x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2015 | |
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, 2015 | ||
Common stock, $1.00 par value | 44,821,847 | shares |
TABLE OF CONTENTS | |||
Page | |||
Glossary of Terms and Abbreviations | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | ||
Condensed Consolidated Statements of Income (Loss) - unaudited | |||
Three Months Ended March 31, 2015 and 2014 | |||
Condensed Consolidated Statements of Comprehensive Income (Loss) - unaudited | |||
Three Months Ended March 31, 2015 and 2014 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
March 31, 2015, December 31, 2014 and March 31, 2014 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Three Months Ended March 31, 2015 and 2014 | |||
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 issued by the FASB |
Bbl | Barrel |
BHC | Black Hills Corporation; the Company |
Black Hills Electric Generation | Black Hills Electric Generation, LLC, 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 |
Btu | British thermal unit |
Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation |
Cheyenne Prairie | Cheyenne Prairie Generating Station is a 132 MW natural gas-fired generating facility jointly owned by Black Hills Power and Cheyenne Light in Cheyenne, Wyoming. Cheyenne Prairie was placed into commercial service on October 1, 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 IPP | Black Hills Colorado IPP, LLC a direct wholly-owned subsidiary of Black Hills Electric Generation |
CPCN | Certificate of Public Convenience and Necessity |
CPUC | Colorado Public Utilities Commission |
CVA | Credit Valuation Adjustment |
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) |
Energy West | Energy West Wyoming, Inc., a subsidiary of Gas Natural, Inc. |
FASB | Financial Accounting Standards Board |
Fitch | Fitch Ratings |
GAAP | Accounting principles generally accepted in the United States of America |
GHG | Greenhouse Gases |
GCA | Gas Cost Adjustment -- adjustments that allow us to pass the prudently-incurred cost of natural gas and certain services through to customers. |
Global Settlement | Settlement with a 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. |
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 |
KCC | Kansas Corporation Commission |
kV | Kilovolt |
LIBOR | London Interbank Offered Rate |
LOE | Lease Operating Expense |
Mcf | Thousand cubic feet |
Mcfe | Thousand cubic feet equivalent. |
MMBtu | Million British thermal units |
Moody’s | Moody’s Investors Service, Inc. |
MW | Megawatts |
MWh | Megawatt-hours |
NGL | Natural Gas Liquids (1 barrel equals 6 Mcfe) |
NPSC | Nebraska Public Service Commission |
PPA | Power Purchase Agreement |
Revolving Credit Facility | Our $500 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which matures in 2019. |
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 |
WRDC | Wyodak Resources Development Corp., a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
(unaudited) | Three Months Ended March 31, | |||||
2015 | 2014 | |||||
(in thousands, except per share amounts) | ||||||
Revenue | $ | 441,987 | $ | 460,169 | ||
Operating expenses: | ||||||
Utilities - | ||||||
Fuel, purchased power and cost of natural gas sold | 205,327 | 230,468 | ||||
Operations and maintenance | 71,084 | 71,227 | ||||
Non-regulated energy operations and maintenance | 22,050 | 22,332 | ||||
Depreciation, depletion and amortization | 39,586 | 36,083 | ||||
Taxes - property, production and severance | 11,936 | 10,336 | ||||
Other operating expenses | 52 | 125 | ||||
Total operating expenses | 350,035 | 370,571 | ||||
Operating income | 91,952 | 89,598 | ||||
Other income (expense): | ||||||
Interest charges - | ||||||
