x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2013 | |
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, 2013 | ||
Common stock, $1.00 par value | 44,442,886 | 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 Months Ended March 31, 2013 and 2012 | |||
Condensed Consolidated Statements of Comprehensive Income - unaudited | |||
Three Months Ended March 31, 2013 and 2012 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
March 31, 2013, Dec. 31, 2012 and March 31, 2012 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Three Months Ended March 31, 2013 and 2012 | |||
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 | |||
Index to Exhibits |
AFUDC | Allowance for Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income (Loss) |
ASU | Accounting Standards Update |
Basin Electric | Basin Electric Power Cooperative |
Bbl | Barrel |
BHC | Black Hills Corporation; the Company |
BHEP | Black Hills Exploration and Production, Inc., 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 of Black Hills Utility Holdings, Inc., and its subsidiaries |
Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Power | Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Utility Holdings | Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Wyoming | Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation |
Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation |
Cheyenne Prairie | Cheyenne Prairie Generating Station currently being constructed in Cheyenne, Wyo. by Cheyenne Light and Black Hills Power. Construction is expected to be completed for this 132 megawatt facility in 2014. |
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, LLC a direct wholly-owned subsidiary of Black Hills Electric Generation |
Cooling degree day | A cooling degree day is equivalent to each degree that the average of the high and low temperature for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average. |
Conflict Mineral | As defined by the Dodd-Frank, conflict minerals are cassiterite, columbite-tantalite, gold and wolframite that are mined in the Democratic Republic of the Congo or surrounding countries |
CPCN | Certificate of Public Convenience and Necessity |
CPUC | Colorado Public Utilities Commission |
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 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) |
Enserco | Enserco Energy Inc., representing our Energy Marketing segment, sold Feb. 29, 2012 |
FASB | Financial Accounting Standards Board |
FERC | United States Federal Energy Regulatory Commission |
Fitch | Fitch Ratings |
GAAP | Accounting principles generally accepted in the United States of America |
Heating Degree Day | A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average. |
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 | United States Internal Revenue Service |
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 |
LIBOR | London Interbank Offered Rate |
LOE | Lease Operating Expense |
Mcf | Thousand cubic feet |
Mcfe | Thousand cubic feet equivalent. Natural gas liquid is converted by dividing gallons by 7. Crude oil is converted by multiplying barrels by 6. |
MMBtu | Million British thermal units |
Moody’s | Moody’s Investors Service, Inc. |
MWh | Megawatt-hour |
NGL | Natural Gas Liquids. One gallon equals 7 Mcfe |
OTC | Over-the-counter |
PPA | Power Purchase Agreement |
PSCo | Public Service Company of Colorado |
Revolving Credit Facility | Our $500 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which matures in 2017 |
SDPUC | South Dakota Public Utilities Commission |
SEC | U. S. Securities and Exchange Commission |
S&P | Standard and Poor’s, a division of The McGraw-Hill Companies, Inc. |
WPSC | Wyoming Public Service Commission |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
(in thousands, except per share amounts) | ||||||
Revenue | $ | 380,671 | $ | 365,851 | ||
Operating expenses: | ||||||
Utilities - | ||||||
