x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2010. | |
OR |
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the transition period from __________ to __________. | |
Commission File Number 001-31303 |
Black Hills Corporation | |
Incorporated in South Dakota |
IRS Identification Number 46-0458824 |
625 Ninth Street | |
Rapid City, South Dakota 57701 | |
Registrant's telephone number (605) 721-1700 | |
Former name, former address, and former fiscal year if changed since last report | |
NONE |
Yes |
x |
No |
o |
Yes |
o |
No |
o |
Large accelerated filer |
x |
Accelerated filer |
o |
Non-accelerated filer |
o |
Smaller reporting company |
o |
Yes |
o |
No |
x |
Class |
Outstanding at April 30, 2010 |
Common stock, $1.00 par value |
39,175,311 shares |
Page | ||
Glossary of Terms and Abbreviations and Accounting Standards |
3-4 | |
PART I. |
FINANCIAL INFORMATION |
|
Item 1. |
Financial Statements |
|
Condensed Consolidated Statements of Income - unaudited
Three Months Ended March 31, 2010 and 2009 |
5 | |
Condensed Consolidated Balance Sheets - unaudited
March 31, 2010, December 31, 2009 and March 31, 2009 |
6 | |
Condensed Consolidated Statements of Cash Flows - unaudited
Three Months Ended March 31, 2010 and 2009 |
7 | |
Notes to Condensed Consolidated Financial Statements - unaudited |
8-38 | |
Item 2. |
Management's Discussion and Analysis of Financial Condition and
Results of Operations |
39-73 |
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
74-78 |
Item 4. |
Controls and Procedures |
79 |
PART II. |
OTHER INFORMATION |
|
Item 1. |
Legal Proceedings |
80 |
Item 1A. |
Risk Factors |
80 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
80 |
Item 6. |
Exhibits |
81 |
Signatures |
82 | |
Exhibit Index |
83 |
Acquisition Facility |
Our $1.0 billion single-draw, senior unsecured facility from which a $383 million draw was used to provide part of the funding for the Aquila Transaction |
AFUDC |
Allowance for Funds Used During Construction |
AOCI |
Accumulated Other Comprehensive Income (Loss) |
Aquila |
Aquila, Inc. |
Aquila Transaction |
Our July 14, 2008 acquisition of Aquila's regulated electric utility in Colorado and its regulated gas utilities in Colorado, Kansas, Nebraska and Iowa |
ASC |
Accounting Standards Codification |
ASC 810-10-15 |
ASC 810-10-15, "Consolidation of Variable Interest Entities" |
ASC 820 |
ASC 820, "Fair Value Measurements and Disclosures" |
ASC 932-10-S99 |
ASC 932-10-S99, "Extractive Activities – Oil and Gas, SEC Materials" |
Bbl |
Barrel |
Bcf |
Billion cubic feet |
Bcfe |
Billion cubic feet equivalent |
BHCRPP |
Black Hills Corporation Risk Policies and Procedures |
BHEP |
Black Hills Exploration and Production, Inc., representing our Oil and Gas segment, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Black Hills Electric Generation |
Black Hills Electric Generation, LLC, representing our Power Generation segment, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Black Hills Energy |
The name used to conduct the business activities of Black Hills Utility Holdings, including the gas and electric utility properties acquired from Aquila |
Black Hills Non-regulated Holdings |
Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of the Company that was formerly known as Black Hills Energy, Inc. |
Black Hills Power |
Black Hills Power, Inc., a direct, wholly-owned subsidiary of the Company |
Black Hills Service Company |
Black Hills Service Company, a direct, wholly-owned subsidiary of the Company |
Black Hills Utility Holdings |
Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of the Company formed to acquire and own the utility properties acquired from Aquila, all which are now doing business as Black Hills Energy |
Black Hills Wyoming |
Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation |
Btu |
British thermal unit |
Cheyenne Light |
Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of the Company |
Colorado Electric |
Black Hills Colorado Electric Utility Company, LP, (doing business as Black Hills Energy), an indirect, wholly-owned subsidiary of Black Hills Utility Holdings |
Colorado Gas |
Black Hills Colorado Gas Utility Company, LP, (doing business as Black Hills Energy), an indirect, wholly-owned subsidiary of Black Hills Utility Holdings |
Corporate Credit Facility |
Our $525 million credit facility which was terminated on April 15, 2010 |
CPUC |
Colorado Public Utilities Commission |
Dth |
Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu) |
Enserco |
Enserco Energy Inc., representing our Energy Marketing segment, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
FASB |
Financial Accounting Standards Board |