Interest expense incurred (including amortization of debt issuance costs, premiums and discounts and realized settlements on interest rate swaps) | (19,910 | ) | (17,860 | ) | ||
Allowance for funds used during construction - borrowed | 158 | 270 | ||||
Capitalized interest | 276 | 257 | ||||
Interest income | 448 | 390 | ||||
Allowance for funds used during construction - equity | 56 | 238 | ||||
Other income (expense), net | 331 | 592 | ||||
Total other income (expense), net | (18,641 | ) | (16,113 | ) | ||
Income (loss) before earnings (loss) of unconsolidated subsidiaries and income taxes | 73,311 | 73,485 | ||||
Equity in earnings (loss) of unconsolidated subsidiaries | (297 | ) | (1 | ) | ||
Income tax benefit (expense) | (25,120 | ) | (25,366 | ) | ||
Net income (loss) available for common stock | $ | 47,894 | $ | 48,118 | ||
Earnings (loss) per share of common stock: | ||||||
Earnings (loss) per share, Basic | $ | 1.08 | $ | 1.09 | ||
Earnings (loss) per share, Diluted | $ | 1.07 | $ | 1.08 | ||
Weighted average common shares outstanding: | ||||||
Basic | 44,541 | 44,330 | ||||
Diluted | 44,660 | 44,554 | ||||
Dividends declared per share of common stock | $ | 0.405 | $ | 0.390 |
(unaudited) | Three Months Ended March 31, | |||||
2015 | 2014 | |||||
(in thousands) | ||||||
Net income (loss) available for common stock | $ | 47,894 | $ | 48,118 | ||
Other comprehensive income (loss), net of tax: | ||||||
Fair value adjustments on derivatives designated as cash flow hedges (net of tax (expense) benefit of $(1,042) and $1,307 for the three months ended 2015 and 2014, respectively) | 1,836 | (2,257 | ) | |||
Reclassification adjustments for cash flow hedges settled and included in net income (loss) (net of tax (expense) benefit of $1,254 and $(425) for the three months ended 2015 and 2014, respectively) | (1,241 | ) | 780 | |||
Benefit plan liability adjustments - net gain (loss) (net of tax (expense) benefit of $15 and $2 for the three months ended 2015 and 2014, respectively) | (27 | ) | (2 | ) | ||
Benefit plan liability adjustments - prior service cost (net of tax (expense) benefit of $(90) for the three months ended 2014 | — | 164 | ||||
Reclassification adjustments of benefit plan liability - prior service cost (net of tax (expense) benefit of $19 and $4 for the three months ended 2015 and 2014, respectively) | (36 | ) | (9 | ) | ||
Reclassification adjustments of benefit plan liability - net gain (loss) (net of tax (expense) benefit of $(247) and $(85) for the three months ended 2015 and 2014, respectively) | 458 | 157 | ||||
Other comprehensive income (loss), net of tax | 990 | (1,167 | ) | |||
Comprehensive income (loss) available for common stock | $ | 48,884 | $ | 46,951 |
(unaudited) | As of | ||||||||||
March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 63,385 | $ | 21,218 | $ | 17,641 | |||||
Restricted cash and equivalents | 2,191 | 2,056 | 2 | ||||||||
Accounts receivable, net | 178,421 | 189,992 | 203,625 | ||||||||
Materials, supplies and fuel | 66,626 | 91,191 | 66,187 | ||||||||
Derivative assets, current | — | — | 1,846 | ||||||||
Income tax receivable, net | 159 | 2,053 | 1,826 | ||||||||
Deferred income tax assets, net, current | 23,913 | 48,288 | 25,780 | ||||||||
Regulatory assets, current | 56,542 | 74,396 | 62,946 | ||||||||
Other current assets | 47,448 | 24,842 | 24,563 | ||||||||
Total current assets | 438,685 | 454,036 | 404,416 | ||||||||
Investments | 17,210 | 17,294 | 16,916 | ||||||||
Property, plant and equipment | 4,652,058 | 4,563,400 | 4,318,194 | ||||||||
Less: accumulated depreciation and depletion | (1,351,857 | ) | (1,324,025 | ) | (1,298,398 | ) | |||||
Total property, plant and equipment, net | 3,300,201 | 3,239,375 | 3,019,796 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,121 | 3,176 | 3,342 | ||||||||