Fuel, purchased power and cost of gas sold | 168,173 | 157,183 | ||||
Operations and maintenance | 65,690 | 64,760 | ||||
Non-regulated energy operations and maintenance | 21,329 | 22,595 | ||||
Depreciation, depletion and amortization | 34,781 | 38,559 | ||||
Taxes - property, production and severance | 10,380 | 11,510 | ||||
Other operating expenses | 472 | 1,196 | ||||
Total operating expenses | 300,825 | 295,803 | ||||
Operating income | 79,846 | 70,048 | ||||
Other income (expense): | ||||||
Interest charges - | ||||||
Interest expense incurred (including amortization of debt issuance costs, premiums and discounts and realized settlements on interest rate swaps) | (23,672 | ) | (29,914 | ) | ||
Allowance for funds used during construction - borrowed | 74 | 518 | ||||
Capitalized interest | 266 | 161 | ||||
Unrealized gain (loss) on interest rate swaps, net | 7,456 | 12,045 | ||||
Interest income | 285 | 437 | ||||
Allowance for funds used during construction - equity | 200 | 277 | ||||
Other income (expense), net | 405 | 1,472 | ||||
Total other income (expense) | (14,986 | ) | (15,004 | ) | ||
Income (loss) from continuing operations before earnings (loss) of unconsolidated subsidiaries and income taxes | 64,860 | 55,044 | ||||
Equity in earnings (loss) of unconsolidated subsidiaries | (86 | ) | (56 | ) | ||
Income tax benefit (expense) | (21,577 | ) | (19,717 | ) | ||
Income (loss) from continuing operations | 43,197 | 35,271 | ||||
Income (loss) from discontinued operations, net of tax | — | (5,484 | ) | |||
Net income (loss) available for common stock | $ | 43,197 | $ | 29,787 | ||
Earnings (loss) per share, Basic - | ||||||
Income (loss) from continuing operations, per share | $ | 0.98 | $ | 0.81 | ||
Income (loss) from discontinued operations, per share | — | (0.13 | ) | |||
Total income (loss) per share, Basic | $ | 0.98 | $ | 0.68 | ||
Earnings (loss) per share, Diluted - | ||||||
Income (loss) from continuing operations, per share | $ | 0.97 | $ | 0.80 | ||
Income (loss) from discontinued operations, per share | — | (0.12 | ) | |||
Total income (loss) per share, Diluted | $ | 0.97 | $ | 0.68 | ||
Weighted average common shares outstanding: | ||||||
Basic | 44,053 | 43,731 | ||||
Diluted | 44,312 | 43,969 | ||||
Dividends paid per share of common stock | $ | 0.380 | $ | 0.370 |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
(in thousands) | ||||||
Net income (loss) available for common stock | $ | 43,197 | $ | 29,787 | ||
Other comprehensive income (loss), net of tax: | ||||||
Fair value adjustment on derivatives designated as cash flow hedges (net of tax (expense) benefit of $1,117 and $55, respectively) | (1,661 | ) | 576 | |||
Reclassification adjustments related to defined benefit plan (net of tax of $(175) and $0) | 457 | — | ||||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) (net of tax (expense) benefit of $(236) and $445, respectively) | 468 | (742 | ) | |||
Other comprehensive income (loss), net of tax | (736 | ) | (166 | ) | ||
Comprehensive income (loss) available for common stock | $ | 42,461 | $ | 29,621 |
As of | |||||||||||
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 12,397 | $ | 15,462 | $ | 56,132 | |||||
Restricted cash and equivalents | 6,846 | 7,916 | 8,960 | ||||||||
Accounts receivable, net | 168,783 | 163,698 | 143,987 | ||||||||
Materials, supplies and fuel | 64,189 | 77,643 | 63,236 | ||||||||
Derivative assets, current | 1,630 | 3,236 | 17,877 | ||||||||
Income tax receivable, net | — | — | 10,399 | ||||||||
Deferred income tax assets, net, current | 38,196 | 77,231 | 23,710 | ||||||||
Regulatory assets, current | 23,422 | 31,125 | 56,282 | ||||||||
Other current assets | 28,260 | 28,795 | 26,546 | ||||||||
Total current assets | 343,723 | 405,106 | 407,129 | ||||||||
Investments | 16,545 | 16,402 | 16,451 | ||||||||
Property, plant and equipment | 3,977,704 | 3,930,772 | 3,800,011 | ||||||||
Less accumulated depreciation and depletion | (1,210,833 | ) | (1,188,023 | ) | (980,944 | ) | |||||
