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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

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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

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