Regulatory assets, non-current | 178,935 | 183,443 | 138,173 | ||||||||
Other assets, non-current | 28,280 | 29,086 | 28,925 | ||||||||
Total other assets, non-current | 563,732 | 569,101 | 523,836 | ||||||||
TOTAL ASSETS | $ | 4,319,828 | $ | 4,279,806 | $ | 3,964,964 |
(unaudited) | As of | ||||||||||
March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 88,770 | $ | 124,139 | $ | 149,681 | |||||
Accrued liabilities | 166,781 | 170,115 | 145,973 | ||||||||
Derivative liabilities, current | 3,342 | 3,340 | 3,498 | ||||||||
Regulatory liabilities, current | 17,621 | 3,687 | 583 | ||||||||
Notes payable | 102,600 | 75,000 | 100,000 | ||||||||
Current maturities of long-term debt | — | 275,000 | — | ||||||||
Total current liabilities | 379,114 | 651,281 | 399,735 | ||||||||
Long-term debt, net of current maturities | 1,542,658 | 1,267,589 | 1,396,949 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 522,290 | 523,716 | 466,856 | ||||||||
Derivative liabilities, non-current | 2,143 | 2,680 | 4,805 | ||||||||
Regulatory liabilities, non-current | 148,918 | 145,144 | 116,793 | ||||||||
Benefit plan liabilities | 162,334 | 158,966 | 113,324 | ||||||||
Other deferred credits and other liabilities | 154,604 | 154,406 | 129,083 | ||||||||
Total deferred credits and other liabilities | 990,289 | 984,912 | 830,861 | ||||||||
Commitments and contingencies (See Notes 7, 8, 13, 14) | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock equity — | |||||||||||
Common stock $1 par value; 100,000,000 shares authorized; issued 44,856,790; 44,714,072; and 44,666,953 shares, respectively | 44,857 | 44,714 | 44,667 | ||||||||
Additional paid-in capital | 749,517 | 748,840 | 742,016 | ||||||||
Retained earnings | 629,135 | 599,389 | 570,963 | ||||||||
Treasury stock, at cost – 33,755; 42,226; and 37,038 shares, respectively | (1,688 | ) | (1,875 | ) | (1,638 | ) | |||||
Accumulated other comprehensive income (loss) | (14,054 | ) | (15,044 | ) | (18,589 | ) | |||||
Total stockholders’ equity | 1,407,767 | 1,376,024 | 1,337,419 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,319,828 | $ | 4,279,806 | $ | 3,964,964 |
(unaudited) | Three Months Ended March 31, | |||||
2015 | 2014 | |||||
Operating activities: | (in thousands) | |||||
Net income (loss) available for common stock | $ | 47,894 | $ | 48,118 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation, depletion and amortization | 39,586 | 36,083 | ||||
Deferred financing cost amortization | 519 | 568 | ||||
Stock compensation | 2,083 | 3,716 | ||||
Deferred income taxes | 22,048 | 25,953 | ||||
Employee benefit plans | 5,283 | 3,703 | ||||
Other adjustments, net | 6,748 | 5,190 | ||||
Changes in certain operating assets and liabilities: | ||||||
Materials, supplies and fuel | 25,689 | 22,291 | ||||
Accounts receivable, unbilled revenues and other operating assets | 47,947 | (78,576 | ) | |||
Accounts payable and other operating liabilities | (44,652 | ) | 29,074 | |||
Other operating activities, net | (1,658 | ) | 1,978 | |||
Net cash provided by (used in) operating activities | 151,487 | 98,098 | ||||
Investing activities: | ||||||
Property, plant and equipment additions | (117,523 | ) | (83,609 | ) | ||
Other investing activities | (348 | ) | (3,220 | ) | ||
Net cash provided by (used in) investing activities | (117,871 | ) | (86,829 | ) | ||
Financing activities: | ||||||
Dividends paid on common stock | (18,148 | ) | (17,399 | ) | ||
Common stock issued | 999 | 881 | ||||
Short-term borrowings - issuances | 77,700 | 86,800 | ||||
Short-term borrowings - repayments | (50,100 | ) | (69,300 | ) | ||
Other financing activities | (1,900 | ) | (2,451 | ) | ||
Net cash provided by (used in) financing activities | 8,551 | (1,469 | ) | |||