Total property, plant and equipment, net | 2,766,871 | 2,742,749 | 2,819,067 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,565 | 3,620 | 3,787 | ||||||||
Derivative assets, non-current | — | 510 | 881 | ||||||||
Regulatory assets, non-current | 181,119 | 188,268 | 186,093 | ||||||||
Other assets, non-current | 21,367 | 19,420 | 21,132 | ||||||||
Total other assets, non-current | 559,447 | 565,214 | 565,289 | ||||||||
TOTAL ASSETS | $ | 3,686,586 | $ | 3,729,471 | $ | 3,807,936 |
As of | |||||||||||
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 82,437 | $ | 84,422 | $ | 59,793 | |||||
Accrued liabilities | 140,230 | 154,389 | 151,130 | ||||||||
Derivative liabilities, current | 89,112 | 96,541 | 76,389 | ||||||||
Accrued income tax, net | 1,157 | 4,936 | — | ||||||||
Regulatory liabilities, current | 19,020 | 13,628 | 35,414 | ||||||||
Notes payable | 245,000 | 277,000 | 225,000 | ||||||||
Current maturities of long-term debt | 104,637 | 103,973 | 8,977 | ||||||||
Total current liabilities | 681,593 | 734,889 | 556,703 | ||||||||
Long-term debt, net of current maturities | 936,477 | 938,877 | 1,272,016 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 367,502 | 385,908 | 317,369 | ||||||||
Derivative liabilities, non-current | 15,237 | 16,941 | 43,169 | ||||||||
Regulatory liabilities, non-current | 126,573 | 127,656 | 112,516 | ||||||||
Benefit plan liabilities | 172,353 | 167,397 | 157,623 | ||||||||
Other deferred credits and other liabilities | 125,958 | 125,294 | 123,848 | ||||||||
Total deferred credits and other liabilities | 807,623 | 823,196 | 754,525 | ||||||||
Commitments and contingencies (See Notes 6, 9, 11 and 14) | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock equity — | |||||||||||
Common stock $1 par value; 100,000,000 shares authorized; issued 44,482,304; 44,278,189; and 44,151,428 shares, respectively | 44,482 | 44,278 | 44,151 | ||||||||
Additional paid-in capital | 735,000 | 733,095 | 725,512 | ||||||||
Retained earnings | 519,184 | 492,869 | 490,114 | ||||||||
Treasury stock, at cost – 41,606; 71,782; and 65,015 shares, respectively | (1,549 | ) | (2,245 | ) | (2,041 | ) | |||||
Accumulated other comprehensive income (loss) | (36,224 | ) | (35,488 | ) | (33,044 | ) | |||||
Total stockholders’ equity | 1,260,893 | 1,232,509 | 1,224,692 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,686,586 | $ | 3,729,471 | $ | 3,807,936 |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
(in thousands) | ||||||
Operating activities: | ||||||
Net income (loss) available to common stock | $ | 43,197 | $ | 29,787 | ||
(Income) loss from discontinued operations, net of tax | — | 5,484 | ||||
Income (loss) from continuing operations | 43,197 | 35,271 | ||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: | ||||||
Depreciation, depletion and amortization | 34,781 | 38,559 | ||||
Deferred financing cost amortization | 1,095 | 2,719 | ||||
Derivative fair value adjustments | 3,673 | 1,594 | ||||
Stock compensation | 3,778 | 1,817 | ||||
Unrealized mark-to-market (gain) loss on interest rate swaps | (7,456 | ) | (12,045 | ) | ||
Deferred income taxes | 20,541 | 18,083 | ||||
Allowance for funds used during construction - equity | (200 | ) | (277 | ) | ||
Employee benefit plans | 5,548 | 5,246 | ||||
Other adjustments, net | 3,614 | 2,243 | ||||
Changes in certain operating assets and liabilities: | ||||||
Materials, supplies and fuel | 18,519 | 20,828 | ||||
Accounts receivable, unbilled revenues and other current assets | (9,166 | ) | 9,439 | |||
Accounts payable and other current liabilities | (13,637 | ) | (42,368 | ) | ||
Regulatory assets | 9,463 | (776 | ) | |||
Regulatory liabilities | 374 | 18,938 | ||||
Contributions to defined benefit pension plans | — | (25,000 | ) | |||
Other operating activities, net | (4,892 | ) | 610 | |||
Net cash provided by operating activities of continuing operations | 109,232 | 74,881 | ||||
