Black Hills Corp. Reports 34 Percent Increase in 2013 First Quarter Adjusted Earnings Per Share

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Black Hills Corp. Reports 34 Percent Increase in 2013 First Quarter Adjusted Earnings Per Share

RAPID CITY, S.D.--(BUSINESS WIRE)-- Black Hills Corp. (NYS: BKH) today announced 2013 first quarter financial results. Income from continuing operations, as adjusted, was $38.4 million, or $0.87 per diluted share, compared with $28.5 million, or $0.65 per diluted share, for the same period in 2012 (this is a non-GAAP measure and an accompanying schedule for the GAAP to non-GAAP adjustment reconciliation is provided).

"Our strong earnings growth in the first quarter met our expectations," said David R. Emery, chairman, president and chief executive officer of Black Hills Corp. "Adjusted earnings per share increased 34 percent resulting from higher earnings at our electric and gas utilities and lower interest expense. The utilities benefited from customer rate adjustments, the Wyoming construction financing rider and increased demand across most customer classes. A return to more normal weather provided approximately $0.10 per share positive earnings impact compared to the same quarter last year, mostly in the gas utilities. Interest expense was down due to lower outstanding debt."


"We maintained our focus on operational excellence in the quarter, continuing top tier performance in system reliability, plant availability, customer cost and other key industry metrics," Emery said.

  
Three Months Ended March 31,
(in millions, except per share amounts)  2013  2012
Non-GAAP *:  
Income from continuing operations, as adjusted$38.4$28.5
Income (loss) from discontinued operations   (5.5)
Net income, as adjusted (non-GAAP)$38.4   $23.0 
 
Earnings per share from continuing operations, as adjusted, diluted$0.87$0.65
Earnings (loss) per share, discontinued operations   (0.12)
Earnings per share, as adjusted, diluted (non-GAAP)$0.87   $0.53 
 
GAAP:
Income from continuing operations$43.2$35.3
Income (loss) from discontinued operations   (5.5)
Net income$43.2   $29.8 
 
Earnings per share from continuing operations, diluted$0.97$0.80
Income (loss) from discontinued operations   (0.12)
Earnings per share, diluted  $0.97   $0.68 

* These are Non-GAAP measures. Accompanying schedules for the GAAP to Non-GAAP adjustment reconciliations are provided below.

 

"We advanced several key strategic initiatives since year-end. Construction commenced in April on the $237 million, 132 megawatt Cheyenne Prairie Generating Station. This project, one of the largest in the company's history, will meet growing demand for Cheyenne Light and replace generating capacity at Black Hills Power that is being closed due to recent U.S. Environmental Protection Agency regulations. Our oil and gas group is drilling the first of two horizontal wells in the Mancos Shale formation in the Piceance Basin. The wells are part of a transaction through which Black Hills will earn up to an additional 20,000 net acres of Mancos Shale leasehold in the Piceance Basin in exchange for drilling and completing the wells," Emery continued.

Black Hills Corp. highlights, recent regulatory filings and updates, and other events include:

Utilities

  • On April 30, Colorado Electric filed its electric resource plan with the Colorado Public Utilities Commission, addressing its projected resource requirements through 2019. The resource plan identified a 40 megawatt, simple-cycle, natural gas-fired turbine as the replacement capacity for the retirement of the coal-fired, 42 megawatt W.N. Clark power plant, consistent with the requirements of the Colorado Clean Air - Clean Jobs Act. A Certificate of Public Convenience and Necessity was submitted to the commission requesting approval for the new generating capacity. If approved, the plant will be constructed at the Pueblo Airport Generating Station and placed into service in the first quarter of 2017. The resource plan also recommended the retirement of the natural gas-fired Pueblo Units 5 and 6 by Dec. 31, 2013. A Certificate of Public Convenience and Necessity was submitted to the commission seeking approval to retire these plants, which total 29 megawatts and were placed in service in the 1940s.
  • On April 23, Colorado Electric issued a request for proposals for up to 30 megawatts of wind energy delivered to its electric system in southern Colorado. Our Power Generation segment may elect to bid into this request for proposal.
  • On April 8, construction and infrastructure work commenced on the 132 megawatt Cheyenne Prairie Generating Station in Cheyenne, Wyo. Project costs for plant construction and associated transmission are estimated at $222 million, with up to $15 million of construction financing costs, for a total of $237 million. Construction for the new power plant is expected to be completed by the fourth quarter of 2014.
  • The gas utilities segment continued its efforts to acquire small municipal gas distribution systems adjacent to our existing gas utility service territories. We acquired two small systems during the quarter, adding about 500 retail and two high-volume industrial customers.
  • On Dec. 17, 2012, Black Hills Power filed a request with the South Dakota Public Utilities Commission seeking a 9.94 percent, or $13.7 million, increase in annual electric revenue. A public hearing with the commission is scheduled for Oct. 8-11. Interim rates, subject to refund, are scheduled to begin June 16.
  • On Dec. 17, 2012, Black Hills Power filed a request with the South Dakota Public Utilities Commission to use a construction financing rider for Cheyenne Prairie Generating Station in lieu of the traditional allowance for funds used during construction. This rider request will allow Black Hills Power to earn and collect a rate of return during the construction period on its 40 percent share of the total project cost, while also lowering the overall cost of the project to customers. On Jan. 17, the commission approved a stipulation with interim rates effective April 1, subject to refund. A public hearing with the commission is scheduled for Sept. 16-20.

Non-regulated Energy

  • Oil and Gas reported a 27 percent reduction in total volumes sold, reflecting the sale of the Williston Basin oil and gas assets in 2012. Results were aided by a 15 percent increase in average hedged price received for crude oil, offset by an 18 percent decrease in average hedged price received for natural gas.

Corporate

  • Interest expense decreased by about $4.2 million after-tax, or $0.09 per share, due primarily to an approximate $220 million decrease in outstanding debt.
  • On April 22, the company declared a quarterly dividend of $0.38 per share, equivalent to an annual dividend rate of $1.52 per share. The company has increased its dividend for 43 consecutive years.

BLACK HILLS CORPORATION
CONSOLIDATED FINANCIAL RESULTS

(Minor differences may result due to rounding. Prior period information has been revised to reclassify information related to discontinued operations.)

   
Three Months Ended March 31,
2013  2012
(in millions)
Net income (loss):  
Utilities:
Electric$12.4$8.7
Gas18.5   15.2 
Total Utilities Group30.9   23.9 
 
Non-regulated Energy:
Power generation5.66.9
Coal mining1.11.0
Oil and gas(0.1)   
Total Non-regulated Energy Group6.6   7.9 
 

Corporate and Eliminations (a)(b)

5.7   3.4 
 
Income from continuing operations43.2   35.3 
 
Income (loss) from discontinued operations, net of tax (b)   (5.5)
Net income (loss)  $43.2   $29.8 

(a) 

Financial results include a $4.8 million net after-tax non-cash mark-to-market gain on certain interest rate swaps for the three months ended March 31, 2013, and a $7.8 million net after-tax non-cash mark-to-market gain on those same interest rate swaps for the three months ended March 31, 2012.

(b) 

Certain indirect corporate costs and inter-segment interest expense previously charged to our Energy Marketing segment could not be reclassified to discontinued operations and, accordingly, have been presented within Corporate in the after-tax amount of $1.6 million for the three months ended March 31, 2012.

 
  
Three Months Ended March 31,
   2013  2012
Weighted average common shares outstanding (in thousands):  
Basic44,05343,731
Diluted44,31243,969
 
Earnings per share:
Basic -
Continuing Operations$0.98$0.81
Discontinued Operations   (0.13)
Total Basic Earnings Per Share$0.98   $0.68 
 
Diluted -
Continuing Operations$0.97$0.80
Discontinued Operations   (0.12)
Total Diluted Earnings Per Share$0.97   $0.68 
 

DIVIDENDS

On April 22, 2013, the company's board of directors declared a quarterly dividend on the common stock. Common shareholders of record at the close of business on May 17, 2013, will receive $0.38 per share, equivalent to an annual dividend rate of $1.52 per share, payable on June 1, 2013.

2013 EARNINGS GUIDANCE REAFFIRMED

Black Hills reaffirms expected 2013 earnings from continuing operations, as adjusted, to be in the range of $2.20 to $2.40 per share, based on assumptions listed with our original guidance issued on Nov. 7, 2012.