Net change in cash and cash equivalents | 42,167 | 9,800 | ||||
Cash and cash equivalents, beginning of period | 21,218 | 7,841 | ||||
Cash and cash equivalents, end of period | $ | 63,385 | $ | 17,641 |
Three Months Ended March 31, 2015 | External Operating Revenue | Inter-company Operating Revenue | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 182,974 | $ | 3,424 | $ | 18,929 | ||||||
Gas | 237,651 | — | 22,212 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,953 | 20,721 | 8,145 | |||||||||
Coal Mining | 8,142 | 7,792 | 3,010 | |||||||||
Oil and Gas | 11,267 | — | (5,071 | ) | ||||||||
Corporate activities | — | — | 669 | |||||||||
Inter-company eliminations | — | (31,937 | ) | — | ||||||||
Total | $ | 441,987 | $ | — | $ | 47,894 |
Three Months Ended March 31, 2014 | External Operating Revenue | Inter-company Operating Revenue | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 178,095 | $ | 4,007 | $ | 14,575 | ||||||
Gas | 259,337 | — | 24,698 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,269 | 21,079 | 8,073 | |||||||||
Coal Mining | 6,618 | 8,880 | 2,464 | |||||||||
Oil and Gas | 14,850 | — | (2,022 | ) | ||||||||
Corporate activities | — | — | 330 | |||||||||
Inter-company eliminations | — | (33,966 | ) | — | ||||||||
Total | $ | 460,169 | $ | — | $ | 48,118 |
Total Assets (net of inter-company eliminations) as of: | March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||
Utilities: | |||||||||||
Electric (a) | $ | 2,817,423 | $ | 2,748,680 | $ | 2,572,616 | |||||
Gas | 839,802 | 906,922 | 842,660 | ||||||||
Non-regulated Energy: | |||||||||||
Power Generation (a) | 75,945 | 76,945 | 90,643 | ||||||||
Coal Mining | 77,399 | 74,407 | 74,523 | ||||||||
Oil and Gas | 403,657 | 366,247 | 295,083 | ||||||||
Corporate activities | 105,602 | 106,605 | 89,439 | ||||||||
Total assets | $ | 4,319,828 | $ | 4,279,806 | $ | 3,964,964 |
(a) | The PPA under which Black Hills Colorado IPP provides generation to support Colorado Electric customers from the Pueblo Airport Generation Station is accounted for as a capital lease. As such, assets owned by our Power Generation segment are recorded at Colorado Electric under accounting for a capital lease. |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2015 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 53,862 | $ | 24,540 | $ | (834 | ) | $ | 77,568 | |||
Gas Utilities | 63,252 | 28,785 | (1,588 | ) | 90,449 | |||||||
Power Generation | 1,152 | — | — | 1,152 | ||||||||
Coal Mining | 3,638 | — | — | 3,638 | ||||||||
Oil and Gas | 4,646 | — | (13 | ) | 4,633 | |||||||
Corporate | 981 | — | — | 981 | ||||||||
Total | $ | 127,531 | $ | 53,325 | $ | (2,435 | ) | $ | 178,421 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
December 31, 2014 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 59,714 | $ | 26,474 | $ | (722 | ) | $ | 85,466 | |||
Gas Utilities | 47,394 | 45,546 | (781 | ) | 92,159 | |||||||
Power Generation | 1,369 | — | — | 1,369 | ||||||||
Coal Mining | 3,151 | — | — | 3,151 | ||||||||
Oil and Gas | 5,305 | — | (13 | ) | 5,292 | |||||||
Corporate | 2,555 | — | — | 2,555 | ||||||||
Total | $ | 119,488 | $ | 72,020 | $ | (1,516 | ) | $ | 189,992 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2014 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 53,733 | $ | 20,063 | $ | (690 | ) | $ | 73,106 | |||
Gas Utilities | 77,982 | 35,791 | (814 | ) | 112,959 | |||||||
Power Generation | 1,340 | — | — | 1,340 | ||||||||
Coal Mining | 2,616 | — | — | 2,616 | ||||||||
Oil and Gas | 10,920 | — | (13 | ) | 10,907 | |||||||
Corporate | 2,697 | — | — | 2,697 | ||||||||
Total | $ | 149,288 | $ | 55,854 | $ | (1,517 | ) | $ | 203,625 |
Maximum | As of | As of | As of | |||||||