Net cash provided by (used in) operating activities of discontinued operations | — | 21,184 | ||||
Net cash provided by operating activities | 109,232 | 96,065 | ||||
Investing activities: | ||||||
Property, plant and equipment additions | (63,939 | ) | (67,652 | ) | ||
Other investing activities | 1,030 | 1,105 | ||||
Net cash provided by (used in) investing activities of continuing operations | (62,909 | ) | (66,547 | ) | ||
Proceeds from sale of discontinued business operations | — | 108,837 | ||||
Net cash provided by (used in) investing activities of discontinued operations | — | (824 | ) | |||
Net cash provided by (used in) investing activities | (62,909 | ) | 41,466 | |||
Financing activities: | ||||||
Dividends paid on common stock | (16,882 | ) | (16,276 | ) | ||
Common stock issued | 1,231 | 764 | ||||
Short-term borrowings - issuances | 78,500 | 56,453 | ||||
Short-term borrowings - repayments | (110,500 | ) | (176,453 | ) | ||
Long-term debt - repayments | (1,737 | ) | (1,897 | ) | ||
Other financing activities | — | (2,758 | ) | |||
Net cash provided by (used in) financing activities of continuing operations | (49,388 | ) | (140,167 | ) | ||
Net cash provided by (used in) financing activities of discontinued operations | — | — | ||||
Net cash provided by (used in) financing activities | (49,388 | ) | (140,167 | ) | ||
Net change in cash and cash equivalents | (3,065 | ) | (2,636 | ) | ||
Cash and cash equivalents, beginning of period* | 15,462 | 58,768 | ||||
Cash and cash equivalents, end of period | $ | 12,397 | $ | 56,132 |
* | Includes cash of discontinued operations of $37.1 million at Dec. 31, 2011. |
Three Months Ended | |||||||
March 31, 2013 | March 31, 2012 | ||||||
(in thousands) | |||||||
Non-cash investing and financing activities from continuing operations— | |||||||
Property, plant and equipment acquired with accrued liabilities | $ | 31,780 | $ | 31,644 | |||
Increase (decrease) in capitalized assets associated with asset retirement obligations | $ | — | $ | 2,826 | |||
Cash (paid) refunded during the period for continuing operations— | |||||||
Interest (net of amounts capitalized) | $ | (12,768 | ) | $ | (16,799 | ) | |
Income taxes, net | $ | (4,656 | ) | $ | (1,838 | ) |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | |||||||||
Materials and supplies | $ | 50,401 | $ | 43,397 | $ | 44,361 | |||||
Fuel - Electric Utilities | 8,445 | 8,589 | 7,812 | ||||||||
Natural gas in storage held for distribution | 5,343 | 25,657 | 11,063 | ||||||||
Total materials, supplies and fuel | $ | 64,189 | $ | 77,643 | $ | 63,236 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2013 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 47,896 | $ | 21,591 | $ | (623 | ) | $ | 68,864 | |||
Gas Utilities | 59,024 | 28,439 | (751 | ) | 86,712 | |||||||
Power Generation | 3 | — | — | 3 | ||||||||
Coal Mining | 1,857 | — | — | 1,857 | ||||||||
Oil and Gas | 10,340 | — | (19 | ) | 10,321 | |||||||
Corporate | 1,026 | — | — | 1,026 | ||||||||
Total | $ | 120,146 | $ | 50,030 | $ | (1,393 | ) | $ | 168,783 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
Dec. 31, 2012 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 54,482 | $ | 23,843 | $ | (527 | ) | $ | 77,798 | |||
Gas Utilities | 31,495 | 39,962 | (222 | ) | 71,235 | |||||||
Power Generation | 16 | — | — | 16 | ||||||||
Coal Mining | 2,247 | — | — | 2,247 | ||||||||
Oil and Gas | 11,622 | — | (19 | ) | 11,603 | |||||||
Corporate | 799 | — | — | 799 | ||||||||
Total | $ | 100,661 | $ | 63,805 | $ | (768 | ) | $ | 163,698 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2012 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 44,356 | $ | 19,381 | $ | (585 | ) | $ | 63,152 | |||
Gas Utilities | 44,287 | 18,502 | (936 | ) | 61,853 | |||||||
Power Generation | 265 | — | — | 265 | ||||||||
Coal Mining | 2,578 | — | — | 2,578 | ||||||||
Oil and Gas | 15,014 | — | (105 | ) | 14,909 | |||||||
