjustments:

Flow-through repairs deductions

5.6

4.0

Flow-through of state bonus depreciation deduction

1.3

2.6

Recognition of state NOL benefit/valuation allowance release

0.0

0.8

State income tax & other, net

(0.9)

(2.0)

$

6.0

$

5.4

Income tax expense

$

(8.0)

$

(9.2)

Regulated Operations

In the regulated operations, electric net income improved $0.4 million, due primarily to an increase in DGGS related revenues, including approximately $2.7 million that the Company had previously deferred pending the outcome of allocation uncertainty in Montana, and lower income taxes, offset by a decrease in gross margin caused by warmer winter weather in our service territories.  Natural gas net income declined $0.7 million, due primarily to a decrease in gross margins caused by warmer winter weather in our service territories, offset in part by a reduction in operating expenses, property taxes, interest expenses and income tax expense. 

Liquidity and Capital Resources

As of March 31, 2012, cash and cash equivalents were $7.8 million compared with $5.9 million at Dec. 31, 2011.  The Company had $177.0 million available from its revolving credit facility at March 31, 2012, compared with $130.1 million at Dec. 31, 2011. 

Dividend Declaration

NorthWestern's Board of Directors declared a quarterly common stock dividend of 37 cents per share, payable on June 30, 2012, to common shareholders of record as of June 15, 2012. 

Update on DGGS Outage

DGGS was shut down on January 31, 2012 after problems were discovered in the power turbines of two of the generation units. Similar problems were subsequently found in the third unit. We expect two of the three units to be returned to service by April 30, 2012 using either the original turbines after servicing by their supplier Pratt & Whitney Power Systems (PWPS) or turbines on loan from PWPS.  We expect the turbine repair costs to be covered under the manufacturer's warranty; however, we are also incurring incremental costs for contracts with third parties for replacement regulation service.  During the first quarter of 2012, our incremental costs for replacement regulation service totaled approximately $0.5 million.  We have been actively managing our contracted service in an effort to reduce these costs as much as possible as DGGS is brought back into service.  We believe the incremental contracted costs for regulation service are recoverable from customers through our normal course of business; however, there can be no assurance that the MPSC and/or FERC will allow us full recovery of such costs.

Highlights for first quarter of 2012

  • Received a final order from the MPSC approving total project costs and establishing final rates for DGGS;
  • Received approval from the MPSC for the Spion Kop wind project in Montana; and
  • Submitted an application with the MPSC to place our majority interest in the Battle Creek Field natural gas production fields and gathering system acquired into regulated natural gas rate base in Montana;

2012 Earnings Outlook

NorthWestern reaffirms its earnings for 2012 to be $2.35 - $2.50 per fully diluted share. 

Basic assumptions include the following expectations:

  • A consolidated income tax rate of approximately 18% - 20% of pre-tax income;
  • No scheduled maintenance at Colstrip Unit 4 and Big Stone Plants;
  • DGGS outage costs fully recovered;
  • Fully diluted average shares outstanding of 37.0 million; and
  • Normal weather in the Company's electric and natural gas service territories for the remainder of 2012.

Company Hosting Investor Conference Call

NorthWestern will host an investor conference call today at 4:00 p.m. Eastern Time (3:00 p.m. Central Time) to review its financial results for the quarter ended March 31, 2012.

The conference call will be webcast live on the Internet at http://www.northwesternenergy.com under the "Investor Information" heading.  To listen, please go to the site at least 10 minutes in advance of the call to register.  An archived webcast will be available shortly after the call.

A telephonic replay of the call will be available beginning at 6:00 p.m. ET on April 25, 2012, through May 25, 2012, at (800) 723-0498.

Annual Meeting

The Company's Annual Meeting of Stockholders will be today, Wednesday, April 25, 2012, at 10:00 a.m. Mountain Daylight Time at Montana Tech Student Union Building, 1300 W. Park Street, Butte, Montana.

The annual stockholders meeting will be webcast live on the Internet at http://www.northwesternenergy.com under the "Investor Information" heading. 

To listen, please go to the site at least 10 minutes in advance of the call to register. An archived webcast will be available shortly after the call.