Amortization (in years) | March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||
Regulatory assets | ||||||||||
Deferred energy and fuel cost adjustments - current (a) (d) | 1 | $ | 30,833 | $ | 23,820 | $ | 23,935 | |||
Deferred gas cost adjustments (a)(d) | 2 | 6,138 | 37,471 | 38,505 | ||||||
Gas price derivatives (a) | 7 | 21,606 | 18,740 | 4,420 | ||||||
AFUDC (b) | 45 | 12,114 | 12,358 | 12,349 | ||||||
Employee benefit plans (c) (e) | 12 | 97,700 | 97,126 | 65,833 | ||||||
Environmental (a) | subject to approval | 1,240 | 1,314 | 1,317 | ||||||
Asset retirement obligations (a) | 44 | 3,237 | 3,287 | 3,271 | ||||||
Bond issue cost (a) | 23 | 3,240 | 3,276 | 3,383 | ||||||
Renewable energy standard adjustment (a) | 5 | 5,590 | 9,622 | 16,088 | ||||||
Flow through accounting (c) | 35 | 26,835 | 25,887 | 21,837 | ||||||
Decommissioning costs | 10 | 13,702 | 12,484 | — | ||||||
Other regulatory assets (a) | 15 | 13,242 | 12,454 | 10,181 | ||||||
$ | 235,477 | $ | 257,839 | $ | 201,119 | |||||
Regulatory liabilities | ||||||||||
Deferred energy and gas costs (a) (d) | 1 | $ | 18,094 | $ | 6,496 | $ | 6,485 | |||
Employee benefit plans (c) (e) | 12 | 53,151 | 53,139 | 34,355 | ||||||
Cost of removal (a) | 44 | 81,449 | 78,249 | 67,640 | ||||||
Other regulatory liabilities (c) | 25 | 13,845 | 10,947 | 8,896 | ||||||
$ | 166,539 | $ | 148,831 | $ | 117,376 |
(a) | Recovery of costs, but we are not allowed a rate of return. |
(b) | In addition to recovery of costs, we are allowed a rate of return. |
(c) | In addition to recovery or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base, respectively. |
(d) | Our deferred energy, fuel cost, and gas cost adjustments represent the cost of electricity and gas delivered to our electric and gas utility customers that is either higher or lower than current rates and will be recovered or refunded in future rates. Fluctuations in deferred gas cost adjustments compared to the same period in the prior year are primarily due to higher natural gas prices driven by demand and market conditions from the peak winter heating season in the first part of 2014. Our electric and gas utilities file periodic quarterly, semi-annual, and/or annual filings to recover these costs based on the respective cost mechanisms approved by their applicable state utility commissions. |
(e) | Increase compared to March 31, 2014 is due to a decrease in the discount rate and a change in the mortality tables used in employee benefit plan estimates. |
March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||||
Materials and supplies | $ | 52,429 | $ | 49,555 | $ | 50,727 | |||||
Fuel - Electric Utilities | 6,780 | 6,637 | 7,218 | ||||||||
Natural gas in storage held for distribution | 7,417 | 34,999 | 8,242 | ||||||||
Total materials, supplies and fuel | $ | 66,626 | $ | 91,191 | $ | 66,187 |
Three Months Ended March 31, | ||||||
2015 | 2014 | |||||
Net income (loss) available for common stock | $ | 47,894 | $ | 48,118 | ||
Weighted average shares - basic | 44,541 | 44,330 | ||||
Dilutive effect of: | ||||||
Equity compensation | 119 | 224 | ||||
Weighted average shares - diluted | 44,660 | 44,554 |
Three Months Ended March 31, | ||||
2015 | 2014 | |||
Equity compensation | 107 | 46 | ||
Anti-dilutive shares | 107 | 46 |
March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||||||||||
Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 102,600 | $ | 22,300 | $ | 75,000 | $ | 35,000 | $ | 100,000 | $ | 27,700 |
As of March 31, 2015 | Covenant Requirement | |||
Recourse Leverage Ratio | 55% | Less than | 65% |
• | Commodity price risk associated with our natural long position in crude oil and natural gas reserves and production; and our fuel procurement for certain of our gas-fired generation assets; and |