FERC |
Federal Energy Regulatory Commission |
GAAP |
Generally Accepted Accounting Principles |
GSRS |
Gas Safety and Reliability Surcharge |
Iowa Gas |
Black Hills Iowa Gas Utility Company, LLC, (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
IPP |
Independent Power Production |
IPP Transaction |
Our July 11, 2008 sale of seven of our IPP plants to affiliates of Hastings Fund Management Ltd and IIF BH Investment LLC |
IUB |
Iowa Utilities Board |
Kansas Gas |
Black Hills Kansas Gas Utility Company, LLC, (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
KCC |
Kansas Corporation Commission |
LIBOR |
London Interbank Offered Rate |
LOE |
Lease Operating Expense |
Mcf |
One thousand standard cubic feet |
Mcfe |
One thousand standard cubic feet equivalent |
MDU |
MDU Resources Group, Inc. |
MEAN |
Municipal Energy Agency of Nebraska |
MMBtu |
One million British thermal units |
MW |
Megawatt |
MWh |
Megawatt-hour |
Nebraska Gas |
Black Hills Nebraska Gas Utility Company, LLC, (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
NPA |
Nebraska Public Advocate |
NPSC |
Nebraska Public Service Commission |
NYMEX |
New York Mercantile Exchange |
PGA |
Purchase Gas Adjustment |
PPA |
Power Purchase Agreement |
PSCo |
Public Service Company of Colorado |
Revolving Credit Facility |
Our $500 million three-year revolving credit facility which commenced on April 15, 2010 and expires on April 14, 2013 |
SDPUC |
South Dakota Public Utilities Commission |
SEC |
United States Securities and Exchange Commission |
SEC Release No. 33-8995 |
SEC Release No. 33-8995, "Modernization of Oil and Gas Reporting" |
WPSC |
Wyoming Public Service Commission |
WRDC |
Wyodak Resources Development Corp., a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
(in thousands, except per share amounts) |
||||||||
Operating revenues |
$ | 442,332 | $ | 437,943 | ||||
Operating expenses: |
||||||||
Fuel and purchased power |
252,535 | 261,020 | ||||||
Operations and maintenance |
42,622 | 39,335 | ||||||
Gain on sale of assets |
(2,683 | ) | (25,971 | ) | ||||
Administrative and general |
39,088 | 41,766 | ||||||
Depreciation, depletion and amortization |
28,395 | 33,325 | ||||||
Taxes, other than income taxes |
12,673 | 11,698 | ||||||
Impairment of long-lived assets |
- | 43,301 | ||||||
Total operating expenses |
372,630 | 404,474 | ||||||
Operating income |
69,702 | 33,469 | ||||||
Other income (expense): |
||||||||
Interest expense |
(21,766 | ) | (18,901 | ) | ||||
Interest rate swap - unrealized (loss) gain |
(3,035 | ) | 14,763 | |||||
Interest income |
246 | 528 | ||||||
Allowance for funds used during construction - equity |
2,028 | 1,372 | ||||||
Other income, net |
418 | 744 | ||||||
Total other expenses |
(22,109 | ) | (1,494 | ) | ||||
Income from continuing operations before equity in earnings (loss) of unconsolidated subsidiaries and income taxes |
47,593 | 31,975 | ||||||
Equity in earnings (loss) of unconsolidated subsidiaries |
317 | (327 | ) | |||||
Income tax expense |
(16,476 | ) | (6,023 | ) | ||||
Income from continuing operations |
31,434 | 25,625 | ||||||
Income from discontinued operations, net of taxes |
- | 766 | ||||||
Net income |
$ | 31,434 | $ | 26,391 | ||||
Weighted average common shares outstanding: |
||||||||
Basic |
38,848 | 38,511 | ||||||
Diluted |
39,009 | 38,563 | ||||||
Earnings per share: |
||||||||
Basic- |
||||||||
Continuing operations |
$ | 0.81 | $ | 0.67 | ||||
Discontinued operations |
- | 0.02 | ||||||
Total earnings per share - basic |
$ | 0.81 | $ | 0.69 | ||||
Diluted- |
||||||||
Continuing operations |
$ | 0.81 | $ | 0.66 | ||||
Discontinued operations |
- | 0.02 | ||||||
Total earnings per share - diluted |
$ | 0.81 | $ | 0.68 | ||||
Dividends declared per share of common stock |
$ | 0.36 | $ | 0.355 |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
(in thousands, except share amounts) |
||||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 136,023 | $ | 112,901 | $ | 121,562 | ||||||
Restricted cash |
27,215 | 17,502 | - | |||||||||
Accounts Receivables, net |
242,189 | 274,489 | 233,921 | |||||||||
Materials, supplies and fuel |
91,111 | 123,322 | 59,139 | |||||||||
Derivative assets, current |
54,773 | 37,747 | 79,443 | |||||||||
Income tax receivable, net |
- | 2,031 | - | |||||||||
Deferred income tax asset, current |
5,610 | 4,523 | 11,788 | |||||||||
Regulatory assets, current |
42,876 | 25,085 | 19,053 | |||||||||
Other current assets |
26,189 | 27,270 | 11,517 | |||||||||
Total current assets |
625,986 | 624,870 | 536,423 | |||||||||
Investments |
18,466 | 18,524 | 19,956 | |||||||||
Property, plant and equipment |
