x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2012 | |
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 x | 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, 2012 |
Common stock, $1.00 par value | 44,089,428 shares |
TABLE OF CONTENTS | |||
Page | |||
Glossary of Terms and Abbreviations | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | ||
Condensed Consolidated Statements of Income and Comprehensive Income - unaudited | |||
Three Months Ended March 31, 2012 and 2011 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
March 31, 2012, December 31, 2011 and March 31, 2011 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Three Months Ended March 31, 2012 and 2011 | |||
Notes to Condensed Consolidated Financial Statements - unaudited | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II. | OTHER INFORMATION | ||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 4. | Mine Safety Disclosures | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
Signatures | |||
Exhibit Index |
AFUDC | Allowance for Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income (Loss) |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
Bbl | Barrel |
Bcf | Billion cubic feet |
Bcfe | Billion cubic feet equivalent |
BHC | Black Hills Corporation |
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 |
Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of the Company |
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 |
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 |
Colorado IPP | Black Hills Colorado IPP, a direct wholly-owned subsidiary of Black Hills Electric Generation |
CPCN | Certificate of Public Convenience and Necessity |
CPUC | Colorado Public Utilities Commission |
CT | Combustion Turbine |
CVA | Credit Valuation Adjustment |
De-designated interest rate swaps | The $250 million notional amount interest rate swaps that were originally designated as cash flow hedges under accounting for derivatives and hedges but subsequently de-designated. |
Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act |
DRIP | Dividend Reinvestment and Stock Purchase Plan |
Dth | Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu) |
ECA | Energy Cost Adjustment |
Enserco | Enserco Energy Inc., representing our Energy Marketing segment, sold February 29, 2012 |
Equity Forward Instrument | Equity Forward Agreement with J.P. Morgan connected to a public offering of 4,413,519 shares of Black Hills Corporation common stock |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
FERC | Federal Energy Regulatory Commission |
GAAP | Generally Accepted Accounting Principles of the United States |
Global Settlement | Settlement with the utilities commission where the dollar figure is agreed upon, but the specific adjustments used by each party to arrive at the figure are not specified in public rate orders |
IFRS | International Financial Reporting Standards |
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 Producer |
IRS | Internal Revenue Service |
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 |
LIBOR | London Interbank Offered Rate |
LOE | Lease Operating Expense |
Mcf | One thousand standard cubic feet |
Mcfe | One thousand standard cubic feet equivalent. Natural gas liquid is converted by dividing gallons by 7. Crude oil is converted by multiplying by 6. |
MMBtu | One million British thermal units |
MSHA | Mine Safety and Health Administration |
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 |
NGL | Natural Gas Liquids |
NPSC | Nebraska Public Service Commission |
NYMEX | New York Mercantile Exchange |
OTC | Over-the-counter |
PGA | Purchase Gas Adjustment |
PPA | Power Purchase Agreement |
Revolving Credit Facility | Our $500 million five-year revolving credit facility which commenced on February 1, 2012 and expires on February 1, 2017 |
S&P | Standard and Poor's |
SEC | United States Securities and Exchange Commission |
Twin Eagle | Twin Eagle Resource Management, LLC |
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, | ||||||
2012 | 2011 | |||||
(in thousands, except per share amounts) | ||||||
Revenue: | ||||||
Utilities | $ | 336,655 | $ | 374,696 | ||
Non-regulated energy | 29,196 | 26,139 | ||||
Total revenue | 365,851 | 400,835 | ||||
Operating expenses: | ||||||
Utilities - | ||||||
Fuel, purchased power and cost of gas sold | 157,183 | 210,511 | ||||
Operations and maintenance | 64,760 | 67,409 | ||||
Non-regulated energy operations and maintenance | 22,595 | 23,474 | ||||
Depreciation, depletion and amortization | 38,559 | 31,910 | ||||
Taxes - property, production and severance | 11,510 | 8,198 | ||||
Other operating expenses | 1,196 | 966 | ||||
Total operating expenses | 295,803 | 342,468 | ||||
Operating income | 70,048 | 58,367 | ||||
Other income (expense): | ||||||
Interest charges - | ||||||
Interest expense incurred (including amortization of debt issuance costs, premium, discount and realized settlements on interest rate swaps) | (29,914 | ) | (29,203 | ) | ||
Allowance for funds used during construction - borrowed | 518 | 3,363 | ||||
Capitalized interest | 161 | 2,434 | ||||
Unrealized gain (loss) on interest rate swaps, net | 12,045 | 5,465 | ||||
Interest income | 437 | 548 | ||||
Allowance for funds used during construction - equity | 277 | 295 | ||||
Other income, net | 1,472 | 731 | ||||
Total other income (expense) | (15,004 | ) | (16,367 | ) | ||
Income (loss) before equity in earnings (loss) of unconsolidated subsidiaries and income taxes | 55,044 | 42,000 | ||||
Equity in earnings (loss) of unconsolidated subsidiaries | (56 | ) | 993 | |||
Income tax benefit (expense) | (19,717 | ) | (13,925 | ) | ||
Income (loss) from continuing operations | 35,271 | 29,068 | ||||
Income (loss) from discontinued operations, net of tax | (5,484 | ) | (2,158 | ) | ||
Net income available for common stock | 29,787 | 26,910 | ||||
Other comprehensive income (loss), net of tax | (166 | ) | (1,579 | ) | ||
Comprehensive income (loss) | $ | 29,621 | $ | 25,331 | ||
Income (loss) per share, Basic - | ||||||
Income (loss) from continuing operations, per share | $ | 0.81 | $ | 0.74 | ||
Income (loss) from discontinued operations, per share | (0.13 | ) | (0.05 | ) | ||
Total income (loss) per share, Basic | $ | 0.68 | $ | 0.69 | ||
Income (loss) per share, Diluted - | ||||||
Income (loss) from continuing operations, per share | $ | 0.80 | $ | 0.73 | ||
Income (loss) from discontinued operations, per share | (0.12 | ) | (0.05 | ) | ||
Total income (loss) per share, Diluted | $ | 0.68 | $ | 0.68 | ||
Weighted average common shares outstanding: | ||||||
Basic | 43,731 | 39,059 | ||||
Diluted | 43,969 | 39,761 | ||||
Dividends paid per share of common stock | $ | 0.37 | $ | 0.365 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 56,132 | $ | 21,628 | $ | 26,418 | |||||
Restricted cash | 8,960 | 9,254 | 3,406 | ||||||||
Accounts receivable, net | 143,987 | 156,774 | 151,524 | ||||||||
Materials, supplies and fuel | 63,236 | 84,064 | 45,635 | ||||||||
Derivative assets, current | 17,877 | 18,583 | 7,812 | ||||||||
Income tax receivable, net | 10,399 | 9,344 | 20,173 | ||||||||
Deferred income tax assets, net, current | 23,710 | 37,202 | 20,491 | ||||||||
Regulatory assets, current | 56,282 | 59,955 | 36,834 | ||||||||
Other current assets | 26,546 | 21,266 | 17,486 | ||||||||
Assets of discontinued operations | — | 340,851 | 295,724 | ||||||||
Total current assets | 407,129 | 758,921 | 625,503 | ||||||||
Investments | 16,451 | 17,261 | 17,088 | ||||||||
Property, plant and equipment | 3,800,011 | 3,724,016 | 3,454,179 | ||||||||
Less accumulated depreciation and depletion | (980,944 | ) | (934,441 | ) | (886,401 | ) | |||||
Total property, plant and equipment, net | 2,819,067 | 2,789,575 | 2,567,778 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,787 | 3,843 | 4,011 | ||||||||
Derivative assets, non-current | 881 | 1,971 | 1,184 | ||||||||
Regulatory assets, non-current | 186,093 | 182,175 | 140,735 | ||||||||
Other assets, non-current | 21,132 | 19,941 | 19,655 | ||||||||
Total other assets | 565,289 | 561,326 | 518,981 | ||||||||
TOTAL ASSETS | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 59,793 | $ | 104,748 | $ | 104,742 | |||||
Accrued liabilities | 151,130 | 151,319 | 127,235 | ||||||||
Derivative liabilities, current | 76,389 | 84,367 | 59,972 | ||||||||
Regulatory liabilities, current | 35,414 | 16,231 | 15,004 | ||||||||
Notes payable | 225,000 | 345,000 | 287,000 | ||||||||
Current maturities of long-term debt | 8,977 | 2,473 | 4,254 | ||||||||
Liabilities of discontinued operations | — | 173,929 | 163,293 | ||||||||
Total current liabilities | 556,703 | 878,067 | 761,500 | ||||||||
Long-term debt, net of current maturities | 1,272,016 | 1,280,409 | 1,184,830 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 317,369 | 300,988 | 301,097 | ||||||||
Derivative liabilities, non-current | 43,169 | 49,033 | 15,790 | ||||||||
Regulatory liabilities, non-current | 112,516 | 108,217 | 90,923 | ||||||||
Benefit plan liabilities | 157,623 | 177,480 | 128,170 | ||||||||
Other deferred credits and other liabilities | 123,848 | 123,553 | 133,893 | ||||||||
Total deferred credits and other liabilities | 754,525 | 759,271 | 669,873 | ||||||||
Stockholders' equity: | |||||||||||
Common stockholders' — | |||||||||||
Common stock $1 par value: 100,000,000 shares authorized: issued 44,151,428; 43,957,502 and 39,434,304 shares, respectively | 44,151 | 43,958 | 39,434 | ||||||||
Additional paid-in capital | 725,512 | 722,623 | 601,021 | ||||||||
Retained earnings | 490,114 | 476,603 | 498,614 | ||||||||
Treasury stock at cost – 65,015; 32,766 and 26,075 shares, respectively | (2,041 | ) | (970 | ) | (762 | ) | |||||
Accumulated other comprehensive income (loss) | (33,044 | ) | (32,878 | ) | (25,160 | ) | |||||
Total stockholders' equity | 1,224,692 | 1,209,336 | 1,113,147 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Operating activities: | (in thousands) | ||||||
Net income (loss) | $ | 29,787 | $ | 26,910 | |||
(Income) loss from discontinued operations, net of tax | 5,484 | 2,158 | |||||
Income (loss) from continuing operations | 35,271 | 29,068 | |||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 38,559 | 31,910 | |||||
Deferred financing cost amortization | 2,719 | 1,528 | |||||
Derivative fair value adjustments | 1,594 | 2,010 | |||||
Stock compensation | 1,817 | 2,289 | |||||
Unrealized mark-to-market (gain) loss on interest rate swaps | (12,045 | ) | (5,465 | ) | |||
Deferred income taxes | 18,083 | 25,844 | |||||
Equity in (earnings) loss of unconsolidated subsidiaries | 56 | (993 | ) | ||||
Allowance for funds used during construction - equity | (277 | ) | (295 | ) | |||
Employee benefit plans | 5,246 | 3,642 | |||||
Other adjustments, net | 2,187 | (3,440 | ) | ||||
Changes in certain operating assets and liabilities: | |||||||
Materials, supplies and fuel | 20,828 | 17,280 | |||||
Accounts receivable and other current assets | 9,439 | (5,591 | ) | ||||
Accounts payable and other current liabilities | (42,368 | ) | (44,617 | ) | |||
Regulatory assets | (776 | ) | 33,966 | ||||
Regulatory liabilities | 18,938 | 9,984 | |||||
Contributions to defined benefit pension plans | (25,000 | ) | — | ||||
Other operating activities, net | 610 | 5,301 | |||||
Net cash provided by operating activities of continuing operations | 74,881 | 102,421 | |||||
Net cash provided by (used in) operating activities of discontinued operations | 21,184 | 8,850 | |||||
Net cash provided by operating activities | 96,065 | 111,271 | |||||
Investing activities: | |||||||
Property, plant and equipment additions | (67,652 | ) | (121,615 | ) | |||
Other investing activities | 1,105 | 786 | |||||
Net cash provided by (used in) investing activities of continuing operations | (66,547 | ) | (120,829 | ) | |||
Proceeds from sale of business operations | 108,837 | — | |||||
Net cash provided by (used in) investing activities of discontinued operations | (824 | ) | (929 | ) | |||
Net cash provided by (used in) investing activities | 41,466 | (121,758 | ) | ||||
Financing activities: | |||||||
Dividends paid on common stock | (16,276 | ) | (14,371 | ) | |||
Common stock issued | 764 | 605 | |||||
Short-term borrowings - issuances | 56,453 | 210,000 | |||||
Short-term borrowings - repayments | (176,453 | ) | (172,000 | ) | |||
Long-term debt - repayments | (1,897 | ) | (2,155 | ) | |||
Other financing activities | (2,758 | ) | (14 | ) | |||
Net cash provided by (used in) financing activities of continuing operations | (140,167 | ) | 22,065 | ||||
Net cash provided by (used in) financing activities of discontinued operations | — | — | |||||
Net cash provided by (used in) financing activities | (140,167 | ) | 22,065 | ||||
Net change in cash and cash equivalents | (2,636 | ) | 11,578 | ||||
Cash and cash equivalents, beginning of period* | 58,768 | 32,438 | |||||
Cash and cash equivalents, end of period* | $ | 56,132 | $ | 44,016 |
* | Cash and cash equivalents include cash of discontinued operations of $37.1 million, $17.6 million and $16.0 million at December 31, 2011, March 31, 2011 and December 31, 2010, respectively. |
Three Months Ended | |||||||
March 31, 2012 | March 31, 2011 | ||||||
(in thousands) | |||||||
Non-cash investing activities from continuing operations— | |||||||
Property, plant and equipment acquired with accrued liabilities | $ | 31,644 | $ | 32,220 | |||
Capitalized assets associated with retirement obligations | $ | 2,826 | $ | — | |||
Cash (paid) refunded during the period for continuing operations— | |||||||
Interest (net of amounts capitalized) | $ | (16,799 | ) | $ | (11,572 | ) | |
Income taxes, net | $ | (1,838 | ) | $ | 48 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||
Materials and supplies | $ | 44,361 | $ | 40,838 | $ | 34,129 | ||||||
Fuel - Electric Utilities | 7,812 | 8,201 | 9,307 | |||||||||
Natural gas in storage - gas utilities | 11,063 | 35,025 | 2,199 | |||||||||
Total materials, supplies and fuel | $ | 63,236 | $ | 84,064 | $ | 45,635 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2012 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 44,356 | $ | 19,381 | $ | (585 | ) | $ | 63,152 | |||
Gas | 44,287 | 18,502 | (936 | ) | 61,853 | |||||||
Oil and Gas | 15,014 | — | (105 | ) | 14,909 | |||||||
Coal Mining | 2,578 | — | — | 2,578 | ||||||||
Power Generation | 265 | — | — | 265 | ||||||||
Corporate | 1,230 | — | — | 1,230 | ||||||||
Total | $ | 107,730 | $ | 37,883 | $ | (1,626 | ) | $ | 143,987 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
December 31, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 42,773 | $ | 21,151 | $ | (545 | ) | $ | 63,379 | |||
Gas | 39,353 | 38,992 | (1,011 | ) | 77,334 | |||||||
Oil and Gas | 11,282 | — | (105 | ) | 11,177 | |||||||
Coal Mining | 4,056 | — | — | 4,056 | ||||||||
Power Generation | 282 | — | — | 282 | ||||||||
Corporate | 546 | — | — | 546 | ||||||||
Total | $ | 98,292 | $ | 60,143 | $ | (1,661 | ) | $ | 156,774 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 46,077 | $ | 16,196 | $ | (728 | ) | $ | 61,545 | |||
Gas | 58,665 | 21,620 | (1,763 | ) | 78,522 | |||||||
Oil and Gas | 7,503 | — | (161 | ) | 7,342 | |||||||
Coal Mining | 982 | — | — | 982 | ||||||||
Power Generation | 2,050 | — | — | 2,050 | ||||||||
Corporate | 1,083 | — | — | 1,083 | ||||||||
Total | $ | 116,360 | $ | 37,816 | $ | (2,652 | ) | $ | 151,524 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||||||||
Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 75,000 | $ | 41,200 | $ | 195,000 | $ | 43,700 | $ | 187,000 | $ | 51,000 | ||||||
Term Loan due 2011* | — | — | — | — | 100,000 | — | ||||||||||||
Term Loan due 2012 | 150,000 | — | 150,000 | — | — | — | ||||||||||||
Total | $ | 225,000 | $ | 41,200 | $ | 345,000 | $ | 43,700 | $ | 287,000 | $ | 51,000 |
As of | Covenant | |||||||
March 31, 2012 | Requirement | |||||||
Consolidated Net Worth | $ | 1,224,692 | $ | 899,024 | ||||
Recourse Leverage Ratio | 56.4 | % | 65.0 | % |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Income (loss) from continuing operations | $ | 35,271 | $ | 29,068 | |||
Weighted average shares - basic | 43,731 | 39,059 | |||||
Dilutive effect of: | |||||||
Restricted stock | 147 | 132 | |||||
Stock options | 18 | 17 | |||||
Equity forward instruments | — | 460 | |||||
Other dilutive effects | 73 | 93 | |||||
Weighted average shares - diluted | 43,969 | 39,761 |
Three Months Ended March 31, | ||||
2012 | 2011 | |||
Stock options | 127 | 83 | ||
Restricted stock | 31 | 7 | ||
Other stock | 16 | — | ||
Anti-dilutive shares | 174 | 90 |
Three Months Ended March 31, 2012 | Pre-tax Amount | Tax (Expense) Benefit | Net-of-tax Amount | ||||||||
Fair value adjustment of derivatives designated as cash flow hedges | $ | 521 | $ | 55 | $ | 576 | |||||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) | (1,187 | ) | 445 | (742 | ) | ||||||
Other comprehensive income (loss) | $ | (666 | ) | $ | 500 | $ | (166 | ) |
Three Months Ended March 31, 2011 | Pre-tax Amount | Tax (Expense) Benefit | Net-of-tax Amount | ||||||||
Fair value adjustment of derivatives designated as cash flow hedges | $ | (3,785 | ) | $ | 1,637 | $ | (2,148 | ) | |||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) | 861 | (292 | ) | 569 | |||||||
Other comprehensive income (loss) | $ | (2,924 | ) | $ | 1,345 | $ | (1,579 | ) |
Derivatives Designated as Cash Flow Hedges | Employee Benefit Plans | Total | |||||||
Balance as of December 31, 2011 | $ | (13,802 | ) | $ | (19,076 | ) | $ | (32,878 | ) |
Other comprehensive income (loss) | (166 | ) | — | (166 | ) | ||||
Ending Balance March 31, 2012 | $ | (13,968 | ) | $ | (19,076 | ) | $ | (33,044 | ) |
Derivatives Designated as Cash Flow Hedges | Employee Benefit Plans | Total | |||||||
Balance as of December 31, 2010 | $ | (12,439 | ) | $ | (11,142 | ) | $ | (23,581 | ) |
Other comprehensive income (loss) | (1,579 | ) | — | (1,579 | ) | ||||
Ending Balance March 31, 2011 | $ | (14,018 | ) | $ | (11,142 | ) | $ | (25,160 | ) |
• | We granted 66,690 target performance shares to certain officers and business unit leaders for the January 1, 2012 through December 31, 2014 performance period during the three months ended March 31, 2012. Actual shares are issued after the end of the performance plan period. 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 200% of target. In addition, certain stock price performance must be achieved 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 $32.26 per share. |
• | We granted 139,550 shares of restricted common stock and restricted stock units during the three months ended March 31, 2012. The pre-tax compensation cost related to the awards of restricted stock and restricted stock units of approximately $4.9 million will be recognized over the vesting period. |
• | Stock options totaling 41,206 shares were exercised during the three months ended March 31, 2012 at a weighted-average exercise price of $28.28 per share, providing $1.2 million of proceeds. |
• | We issued 3,690 shares of common stock under our short-term incentive compensation plan during the three months ended March 31, 2012. Pre-tax compensation cost related to the awards was approximately $0.1 million, which was expensed in 2011. |
• | Our utilities are generally limited to the amount of dividends allowed to be paid to us as a utility holding company under the Federal Power Act and settlement agreements with state regulatory jurisdictions. As of March 31, 2012, the restricted net assets at our Utilities Group were approximately $81.4 million. |
• | As required by the covenant in the Black Hills Wyoming project financing, Black Hills Non-regulated Holdings has maintained restricted equity of at least $100.0 million. |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 1,430 | $ | 1,355 | ||
Interest cost | 3,687 | 3,732 | ||||
Expected return on plan assets | (4,084 | ) | (4,239 | ) | ||
Prior service cost | 22 | 25 | ||||
Net loss (gain) | 2,408 | 1,135 | ||||
Net periodic benefit cost | $ | 3,463 | $ | 2,008 |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 402 | $ | 375 | ||
Interest cost | 523 | 542 | ||||
Expected return on plan assets | (19 | ) | (41 | ) | ||
Prior service cost (benefit) | (125 | ) | (120 | ) | ||
Net loss (gain) | 222 | 169 | ||||
Net periodic benefit cost | $ | 1,003 | $ | 925 |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 246 | $ | 257 | ||
Interest cost | 331 | 324 | ||||
Prior service cost | 1 | 1 | ||||
Net loss (gain) | 202 | 127 | ||||
Net periodic benefit cost | $ | 780 | $ | 709 |
Contributions Made | |||||||||
Three Months Ended March 31, 2012 | Additional Contributions Anticipated for 2012 | Contributions Anticipated for 2013 | |||||||
Defined Benefit Pension Plans | $ | 25,000 | $ | — | $ | 4,500 | |||
Non-pension Defined Benefit Postretirement Healthcare Plans | $ | 1,063 | $ | 3,188 | $ | 4,380 | |||
Supplemental Non-qualified Defined Benefit Plans | $ | 278 | $ | 833 | $ | 1,090 |
• | 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 to areas in Colorado, Iowa, Kansas and Nebraska. |
• | Oil and Gas, which acquires, explores for, develops and produces crude 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 Colorado; and |
• | Coal Mining, which engages in the mining and sale of coal from our mine near Gillette, Wyoming. |
Three Months Ended March 31, 2012 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 156,133 | $ | 3,036 | $ | 8,746 | ||||||
Gas | 180,522 | — | 15,207 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 21,645 | — | 13 | |||||||||
Power Generation | 1,178 | 18,449 | 6,914 | |||||||||
Coal Mining | 6,373 | 8,616 | 1,000 | |||||||||
Corporate (a)(b) | — | — | 3,391 | |||||||||
Intercompany eliminations | — | (30,101 | ) | — | ||||||||
Total | $ | 365,851 | $ | — | $ | 35,271 |
Three Months Ended March 31, 2011 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 144,430 | $ | 3,839 | $ | 10,249 | ||||||
Gas | 230,266 | — | 19,263 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 17,906 | — | (715 | ) | ||||||||
Power Generation | 687 | 6,933 | 1,186 | |||||||||
Coal Mining | 7,614 | 7,881 | (1,298 | ) | ||||||||
Corporate (a)(b) | — | — | 451 | |||||||||
Intercompany eliminations | — | (18,721 | ) | (68 | ) | |||||||
Total | $ | 400,903 | $ | (68 | ) | $ | 29,068 |
(a) | Income (loss) from continuing operations includes $7.8 million and $3.6 million net after-tax mark-to-market gain on interest rate swaps for the three months ended March 31, 2012 and March 31, 2011, respectively. |
(b) | Certain direct corporate costs and inter-segment interest expense previously allocated to our Energy Marketing segment were not classified as discontinued operations but were included in the Corporate segment. See Note 17 for further information. |
Total Assets (net of inter-company eliminations) | March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||
Utilities: | |||||||||||
Electric (a) | $ | 2,268,524 | $ | 2,254,914 | $ | 1,868,600 | |||||
Gas | 717,185 | 746,444 | 683,927 | ||||||||
Non-regulated Energy: | |||||||||||
Oil and Gas | 430,851 | 425,970 | 355,357 | ||||||||
Power Generation (a) | 128,225 | 129,121 | 336,827 | ||||||||
Coal Mining | 87,139 | 88,704 | 94,416 | ||||||||
Corporate (b) | 176,012 | 141,079 | 94,499 | ||||||||
Discontinued operations (c) | — | 340,851 | 295,724 | ||||||||
Total assets | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
(a) | The PPA under which the new generating facility was constructed at our Pueblo Airport Generation site by Colorado IPP to support Colorado Electric customers is accounted for as a capital lease. Therefore, commencing December 31, 2011, assets previously at Power Generation are now accounted for at Colorado Electric under accounting for a capital lease. |
• | Commodity price risk associated with our natural long position with crude oil and natural gas reserves and production, fuel procurement for certain of our gas-fired generation assets and variability in revenue due to changes in gas usage at our regulated segment; and |
• | Interest rate risk associated with our variable rate credit facility, project financing floating rate debt and our derivative instruments. |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||||||||
Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | ||||||||||||||||||
Notional (a) | 522,000 | 5,001,750 | 528,000 | 5,406,250 | 487,500 | 5,974,800 | |||||||||||||||||
Maximum terms in years (b) | 1.25 | 1.50 | 1.25 | 1.75 | 1.00 | 0.25 | |||||||||||||||||
Derivative assets, current | $ | 406 | $ | 8,256 | $ | 729 | $ | 8,010 | $ | 108 | $ | 6,649 | |||||||||||
Derivative assets, non-current | $ | 46 | $ | 808 | $ | 771 | $ | 1,148 | $ | — | $ | 975 | |||||||||||
Derivative liabilities, current | $ | 2,904 | $ | — | $ | 2,559 | $ | — | $ | 4,688 | $ | — | |||||||||||
Derivative liabilities, non-current | $ | 1,084 | $ | — | $ | 811 | $ | 7 | $ | 2,678 | $ | 157 | |||||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (3,566 | ) | $ | 9,064 | $ | (1,928 | ) | $ | 9,152 | $ | (7,613 | ) | $ | 7,467 | ||||||||
Revenue (c) | $ | 30 | $ | — | $ | 58 | $ | — | $ | 355 | $ | — |
(a) | Crude oil in Bbls, gas in MMBtus |
(b) | Refers to the term of the derivative instrument. Assets and liabilities are classified as current or non-current based on the term of the hedged transaction and the corresponding settlement of the derivative instruments. |
(c) | Represents the amortization of put premiums. |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||
Notional (MMBtus) | Latest Expiration (months) | Notional (MMBtus) | Latest Expiration (months) | Notional (MMBtus) | Latest Expiration (months) | ||||||||||||
Natural gas futures purchased | 11,550,000 | 81 | 14,310,000 | 84 | 4,680,000 | 24 | |||||||||||
Natural gas options purchased | 670,000 | 12 | 1,720,000 | 3 | — | — | |||||||||||
Natural gas basis swaps purchased | 7,640,000 | 81 | 7,160,000 | 60 | — | — |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
Derivative assets, current | $ | 9,215 | $ | 9,844 | $ | 1,056 | |||||
Derivative assets, non-current | $ | 27 | $ | 52 | $ | 209 | |||||
Derivative liabilities, non-current | $ | 6,407 | $ | 7,156 | $ | — | |||||
Net unrealized gain (loss) included in Regulatory assets or liabilities | $ | 15,223 | $ | 17,556 | $ | 2,455 | |||||
Included in Derivatives: | |||||||||||
Cash collateral receivable (payable) | $ | 17,651 | $ | 19,416 | $ | 3,720 | |||||
Option premiums and commissions | $ | 407 | $ | 880 | $ | — |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||||||||
Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | ||||||||||||||||||
Notional | $ | 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 | 4.75 | 1.75 | 5.00 | 2.00 | 5.75 | 0.75 | |||||||||||||||||
Derivative liabilities, current | $ | 6,777 | $ | 66,708 | $ | 6,513 | $ | 75,295 | $ | 6,769 | $ | 48,515 | |||||||||||
Derivative liabilities, non-current | $ | 18,441 | $ | 17,237 | $ | 20,363 | $ | 20,696 | $ | 12,955 | $ | — | |||||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (25,218 | ) | $ | — | $ | (26,876 | ) | $ | — | $ | (19,724 | ) | $ | — | ||||||||
Pre-tax gain (loss) | $ | — | $ | 12,045 | $ | — | $ | (42,010 | ) | $ | — | $ | 5,465 | ||||||||||
Cash collateral receivable (payable) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
* | Maximum terms in years reflect the amended early termination dates. If the early termination dates are not extended, the swaps will require cash settlement based on the swap value on the termination date. If extended, de-designated swaps totaling $100 million terminate in 7 years and de-designated swaps totaling $150 million terminate in 17 years. |
• | The commodity option contracts for the Oil and Gas segment are valued under the market approach and include calls and puts. Fair value was derived using quoted prices from third party brokers for similar instruments as to quantity and timing. The prices are then validated through multiple sources. |
• | The commodity basis swaps for the Oil and Gas segment are valued under the market approach using the instrument's current forward price strip hedged for the same quantity and date and discounted based on the three-month LIBOR. |
• | The commodity contracts for the Utilities, valued using the market approach, include exchange-traded futures, options and basis swaps (Level 2) and OTC basis swaps (Level 3) for natural gas contracts. For Level 2 assets and liabilities, fair value was derived using broker quotes validated by the Chicago Mercantile Exchange pricing for similar instruments. For Level 3 assets and liabilities, fair value was derived using average price quotes from the OTC contract broker and an independent third party market participant. |
• | The interest rate swaps are valued using the market valuation approach. The company establishes fair value by obtaining price quotes directly from the counterparty which are based on the floating three-month LIBOR curve for the term of the contract. The fair value obtained from the counterparty is then validated by utilizing a nationally recognized service that obtains observable inputs to compute fair value for the same instrument. In addition, the fair value for the interest rate swap derivatives includes a CVA component. The CVA considers the fair value of the interest rate swap and the probability of default based on the life of the contract. For the probability of a default component, we utilize observable inputs supporting Level 2 disclosure by using our credit default spread, if available, or a generic credit default spread curve that takes into account our credit ratings. |
As of March 31, 2012 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||||||
Options -- Oil | $ | — | $ | 404 | $ | — | $ | — | $ | — | $ | 404 | ||||||||||||
Basis Swaps -- Oil | — | 48 | — | — | — | 48 | ||||||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Basis Swaps -- Gas | — | 9,064 | — | — | — | 9,064 | ||||||||||||||||||
Commodity derivatives — Utilities | — | (8,412 | ) | 3 | — | 17,651 | 9,242 | |||||||||||||||||
Repurchase agreement (a) | 43,128 | — | — | — | — | 43,128 | ||||||||||||||||||
Money market funds and term deposits (a) | 12,791 | — | — | — | — | 12,791 | ||||||||||||||||||
Total | $ | 55,919 | $ | 1,104 | $ | 3 | $ | — | $ | 17,651 | $ | 74,677 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||||||
Options -- Oil | $ | — | $ | 1,347 | $ | — | $ | — | $ | — | $ | 1,347 | ||||||||||||
Basis Swaps -- Oil | — | 2,641 | — | — | — | 2,641 | ||||||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Basis Swaps -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Commodity derivatives — Utilities | — | 6,359 | 48 | — | — | 6,407 | ||||||||||||||||||
Interest rate swaps | — | 109,163 | — | — | — | 109,163 | ||||||||||||||||||
Total | $ | — | $ | 119,510 | $ | 48 | $ | — | $ | — | $ | 119,558 |
As of December 31, 2011 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 9,885 | $ | 768 | $ | 5 | $ | — | $ | 10,658 | ||||||||||||
Commodity derivatives —Utilities | — | (9,520 | ) | — | — | 19,416 | 9,896 | |||||||||||||||||
Money market funds | 6,005 | — | — | — | — | 6,005 | ||||||||||||||||||
Total | $ | 6,005 | $ | 365 | $ | 768 | $ | 5 | $ | 19,416 | $ | 26,559 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 2,207 | $ | 1,165 | $ | 5 | $ | — | $ | 3,377 | ||||||||||||
Commodity derivatives — Utilities | — | 7,156 | — | — | — | 7,156 | ||||||||||||||||||
Interest rate swaps | — | 122,867 | — | — | — | 122,867 | ||||||||||||||||||
Total | $ | — | $ | 132,230 | $ | 1,165 | $ | 5 | $ | — | $ | 133,400 |
As of March 31, 2011 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 7,626 | $ | 106 | $ | — | $ | — | $ | 7,732 | ||||||||||||
Commodity derivatives — Utilities | — | (2,455 | ) | — | — | 3,720 | 1,265 | |||||||||||||||||
Money market funds | 9,050 | — | — | — | — | 9,050 | ||||||||||||||||||
Total | $ | 9,050 | $ | 5,171 | $ | 106 | $ | — | $ | 3,720 | $ | 18,047 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 7,523 | $ | — | $ | — | $ | — | $ | 7,523 | ||||||||||||
Commodity derivatives — Utilities | — < |