Black Hills Corp. Announces 21 Percent Growth in 2013 Second Quarter Adjusted Earnings Per Share

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Black Hills Corp. Announces 21 Percent Growth in 2013 Second Quarter Adjusted Earnings Per Share

RAPID CITY, S.D.--(BUSINESS WIRE)-- Black Hills Corp. (NYS: BKH) today announced 2013 second quarter financial results. Income from continuing operations, as adjusted, was $18.3 million, or $0.41 per diluted share, compared with $15.1 million, or $0.34 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).

"We achieved solid earnings growth in the second quarter," said David R. Emery, chairman, president and chief executive officer of Black Hills Corp. "Adjusted earnings per share increased 21 percent over the same period in the prior year, reflecting higher earnings at our gas utilities, power generation and coal mining segments combined with lower interest expense. Gas utilities realized higher sales volumes and gross margins due to colder spring weather as compared to the relatively warm spring last year. Power generation reported higher contract revenues while coal mining benefited from continued efficiency efforts. Interest expense was lower due to reduced outstanding debt.

    
Three Months Ended June 30,Six Months Ended June 30,
(in millions, except per share amounts)  2013  2012  2013  2012
Non-GAAP *:    
Income from continuing operations, as adjusted$18.3$15.1$56.6$43.5
Income (loss) from discontinued operations     (1.2)      (6.6)
Net income, as adjusted (non-GAAP)$18.3   $13.9   $56.6  $36.9 
 
Earnings per share from continuing operations, as adjusted, diluted$0.41$0.34$1.28$0.99
Earnings (loss) per share, discontinued operations     (0.03)      (0.15)
Earnings per share, as adjusted, diluted (non-GAAP)$0.41   $0.31   $1.28  $0.84 
 
GAAP:
Income from continuing operations$30.5$(12.3)$73.7$22.9
Income (loss) from discontinued operations     (1.2)      (6.6)
Net income$30.5   $(13.5)  $73.7  $16.3 
 
Earnings per share from continuing operations, diluted$0.69$(0.28)$1.66$0.52
Income (loss) from discontinued operations     (0.03)      (0.15)
Earnings per share, diluted  $0.69   $(0.31)  $1.66  $0.37 
* These are Non-GAAP measures. Accompanying schedules for the GAAP to Non-GAAP adjustment reconciliations are provided below.
 

"We made excellent progress on two key strategic initiatives during the quarter. Construction commenced in April on the $237 million, 132 megawatt Cheyenne Prairie Generating Station. This project will meet our customers' growing demand for electricity at Cheyenne Light and replace generating capacity at Black Hills Power that is being closed due to U.S. Environmental Protection Agency regulations. Our oil and gas segment drilled two horizontal wells in the Mancos Shale formation in the Piceance Basin. We expect both wells to be completed and producing prior to year-end. The wells are part of a transaction through which we will earn approximately 20,000 net acres of Mancos Shale leasehold in the Piceance Basin in exchange for drilling and completing the two wells.

"In recognition of our improved financial position, Standard & Poor's and Fitch both raised our corporate credit rating to BBB from BBB-. These rating agency actions, combined with our solid second quarter financial performance, affirm our strategies for improving cash flows, growing earnings and strengthening our balance sheet," Emery concluded.

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. A hearing with the commission is scheduled for Nov. 12-15 regarding the resource plan and the two certificates of public convenience and necessity.
  • On April 23, Colorado Electric issued a request for proposals for up to 30 megawatts of wind energy for its electric system in southern Colorado. Bids have been received, an independent evaluation has been completed and bid results have been submitted to the commission. Our power generation segment elected to bid into this request for proposal. A hearing with the commission is scheduled for Sept. 4-6, and an initial decision is anticipated in early October.
  • 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 project is currently on schedule and within budget.
  • Gas utilities continued efforts to acquire small municipal gas distribution systems adjacent to our existing gas utility service territories. We acquired another small system during the quarter, adding about 300 retail customers and a few commercial 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 hearing with the commission is scheduled for Oct. 8-11. Interim rates, subject to refund, were implemented 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 typical allowance for funds used during construction. The requested rider 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. Interim rates, subject to refund, were implemented April 1. A hearing with the commission is scheduled for Sept. 16-20.

Non-regulated Energy

  • Oil and gas drilled two horizontal wells in the Mancos Shale formation in the Piceance Basin. Both wells should be completed and producing prior to year-end. The wells are part of a transaction in which the company will earn approximately 20,000 net acres of Mancos Shale leasehold in the Piceance Basin in exchange for drilling and completing the two wells.

