x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 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 October 31, 2012 |
Common stock, $1.00 par value | 44,180,030 shares |
TABLE OF CONTENTS | |||
Page | |||
Glossary of Terms and Abbreviations | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | ||
Condensed Consolidated Statements of Income - unaudited | |||
Three and Nine Months Ended Sept. 30, 2012 and 2011 | |||
Condensed Consolidated Statements of Comprehensive Income (Loss) - unaudited | |||
Three and Nine Months Ended Sept. 30, 2012 and 2011 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
Sept. 30, 2012, Dec. 31, 2011 and Sept. 30, 2011 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Nine Months Ended Sept. 30, 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 |
AltaGas | AltaGas Renewable Energy Colorado, LLC |
AOCI | Accumulated Other Comprehensive Income (Loss) |
ARO | Asset Retirement Obligation |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
Bbl | Barrel |
Bcf | Billion cubic feet |
Bcfe | Billion cubic feet equivalent |
BHC | Black Hills Corporation, the "Company" |
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 |
CFTC | Commodity Futures Trading Commission |
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 |
CWIP | Construction Work-In-Progress |
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 were subsequently de-designated. |
Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act |
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 Feb. 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 barrels 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 |
REPA | Renewable Energy Purchase Agreement |
Revolving Credit Facility | Our $500 million five-year revolving credit facility which commenced on Feb. 1, 2012 and expires on Feb. 1, 2017 |
S&P | Standard and Poor's |
SEC | United States Securities and Exchange Commission |
WPSC | Wyoming Public Service Commission |
WRDC | Wyodak Resources Development Corp., a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, representing our Coal Mining segment |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
(in thousands, except per share amounts) | ||||||||||||
Revenue: | ||||||||||||
Utilities | $ | 214,716 | $ | 223,714 | $ | 766,317 | $ | 834,463 | ||||
Non-regulated energy | 32,092 | 25,809 | 88,705 | 76,544 | ||||||||
Total revenue | 246,808 | 249,523 | 855,022 | 911,007 | ||||||||
Operating expenses: | ||||||||||||
Utilities - | ||||||||||||
Fuel, purchased power and cost of gas sold | 62,582 | 86,127 | 283,217 | 400,465 | ||||||||
Operations and maintenance | 59,398 | 58,313 | 183,721 | 184,411 | ||||||||
Non-regulated energy operations and maintenance | 22,466 | 22,813 | 65,774 | 69,438 | ||||||||
Gain on sale of operating assets | (27,285 | ) | — | (27,285 | ) | — | ||||||
Depreciation, depletion and amortization | 41,408 | 33,278 | 121,398 | 97,434 | ||||||||
Taxes - property, production and severance | 10,213 | 9,161 | 31,201 | 24,598 | ||||||||
Impairment of long-lived assets | — | — | 26,868 | — | ||||||||
Other operating expenses | 216 | 259 | 1,679 | 562 | ||||||||
Total operating expenses | 168,998 | 209,951 | 686,573 | 776,908 | ||||||||
Operating income | 77,810 | 39,572 | 168,449 | 134,099 | ||||||||
Other income (expense): | ||||||||||||
Interest charges - | ||||||||||||
Interest expense incurred (including amortization of debt issuance costs, premiums, discounts and realized settlements on interest rate swaps) | (27,475 | ) | (29,303 | ) | (85,151 | ) | (87,099 | ) | ||||
Allowance for funds used during construction - borrowed | 1,127 | 3,520 | 2,608 | 9,874 | ||||||||
Capitalized interest | 175 | 2,981 | 467 | 8,198 | ||||||||
Unrealized gain (loss) on interest rate swaps, net | 605 | (38,246 | ) | (2,902 | ) | (40,608 | ) | |||||
Interest income | 364 | 536 | 1,428 | 1,547 | ||||||||
Allowance for funds used during construction - equity | 196 | 189 | 668 | 676 | ||||||||
Other income (expense), net | (287 | ) | 528 | 2,073 | 1,763 | |||||||
Total other income (expense) | (25,295 | ) | (59,795 | ) | (80,809 | ) | (105,649 | ) | ||||
Income (loss) before equity in earnings (loss) of unconsolidated subsidiaries and income taxes | 52,515 | (20,223 | ) | 87,640 | 28,450 | |||||||
Equity in earnings (loss) of unconsolidated subsidiaries | 22 | 43 | (12 | ) | 1,076 | |||||||
Income tax benefit (expense) | (17,914 | ) | 9,017 | (30,057 | ) | (7,915 | ) | |||||
Income (loss) from continuing operations | 34,623 | (11,163 | ) | 57,571 | 21,611 | |||||||
Income (loss) from discontinued operations, net of tax | (166 | ) | 638 | (6,810 | ) | 2,526 | ||||||
Net income (loss) available for common stock | $ | 34,457 | $ | (10,525 | ) | $ | 50,761 | $ | 24,137 | |||
Income (loss) per share, Basic - | ||||||||||||
Income (loss) from continuing operations, per share | $ | 0.79 | $ | (0.29 | ) | $ | 1.31 | $ | 0.55 | |||
Income (loss) from discontinued operations, per share | — | 0.02 | (0.16 | ) | 0.07 | |||||||
Total income (loss) per share, Basic | $ | 0.79 | $ | (0.27 | ) | $ | 1.15 | $ | 0.62 | |||
Income (loss) per share, Diluted - | ||||||||||||
Income (loss) from continuing operations, per share | $ | 0.78 | $ | (0.29 | ) | $ | 1.31 | $ | 0.54 | |||
Income (loss) from discontinued operations, per share | — | 0.02 | (0.16 | ) | 0.07 | |||||||
Total income (loss) per share, Diluted | $ | 0.78 | $ | (0.27 | ) | $ | 1.15 | $ | 0.61 | |||
Weighted average common shares outstanding: | ||||||||||||
Basic | 43,847 | 39,145 | 43,792 | 39,105 | ||||||||
Diluted | 44,108 | 39,145 | 44,026 | 39,792 | ||||||||
Dividends paid per share of common stock | $ | 0.370 | $ | 0.365 | $ | 1.110 | $ | 1.095 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
(in thousands) | ||||||||||||
Net income (loss) available for common stock | $ | 34,457 | $ | (10,525 | ) | $ | 50,761 | $ | 24,137 | |||
Other comprehensive income (loss), net of tax: | ||||||||||||
Fair value adjustment of derivatives designated as cash flow hedges (net of tax of $1,204 and $(1,215) for the three months ended 2012 and 2011 and $1,092 and $653 for the nine months ended 2012 and 2011, respectively) | (3,591 | ) | 1,922 | (3,004 | ) | (991 | ) | |||||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) (net of tax of $13 and $(129) for the three months ended 2012 and 2011 and $890 and $(985) for the nine months ended 2012 and 2011, respectively) | 28 | 285 | (1,333 | ) | 1,907 | |||||||
Other comprehensive income (loss), net of tax | (3,563 | ) | 2,207 | (4,337 | ) | 916 | ||||||
Comprehensive income (loss) | $ | 30,894 | $ | (8,318 | ) | $ | 46,424 | $ | 25,053 |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 247,192 | $ | 21,628 | $ | 30,198 | |||||
Restricted cash and equivalents | 7,302 | 9,254 | 4,080 | ||||||||
Accounts receivable, net | 104,482 | 156,774 | 102,673 | ||||||||
Materials, supplies and fuel | 80,900 | 84,064 | 84,607 | ||||||||
Derivative assets, current | 16,063 | 18,583 | 12,177 | ||||||||
Income tax receivable, net | 11,869 | 9,344 | 4,728 | ||||||||
Deferred income tax assets, net, current | 33,681 | 37,202 | 37,931 | ||||||||
Regulatory assets, current | 24,606 | 59,955 | 45,713 | ||||||||
Other current assets | 44,823 | 21,266 | 25,269 | ||||||||
Assets of discontinued operations | — | 340,851 | 332,503 | ||||||||