CONFERENCE CALL AND WEBCAST

Black Hills Corp. will host a live conference call and webcast at 11 a.m. EDT on Friday, May 3, 2013, to discuss the company's financial and operating performance.

To access the live webcast and download a copy of the investor presentation, go to the Black Hills website at http://www.blackhills.com, and click on "Events and Presentations" in the "Investor Relations" section. The presentation will be posted on the website before the webcast. Listeners should allow at least five minutes for registering and accessing the presentation. Those interested in asking a question during the live broadcast or those without Internet access can call 800-510-0146 if calling within the United States. International callers can call 617-614-3449. All callers need to enter the pass code 64137040 when prompted.

For those unable to listen to the live broadcast, a replay will be available on the company's website or by telephone through Friday, May 17, 2013, at 888-286-8010 in the United States and at 617-801-6888 for international callers. The replay pass code is 73117713.

USE OF NON-GAAP FINANCIAL MEASURE

As noted in this news release, in addition to presenting its earnings information in conformity with Generally Accepted Accounting Principles, the company has provided non-GAAP earnings data reflecting adjustments for special items as specified in the GAAP to non-GAAP adjustment reconciliation table below. Income (loss) from continuing operations, as adjusted, and Net income (loss), as adjusted, are defined as Income (loss) from continuing operations and Net income (loss), adjusted for expenses, gains and losses that the company believes do not reflect the company's core operating performance. The company believes that non-GAAP financial measures are useful to investors because the items excluded are not indicative of the company's continuing operating results. The company's management uses these non-GAAP financial measures as an indicator for planning and forecasting future periods. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. The presentation of these non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by other income and expenses that are unusual, non-routine or non-recurring.

GAAP TO NON-GAAP ADJUSTMENT RECONCILIATION

  
Three Months Ended March 31,
(In millions, except per share amounts)2013  2012
(after-tax)Income EPSIncome EPS
Income (loss) from continuing operations (GAAP)$43.2  $0.97 $35.3  $0.80 
Adjustments, after-tax:  
Unrealized (gain) loss on certain interest rate swaps(4.8)(0.11)(7.8)(0.18)
Credit facility fee write off1.00.02
Rounding  0.01   0.01 
Total adjustments(4.8) (0.10)(6.8) (0.15)
 
Income (loss) from continuing operations, as adjusted (non-GAAP)38.40.8728.50.65
Income (loss) from discontinued operations, net of tax   (5.5) (0.12)
Net income (loss), as adjusted (non-GAAP)$38.4  $0.87 $23.0  $0.53 
 

BUSINESS UNIT PERFORMANCE SUMMARY

Business Group highlights for the three months ended March 31, 2013, compared to the three months ended March 31, 2012, are discussed below. The following business group and segment information does not include certain intercompany eliminations or discontinued operations. Minor differences in comparative amounts may result due to rounding. All amounts are presented on a pre-tax basis unless otherwise indicated. Prior period information has been revised to reclassify information related to discontinued operations.

Utilities Group

Income from continuing operations for the Utilities Group for the first quarter ended March 31, 2013 was $30.9 million, compared to $23.9 million in 2012.

Electric Utilities

    
Three Months Ended
March 31,Variance
   2013 2012  2013 vs. 2012
(in millions)
Gross margin$90.5  $85.5   $5.0 
 
Operations and maintenance38.839.2(0.4)
Depreciation and amortization19.2  18.9   0.3 
Operating income32.527.35.2
 
Interest expense, net(14.4)(13.2)(1.2)
Other (income) expense, net0.30.7(0.4)
Income tax benefit (expense)(6.0) (6.0)   
Income (loss) from continuing operations$12.4  $8.7   $3.7 
 
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Three Months Ended March 31,
   2013  2012
Operating Statistics:  
Retail sales - MWh1,136,1701,118,810
Contracted wholesale sales - MWh103,78489,048
Off-system sales - MWh340,532   527,547 
Total electric sales - MWh1,580,486   1,735,405 
    
Total gas sales - Cheyenne Light - Dth1,945,884   1,787,758 
 
Regulated power plant availability: