NorthWestern Reports First Quarter 2013 Financial Results

Company reports diluted earnings per share of $1.01 for first quarter 2013

Reaffirms guidance for 2013 of $2.40 - $2.55 per diluted share

Declares a quarterly dividend of $0.38 per share, payable June 30, 2013

Apr 25, 2013, 06:00 ET from NorthWestern Corporation

SIOUX FALLS, S.D., April 25, 2013 /PRNewswire/ -- NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) reported financial results for the quarter ended March 31, 2013.  Net income was $37.9 million, or $1.01 per diluted share, for the quarter ended March 31, 2013, compared with net income of $32.0 million, or $0.88 per diluted share, for the quarter ended March 31, 2012.  

"Our first quarter net income was $5.9 million better than the prior year as we continued executing our strategy to add natural gas supply for customers and experienced improved retail and transmission volumes.  This was partially offset by higher operating expenses (particularly related to our Distribution System Infrastructure Project), higher property taxes and increased depreciation expense," said Bob Rowe, Chief Executive Officer.  "Our continued focus is to remain committed to funding DSIP and continuing our significant investments in our base electric and gas transmission and distribution systems while we seek additional regulated energy supply resources to provide our customers long-term price stability and resource adequacy." 

 

Summary Financial Results

Three Months Ended March 31,

2013

2012

Total Revenues

$

313,020

$

309,100

Cost of Sales

132,196

138,396

Gross Margin

180,824

170,704

Operating Expenses

Operating, general and administrative

68,837

65,573

Property and other taxes

25,759

23,665

Depreciation

29,218

26,433

Total Operating Expenses

123,814

115,671

Operating Income

57,010

55,033

Interest Expense, net

(16,779)

(15,962)

Other Income

2,715

984

Income Before Income Taxes

42,946

40,055

Income Tax Expense

(5,044)

(8,012)

Net Income

$

37,902

$

32,043

Average Common Shares Outstanding

37,384

36,328

Basic Earnings per Average Common Share

$

1.01

$

0.88

Diluted Earnings per Average Common Share

$

1.01

$

0.88

Dividends Declared per Average Common Share

$

0.38

$

0.37

 

Recent significant items

  • Improvement in net income of approximately $5.9 million as compared with the first quarter of 2012, due primarily to:
    • Higher gross margin of $10.1 million, primarily due to:
      • an increase in revenues associated with natural gas production;
      • increased retail natural gas and electric volumes, driven by colder winter weather;
      • an increase in transmission capacity revenues; and
      • the acquisition of the Spion Kop wind farm during the fourth quarter of 2012.
    • higher capitalization of accumulated funds used during construction on projects (AFUDC); and
    • lower income tax expense of about $3.0 million, driven by production tax credits associated with Spion Kop and an increase in flow-through repairs deductions.

These increases were partially offset by:

    • higher operating expenses of $8.1 million, primarily due to:
      • Incremental costs related to the Distribution System Infrastructure Project (DSIP) that had been deferred in 2012, pursuant an Montana Public Service Commission (MPSC) approval of an accounting order;
      • higher natural gas production costs;
      • an increase in plant operator costs related to the Spion Kop acquisition; and
      • higher other operating expenses of $4.9 million, related to property taxes and depreciation;
  • In April, the MPSC approved settlement agreements between NorthWestern and intervenors to increase our annual natural gas delivery rates by approximately $11.5 million, effective April 1, 2013, based on a return on equity of 9.8%; and
  • Received proceeds of approximately $17.7 million after commissions and other fees from the sale of 459,246 common shares under our Equity Distribution Agreement.

 

Summary Financial Results

The following table reconciles the primary changes from the first quarter 2012 to 2013:

Three Months Ended March 31,

Pre-tax

Net

EPS

($millions, except EPS)

Income

Income(1)

Diluted

2012 reported

$

40.0

$

32.0

$

0.88

Gross Margin

Natural gas production

3.6

2.2

0.05

Transmission capacity

2.5

1.5

0.04

Natural gas retail volumes

1.8

1.1

0.03

Spion Kop

1.6

1.0

0.03

DSM lost revenues

0.9

0.6

0.02

Transportation and storage capacity

0.9

0.6

0.02

Electric retail volumes

0.8

0.5

0.01

Montana property tax tracker

0.4

0.2

0.01

DGGS

(4.3)

(2.6)

(0.07)

Other

1.9

1.2

0.03

     Subtotal - Gross Margin

10.1

6.3

0.17

OG&A Expense

Distribution System Infrastructure Project (DSIP) expenses

(2.6)

(1.6)

(0.04)

Non-employee directors deferred compensation

(1.4)

(0.9)

(0.02)

Natural gas production

(0.9)

(0.6)

(0.02)

Insurance expense

(0.7)

(0.4)

(0.01)

Plant operator costs

(0.5)

(0.3)

(0.01)

Pension and employee benefits

4.2

2.6

0.07

Other

(1.3)

(0.8)

(0.02)

     Subtotal - OG&A Expense

(3.2)

(2.0)

(0.05)

Other

Depreciation expense

(2.8)

(1.7)

(0.05)

Property and other taxes

(2.1)

(1.3)

(0.03)

Interest expense

(0.8)

(0.5)

(0.01)

Other income

1.7

1.0

0.03

Income tax and other items

Flow-through repairs deductions

2.1

0.06

Production tax credits

1.2

0.03

Flow-through of state bonus depreciation deduction

0.4

0.01

State income tax and other, net

0.3

0.01

Impact of higher share count

(0.03)

All other, net

0.1

(0.01)

     Total EPS impact of above items

0.13

2013 reported

42.9

37.9

1.01

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

For more information see www.northwesternenergy.com/documents/investor/Q113.pdf

Significant Drivers

Gross Margin

Consolidated gross margin for the quarter ended March 31, 2013 was $180.8 million compared with $170.7 million for the same period of 2012.  Consolidated gross margin increased $10.1 million primarily due to:

  • An increase in natural gas production margin, primarily due to the acquisition of the Bear Paw assets in the third quarter of 2012;
  • An increase in natural gas and electric retail volumes due primarily to colder winter weather;
  • An increase in transmission capacity revenues due to higher demand to transmit energy for others across our lines;
  • The acquisition of the Spion Kop wind farm in the fourth quarter of 2012;
  • An increase in demand side management lost revenues recovered through our supply trackers related to efficiency measures implemented by customers;
  • An increase in transportation and storage capacity revenues due to higher demand to transmit natural gas for others across our pipelines and higher demand to store natural gas for others as a result of lower average natural gas prices; and
  • An increase in Montana property taxes included in a tracker.

These increases were partly offset by:

  • Lower Dave Gates Generating Station revenue in the first quarter 2013, as the same period in 2012 included recognition of approximately $2.7 million that we had deferred in prior periods pending outcome of allocation uncertainty; and
  • During the first quarter of 2013, our FERC related deferral increased by approximately $1.6 million as compared with 2012 due to the initial FERC ALJ non-binding decision.

Operating, General and Administrative Expenses

Consolidated operating, general and administrative expenses were $68.8 million for the quarter ended March 31, 2013 as compared with $65.6 million during the same period of 2012.  The increase in operating, general and administrative expenses of $3.2 million was primarily due to:

  • Incremental expenses related to DSIP;
  • Non-employee directors deferred compensation increased primarily due to changes in our stock price with an equal and offsetting impact to other income;
  • Higher natural gas production costs due to the Bear Paw acquisition;
  • Increased insurance expense primarily due to general liability matters; and
  • Higher plant operator costs primarily due to the Spion Kop acquisition.

These increases were partly offset by lower employee benefits primarily due to decreased pension expense.

Property and Other Taxes

Property and other taxes were $25.8 million for the three months ended March 31, 2013, as compared with $23.7 million in the same period of 2012. This increase was primarily due to higher estimated property valuations in Montana and plant additions.

Depreciation Expense

Depreciation expense was $29.2 million for the three months ended March 31, 2013, as compared with $26.4 million in the same period of 2012. This increase was primarily due to plant additions.

Interest Expense

Consolidated interest expense was $16.8 million for the quarter ended March 31, 2013 as compared with $16.0 million during the same period of 2012.  This increase was primarily due to higher debt outstanding partially offset by higher capitalization of AFUDC.

Income Tax Expense

Consolidated income tax expense for the quarter ended March 31, 2013 was $5.0 million as compared with $8.0 million in same period of 2012.  The effective tax rate for the quarter ended March 31, 2013 was 11.7% as compared with 20.0% for the same period of 2012.    The effective tax rate differs from the federal statutory tax rate of 35% primarily due to repairs deductions, state tax benefit of bonus depreciation deductions and production tax credits.

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

Three months ended March 31,

(in millions)

2013

2012

Income Before Income Taxes

$

42.9

$

40.1

Income tax calculated at 35% Federal statutory rate

15.0

14.0

Permanent or flow through adjustments:

Flow-through repairs deductions

(7.7)

(5.6)

Production tax credits

(1.2)

Flow-through of state bonus depreciation deduction

(1.8)

(1.4)

State income tax and other, net

0.7

1.0

(10.0)

(6.0)

Income tax expense

$

5.0

$

8.0

Liquidity and Capital Resources

As of March 31, 2013, cash and cash equivalents were $6.9 million compared with $7.8 million at March 31, 2012.  The Company had $253.5 million available from its revolving credit facility at March 31, 2013, compared with $177.0 million at March 31, 2012. 

Dividend Declared

NorthWestern's Board of Directors declared a quarterly common stock dividend of $0.38 per share, payable June 30, 2013, to common shareholders of record as of June 14, 2013. 

2013 Earnings Reaffirmed

NorthWestern reaffirms its 2013 earnings to be $2.40 - 2.55 per diluted share.

Basic assumptions include the following expectations:

  • A consolidated income tax rate of approximately 12% of pre-tax income;
  • Colstrip Unit 4, Big Stone, and Coyote generation plants are scheduled for routine maintenance during second quarter of 2013
  • Diluted average shares outstanding of 38.1 million; and
  • Normal weather in the Company's electric and natural gas service territories for the remainder of 2013.

Company Hosting Investor Conference Call

As previously announced, NorthWestern will host an investor conference call today at 3:30 pm Eastern Time to review its financial results for the year ended March 31, 2013.

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, 2013 through May 25, 2013, at (888) 203-1112 access code 2569194.

Annual Stockholders Meeting to be Held today

As previously announced, NorthWestern will hold its annual stockholders meeting today at 10:00 a.m. Central Daylight Time at the NorthWestern Energy Operations Center, 600 Market Street West, Huron, South Dakota.

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 provides electricity and natural gas to approximately 673,200 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 "2013 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;
  • 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.

Non-GAAP Financial Measure

This press release includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin, that is considered a "non-GAAP financial measures." Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Gross Margin (Revenues less Cost of Sales) is a non-GAAP financial measure due to the exclusion of depreciation from the measure. The presentation of Gross Margin is intended to supplement investors' understanding of our operating performance. Gross Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow recovery of operating costs. Our Gross Margin measure may not be comparable to other companies' Gross Margin measure. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

 

NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share amounts)

Three Months Ended March 31,

2013

2012

Revenues

Electric

$

210,092

$

207,055

Gas

102,518

101,746

Other

410

299

Total Revenues

313,020

309,100

Operating Expenses

Cost of Sales

132,196

138,396

Operating, general and administrative

68,837

65,573

Property and other taxes

25,759

23,665

Depreciation

29,218

26,433

Total Operating Expenses

256,010

254,067

Operating Income

57,010

55,033

Interest Expense, net

(16,779)

(15,962)

Other Income

2,715

984

Income Before Income Taxes

42,946

40,055

Income Tax Expense

(5,044)

(8,012)

Net Income

$

37,902

$

32,043

Average Common Shares Outstanding

37,384

36,328

Basic Earnings per Average Common Share

$

1.01

$

0.88

Diluted Earnings per Average Common Share

$

1.01

$

0.88

Dividends Declared per Average Common Share

$

0.38

$

0.37

Average shares used in computing the basic and diluted earnings per share are as follows:

Three Months Ended

March 31, 2013

March 31, 2012

Basic computation

37,384,429

36,328,360

Dilutive effect of

Restricted stock and performance share awards

101,305

171,933

Diluted computation

37,485,734

36,500,293

 

NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

March 31, 2013

December 31, 2012

ASSETS

Current Assets

$

265,378

$

303,128

Property, Plant, and Equipment, Net

2,444,405

2,435,590

Goodwill

355,128

355,128

Regulatory Assets

388,483

367,890

Other Noncurrent Assets

27,336

23,797

Total Assets

$

3,480,730

$

3,485,533

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Maturities of Long-term Debt and Capital Leases

$

1,638

$

1,612

Short-term Borrowings

43,985

122,934

Other Current Liabilities

330,413

324,719

Long-term Capital Leases

31,146

31,562

Long-term Debt

1,055,079

1,055,074

Noncurrent Regulatory Liabilities

279,784

276,618

Deferred Income Taxes

382,636

363,928

Other Noncurrent Liabilities

380,439

375,054

Total Liabilities

2,505,120

2,551,501

Total Shareholders' Equity

975,610

934,032

Total Liabilities and Shareholders' Equity

$

3,480,730

$

3,485,533

 

NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended March 31,

2013

2012

Operating Activities

Net income

$

37,902

$

32,043

Non-cash items

55,953

46,807

Changes in operating assets and liabilities

18,025

41,075

Cash Provided by Operating Activities

111,880

119,925

Cash Used in Investing Activities

(38,114)

(47,027)

Cash Used in Financing Activities

(76,704)

(71,034)

Net (Decrease) Increase in Cash and Cash Equivalents

(2,938)

1,864

Cash and Cash Equivalents, beginning of period

9,822

5,928

Cash and Cash Equivalents, end of period

$

6,884

$

7,792

 

NORTHWESTERN CORPORATION

REGULATED ELECTRIC SEGMENT

Three Months Ended March 31,

(Unaudited)

Results

2013

2012

Change

% Change

(dollars in millions)

Retail revenue

$

200.0

$

192.0

$

8.0

4.2

%

Regulatory amortization

(5.9)

(0.5)

(5.4)

1,080.0

   Total retail revenues

194.1

191.5

2.6

1.4

Transmission

13.6

11.1

2.5

22.5

Ancillary Services

0.4

2.2

(1.8)

(81.8)

Wholesale

0.5

0.9

(0.4)

(44.4)

Other

1.5

1.4

0.1

7.1

Total Revenues

$

210.1

$

207.1

$

3.0

1.4

Total Cost of Sales

83.1

83.0

0.1

0.1

Gross Margin

$

127.0

$

124.1

$

2.9

2.3

%

Revenues

Megawatt Hours (MWH)

Avg. Customer Counts

2013

2012

2013

2012

2013

2012

(in thousands)

Retail Electric

Montana

$

76,006

$

72,137

681

671

276,601

274,164

South Dakota

13,824

12,986

178

160

49,175

48,840

Residential 

89,830

85,123

859

831

325,776

323,004

Montana

77,772

75,696

780

794

62,638

62,010

South Dakota

17,344

16,916

245

235

12,060

11,954

Commercial

95,116

92,612

1,025

1,029

74,698

73,964

Industrial

10,401

9,637

748

730

74

73

Other

4,660

4,581

23

23

4,509

4,511

Total Retail Electric

$

200,007

$

191,953

2,655

2,613

405,057

401,552

Total Wholesale Electric

$

507

$

869

23

53

Degree Days

2013 as compared with:

Heating Degree-Days

2013

2012

Historic

2012

Historic

Montana

3,223

3,039

3,283

6% colder

2% warmer

South Dakota

4,217

3,417

4,054

23% colder

4% colder

 

 

NORTHWESTERN CORPORATION

REGULATED NATURAL GAS SEGMENT

Three Months Ended March 31,

(Unaudited)

Results

2013

2012

Change

% Change

(dollars in millions)

Retail revenues

$

101.7

$

95.6

$

6.1

6.4

%

Regulatory amortization

(10.4)

(3.2)

(7.2)

225.0

     Total retail revenues

91.3

92.4

(1.1)

(1.2)

Wholesale and other

11.2

9.3

1.9

20.4

Total Revenues

102.5

101.7

0.8

0.8

Total Cost of Sales

49.1

55.4

(6.3)

(11.4)

Gross Margin

$

53.4

$

46.3

$

7.1

15.3

%

Revenue

Dekatherms (Dkt)

Avg. Customer Counts

2013

2012

2013

2012

2013

2012

(in thousands)

Retail Gas

Montana

$

42,864

$

41,839

5,161

4,983

161,070

159,886

South Dakota

11,879

10,363

1,512

1,256

38,461

38,098

Nebraska

10,913

9,421

1,276

1,141

37,028

36,918

Residential

65,656

61,623

7,949

7,380

236,559

234,902

Montana

21,540

21,050

2,621

2,524

22,534

22,427

South Dakota

7,818

6,653

1,271

1,051

6,083

6,001

Nebraska

5,777

5,415

871

829

4,655

4,639

Commercial

35,135

33,118

4,763

4,404

33,272

33,067

Industrial

460

443

57

54

266

277

Other

416

395

58

53

158

150

Total Retail Gas

$

101,667

$

95,579

12,827

11,891

270,255

268,396

Degree Days

2013 as compared with:

Heating Degree-Days

2013

2012

Historic Average

2012

Historic Average

Montana

3,223

3,039

3,283

6% colder

2% warmer

South Dakota

4,217

3,417

4,054

23% colder

4% colder

Nebraska

3,355

2,949

3,365

14% colder

remained flat

 

NORTHWESTERN CORPORATION

FIRST QUARTER SEGMENT RESULTS

(Unaudited)

(in thousands)

Three Months Ended

March 31, 2013

Electric

Gas

Other

Eliminations

Total

Operating revenues

$

210,092

$

102,518

$

410

$

$

313,020

Cost of sales

83,095

49,101

132,196

Gross margin

126,997

53,417

410

180,824

Operating, general and administrative

45,718

19,895

3,224

68,837

Property and other taxes

19,152

6,604

3

25,759

Depreciation

23,611

5,599

8

29,218

Operating income (loss)

38,516

21,319

(2,825)

57,010

Interest expense

(14,127)

(2,426)

(226)

(16,779)

Other income

2,011

677

27

2,715

Income tax (expense) benefit

(4,304)

(1,772)

1,032

(5,044)

Net income (loss)

$

22,096

$

17,798

$

(1,992)

$

$

37,902

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

SOURCE NorthWestern Corporation



RELATED LINKS

http://www.northwesternenergy.com