Total current assets | 570,918 | 758,921 | 679,879 | ||||||||
Investments | 16,273 | 17,261 | 17,338 | ||||||||
Property, plant and equipment | 3,950,222 | 3,724,016 | 3,656,762 | ||||||||
Less accumulated depreciation and depletion | (1,253,808 | ) | (934,441 | ) | (931,299 | ) | |||||
Total property, plant and equipment, net | 2,696,414 | 2,789,575 | 2,725,463 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,675 | 3,843 | 3,899 | ||||||||
Derivative assets, non-current | 1,167 | 1,971 | 3,246 | ||||||||
Regulatory assets, non-current | 191,935 | 182,175 | 142,267 | ||||||||
Other assets, non-current | 19,850 | 19,941 | 20,081 | ||||||||
Total other assets | 570,023 | 561,326 | 522,889 | ||||||||
TOTAL ASSETS | $ | 3,853,628 | $ | 4,127,083 | $ | 3,945,569 |
Sept. 30, 2012 | December 31, 2011 | Sept. 30, 2011 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 69,138 | $ | 104,748 | $ | 91,628 | |||||
Accrued liabilities | 179,284 | 151,319 | 161,650 | ||||||||
Derivative liabilities, current | 86,509 | 84,367 | 101,312 | ||||||||
Regulatory liabilities, current | 10,705 | 16,231 | 10,568 | ||||||||
Notes payable | 225,000 | 345,000 | 359,000 | ||||||||
Current maturities of long-term debt | 328,310 | 2,473 | 2,893 | ||||||||
Liabilities of discontinued operations | — | 173,929 | 171,685 | ||||||||
Total current liabilities | 898,946 | 878,067 | 898,736 | ||||||||
Long-term debt, net of current maturities | 942,950 | 1,280,409 | 1,282,194 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 338,194 | 300,988 | 317,864 | ||||||||
Derivative liabilities, non-current | 41,410 | 49,033 | 22,475 | ||||||||
Regulatory liabilities, non-current | 120,491 | 108,217 | 85,074 | ||||||||
Benefit plan liabilities | 167,690 | 177,480 | 124,214 | ||||||||
Other deferred credits and other liabilities | 129,630 | 123,553 | 127,007 | ||||||||
Total deferred credits and other liabilities | 797,415 | 759,271 | 676,634 | ||||||||
Commitments and contingencies (See Notes 6, 7, 9, 11, 12 and 14) | |||||||||||
Stockholders' equity: | |||||||||||
Common stock — | |||||||||||
Common stock $1 par value: 100,000,000 shares authorized: issued 44,250,588; 43,957,502 and 39,491,616 shares, respectively | 44,251 | 43,958 | 39,492 | ||||||||
Additional paid-in capital | 731,176 | 722,623 | 604,945 | ||||||||
Retained earnings | 478,459 | 476,603 | 467,043 | ||||||||
Treasury stock at cost – 75,420; 32,766 and 28,041 shares, respectively | (2,354 | ) | (970 | ) | (810 | ) | |||||
Accumulated other comprehensive income (loss) | (37,215 | ) | (32,878 | ) | (22,665 | ) | |||||
Total stockholders' equity | 1,214,317 | 1,209,336 | 1,088,005 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,853,628 | $ | 4,127,083 | $ | 3,945,569 |
Nine Months Ended Sept. 30, | ||||||
2012 | 2011 | |||||
Operating activities: | (unaudited, in thousands) | |||||
Net income (loss) available to common stock | $ | 50,761 | $ | 24,137 | ||
(Income) loss from discontinued operations, net of tax | 6,810 | (2,526 | ) | |||
Income (loss) from continuing operations | 57,571 | 21,611 | ||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: | ||||||
Depreciation, depletion and amortization | 121,398 | 97,434 | ||||
Deferred financing cost amortization | 5,301 | 5,040 | ||||
Impairment of long-lived assets | 26,868 | — | ||||
Derivative fair value adjustments | (3,522 | ) | (2,305 | ) | ||
Gain on sale of operating assets | (27,285 | ) | — | |||
Stock compensation | 5,974 | 4,840 | ||||
Unrealized mark-to-market (gain) loss on interest rate swaps | 2,902 | 40,608 | ||||
Deferred income taxes | 28,718 | 20,854 | ||||
Allowance for funds used during construction - equity | (668 | ) | (676 | ) | ||