3,045,126 | 2,975,993 | 2,750,760 | |||||||||
Less accumulated depreciation and depletion |
(830,423 | ) | (815,263 | ) | (750,748 | ) | ||||||
Total property, plant and equipment, net |
2,214,703 | 2,160,730 | 2,000,012 | |||||||||
Other assets: |
||||||||||||
Goodwill |
353,734 | 353,734 | 359,093 | |||||||||
Intangible assets, net |
4,248 | 4,309 | 4,870 | |||||||||
Derivative assets, non-current |
5,877 | 3,777 | 11,606 | |||||||||
Regulatory assets, non-current |
117,561 | 135,578 | 137,108 | |||||||||
Other assets, non-current |
18,064 | 16,176 | 12,041 | |||||||||
Total other assets |
499,484 | 513,574 | 524,718 | |||||||||
TOTAL ASSETS |
$ | 3,358,639 | $ | 3,317,698 | $ | 3,081,109 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 194,342 | $ | 229,352 | $ | 191,817 | ||||||
Accrued liabilities |
140,939 | 151,504 | 129,405 | |||||||||
Derivative liabilities, current |
68,834 | 57,166 | 105,883 | |||||||||
Accrued income taxes, net |
10,568 | - | 19,794 | |||||||||
Regulatory liabilities, current |
9,850 | 7,092 | 14,939 | |||||||||
Notes payable |
223,000 | 164,500 | 479,800 | |||||||||
Current maturities of long-term debt |
24,426 | 35,245 | 32,082 | |||||||||
Total current liabilities |
671,959 | 644,859 | 973,720 | |||||||||
Long-term debt, net of current maturities |
993,514 | 1,015,912 | 471,226 | |||||||||
Deferred credits and other liabilities: |
||||||||||||
Deferred income tax liability, non-current |
270,079 | 262,034 | 222,157 | |||||||||
Derivative liabilities, non-current |
12,081 | 11,999 | 20,656 | |||||||||
Regulatory liabilities, non-current |
44,788 | 42,458 | 39,514 | |||||||||
Benefit plan liabilities |
144,199 | 140,671 | 160,397 | |||||||||
Other deferred credits and other liabilities |
114,021 | 114,928 | 121,842 | |||||||||
Total deferred credits and other liabilities |
585,168 | 572,090 | 564,566 | |||||||||
Stockholders' equity: |
||||||||||||
Common stockholders' equity - |
||||||||||||
Common stock $1 par value; 100,000,000 shares authorized; Issued 39,178,067; 38,977,526 and 38,796,005 shares, respectively |
39,178 | 38,978 | 38,796 | |||||||||
Additional paid-in capital |
593,589 | 591,390 | 585,244 | |||||||||
Retained earnings |
491,202 | 473,857 | 460,091 | |||||||||
Treasury stock at cost – 4,284; 8,834 and 4,725 shares, respectively |
(112 | ) | (224 | ) | (119 | ) | ||||||
Accumulated other comprehensive loss |
(15,859 | ) | (19,164 | ) | (12,415 | ) | ||||||
Total stockholders' equity |
1,107,998 | 1,084,837 | 1,071,597 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ | 3,358,639 | $ | 3,317,698 | $ | 3,081,109 |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
(in thousands) |
||||||||
Operating activities: |
||||||||
Net income |
$ | 31,434 | $ | 26,391 | ||||
Income from discontinued operations, net of taxes |
- | (766 | ) | |||||
Income from continuing operations |
31,434 | 25,625 | ||||||
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
28,395 | 33,325 | ||||||
Impairment of long-lived assets |
- | 43,301 | ||||||
Derivative fair value adjustments |
(1,579 | ) | 6,154 | |||||
Gain on sale of operating assets |
(2,683 | ) | (25,971 | ) | ||||
Stock compensation |
989 | 18 | ||||||
Unrealized mark-to-market loss (gain) on interest rate swaps |
3,035 | (14,763 | ) | |||||
Deferred income taxes |
3,492 | (5,427 | ) | |||||
Equity in (earnings) loss of unconsolidated subsidiaries |
(317 | ) | 327 | |||||
Allowance for funds used during construction - equity |
(2,028 | ) | (1,372 | ) | ||||
Employee benefit plans |
3,940 | 4,420 | ||||||
Other non-cash adjustments |
2,382 | 2,241 | ||||||
Change in operating assets and liabilities: |
||||||||
Materials, supplies and fuel |
21,755 | 65,838 | ||||||
Accounts receivable and other current assets |
24,044 | 123,993 | ||||||
Accounts payable and other current liabilities |
(24,716 | ) | (83,994 | ) | ||||
Regulatory assets |
3,277 | 23,477 | ||||||
Regulatory liabilities |
2,834 | 9,550 | ||||||
Other operating activities |
(5,335 | ) | (7,290 | ) | ||||
Net cash provided by operating activities of continuing operations |
88,919 | 199,452 | ||||||
Net cash provided by operating activities of discontinued operations |
- | 883 | ||||||
Net cash provided by operating activities |
88,919 | 200,335 | ||||||
Investing activities: |
||||||||
Property, plant and equipment additions |
(81,290 | ) | (71,272 | ) | ||||
Proceeds from sale of ownership interest in operating assets |
6,105 | 51,878 | ||||||
Working capital adjustment of purchase price allocation on Aquila assets |
- | 7,900 | ||||||
Other investing activities |
(2,865 | ) | 135 | |||||
Net cash used in investing activities |