Corporate | 1,230 | — | — | 1,230 | ||||||||
Total | $ | 107,730 | $ | 37,883 | $ | (1,626 | ) | $ | 143,987 |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | ||||||||||||||||
Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 95,000 | $ | 36,500 | $ | 127,000 | $ | 36,300 | $ | 75,000 | $ | 41,200 | ||||||
Term Loan due June 2013 | 150,000 | — | 150,000 | — | 150,000 | — | ||||||||||||
Total | $ | 245,000 | $ | 36,500 | $ | 277,000 | $ | 36,300 | $ | 225,000 | $ | 41,200 |
As of | ||||||||
March 31, 2013 | Covenant Requirement | |||||||
Consolidated Net Worth | $ | 1,260,893 | Greater than | $ | 946,493 | |||
Recourse Leverage Ratio | 52.2 | % | Less than | 65.0 | % |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
Income (loss) from continuing operations | $ | 43,197 | $ | 35,271 | ||
Weighted average shares - basic | 44,053 | 43,731 | ||||
Dilutive effect of: | ||||||
Restricted stock | 155 | 147 | ||||
Stock options | 13 | 18 | ||||
Other dilutive effects | 91 | 73 | ||||
Weighted average shares - diluted | 44,312 | 43,969 |
Three Months Ended March 31, | ||||
2013 | 2012 | |||
Stock options | 6 | 127 | ||
Restricted stock | 34 | 31 | ||
Other stock | — | 16 | ||
Anti-dilutive shares | 40 | 174 |
(8) | OTHER COMPREHENSIVE INCOME |
Location on the Condensed Consolidated Statements of Income | Amount Reclassified from AOCI | |||||||
Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 | |||||||
Gains and losses on cash flow hedges: | ||||||||
Interest rate swaps | Interest expense | $ | 1,796 | $ | 1,822 | |||
Commodity contracts | Revenue | (1,092 | ) | (3,009 | ) | |||
704 | (1,187 | ) | ||||||
Income tax | Income tax benefit (expense) | (236 | ) | 445 | ||||
Total reclassification adjustments related to cash flow hedges, net of tax | $ | 468 | $ | (742 | ) | |||
Amortization of defined benefit plans: | ||||||||
Prior service cost | Utilities - Operations and maintenance | $ | (31 | ) | $ | — | ||
Non-regulated energy operations and maintenance | (32 | ) | — | |||||
Actuarial gain (loss) | Utilities - Operations and maintenance | 421 | — | |||||
Non-regulated energy operations and maintenance | 274 | — | ||||||
632 | — | |||||||
Income tax | Income tax benefit (expense) | (175 | ) | — | ||||
Total reclassification adjustments related to defined benefit plans, net of tax | $ | 457 | $ | — |
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), net of tax | (166 | ) | — | (166 | ) | ||||
Ending Balance March 31, 2012 | $ | (13,968 | ) | $ | (19,076 | ) | $ | (33,044 | ) |
Balance as of December 31, 2012 | $ | (15,713 | ) | $ | (19,775 | ) | $ | (35,488 | ) |
Other comprehensive income (loss), net of tax | (1,193 | ) | 457 | (736 | ) | ||||
Ending Balance March 31, 2013 | $ | (16,906 | ) | $ | (19,318 | ) | $ | (36,224 | ) |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
Service cost | $ | 1,608 | $ | 1,430 | ||
Interest cost | 3,825 | 3,687 | ||||
Expected return on plan assets | (4,654 | ) | (4,084 | ) | ||
Prior service cost | 16 | 22 | ||||
Net loss (gain) | 3,062 | 2,408 | ||||
Net periodic benefit cost | $ | 3,857 | $ | 3,463 |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
Service cost | $ | 419 | $ | 402 | ||
Interest cost | 417 | 523 | ||||
Expected return on plan assets | (20 | ) | (19 | ) | ||
Prior service cost (benefit) | (125 | ) | (125 | ) | ||
Net loss (gain) | 121 | 222 | ||||
Net periodic benefit cost | $ | 812 | $ | 1,003 |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
Service cost | $ | 348 | $ | 246 | ||
Interest cost | 332 | 331 | ||||
Prior service cost | 1 | 1 | ||||
Net loss (gain) | 198 | 202 | ||||
Net periodic benefit cost | $ | 879 | $ | 780 |
Contributions Made | Additional | ||||||||
Three Months Ended March 31, 2013 | Contributions Anticipated for 2013 | Contributions Anticipated for 2014 | |||||||
Defined Benefit Pension Plans | $ | — | $ | 8,787 | $ | 19,922 | |||
Non-pension Defined Benefit Postretirement Healthcare Plans | $ | 784 | $ | 2,352 | $ | 3,350 | |||