Employee benefit plans | 15,737 | 10,930 | ||||
Other adjustments, net | 3,505 | 3,177 | ||||
Changes in certain operating assets and liabilities: | ||||||
Materials, supplies and fuel | 3,085 | (21,692 | ) | |||
Accounts receivable, unbilled revenues and other current assets | 43,447 | 50,649 | ||||
Accounts payable and other current liabilities | (22,042 | ) | (51,846 | ) | ||
Regulatory assets | 15,544 | 22,357 | ||||
Regulatory liabilities | (1,983 | ) | 5,041 | |||
Contributions to defined benefit pension plans | (25,000 | ) | (11,050 | ) | ||
Other operating activities, net | (1,067 | ) | (1,755 | ) | ||
Net cash provided by operating activities of continuing operations | 248,483 | 193,217 | ||||
Net cash provided by (used in) operating activities of discontinued operations | 21,184 | 13,309 | ||||
Net cash provided by operating activities | 269,667 | 206,526 | ||||
Investing activities: | ||||||
Property, plant and equipment additions | (261,414 | ) | (326,543 | ) | ||
Proceeds from sale of assets | 268,482 | 583 | ||||
Investment in notes receivable | (21,832 | ) | — | |||
Other investing activities | 5,057 | 1,051 | ||||
Net cash provided by (used in) investing activities of continuing operations | (9,707 | ) | (324,909 | ) | ||
Proceeds from sale of discontinued business operations | 108,837 | — | ||||
Net cash provided by (used in) investing activities of discontinued operations | (824 | ) | (1,953 | ) | ||
Net cash provided by (used in) investing activities | 98,306 | (326,862 | ) | |||
Financing activities: | ||||||
Dividends paid on common stock | (48,904 | ) | (43,169 | ) | ||
Common stock issued | 3,835 | 2,199 | ||||
Short-term borrowings - issuances | 62,453 | 770,000 | ||||
Short-term borrowings - repayments | (182,453 | ) | (560,000 | ) | ||
Long-term debt - repayments | (11,647 | ) | (6,169 | ) | ||
Other financing activities | (2,833 | ) | (28 | ) | ||
Net cash provided by (used in) financing activities of continuing operations | (179,549 | ) | 162,833 | |||
Net cash provided by (used in) financing activities of discontinued operations | — | (157 | ) | |||
Net cash provided by (used in) financing activities | (179,549 | ) | 162,676 | |||
Net change in cash and cash equivalents | 188,424 | 42,340 | ||||
Cash and cash equivalents, beginning of period* | 58,768 | 32,438 | ||||
Cash and cash equivalents, end of period* | $ | 247,192 | $ | 74,778 |
* | Includes cash of discontinued operations of $37.1 million, $44.6 million and $16.0 million at Dec. 31, 2011, Sept. 30, 2011 and Dec. 31, 2010, respectively. |
Nine Months Ended | |||||||
Sept. 30, 2012 | Sept. 30, 2011 | ||||||
(in thousands) | |||||||
Non-cash investing activities from continuing operations— | |||||||
Property, plant and equipment acquired with accounts payable and accrued liabilities | $ | 39,303 | $ | 49,566 | |||
Capitalized assets associated with retirement obligations | $ | 3,806 | $ | — | |||
Cash (paid) refunded during the period for continuing operations— | |||||||
Interest (net of amounts capitalized) | $ | (69,901 | ) | $ | (60,934 | ) | |
Income taxes, net | $ | 425 | $ | 11,939 |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | ||||||||||
Materials and supplies | $ | 43,847 | $ | 40,838 | $ | 37,327 | ||||||
Fuel - Electric Utilities | 8,289 | 8,201 | 8,639 | |||||||||
Natural gas in storage held for distribution | 28,764 | 35,025 | 38,641 | |||||||||
Total materials, supplies and fuel | $ | 80,900 | $ | 84,064 | $ | 84,607 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
Sept. 30, 2012 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 46,802 | $ | 18,441 | $ | (603 | ) | $ | 64,640 | |||
Gas Utilities | 18,198 | 9,480 | (204 | ) | 27,474 | |||||||