Corporate

  • On July 24, Standard & Poor's Rating Services raised the company's corporate credit rating to BBB from BBB-, with a stable outlook.
  • On July 24, the company declared a quarterly dividend of $0.38 per share, equivalent to an annual dividend rate of $1.52 per share. Black Hills has increased its dividend for 43 consecutive years.
  • On June 21, the company closed a new $275 million unsecured term loan. The new loan has a maturity date of June 19, 2015, with a cost of borrowing based on LIBOR plus a spread of 112.5 basis points per annum. The proceeds of the term note were used to repay a $150 million term note due June 24, 2013, a $100 million term note due Sept. 30, 2013, and other short-term borrowings.
  • On May 10, Fitch Ratings raised the company's corporate credit rating to BBB from BBB-, with a positive outlook.
 
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 June 30,Six Months Ended June 30,
2013  20122013  2012
(in millions)  
Net income (loss):  
Utilities:
Electric$10.6$14.2$23.0$22.9
Gas 3.2    1.2  21.7    16.4 
Total Utilities Group 13.8    15.4  44.7    39.3 
 
Non-regulated Energy:
Power generation5.13.910.710.8
Coal mining1.91.23.02.2
Oil and gas (a) (1.9)   (19.6) (2.0)   (19.6)
Total Non-regulated Energy Group 5.1    (14.5) 11.7    (6.6)
 
Corporate and Eliminations (b) (c) 11.7    (13.2) 17.3    (9.8)
 
Income from continuing operations 30.5    (12.3) 73.7    22.9 
 
Income (loss) from discontinued operations, net of tax     (1.2)     (6.6)
Net income (loss)  $30.5   $(13.5)$73.7   $16.3 
(a) Financial results for the three and six months ended June 30, 2012, included a non-cash after-tax ceiling test impairment of $17.3 million.
(b)Financial results include a $12.2 million and $17.1 million net after-tax non-cash mark-to-market gain on certain interest rate swaps for the three and six months ended June 30, 2013, respectively, and a $10.1 million and $2.3 million net after-tax non-cash mark-to-market loss on those same interest rate swaps for the three and six months ended June 30, 2012, respectively.
(c)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 six months ended June 30, 2012.
 
    
Three Months Ended June 30,Six Months Ended June 30,
   2013  20122013  2012
Weighted average common shares outstanding (in thousands):    
Basic44,17243,79944,11343,765
Diluted44,41243,79944,36343,984
 
Earnings per share:
Basic -
Continuing Operations$0.69$(0.28)$1.67$0.52
Discontinued Operations    (0.03)    (0.15)
Total Basic Earnings Per Share$0.69  $(0.31)$1.67  $0.37 
 
Diluted -
Continuing Operations$0.69$(0.28)$1.66$0.52
Discontinued Operations    (0.03)    (0.15)
Total Diluted Earnings Per Share$0.69  $(0.31)$1.66  $0.37 
 

DIVIDENDS

On July 24, 2013, Black Hills' board of directors declared a quarterly dividend on the common stock. Common shareholders of record at the close of business on Aug. 16, 2013, will receive $0.38 per share, equivalent to an annual dividend rate of $1.52 per share, payable on Sept. 1, 2013.

2013 EARNINGS GUIDANCE REAFFIRMED

The company reaffirms expected 2013 earnings from continuing operations, as adjusted, to be in the range of $2.20 to $2.40 per share, consistent with the original guidance issued on Nov. 7, 2012.

CONFERENCE CALL AND WEBCAST

Black Hills will host a live conference call and webcast at 11 a.m. EDT on Tuesday, Aug. 6, 2013, to discuss our financial and operating performance.

To access the live webcast and download a copy of the investor presentation, go to the Black Hills website at www.blackhillscorp.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 866-515-2915 if calling within the United States. International callers can call 617-399-5129. All callers need to enter the pass code 47607802 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 Tuesday, Aug. 20, 2013, at 888-286-8010 in the United States and at 617-801-6888 for international callers. The replay pass code is 73331057.

USE OF NON-GAAP FINANCIAL MEASURE

As noted in this news release, in addition to presenting our 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. Black Hills believes that non-GAAP financial measures are useful to investors because the items excluded are not indicative of the company's continuing operating results. Company 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 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 June 30,  Six Months Ended June 30,
(In millions, except per share amounts)2013  20122013 Read Full Story

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