Supplemental Non-qualified Defined Benefit and Defined Contribution Plans | $ | 322 | $ | 965 | $ | 1,463 |
Three Months Ended March 31, 2013 | External Operating Revenue | Intercompany Operating Revenue | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 158,483 | $ | 4,147 | $ | 12,356 | ||||||
Gas | 199,812 | — | 18,483 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,022 | 19,338 | 5,644 | |||||||||
Coal Mining | 6,010 | 7,573 | 1,065 | |||||||||
Oil and Gas | 15,344 | — | (53 | ) | ||||||||
Corporate activities (a) | — | — | 5,699 | |||||||||
Intercompany eliminations | — | (31,058 | ) | 3 | ||||||||
Total | $ | 380,671 | $ | — | $ | 43,197 |
Three Months Ended March 31, 2012 | External Operating Revenue | Intercompany Operating Revenue | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 156,133 | $ | 3,036 | $ | 8,746 | ||||||
Gas | 180,522 | — | 15,207 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,178 | 18,449 | 6,914 | |||||||||
Coal Mining | 6,373 | 8,616 | 1,000 | |||||||||
Oil and Gas | 21,645 | — | 13 | |||||||||
Corporate activities (a)(b) | — | — | 3,391 | |||||||||
Intercompany eliminations | — | (30,101 | ) | — | ||||||||
Total | $ | 365,851 | $ | — | $ | 35,271 |
(a) | Income (loss) from continuing operations includes a $4.8 million and a $7.8 million net after-tax non-cash mark-to-market gain for the three months ended March 31, 2013 and 2012, respectively. |
(b) | Certain indirect corporate costs and inter-segment interest expense after-tax totaling $1.6 million for the three months ended March 31, 2012 were included in the Corporate activities in continuing operations and were not reclassified as discontinued operations. |
Total Assets (net of inter-company eliminations) as of: | March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | ||||||||
Utilities: | |||||||||||
Electric (a) | $ | 2,367,014 | $ | 2,387,458 | $ | 2,268,524 | |||||
Gas | 752,468 | 765,165 | 717,185 | ||||||||
Non-regulated Energy: | |||||||||||
Power Generation (a) | 115,708 | 119,170 | 128,225 | ||||||||
Coal Mining | 82,839 | 83,810 | 87,139 | ||||||||
Oil and Gas | 255,786 | 258,460 | 430,851 | ||||||||
Corporate activities | 112,771 | 115,408 | 176,012 | ||||||||
Total assets | $ | 3,686,586 | $ | 3,729,471 | $ | 3,807,936 |
(a) | The PPA under which the Pueblo Airport Generation site owned by Colorado IPP supports Colorado customers is accounted for as a capital lease. Therefore, assets owned by the Power Generation segment are included in Total Assets of Electric Utilities Segment under this accounting for a capital lease. |
• | Commodity price risk associated with 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 |
• | Interest rate risk associated with our variable rate credit facility, project financing floating rate debt and our other long-term debt instruments. |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | ||||||||||||||||||
Crude oil futures, swaps and options | Natural gas futures and swaps | Crude oil futures, swaps and options | Natural gas futures and swaps | Crude oil futures, swaps and options | Natural gas futures and swaps | |||||||||||||||
Notional (a) | 522,000 | 10,633,000 | 528,000 | 8,215,500 | 522,000 | 5,001,750 | ||||||||||||||
Maximum terms in years (b) | 0.75 | 0.5 | 1 | 0.75 | 1.25 | 1.5 | ||||||||||||||
Derivative assets, current | $ | 821 | $ | 287 | $ | 1,405 | $ | 1,831 | $ | 406 | $ | 8,256 | ||||||||
Derivative assets, non-current | $ | — | $ | — | $ | 297 | $ | 170 | $ | 46 | $ | 808 | ||||||||
Derivative liabilities, current | $ | 250 | $ | 1,188 | $ | 847 | $ | 507 | $ | 2,904 | $ | — | ||||||||
Derivative liabilities, non-current | $ | — | $ | — | $ | — | $ | — | $ | 1,084 | $ | — | ||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | 10 | $ | (2,781 | ) | $ | 206 | $ | 873 | $ | (3,566 | ) | $ | 9,064 | ||||||
Cash collateral receivable (payable) included in derivatives | $ | 730 | $ | 1,880 | $ | 786 | $ | 620 | $ | — | $ | — | ||||||||