Oil and Gas | 10,272 | — | (105 | ) | 10,167 | |||||||
Coal Mining | 1,540 | — | — | 1,540 | ||||||||
Power Generation | 4 | — | — | 4 | ||||||||
Corporate | 657 | — | — | 657 | ||||||||
Total | $ | 77,473 | $ | 27,921 | $ | (912 | ) | $ | 104,482 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
Dec. 31, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 42,773 | $ | 21,151 | $ | (545 | ) | $ | 63,379 | |||
Gas Utilities | 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 | |||||||||
Sept. 30, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 41,889 | $ | 16,401 | $ | (590 | ) | $ | 57,700 | |||
Gas Utilities | 21,168 | 12,518 | (789 | ) | 32,897 | |||||||
Oil and Gas | 8,820 | — | (161 | ) | 8,659 | |||||||
Coal Mining | 1,845 | — | — | 1,845 | ||||||||
Power Generation | 119 | — | — | 119 | ||||||||
Corporate | 1,453 | — | — | 1,453 | ||||||||
Total | $ | 75,294 | $ | 28,919 | $ | (1,540 | ) | $ | 102,673 |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | ||||||||||||||||
Notes Payable | Letters of Credit | Notes Payable | Letters of Credit | Notes Payable | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 75,000 | $ | 36,300 | $ | 195,000 | $ | 43,700 | $ | 209,000 | $ | 42,355 | ||||||
Term Loan due June 2013 (a) | 150,000 | — | 150,000 | — | 150,000 | — | ||||||||||||
Total | $ | 225,000 | $ | 36,300 | $ | 345,000 | $ | 43,700 | $ | 359,000 | $ | 42,355 |
As of | ||||||||
Sept. 30, 2012 | Covenant Requirement | |||||||
Consolidated Net Worth | $ | 1,214,317 | Greater than | $ | 909,511 | |||
Recourse Leverage Ratio | 56.3 | % | Less than | 65.0 | % |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||
Income (loss) from continuing operations | $ | 34,623 | $ | (11,163 | ) | $ | 57,571 | $ | 21,611 | ||||
Weighted average shares - basic | 43,847 | 39,145 | 43,792 | 39,105 | |||||||||
Dilutive effect of: | |||||||||||||
Restricted stock | 175 | — | 159 | 147 | |||||||||
Stock options | 12 | — | 14 | 16 | |||||||||
Equity forward instruments | — | — | — | 473 | |||||||||
Other dilutive effects | 74 | — | 61 | 51 | |||||||||
Weighted average shares - diluted | 44,108 | 39,145 | 44,026 | 39,792 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||
2012 | 2011 | 2012 | 2011 | |||||
Stock options | 77 | 176 | 101 | 119 | ||||
Restricted stock | 61 | 20 | 53 | 17 | ||||
Other stock | — | 27 | 19 | 19 | ||||
Anti-dilutive shares | 138 | 223 | 173 | 155 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Service cost | $ | 1,431 | $ | 1,355 | $ | 4,291 | $ | 4,066 | ||||
Interest cost | 3,688 | 3,732 | 11,062 | 11,196 | ||||||||
Expected return on plan assets | (4,084 | ) | (4,239 | ) | (12,252 | ) | (12,717 | ) | ||||
Prior service cost | 22 | 25 | 66 | 75 | ||||||||
Net loss (gain) | 2,408 | 1,135 | 7,224 | 3,405 | ||||||||
Net periodic benefit cost | $ | 3,465 | $ | 2,008 | $ | 10,391 | $ | 6,025 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Service cost | $ | 402 | $ | 375 | $ | 1,206 | $ | 1,125 | ||||
Interest cost | 523 | 542 | 1,569 | 1,626 | ||||||||
Expected return on plan assets | (19 | ) | (41 | ) | (57 | ) | (123 | ) | ||||
Prior service cost (benefit) | (125 | ) | (120 | ) | (375 | ) | (360 | ) | ||||
Net loss (gain) | 222 | 169 | 666 | 507 | ||||||||
Net periodic benefit cost | $ | 1,003 | $ | 925 | $ | 3,009 | $ | 2,775 |
Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Service cost | $ | 243 | $ | 257 | $ | 735 | $ | 771 | ||||
Interest cost | 331 | 324 | 993 | 973 | ||||||||
Prior service cost | 1 | 1 | 3 | 3 | ||||||||
Net loss (gain) | 202 | 128 | 606 | 383 | ||||||||
Net periodic benefit cost | $ | 777 | $ | 710 | $ | 2,337 | $ | 2,130 |