(78,050 | ) | (11,359 | ) | ||||
Financing activities: |
||||||||
Dividends paid |
(14,089 | ) | (13,753 | ) | ||||
Common stock issued |
1,522 | 764 | ||||||
Increase in short-term borrowings |
108,500 | 33,000 | ||||||
Decrease in short-term borrowings |
(50,000 | ) | (257,000 | ) | ||||
Long-term debt - repayments |
(33,217 | ) | (22 | ) | ||||
Other financing activities |
(463 | ) | 1,065 | |||||
Net cash provided by (used in) financing activities |
12,253 | (235,946 | ) | |||||
Increase (decrease) in cash and cash equivalents |
23,122 | (46,970 | ) | |||||
Cash and cash equivalents: |
||||||||
Beginning of period |
112,901 | 168,532 | ||||||
End of period |
$ | 136,023 | $ | 121,562 |
(1) |
MANAGEMENT'S STATEMENT |
(2) |
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS |
(3) |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
Three Months Ended |
||||||||
March 31, 2010 |
March 31, 2009 |
|||||||
(in thousands) |
||||||||
Non-cash investing activities- |
||||||||
Property, plant and equipment acquired with accrued liabilities |
$ | 23,473 | $ | 28,947 | ||||
Cash (paid) refunded during the period for- |
||||||||
Interest (net of amounts capitalized) |
$ | (10,182 | ) | $ | (10,177 | ) | ||
Income taxes |
$ | 44 | $ | 24,495 |
|
March 2009 includes less than $0.1 million of cash for discontinued operations. |
(4) |
MATERIALS, SUPPLIES AND FUEL |
Major Classification |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
|||||||||
Materials and supplies |
$ | 32,200 | $ | 31,535 | $ | 34,574 | ||||||
Fuel - Electric Utilities |
9,028 | 7,128 | 7,270 | |||||||||
Natural gas in storage - Gas Utilities |
4,868 | 24,053 | 7,590 | |||||||||
Gas and oil held by Energy Marketing* |
45,015 | 60,606 | 9,705 | |||||||||
Total materials, supplies and fuel |
$ | 91,111 | $ | 123,322 | $ | 59,139 |
|
* As of March 31, 2010, December 31, 2009 and March 31, 2009, market adjustments related to natural gas held by Energy Marketing and recorded in inventory were $(11.0) million, $(0.3) million and $(2.4) million, respectively (see Note 13 for further discussion of Energy Marketing trading activities). |
(5) |
ALLOWANCE FOR DOUBTFUL ACCOUNTS |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
Accounts receivable |
$ | 214,028 | $ | 217,723 | $ | 199,633 | ||||||
Unbilled revenues |
33,392 | 61,387 | 42,120 | |||||||||
Total accounts receivable |
247,420 | 279,110 | 241,753 | |||||||||
Less allowance for doubtful accounts |
(5,231 | ) | (4,621 | ) | (7,832 | ) | ||||||
Net accounts receivable |
$ | 242,189 | $ | 274,489 | $ | 233,921 |
(6) |
NOTES PAYABLE |
(7) |
LONG-TERM DEBT |
(8) |
EARNINGS PER SHARE |
Period ended March 31, 2010 |
Three Months |
|||||||
Income |
Average Shares |
|||||||
Income from continuing operations |
$ | 31,434 | ||||||
Basic earnings |
$ | 31,434 | 38,848 | |||||
Dilutive effect of: |
||||||||
Restricted stock |
- | 89 | ||||||
Other |
- | 72 | ||||||
Diluted earnings |
$ | 31,434 | 39,009 |
Period ended March 31, 2009 |
Three Months |
|||||||
Income |
Average Shares |
|||||||
Income from continuing operations |
$ | 25,625 | ||||||
Basic earnings |
$ | 25,625 | 38,511 | |||||
Dilutive effect of: |
||||||||
Restricted stock |
- | 52 | ||||||
Diluted earnings |
$ | 25,625 | 38,563 |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
Options to purchase common stock |
264 | 435 |
(9) |
OTHER COMPREHENSIVE INCOME |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
Net income |
$ | 31,434 | $ | 26,391 | ||||
Other comprehensive income, net of tax: |
||||||||
Minimum pension liability adjustments (net of tax of $(7)) |
12 | - | ||||||
Fair value adjustments on derivatives designated as cash flow hedges (net of tax of $(591) and $(1,144), respectively) |
1,416 | 2,998 | ||||||
Reclassification adjustments on cash flow hedges settled and included in net income (net of tax of $(1,061) and $(1,917), respectively) |
1,877 | 3,370 | ||||||
Comprehensive income |
$ | 34,739 | $ | 32,759 |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
Derivatives designated as cash flow hedges |
$ | (6,182 | ) | $ | (9,462 | ) | $ | 1,818 | ||||
Employee benefit plans |
(9,624 | ) | (9,636 | ) | (14,127 | ) | ||||||
Amount from equity-method investees |
(53 | ) | (66 | ) | (106 | ) | ||||||
Total |
$ | (15,859 | ) | $ | (19,164 | ) | $ | (12,415 | ) |
(10) |
COMMON STOCK |
|
· |
We granted 77,693 target performance shares to certain officers and business unit leaders for the January 1, 2010 through December 31, 2012 performance period. Actual shares are not issued until the end of the performance plan period (December 31, 2012). Performance shares are awarded based on our total stockholder return over the designated performance period as measured against a selected peer