• | Interest rate risk associated with our variable-rate debt. |
March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||||||||||||
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) | 305,000 | 5,367,500 | 334,500 | 6,582,500 | 442,500 | 8,296,250 | ||||||||||||||
Maximum terms in months (b) | 1 | 1 | 1 | 1 | 1 | 1 | ||||||||||||||
Derivative assets, current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Derivative assets, non-current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Derivative liabilities, current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Derivative liabilities, non-current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(a) | Crude oil in Bbls, natural gas in MMBtus. |
(b) | Refers to the tenor of the derivative instrument. Assets and liabilities are classified as current/non-current based on the production month hedged and the corresponding settlement of the derivative instrument. |
March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||||||
Notional (MMBtus) | Maximum Term (months) (a) | Notional (MMBtus) | Maximum Term (months) (a) | Notional (MMBtus) | Maximum Term (months) (a) | |||||||||
Natural gas futures purchased | 17,280,000 | 69 | 19,370,000 | 72 | 16,140,000 | 80 | ||||||||
Natural gas options purchased | 1,320,000 | 12 | 4,020,000 | 8 | 1,320,000 | 12 | ||||||||
Natural gas basis swaps purchased | 15,735,000 | 57 | 12,005,000 | 60 | 14,575,000 | 69 |
March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||
Derivative assets, current | $ | — | $ | — | $ | 1,846 | |||
Derivative assets, non-current | $ | — | $ | — | $ | — | |||
Derivative liabilities, non-current | $ | — | $ | — | $ | — | |||
Net unrealized (gain) loss included in Regulatory assets or Regulatory liabilities | $ | 21,606 | $ | 18,740 | $ | 4,420 |
March 31, 2015 | December 31, 2014 | March 31, 2014 | |||||||||
Interest Rate Swaps (a) | Interest Rate Swaps (a) | Interest Rate Swaps (a) | |||||||||
Notional | $ | 75,000 | $ | 75,000 | $ | 75,000 | |||||
Weighted average fixed interest rate | 4.97 | % | 4.97 | % | 4.97 | % | |||||
Maximum terms in years | 1.75 | 2.00 | 2.75 | ||||||||
Derivative liabilities, current | $ | 3,342 | $ | 3,340 | $ | 3,498 | |||||
Derivative liabilities, non-current | $ | 2,143 | $ | 2,680 | $ | 4,805 |
(a) | These swaps are designated to borrowings on our Revolving Credit Facility, and are priced using three-month LIBOR, matching the floating portion of the related borrowings. |
Three Months Ended March 31, 2015 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | (886 | ) | Interest expense | $ | 1,437 | $ | — | ||||||||
Commodity derivatives | 3,764 | Revenue | (3,932 | ) | — | |||||||||||
Total | $ | 2,878 | $ | (2,495 | ) | $ | — |
Three Months Ended March 31, 2014 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | (91 | ) | Interest expense | $ | (894 | ) | $ | — | |||||||
Commodity derivatives | (3,473 | ) | Revenue | (311 | ) | — | ||||||||||
Total | $ | (3,564 | ) | $ | (1,205 | ) | $ | — |
• | The commodity contracts for our Oil and Gas segment are valued using the market approach and include exchange-traded futures and basis swaps. Fair value was derived using exchange quoted settlement 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 contracts for our Utilities Segments, valued using the market approach, include exchange-traded futures, options and basis swaps (Level 2) 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. |
• | 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 a 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, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 8,096 | — | (8,096 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 6,526 | — | (6,526 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 1,184 | — | (1,184 | ) | — | ||||||||||
Total | $ | — | $ | 15,806 | $ | — | $ | (15,806 | ) | $ | — | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 2 | — | (2 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 256 | — | (256 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 22,002 | — | (22,002 | ) | — | ||||||||||
Interest rate swaps | — | 5,485 | — | — | 5,485 | |||||||||||
Total | $ | — | $ | 27,745 | $ | — | $ | (22,260 | ) | $ | 5,485 |
As of December 31, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 8,599 | — | (8,599 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 6,558 | — | (6,558 | ) | — | ||||||||||
Commodity derivatives —Utilities | — | 2,389 | — | (2,389 | ) | — | ||||||||||
Total | $ | — | $ | 17,546 | $ | — | $ | (17,546 | ) | $ | — | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | — | — | — | — | |||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 473 | — | (473 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 19,303 | — | (19,303 | ) | — | ||||||||||
Interest rate swaps | — | 6,020 | — | — | 6,020 | |||||||||||
Total | $ | — | $ | 25,796 | $ | — | $ | (19,776 | ) | $ | 6,020 |
As of March 31, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 7 | — | (7 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 490 | — | (490 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 3,226 | — | (1,380 | ) | 1,846 | ||||||||||
Total | $ | — | $ | 3,723 | $ | — | $ | (1,877 | ) | $ | 1,846 | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 1,983 | — | (1,983 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 2,114 | — | (2,114 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 6,919 | — | (6,919 | ) | — | ||||||||||
Interest rate swaps | — | 8,303 | — | — | 8,303 | |||||||||||
Total | $ | — | $ | 19,319 | $ | — | $ | (11,016 | ) | $ | 8,303 |
As of March 31, 2015 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 9,989 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 4,633 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 126 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 132 | |||||
Interest rate swaps | Derivative liabilities — current | — | 3,342 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | 2,143 | |||||
Total derivatives designated as hedges | $ | 14,622 | $ | 5,743 | ||||
Derivatives not designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | — | $ | — | |||
Commodity derivatives | Derivative assets — non-current | — | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 7,530 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 13,288 | |||||
Total derivatives not designated as hedges | $ | — | $ | 20,818 |
As of December 31, 2014 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 10,391 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 4,766 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 185 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 288 | |||||
Interest rate swaps | Derivative liabilities — current | — | 3,340 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | 2,680 | |||||
Total derivatives designated as hedges | $ | 15,157 | $ | 6,493 | ||||
Derivatives not designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | — | $ | — | |||
Commodity derivatives | Derivative assets — non-current | — | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 8,032 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 8,882 | |||||
Total derivatives not designated as hedges | $ | — | $ | 16,914 |
As of March 31, 2014 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 30 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 466 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 3,187 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 910 | |||||