Contributions Made | Contributions Made | Additional | ||||||||||
Three Months Ended Sept. 30, 2012 | Nine Months Ended Sept. 30, 2012 | 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 | $ | 3,189 | $ | 1,063 | $ | 4,380 | ||||
Supplemental Non-qualified Defined Benefit Plans | $ | 278 | $ | 834 | $ | 278 | $ | 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, Wyo. 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, Wyo. |
Three Months Ended Sept. 30, 2012 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 151,281 | $ | 3,736 | $ | 14,573 | ||||||
Gas | 63,435 | — | 3 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas (a) | 24,728 | — | 17,389 | |||||||||
Power Generation | 1,256 | 19,695 | 5,128 | |||||||||
Coal Mining | 6,108 | 8,567 | 1,690 | |||||||||
Corporate (b) | — | — | (4,160 | ) | ||||||||
Intercompany eliminations | — | (31,998 | ) | — | ||||||||
Total | $ | 246,808 | $ | — | $ | 34,623 |
Three Months Ended Sept. 30, 2011 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 151,063 | $ | 2,653 | $ | 15,790 | ||||||
Gas | 72,651 | — | 572 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 19,163 | — | 241 | |||||||||
Power Generation | 1,011 | 7,089 | 337 | |||||||||
Coal Mining | 9,184 | 8,651 | 555 | |||||||||
Corporate (b)(c) | — | — | (28,307 | ) | ||||||||
Intercompany eliminations | — | (21,942 | ) | (351 | ) | |||||||
Total | $ | 253,072 | $ | (3,549 | ) | $ | (11,163 | ) |
Nine Months Ended Sept. 30, 2012 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 451,974 | $ | 11,946 | $ | 37,478 | ||||||
Gas | 314,343 | — | 16,369 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas (a)(d) | 66,994 | — | (2,219 | ) | ||||||||
Power Generation | 3,193 | 56,119 | 15,968 | |||||||||
Coal Mining | 18,518 | 24,273 | 3,924 | |||||||||
Corporate (b) | — | — | (13,949 | ) | ||||||||
Intercompany eliminations | — | (92,338 | ) | — | ||||||||
Total | $ | 855,022 | $ | — | $ | 57,571 |
Nine Months Ended Sept. 30, 2011 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 431,624 | $ | 9,902 | $ | 34,653 | ||||||
Gas | 402,839 | — | 24,275 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 55,907 | — | (553 | ) | ||||||||
Power Generation | 2,589 | 20,911 | 2,071 | |||||||||
Coal Mining | 23,064 | 25,806 | (1,124 | ) | ||||||||
Corporate (b)(c) | — | — | (37,299 | ) | ||||||||
Intercompany eliminations | — | (61,635 | ) | (412 | ) | |||||||
Total | $ | 916,023 | $ | (5,016 | ) | $ | 21,611 |
(a) | Income (loss) from continuing operations includes a $17.7 million after-tax gain on the sale of the Williston Basin assets. See Note 15. |
(b) | Income (loss) from continuing operations includes $0.4 million net after-tax non-cash mark-to-market gain and $1.9 million net after-tax non-cash mark-to-market loss on interest rate swaps for the three and nine months ended Sept. 30, 2012, respectively, and a $24.9 million and $26.4 million net after-tax non-cash mark-to-market loss on interest rate swaps for the three and nine months ended Sept. 30, 2011, respectively. |
(c) | Certain indirect corporate costs and inter-segment interest expenses after-tax totaling $0.5 million for the three months ended Sept. 30, 2011 and $1.6 million and $1.5 million for the nine months ended Sept. 30, 2012 and 2011 were included in the Corporate segment in continuing operations and were not reclassified as discontinued operations. See Note 17 for further information. |
(d) | Income (loss) from continuing operations includes a $17.3 million non-cash after-tax ceiling test impairment expense. See Note 16 for further information. |
Total Assets (net of inter-company eliminations) as of: | Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | |||||||||