About NorthWestern Energy

NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 668,300 customers in Montana, South Dakota and Nebraska.  More information on NorthWestern Energy is available on the Company's Web site at www.northwesternenergy.com.

SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, the information under "2012 Earnings Outlook".  Forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will."  These statements are based upon our current expectations and speak only as of the date hereof.  Our actual future business and financial performance may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including, but not limited to:

  • potential adverse federal, state, or local legislation or regulation or adverse determinations by regulators could have a material effect on our liquidity, results of operations and financial condition;
  • we have capitalized approximately $22.3 million in preliminary survey and investigative costs related to our proposed Mountain States Transmission Intertie (MSTI) transmission project.  If our efforts to complete MSTI are not successful, we may have to write-off all or a portion these costs, which could have a material effect on our results of operations;
  • changes in availability of trade credit, creditworthiness of counterparties, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments, may reduce revenues or may increase operating costs, each of which could adversely affect our liquidity and results of operations;
  • unscheduled generation outages or forced reductions in output, maintenance or repairs, which may reduce revenues and increase cost of sales or may require additional capital expenditures or other increased operating costs; and
  • adverse changes in general economic and competitive conditions in the U.S. financial markets and in our service territories.

Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. 

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NORTHWESTERN CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)

March 31,

2012

December 31, 2011

(unaudited)

ASSETS

Current Assets

$

263,856

$

290,199

Property, Plant, and Equipment, Net

2,230,788

2,213,267

Goodwill

355,128

355,128

Regulatory Assets

321,448

308,804

Other Noncurrent Assets

46,151

43,040

Total Assets

$

3,217,371

$

3,210,438

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Maturities of Long-term Debt and Capital Leases

$

1,538

$

5,162

Commercial Paper

112,978

166,943

Current Liabilities

300,721

303,858

Long-term Capital Leases

32,784

32,918

Long-term Debt

905,055

905,049

Noncurrent Regulatory Liabilities

270,594

265,987

Deferred Income Taxes

320,698

282,406

Other Noncurrent Liabilities

393,301

389,012

Total Liabilities

2,337,669

2,351,326

Total Shareholders' Equity

879,702

859,112

Total Liabilities and Shareholders' Equity

$

3,217,371

$

3,210,438

 

NORTHWESTERN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Three Months Ended March 31,

2012

2011

Operating Activities

Net income

$

32,043

$

32,575

Non-cash items

46,807

45,608

Changes in operating assets and liabilities

41,075

43,897

Cash Provided by Operating Activities

119,925

122,080

Cash Used in Investing Activities

(47,027)

(37,580)

Cash Used In Financing Activities

(71,034)

(83,554)

Net Increase in Cash and Cash Equivalents

$

1,864

$

946

Cash and Cash Equivalents, beginning of period

$

5,928

$

6,234

Cash and Cash Equivalents, end of period

$

7,792

$

7,180

 

NORTHWESTERN CORPORATION REGULATED ELECTRIC SEGMENT (Unaudited)

Results

2012

2011

Change

% Change

(dollars in millions)

Retail revenue

$

192.0

$

196.2

$

(4.2)

(2.1)%

Transmission

11.1

10.9

0.2

1.8

Wholesale

0.9

0.3

0.6

200.0

Regulatory amortization and other

3.1

1.2

1.9

158.3

Total Revenues

207.1

208.6

(1.5)

(0.7)

Total Cost of Sales

83.0

84.4

(1.4)

(1.7)

Gross Margin

$

124.1

$

124.2

$

(0.1)

(0.1)%

Revenues

Megawatt Hours (MWH)

Avg. Customer Counts

2012

2011

2012

2011

2012

2011

(in thousands)

Retail Electric

Montana

$

72,137

$

75,663

671

731

274,164

272,526

South Dakota

12,986

13,393

160

179

48,840

48,705

   Residential 

85,123

89,056

831

910

323,004

321,231

Montana

75,696

77,133

794

820

62,010

61,459

South Dakota

16,916

16,309

235

238

11,954

11,789

Commercial

92,612

93,442

1,029

1,058

73,964

73,248

Industrial

9,637

9,183

730

692

73

72

Other

4,581

4,520

23

24

4,511

4,620

Total Retail Electric

$

191,953

$

196,201

2,613

2,684

401,552

399,171

Total Wholesale Electric

$

869

$

309

53

31

Degree Days

2012 as compared with:

Heating Degree-Days

2012

2011

Historic Average

2011

Historic Average

Montana

3,039

3,490

3,319

13% warmer

8% warmer

South Dakota

3,417

4,569

4,103

25% warmer

17% warmer

 

NORTHWESTERN CORPORATION REGULATED NATURAL GAS SEGMENT (Unaudited)

Results

2012

2011

Change

% Change

(dollars in millions)

Retail revenue

$

95.6

$

121.0

$

(25.4)

(21.0)%

Wholesale and other

6.1

8.2

(2.1)

(25.6)

Total Revenues

101.7

129.2

(27.5)

(21.3)

Total Cost of Sales

55.4

77.6

(22.2)

(28.6)

Gross Margin

$

46.3

$

51.6

$

(5.3)

(10.3)%

Revenues

Dekatherms (Dkt)

Customer Counts

2012

2011

2012

2011

2012

2011

(in thousands)

Retail Gas

Montana

$

41,839

$

51,100

4,983

5,638

159,886

159,029

South Dakota

10,363

13,306

1,256

1,599

38,098

37,712

Nebraska

9,421

11,486

1,141

1,382

36,918

36,949

Residential

61,623

75,892

7,380

8,619

234,902

233,690

Montana

21,050

26,438

2,524

2,915

22,427

22,273

South Dakota

6,653

9,302

1,051

1,332

6,001

5,954

Nebraska

5,415

8,242

829

1,287

4,639

4,636

Commercial

33,118

43,982

4,404

5,534

33,067

32,863

Industrial

443

691

54

78

277

282

Other

395

449

53

58

150

145

Total Retail Gas

$

95,579

$

121,014

11,891

14,289

268,396

266,980

Degree Days

2012 as compared with:

Heating Degree-Days

2012

2011

Historic Average

2011

Historic Average

Montana

3,039

3,490

3,319

13% warmer

8% warmer

South Dakota

3,417

4,569

4,103

25% warmer

17% warmer

Nebraska

2,949

3,573

3,410

17% warmer

14% warmer

 

NORTHWESTERN CORPORATION FIRST QUARTER SEGMENT RESULTS (Unaudited) (in thousands)

Three Months Ended

March 31, 2012

Electric

Gas

Other

Eliminations

Total

Operating revenues

$

207,055

$

101,746

$

299

$

$

309,100

Cost of sales

82,979

55,417

138,396

Gross margin

124,076

46,329

299

170,704

Operating, general and administrative

45,357

19,288

928

65,573

Property and other taxes

17,538

6,124

3

23,665

Depreciation

21,569

4,856

8

26,433

Operating income (loss)

39,612

16,061

(640)

55,033

Interest expense

(13,667)

(2,067)

(228)

(15,962)

Other income

612

345

27

984

Income tax expense

(3,174)

(3,590)

(1,248)

(8,012)

Net income (loss)

$

23,383

$

10,749

$

(2,089)

$

$

32,043

Three Months Ended

March 31, 2011

Electric

Gas

Other

Eliminations

Total

Operating revenues

$

208,622

$

129,212

$

426

$

$

338,260

Cost of sales

84,446

77,625

162,071

Gross margin

124,176

51,587

426

176,189

Operating, general and administrative

45,286

21,448

649

67,383

Property and other taxes

18,741

6,652

3

25,396

Depreciation

20,354

4,953

8

25,315

Operating income (loss)

39,795

18,534

(234)

58,095

Interest expense

(13,527)

(2,665)

(955)

(17,147)

Other income

615

164

26

805

Income tax expense

(3,921)

(4,570)

(687)

(9,178)

Net income (loss)

22,962

11,463

(1,850)

32,575

SOURCE NorthWestern Corporation



RELATED LINKS

http://www.northwesternenergy.com