Cash collateral included in Other current assets | $ | 723 | $ | 2,102 | $ | 1,078 | $ | 709 | $ | — | $ | — |
(a) | Crude oil in Bbls, natural gas in MMBtus. |
(b) | Refers to the term of the derivative instrument. Assets and liabilities are classified as current/non-current based on the term of the hedged transaction and the corresponding settlement of the derivative instrument. |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | ||||||||||||
Notional (MMBtus) | Maximum Term (months) | Notional (MMBtus) | Maximum Term (months) | Notional (MMBtus) | Maximum Term (months) | |||||||||
Natural gas futures purchased | 13,180,000 | 80 | 15,350,000 | 83 | 11,550,000 | 81 | ||||||||
Natural gas options purchased | 440,000 | 5 | 2,430,000 | 2 | 670,000 | 12 | ||||||||
Natural gas basis swaps purchased | 11,350,000 | 69 | 12,020,000 | 72 | 7,640,000 | 81 |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | |||||||||
Derivative assets, current | $ | 522 | $ | — | $ | 9,215 | |||||
Derivative assets, non-current | $ | — | $ | 43 | $ | 27 | |||||
Derivative liabilities, non-current | $ | — | $ | — | $ | 6,407 | |||||
Net unrealized (gain) loss included in Regulatory assets or Regulatory liabilities | $ | 4,315 | $ | 9,596 | $ | 15,223 | |||||
Cash collateral receivable (payable) included in derivatives | $ | 4,487 | $ | 8,576 | $ | 17,651 | |||||
Cash collateral included in Other current assets | $ | 3,295 | $ | 4,354 | $ | — | |||||
Option premiums and commissions included in derivatives | $ | 350 | $ | 1,063 | $ | 407 |
March 31, 2013 | Dec. 31, 2012 | March 31, 2012 | ||||||||||||||||||
Designated Interest Rate Swaps (a) | De-designated Interest Rate Swaps (b) | Designated Interest Rate Swaps (a) | De-designated Interest Rate Swaps (b) | Designated Interest Rate Swaps (a) | De-designated Interest Rate Swaps (b) | |||||||||||||||
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 | 3.75 | 0.75 | 4.00 | 1.00 | 4.75 | 1.75 | ||||||||||||||
Derivative liabilities, current | $ | 6,982 | $ | 80,692 | $ | 7,039 | $ | 88,148 | $ | 6,777 | $ | 66,708 | ||||||||
Derivative liabilities, non-current | $ | 15,237 | $ | — | $ | 16,941 | $ | — | $ | 18,441 | $ | 17,237 | ||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (22,219 | ) | $ | — | $ | (23,980 | ) | $ | — | $ | (25,218 | ) | $ | — | |||||
Pre-tax gain (loss) | $ | — | $ | 7,456 | $ | — | $ | 1,882 | $ | — | $ | 12,045 | ||||||||
Cash collateral receivable (payable) included in derivatives | $ | — | $ | 5,960 | $ | — | $ | 5,960 | $ | — | $ | — |
(a) | These swaps have been designated to $75.0 million of borrowings on our Revolving Credit Facility and $75.0 million of borrowings on our project financing debt at Black Hills Wyoming. The swaps transferred to Black Hills Wyoming such that BHC and Black Hills Wyoming are both jointly and severally liable for the amount of those obligations. These swaps are priced using three-month LIBOR, matching the floating portion of the related swaps. |
(b) | 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 $100.0 million notional terminate in 6 years and de-designated swaps totaling $150.0 million notional terminate in 16 years. |
• | The commodity option contracts for our 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 third party sources and therefore support Level 2 disclosure. |
• | The commodity basis swaps for our 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 our 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 since these instruments are not traded on an exchange. |
• | The interest rate swaps are valued using the market 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 March 31, 2013 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | |||||||||||||
Assets: | |||||||||||||||||
Commodity derivatives — Oil and Gas | |||||||||||||||||
Options -- Oil | $ | — | $ | 71 | $ | — | $ | (11 | ) | $ | 60 | ||||||
Basis Swaps -- Oil | — | 836 | — | (75 | ) | 761 | |||||||||||