Utilities: | ||||||||||||
Electric (a) | $ | 2,302,951 | $ | 2,254,914 | $ | 1,917,184 | ||||||
Gas | 710,099 | 746,444 | 683,163 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas (b) | 263,088 | 425,970 | 405,513 | |||||||||
Power Generation (a) | 119,489 | 129,121 | 372,313 | |||||||||
Coal Mining | 90,444 | 88,704 | 94,908 | |||||||||
Corporate | 367,557 | 141,079 | (c) | 139,985 | (c) | |||||||
Discontinued operations | — | 340,851 | (d) | 332,503 | (d) | |||||||
Total assets | $ | 3,853,628 | $ | 4,127,083 | $ | 3,945,569 |
(a) | Upon commercial operation on Dec. 31, 2011 of the new generating facility constructed by Colorado IPP at our Pueblo Airport Generation site, the PPA under which energy and capacity is sold to Colorado Electric is accounted for as a capital lease. Therefore, commencing Dec. 31, 2011, assets previously recorded at Power Generation are now accounted for at Colorado Electric as a capital lease. |
(b) | 2012 includes a ceiling test impairment and the sale of the Williston Basin assets by our Oil and Gas segment. See Notes 15 and 16. |
(c) | Assets of the Corporate segment were reclassified due to deferred taxes that were not classified as discontinued operations. |
(d) | See Note 17 for further information relating to discontinued operations. |
• | 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 and non-regulated segments; and |
• | Interest rate risk associated with our variable rate credit facility, project financing floating rate debt and our derivative instruments. |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | ||||||||||||||||||
Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | |||||||||||||||
Notional (a) | 537,000 | 7,455,250 | 528,000 | 5,406,250 | 414,000 | 4,957,250 | ||||||||||||||
Maximum terms in years (b) | 1.00 | 1.00 | 1.25 | 1.75 | 1.00 | 0.25 | ||||||||||||||
Derivative assets, current | $ | 1,651 | $ | 2,032 | $ | 729 | $ | 8,010 | $ | 1,885 | $ | 6,937 | ||||||||
Derivative assets, non-current | $ | 494 | $ | 39 | $ | 771 | $ | 1,148 | $ | 2,529 | $ | 717 | ||||||||
Derivative liabilities, current | $ | 527 | $ | 1,040 | $ | 2,559 | $ | — | $ | — | $ | — | ||||||||
Derivative liabilities, non-current | $ | 414 | $ | 141 | $ | 811 | $ | 7 | $ | — | $ | 7 | ||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | 428 | $ | (344 | ) | $ | (1,928 | ) | $ | 9,152 | $ | 4,257 | $ | 7,647 | ||||||
Cash collateral included in Derivative liabilities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Cash collateral included in Other current assets | $ | 1,126 | $ | 1,288 | $ | — | $ | — | $ | — | $ | — | ||||||||
Expense included in Revenue (c) | $ | 350 | $ | 54 | $ | 58 | $ | — | $ | 157 | $ | — |
(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. |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | |||||||||||||||
Notional (MMBtus) | Maximum Term (months) | Notional (MMBtus) | Maximum Term (months) | Notional (MMBtus) | Maximum Term (months) | ||||||||||||
Natural gas futures purchased | 14,690,000 | 75 | 14,310,000 | 84 | 9,890,000 | 18 | |||||||||||
Natural gas options purchased | 5,560,000 | 6 | 1,720,000 | 3 | 3,880,000 | 6 | |||||||||||
Natural gas basis swaps purchased | 8,800,000 | 75 | 7,160,000 | 60 | — | — |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | |||||||||
Derivative assets, current | $ | 12,380 | $ | 9,844 | $ | 3,355 | |||||
Derivative assets, non-current | $ | 634 | $ | 52 | $ | — | |||||
Derivative liabilities, non-current | $ | 4,527 | $ | 7,156 | $ | 1,360 | |||||
Net unrealized (gain) loss included in Regulatory assets or Regulatory liabilities | $ | 9,318 | $ | 17,556 | $ | 11,813 | |||||
Included in Derivatives: | |||||||||||
Cash collateral receivable (payable) | $ | 15,740 | $ | 19,416 | $ | 12,058 | |||||
Option premiums and commissions | $ | 2,065 | $ | 880 | $ | 1,750 |
Sept. 30, 2012 | Dec. 31, 2011 | Sept. 30, 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 | 4.25 | 1.25 | 5.00 | 2.00 | 5.25 | 0.25 | ||||||||||||||
Derivative liabilities, current | $ | 7,028 | $ | 77,914 | $ | 6,513 | $ | 75,295 | $ | 6,724 | $ | 94,588 | ||||||||
Derivative liabilities, non-current | $ | 18,660 | $ | 17,668 | $ | 20,363 | $ | 20,696 | $ | 21,108 | $ | — | ||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (25,688 | ) | $ | — | $ | (26,876 | ) | $ | — | $ | (27,832 | ) | $ | — | |||||
Year-to Date pre-tax gain (loss) | $ | — | $ | (2,902 | ) | $ | — | $ | (42,010 | ) | $ | — | $ | (40,608 | ) | |||||
Cash collateral receivable (payable) included in derivative | $ | — | $ | 3,310 | $ | — | $ | — | $ | — | $ | — |
* | 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 notional terminate in 6.25 years and de-designated swaps totaling $150 million notional terminate in 16.25 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 third party sources and therefore support Level 2 disclosure. |
• | 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. We utilize observable inputs which support Level 2 disclosure. |
• | 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. We establish 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 Sept. 30, 2012 | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||
Assets: | ||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||
Options -- Oil | $ | — | $ | 619 | $ | — | $ | — | $ | — | $ | 619 | ||||||||
Basis Swaps -- Oil | — | 1,526 | — | — | — | 1,526 | ||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||
Basis Swaps -- Gas | — | 2,071 | — | — | — | 2,071 | ||||||||||||||
Commodity derivatives — Utilities | — | (2,760 | ) | 34 | (b) | — | 15,740 | 13,014 | ||||||||||||
Cash and cash equivalents (a) | 247,192 | — | — | — | — | 247,192 | ||||||||||||||
Total | $ | 247,192 | $ | 1,456 | $ | 34 | $ | — | $ | 15,740 | $ | 264,422 | ||||||||
Liabilities: | ||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||
Options -- Oil | $ | — | $ | 885 | $ | — | $ | — | $ | — | $ | 885 | ||||||||
Basis Swaps -- Oil | — | 56 | — | — | — | 56 | ||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||
Basis Swaps -- Gas | — | 1,181 | — | — | — | 1,181 | ||||||||||||||
Commodity derivatives — Utilities | — | 4,527 | — | — | — | 4,527 | ||||||||||||||
Interest rate swaps | — | 124,580 | — | — | (3,310 | ) | 121,270 | |||||||||||||
Total | $ | — | $ | 131,229 | $ | — | $ | — | $ | (3,310 | ) | $ | 127,919 |
(a) | Level 1 assets and liabilities are described in Note 13. |
(b) | The significant unobservable inputs used in the fair value measurement of the long-term OTC contracts are based on the average of price quotes from an independent third party market participant and the OTC contract broker. The unobservable inputs are long-term natural gas prices. Significant changes to these inputs along with the contract term would impact the derivative asset/liability and regulatory asset/liability, but will not impact the results of operations until the contract is settled under the original terms of the contract. The contracts will be classified as Level 2 once settlement is within 60 months of maturity and quoted market prices from a market exchange are available. |
As of Dec. 31, 2011 | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||
Assets: | ||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | 768 | (a) | $ | 5 | $ | — | $ | 773 | |||||||
Basis Swaps -- Oil | — | 727 | — |