Interest rate swaps | Derivative liabilities — current | — | 3,498 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | 4,805 | |||||
Total derivatives designated as hedges | $ | 496 | $ | 12,400 | ||||
Derivatives not designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 1,846 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | — | — | |||||
Commodity derivatives | Derivative liabilities — current | — | — | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 5,539 | |||||
Interest rate swaps | Derivative liabilities — current | — | — | |||||
Interest rate swaps | Derivative liabilities — non-current | — | — | |||||
Total derivatives not designated as hedges | $ | 1,846 | $ | 5,539 |
March 31, 2015 | December 31, 2014 | March 31, 2014 | ||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||
Cash and cash equivalents (a) | $ | 63,385 | $ | 63,385 | $ | 21,218 | $ | 21,218 | $ | 17,641 | $ | 17,641 | ||||||||
Restricted cash and equivalents (a) | $ | 2,191 | $ | 2,191 | $ | 2,056 | $ | 2,056 | $ | 2 | $ | 2 | ||||||||
Notes payable (a) | $ | 102,600 | $ | 102,600 | $ | 75,000 | $ | 75,000 | $ | 100,000 | $ | 100,000 | ||||||||
Long-term debt, including current maturities (b) | $ | 1,542,658 | $ | 1,767,113 | $ | 1,542,589 | $ | 1,734,555 | $ | 1,396,949 | $ | 1,541,727 |
(a) | Carrying value approximates fair value due to either the short-term length of maturity or variable interest rates that approximate prevailing market rates, and therefore is classified in Level 1 in the fair value hierarchy. |
(b) | Long-term debt is valued based on observable inputs available either directly or indirectly for similar liabilities in active markets and therefore is classified in Level 2 in the fair value hierarchy. |
(11) | OTHER COMPREHENSIVE INCOME (LOSS) |
Location on the Condensed Consolidated Statements of Income (Loss) | Amount Reclassified from AOCI | ||||||
Three Months Ended | |||||||
March 31, 2015 | March 31, 2014 | ||||||
Gains (losses) on cash flow hedges: | |||||||
Interest rate swaps | Interest expense | $ | 1,437 | $ | 894 | ||
Commodity contracts | Revenue | (3,932 | ) | 311 | |||
(2,495 | ) | 1,205 | |||||
Income tax | Income tax benefit (expense) | 1,254 | (425 | ) | |||
Reclassification adjustments related to cash flow hedges, net of tax | $ | (1,241 | ) | $ | 780 | ||
Amortization of defined benefit plans: | |||||||
Prior service cost | Utilities - Operations and maintenance | $ | (27 | ) | $ | (25 | ) |
Non-regulated energy operations and maintenance | (28 | ) | 12 | ||||
Actuarial gain (loss) | Utilities - Operations and maintenance | 454 | 157 | ||||
Non-regulated energy operations and maintenance | 251 | 85 | |||||
650 | 229 | ||||||
Income tax | Income tax benefit (expense) | (228 | ) | (81 | ) | ||
Reclassification adjustments related to defined benefit plans, net of tax | $ | 422 | $ | 148 |
Derivatives Designated as Cash Flow Hedges | Employee Benefit Plans | Total | |||||||
Balance as of December 31, 2013 | $ | (7,133 | ) | $ | (10,289 | ) | $ | (17,422 | ) |
Other comprehensive income (loss), net of tax | (1,478 | ) | 311 | (1,167 | ) | ||||
Balance as of March 31, 2014 | $ | (8,611 | ) | $ | (9,978 | ) | $ | (18,589 | ) |
Balance as of December 31, 2014 | $ | 5,093 | $ | (20,137 | ) | $ | (15,044 | ) | |
Other comprehensive income (loss), net of tax | 595 | 395 | 990 | ||||||
Balance as of March 31, 2015 | $ | 5,688 | $ | (19,742 | ) | $ | (14,054 | ) |
Three months ended | March 31, 2015 | March 31, 2014 | |||||
(in thousands) | |||||||
Non-cash investing and financing activities from continuing operations— | |||||||
Property, plant and equipment acquired with accrued liabilities | $ | 33,534 | $ | 40,939 | |||
Increase (decrease) in capitalized assets associated with asset retirement obligations | $ | — | $ | (2,785 | ) | ||