group and can range from 0% to 175% of target. In addition, the ending stock price must be at least equal to 75% of the beginning stock price for a payout to occur. The final value of the performance shares will vary according to the number of shares of common stock that are ultimately granted based upon the actual level of attainment of the performance criteria. The performance awards are paid 50% in the form of cash and 50% in shares of common stock. The grant date
fair value was $24.25 per share. |
|
· |
We issued 9,625 shares of common stock under the 2009 short-term incentive compensation plan during the three months ended March 31, 2010. Pre-tax compensation cost related to the awards was approximately $0.3 million, which was accrued for in 2009. |
|
· |
We granted 149,028 restricted common shares during the three months ended March 31, 2010. The pre-tax compensation cost related to the awards of restricted stock and restricted stock units of approximately $3.9 million will be recognized over the three-year vesting period. |
|
· |
30,000 stock options were exercised during the three months ended March 31, 2010 at a weighted-average exercise price of $21.875 per share which provided $0.7 million of proceeds. |
|
· |
Our utility subsidiaries are generally limited to the amount of dividends allowed by state regulatory authorities to be paid to us as a utility holding company and also may have further restrictions under the Federal Power Act. As of March 31, 2010, the restricted net assets at our Electric and Gas Utilities were approximately $214.5 million. |
|
· |
Our Enserco credit facility is a borrowing base credit facility, the structure of which requires certain levels of tangible net worth and net working capital to be maintained for a given borrowing base election level. In order to maintain a borrowing base election level, we may be restricted from making dividends from Enserco to the parent company of Enserco. The restricted net assets at March
31, 2010 at Enserco were $113.5 million. |
(11) |
EMPLOYEE BENEFIT PLANS |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
Service cost |
$ | 1,533 | $ | 1,929 | ||||
Interest cost |
3,773 | 3,679 | ||||||
Expected return on plan assets |
(3,623 | ) | (3,458 | ) | ||||
Prior service cost |
305 | 41 | ||||||
Net loss |
500 | 752 | ||||||
Net periodic benefit cost |
$ | 2,488 | $ | 2,943 |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
Service cost |
$ | 377 | $ | 260 | ||||
Interest cost |
611 | 542 | ||||||
Expected return on plan assets |
(52 | ) | (56 | ) | ||||
Prior service cost |
(77 | ) | (22 | ) | ||||
Net transition obligation |
- | 15 | ||||||
Net (gain) loss |
159 | (8 | ) | |||||
Net periodic benefit cost |
$ | 1,018 | $ | 731 |
Three Months Ended
March 31, |
||||||||
2010 |
2009 |
|||||||
Service cost |
$ | 171 | $ | 117 | ||||
Interest cost |
321 | 344 | ||||||
Prior service cost |
1 | 1 | ||||||
Net loss |
71 | 147 | ||||||
Net periodic benefit cost |
$ | 564 | $ | 609 |
(12) |
SUMMARY OF INFORMATION RELATING TO SEGMENTS OF OUR BUSINESS |
|
· |
Electric Utilities, which supplies electric utility service to areas in South Dakota, Wyoming, Colorado and Montana and natural gas utility service to Cheyenne, Wyoming and vicinity; and |
|
· |
Gas Utilities, which supplies natural gas utility service in Colorado, Iowa, Kansas and Nebraska. |
|
· |
Oil and Gas, which produces, explores and operates oil and natural gas interests located in the Rocky Mountain region and other states; |
|
· |
Power Generation, which produces and sells power and capacity to wholesale customers from power plants located in Wyoming and Idaho. Additionally, in 2009 our Power Generation segment entered into a 20-year PPA to supply Colorado Electric with 200 MW of capacity and energy from power plants to be constructed in Colorado which are expected to be placed into service by December 31, 2011; |
|
· |
Coal Mining, which engages in the mining and sale of coal from our mine near Gillette, Wyoming; and |
|
· |
Energy Marketing, which markets natural gas, crude oil and related services primarily in the United States and Canada. |
Three Months Ended March 31, 2010 |
External Operating Revenues |
Inter-segment Operating Revenues |
Income (Loss) from Continuing Operations |
|||||||||
Utilities: |
||||||||||||
Electric Utilities |
$ | 148,636 | $ | 173 | $ | 9,852 | ||||||
Gas Utilities(a) |
243,170 | - | 19,498 | |||||||||
Non-regulated Energy: |
||||||||||||
Oil and Gas |
19,743 | - | 2,348 | |||||||||
Power Generation |
8,068 | - | 1,080 | |||||||||
Coal Mining |
6,882 | 7,098 | 1,346 | |||||||||
Energy Marketing |
9,772 | - | 2,193 | |||||||||
Corporate(b) |
- | - | (4,967 | ) | ||||||||
Inter-segment eliminations |
- | (1,210 | ) | 84 | ||||||||
Total |
$ | 436,271 | $ | 6,061 | $ | 31,434 |
Three Months Ended March 31, 2009 |
External Operating Revenues |
Inter-segment Operating Revenues |
Income (Loss) from Continuing Operations |
|||||||||
Utilities: |
||||||||||||
Electric Utilities |
$ | 137,060 | $ | 215 | $ | 9,317 | ||||||
Gas Utilities |
256,337 | - | 17,265 | |||||||||
Non-regulated Energy: |
||||||||||||
Oil and Gas(c) |
16,511 | - | (25,720 | ) | ||||||||
Power Generation(d) |
7,619 | - | 17,153 | |||||||||
Coal Mining |
7,937 | 6,465 | 819 | |||||||||
Energy Marketing |
6,820 | - | 1,037 | |||||||||
Corporate(b) |
- | - | 5,536 | |||||||||
Inter-segment eliminations |
- | (1,021 | ) | 218 | ||||||||
Total |
$ | 432,284 | $ | 5,659 | $ | 25,625 |
(a) |
Income (loss) from continuing operations includes $1.7 million after-tax gain on sale of operating assets at Nebraska Gas. |
(b) |
Income (loss) from continuing operations includes a $2.0 million net after-tax mark-to-market loss on interest rate swaps for the three months ended March 31, 2010 and a $9.6 million net after-tax mark-to-market gain on interest rate swaps for the three months ended March 31, 2009. |
(c) |
As a result of lower natural gas prices at March 31, 2009, our Income (loss) from continuing operations reflects a $27.8 million after-tax non-cash ceiling test impairment of oil and gas assets included in the Oil and Gas segment in the first quarter of 2009 (see Note 18). |
(d) |
Income (loss) from continuing operations includes $16.9 million after-tax gain on sale to MEAN of 23.5% ownership interest in Wygen I power generation facility. |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
Total assets |
||||||||||||
Utilities: |
||||||||||||
Electric Utilities |
$ | 1,701,329 | $ | 1,659,375 | $ | 1,522,885 | ||||||
Gas Utilities |
644,734 | 684,375 | 653,860 | |||||||||
Non-regulated Energy: |
||||||||||||
Oil and Gas |
348,156 | 338,470 | 357,233 | |||||||||
Power Generation |
185,856 | 161,856 | 121,489 | |||||||||
Coal Mining |
82,776 | 76,209 | 75,092 | |||||||||
Energy Marketing |
324,478 | 321,207 | 262,441 | |||||||||
Corporate |
71,310 | 76,206 | 88,109 | |||||||||
Total |
$ | 3,358,639 | $ | 3,317,698 | $ | 3,081,109 |
(13) |
RISK MANAGEMENT ACTIVITIES |
|
· |
Commodity price risk associated with our marketing businesses, our natural long position with crude oil and natural gas reserves and production, and fuel procurement for certain of our gas-fired generation assets and variability in revenue due to changes in gas usage at our regulated Gas Utilities segment resulting from commodity price changes; |
|
· |
Interest rate risk associated with variable rate credit facilities and changes in forward interest rates used to determine the mark-to-market adjustment on our interest rate swaps; and |
|
· |
Foreign currency exchange risk associated with natural gas marketing transacted in Canadian dollars. |
Outstanding at
March 31, 2010 |
Outstanding at
December 31, 2009 |
Outstanding at
March 31, 2009 |
||||||||||||||||||||||
Notional Amounts |
Latest Expiration (months) |
Notional Amounts |
Latest Expiration (months) |
Notional Amounts |
Latest Expiration (months) |
|||||||||||||||||||
(in thousands of MMBtus) |
||||||||||||||||||||||||
Natural gas basis swaps purchased |
240,400 | 19 | 231,703 | 22 | 273,496 | 31 | ||||||||||||||||||
Natural gas basis swaps sold |
245,790 | 19 | 232,673 | 22 | 280,478 | 31 | ||||||||||||||||||
Natural gas fixed-for-float swaps purchased |
87,161 | 20 | 60,927 | 16 | 101,094 | 21 | ||||||||||||||||||
Natural gas fixed-for-float swaps sold |
99,233 | 22 | 72,904 | 25 | 107,705 | 21 | ||||||||||||||||||
Natural gas physical purchases |
125,570 | 24 | 120,680 | 27 | 143,642 | 19 | ||||||||||||||||||
Natural gas physical sales |
123,620 | 24 | 124,830 | 27 | 136,504 | 19 |
Outstanding at
March 31, 2010 |
Outstanding at
December 31, 2009 |
Outstanding at
March 31, 2009 |
||||||||||||||||||||||
Notional Amounts |
Latest Expiration (months) |
Notional Amounts |
Latest Expiration (months) |
Notional Amounts |
Latest Expiration (months) |
|||||||||||||||||||
(in thousands of Bbls) |
||||||||||||||||||||||||
Crude oil physical purchases |
5,296 | 9 | 5,048 | 12 | 5,070 | 9 | ||||||||||||||||||
Crude oil physical sales |
5,647 | 9 | 4,998 | 12 | 4,301 | 9 | ||||||||||||||||||
Crude oil swaps/options purchased |
- | - | - | - | 67 | 1 | ||||||||||||||||||
Crude oil swaps/options sold |
94 | 2 | 69 | 2 | 119 | 4 |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
Current derivative assets |
$ | 40,541 | $ | 25,366 | $ | 53,741 | ||||||
Non-current derivative assets |
$ | 2,409 | $ | 3,090 | $ | 2,317 | ||||||
Current derivative liabilities |
$ | 17,733 | $ | 9,377 | $ | 20,422 | ||||||
Non-current derivative liabilities |
$ | (588 | ) | $ | (733 | ) | $ | (534 | ) | |||
Cash collateral (receivable)/payable included in derivative assets/liabilities(a) |
$ | (171 | ) | $ | (2,728 | ) | $ | 3,673 | ||||
Unrealized gain |
$ | 25,634 | $ | 17,084 | $ | 39,843 |
(a) |
A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract. When the right of offset exists, accounting standards permit the netting of receivables and payables under a legally enforceable master netting agreement between counterparties. Accounting
standards also permit offsetting of fair value amounts recognized for the right to reclaim, or the obligation to return, cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty. At March 31, 2010, and December 31, 2009, we had the right to reclaim cash collateral of $0.2 million and $2.7 million, respectively. At March 31, 2009, we had an obligation to return cash collateral of $3.7 million. |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||||||||||||||
Crude Oil Swaps/Options |
Natural Gas Swaps |
Crude Oil Swaps/Options |
Natural Gas Swaps |
Crude Oil Swaps/Options |
Natural Gas Swaps |
|||||||||||||||||||
Notional* |
565,500 | 10,142,050 | 472,500 | 9,602,300 | 450,000 | 9,946,500 | ||||||||||||||||||
Maximum terms in years** |
0.25 | 0.75 | 0.25 | 0.75 | 0.25 | 0.75 | ||||||||||||||||||
Current derivative assets |
$ | 2,816 | $ | 9,151 | $ | 3,345 | $ | 5,994 | $ | 5,189 | $ | 18,932 | ||||||||||||
Non-current derivative assets |
$ | 220 | $ | 3,248 | $ | 136 | $ | 551 | $ | 4,523 | $ | 4,764 | ||||||||||||
Current derivative liabilities |
$ | 2,655 | $ | 53 | $ | 1,220 | $ | 1,435 | $ | - | $ | 4 | ||||||||||||
Non-current derivative liabilities |
$ | 1,428 | $ | - | $ | 2,502 | $ | 391 | $ | 524 | $ | 244 | ||||||||||||
Pre-tax accumulated other comprehensive income (loss) included in balance sheets |
$ | (1,908 | ) | $ | 12,346 | $ | (862 | ) | $ | 4,719 | $ | 8,629 | $ | 23,448 | ||||||||||
Earnings |
$ | 861 | $ | - | $ | 621 | $ | - | $ | 559 | $ | - |
* |
Crude in Bbls, gas in MMBtu. |
** |
Refers to the term of the derivative instrument. Assets and liabilities are classified as current/non-current based on the timing of the hedged transaction and the corresponding settlement of the derivative instrument. |
Outstanding at
March 31, 2010 |
Outstanding at
December 31, 2009 |
Outstanding at
March 31, 2009 |
||||||||||||||||||||||
Notional Amounts* |
Latest Expiration (months) |
Notional Amounts* |
Latest Expiration (months) |
Notional Amounts* |
Latest Expiration (months) |
|||||||||||||||||||
Natural gas futures purchased |
4,740,000 | 24 | 6,220,000 | 15 | 2,110,000 | 24 | ||||||||||||||||||
Natural gas options purchased |
- | - | 1,910,000 | 3 | - | - | ||||||||||||||||||
Natural gas basis swaps purchased |
- | - | 225,000 | 3 | - | - |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
Current derivative assets(a) |
$ | 1,943 | $ | 3,042 | $ | 1,581 | ||||||
Non-current derivative assets |
$ | - | $ | - | $ | 2 | ||||||
Non-current derivative liabilities |
$ | 324 | $ | 764 | $ | 82 | ||||||
Net unrealized loss included in regulatory assets |
$ | 6,475 | $ | 2,578 | $ | 543 | ||||||
Cash collateral included in derivative assets/liabilities(b) |
$ | 8,094 | $ | 3,789 | $ | 2,044 |
(a) |
Includes option premium of $0, $1.1 million and $0 at March 31, 2010, December 31, 2009 and March 31, 2009, respectively, which will be recorded as a regulatory asset upon settlement of the options. |
(b) |
At March 31, 2010, December 31, 2009 and March 31, 2009, under master netting agreements we had the right to reclaim cash collateral of $8.1 million, $3.8 million and $2.0 million, respectively. |
March 31, 2010 |
December 31, 2009 |
|||||||
Notional* |
232,500 | 232,500 | ||||||
Maximum terms in months |
7 | 10 | ||||||
Current derivative asset |
$ | 322 | $ | - | ||||
Current derivative liability |
$ | - | $ | 5 | ||||
Pre-tax accumulated other comprehensive income (loss) |
$ | 327 | $ | (5 | ) |
* |
Gas in MMBtus |
|
Financing Activities |
March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||||||||||||||
Designated Interest Rate Swaps |
Dedesignated Interest Rate Swaps |
Designated Interest Rate Swaps |
Dedesignated Interest Rate Swaps |
Designated Interest Rate Swaps |
Dedesignated Interest Rate Swaps |
|||||||||||||||||||
Current notional amount |
$ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | ||||||||||||
Weighted average fixed interest rate |
5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | ||||||||||||
Maximum terms in years |
6.75 | 0.75 | (a) | 7.0 | 1.0 | (a) | 7.75 | 0.75 | (a) | |||||||||||||||
Current derivative liabilities |
$ | 6,571 | $ | 41,822 | $ | 6,342 | $ | 38,787 | $ | 5,780 | $ | 79,677 | ||||||||||||
Non-current derivative liabilities |
$ | 10,917 | $ | - | $ | 9,075 | $ | - | $ | 20,340 | $ | - | ||||||||||||
Pre-tax accumulated other comprehensive income (loss) included in balance sheets |
$ | (17,488 | ) | $ | - | $ | (15,417 | ) | $ | - | $ | (26,120 | ) | $ | - | |||||||||
Pre-tax gain (loss) included in Income Statements |
$ | - | $ | (3,035 | ) | $ | - | $ | 55,653 | $ | - | $ | 14,763 |
(a) |
Reflects the amended mandatory early termination dates of the nine and nineteen year swaps. If the mandatory early termination dates are not extended, the swaps will require cash settlement based on the swap value on the termination date. |
(14) |
FAIR VALUE MEASUREMENTS |
Recurring Fair Value Measures |
At Fair Value as of March 31, 2010 |
|||||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Counterparty Netting and Cash Collateral(a) |
Total |
||||||||||||||||
Assets: |
||||||||||||||||||||
Commodity derivatives – Trading |
$ | - | $ | 214,788 | $ | 1,183 | $ | (172,968 | ) | $ | 43,003 | |||||||||
Commodity derivatives – Oil and Gas |
- | 14,127 | 1,255 | - | 15,382 | |||||||||||||||
Commodity derivatives – regulated Utilities Group |
- | (5,829 | ) | - | 8,094 | 2,265 | ||||||||||||||
Money market funds |
9,000 | - | - | - | 9,000 | |||||||||||||||
$ | 9,000 | $ | 223,086 | $ | 2,438 | $ | (164,874 | ) | $ | 69,650 | ||||||||||
Liabilities: |
||||||||||||||||||||
Commodity derivatives – Trading |
$ | - | $ | 189,194 | $ | 1,143 | $ | (173,139 | ) | $ | 17,198 | |||||||||
Commodity derivatives – Oil and Gas |
- | 4,082 | - | - | 4,082 | |||||||||||||||
Commodity derivatives – regulated Utilities Group |
- | 324 | - | - | 324 | |||||||||||||||
Interest rate swaps |
- | 59,311 | - | - | 59,311 | |||||||||||||||
Total |
$ | - | $ | 252,911 | $ | 1,143 | $ | (173,139 | ) | $ | 80,915 |
Recurring Fair Value Measures |
At Fair Value as of December 31, 2009 |
|||||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Counterparty Netting and Cash Collateral(a) |
Total |
||||||||||||||||
Assets: |
||||||||||||||||||||
Commodity derivatives |
$ | - | $ | 154,205 | $ | 4,879 | $ | (117,560 | ) | $ | 41,524 | |||||||||
Money market fund |
6,000 | - | - | - | 6,000 | |||||||||||||||
Total |
$ | 6,000 | $ | 154,205 | $ | 4,879 | $ | (117,560 | ) | $ | 47,524 | |||||||||
Liabilities: |
||||||||||||||||||||
Commodity derivatives |
$ | - | $ | 133,604 | $ | 5,435 | $ | (124,078 | ) | $ | 14,961 | |||||||||
Interest rate swaps |
- | 54,204 | - | - | 54,204 | |||||||||||||||
Total |
$ | - | $ | 187,808 | $ | 5,435 | $ | (124,078 | ) | $ | 69,165 |
Recurring Fair Value Measures |
At Fair Value as of March 31, 2009 |
|||||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Counterparty Netting and Cash Collateral(a) |
Total |
||||||||||||||||
Assets: |
||||||||||||||||||||
Commodity derivatives |
$ | - | $ | 340,933 | $ | 24,926 | $ | (274,917 | ) | $ | 90,942 | |||||||||
Foreign currency derivatives |
- | 107 | - | - | 107 | |||||||||||||||
Total |
$ | - | $ | 341,040 | $ | 24,926 | $ | (274,917 | ) | $ | 91,049 | |||||||||
Liabilities: |
||||||||||||||||||||
Commodity derivatives |
$ | - | $ | 282,420 | $ | 11,519 | $ | (273,288 | ) | $ | 20,651 | |||||||||
Foreign currency derivatives |
- | 91 | - | - | 91 | |||||||||||||||
Interest rate swaps |
- | 105,797 | - | - | 105,797 | |||||||||||||||
Total |
$ | - | $ | 388,308 | $ | 11,519 | $ | (273,288 | ) | $ | 126,539 |
(a) |
Cash collateral on deposit in margin accounts under master netting agreements at March 31, 2010, December 31, 2009 and March 31, 2009 totaled a net $8.3 million, $6.5 million and $(1.6) million, respectively. |
Three Months Ended
March 31, 2010 |
||||
Commodity Derivatives |
||||
Balance as of beginning of period |
$ | (556 | ) | |
Unrealized losses |
(1,215 | ) | ||
Unrealized gains |
1,381 | |||
Purchases, issuance and settlements |
(307 | ) | ||
Transfers into level 3(a) |
- | |||
Transfers out of level 3(b) |
1,992 | |||
Balances at end of period |
$ | 1,295 | ||
Changes in unrealized gains relating to instruments still held as of quarter-end |
$ | 1,745 |
Three Months Ended
March 31, 2009 |
||||
Commodity Derivatives |
||||
Balance as of beginning of period |
$ | 16,398 | ||
Realized and unrealized losses |
(245 | ) | ||
Purchases, issuance and settlements |