Options -- Gas | — | — | — | — | — | ||||||||||||
Basis Swaps -- Gas | — | 435 | — | (148 | ) | 287 | |||||||||||
Commodity derivatives — Utilities | — | 1,897 | — | (1,375 | ) | 522 | |||||||||||
Cash equivalents (a) | 12,397 | — | — | — | 12,397 | ||||||||||||
Total | $ | 12,397 | $ | 3,239 | $ | — | $ | (1,609 | ) | $ | 14,027 | ||||||
Liabilities: | |||||||||||||||||
Commodity derivatives — Oil and Gas | |||||||||||||||||
Options -- Oil | $ | — | $ | 396 | $ | — | $ | (204 | ) | $ | 192 | ||||||
Basis Swaps -- Oil | — | 670 | — | (612 | ) | 58 | |||||||||||
Options -- Gas | — | — | — | — | — | ||||||||||||
Basis Swaps -- Gas | — | 3,216 | — | (2,028 | ) | 1,188 | |||||||||||
Commodity derivatives — Utilities | — | 5,862 | — | (5,862 | ) | — | |||||||||||
Interest rate swaps | — | 108,871 | — | (5,960 | ) | 102,911 | |||||||||||
Total | $ | — | $ | 119,015 | $ | — | $ | (14,666 | ) | $ | 104,349 |
(a) | Level 1 assets and liabilities are described in Note 13. |
As of Dec. 31, 2012 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | |||||||||||||
Assets: | |||||||||||||||||
Commodity derivatives — Oil and Gas | |||||||||||||||||
Options -- Oil | $ | — | $ | 378 | $ | — | $ | — | $ | 378 | |||||||
Basis Swaps -- Oil | — | 1,325 | — | — | 1,325 | ||||||||||||
Options -- Gas | — | — | — | — | — | ||||||||||||
Basis Swaps -- Gas | — | 2,000 | — | — | 2,000 | ||||||||||||
Commodity derivatives —Utilities | — | — | 43 | (b) | — | 43 | |||||||||||
Cash equivalents (a) | 15,462 | — | — | — | 15,462 | ||||||||||||
Total | $ | 15,462 | $ | 3,703 | $ | 43 | $ | — | $ | 19,208 | |||||||
Liabilities: | |||||||||||||||||
Commodity derivatives — Oil and Gas | |||||||||||||||||
Options -- Oil | $ | — | $ | 1,131 | $ | — | $ | (336 | ) | $ | 795 | ||||||
Basis Swaps -- Oil | — | 502 | — | (450 | ) | 52 | |||||||||||
Options -- Gas | — | — | — | — | — | ||||||||||||
Basis Swaps -- Gas | — | 1,127 | — | (620 | ) | 507 | |||||||||||
Commodity derivatives — Utilities | — | 10,162 | — | (10,162 | ) | — | |||||||||||
Interest rate swaps | — | 118,088 | — | (5,960 | ) | 112,128 | |||||||||||
Total | $ | — | $ | 131,010 | $ | — | $ | (17,528 | ) | $ | 113,482 |
(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 March 31, 2012 | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | 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 | (b) | 17,651 | 9,242 | ||||||||||
Cash equivalents (a) | 55,919 | — | — | — | 55,919 | ||||||||||||
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 | (b) | — | 6,407 | |||||||||||
Interest rate swaps | — | 109,163 | — | — | 109,163 | ||||||||||||
Total | $ | — | $ | 119,510 | $ | 48 | $ | — | $ | 119,558 |
(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 March 31, 2013 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 832 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 206 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 3,110 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 1,114 | |||||
Interest rate swaps | Derivative liabilities — current | — | 6,982 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | 15,237 | |||||
Total derivatives designated as hedges | $ | 1,038 | $ | 26,443 | ||||
Derivatives not designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 2,201 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | — | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 58 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 5,862 | |||||
Interest rate swaps | Derivative liabilities — current | — | 86,652 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | — | |||||
Total derivatives not designated as hedges | $ | 2,201 | $ | 92,572 |
As of Dec. 31, 2012 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 2,874 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 510 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 1,993 | |||||
Commodity derivatives | Derivative liabilities — non-current | — |