EX-99 3 ex991_042308-1q08earnings.htm


NorthWestern Corporation

d/b/a NorthWestern Energy

3010 W. 69th Street

Sioux Falls, SD 57108

www.northwesternenergy.com

 

News Release

FOR IMMEDIATE RELEASE

 

 

NASDAQ-GS: NWEC

 

 

Media Contact:

Bobbi Schroeppel

(866) 622-8081

bobbi.schroeppel@northwestern.com

Investor Relations Contact:

Dan Rausch

(605) 978-2902

daniel.rausch@northwestern.com

                                                                                                                                        

 

 

NORTHWESTERN REPORTS FIRST QUARTER 2008 FINANCIAL RESULTS

 

Reports improvement in net income, gross margin and operating income

 

Sioux Falls, S.D. – April 23, 2008 – NorthWestern Corporation d/b/a NorthWestern Energy (NASDAQ-GS: NWEC) today reported financial results for the quarter ended March 31, 2008.

 

Highlights for the Quarter  

 

•

Net income improved to $23.5 million in the first quarter of 2008, an increase of 23.0 percent compared with $19.1 million in the first quarter of 2007;

 

•

Gross margin improved to $156.9 million in the first quarter of 2008, an increase of 6.5 percent compared with $147.3 million in the first quarter of 2007;

 

•

Operating income improved to $52.1 million in the first quarter of 2008, an increase of 17.3 percent compared with $44.4 million in the first quarter of 2007;

 

•

Reached a tentative settlement of the Company’s transmission rate case filed with the Federal Energy Regulatory Commission (FERC) in February 2008 resulting, pending approval, in an annualized margin increase of approximately $3.0 million.

 

•

Standard & Poor’s Rating Group upgraded the Company’s senior secured, senior unsecured and long-term corporate credit ratings resulting in a decrease in the interest rate, commitment fees and removal of certain covenants associated with the Company’s revolver.

 

•

Filed an application to list on the NYSE Euronext (“NYSE”) under ticker symbol NWE and will begin trading on the NYSE on May 1, 2008.

 

Financial Results

 

Consolidated net income was $23.5 million or $.59 per diluted share for the quarter ended March 31, 2008, compared with consolidated net income of $19.1 million or $.51 per diluted share for the quarter ended March 31, 2007.

 

“We had a solid financial quarter where we benefited from rate relief, customer growth and colder weather than last year,” said Mike Hanson, NorthWestern Energy’s President and CEO. “We remain focused on our core operations and are well poised to move forward on our strategic generation and transmission growth projects.”

 

Consolidated gross margin for the first quarter of 2008 was $156.9 million compared with $147.3 million for the first quarter of 2007. Gross margin in the regulated electric segment increased $7.9 million from

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 2

 

 

the first quarter of 2007. Gross margin in the regulated natural gas segment increased $7.3 million from the first quarter of 2007. Gross margin in the unregulated electric segment decreased $4.6 million from the first quarter of 2007. Gross margin in the “other” segment decreased $1.0 million from the first quarter of 2007.

 

Consolidated operating, general and administrative expenses were $60.1 million for the first quarter of 2008 compared with $62.4 million for the first quarter of 2007. The decrease was due to reduced operating lease expense related to the purchase of our previously leased interest in Colstrip Unit 4 partly offset by higher legal and professional fees, which included a $1.8 million judgment related to the City of Livonia shareholder litigation.

 

Property and other taxes were $23.6 million in the first quarter of 2008 compared with $20.6 million in the same period of 2007. Depreciation expense was $21.1 million in the first quarter of 2008 compared with $19.9 million in the same period of 2007. The increase in depreciation expense was related primarily to the purchase of the previously leased interest in Colstrip Unit 4.

 

Interest expense was $16.1 million for the first quarter of 2008 compared with $13.2 million for the first quarter of 2007, primarily related to the additional debt incurred for the purchase of the previously leased interest in Colstrip Unit 4.

 

Results from Regulated Operations

 

Regulated electric gross margin for the first quarter of 2008 was $93.6 million, up 9.2 percent, compared with $85.7 million for the same period in 2007. This $7.9 million increase was primarily due to an interim increase in transmission and distribution rates in Montana, increased volumes from 1.5 percent customer growth and colder weather. Also contributing to the margin increase was an interim increase in our transmission rates and slightly higher wholesale margin due to increased generation plant availability.

 

Regulated retail electric volumes for the first quarter of 2008 totaled 2,634,000 megawatt hours compared with 2,533,000 megawatt hours for the first quarter of 2007, a 4.0 percent increase. The increase was due primarily to customer growth and colder weather. Wholesale electric volumes were 35,000 megawatt hours for the first quarter 2008, an increase from 32,000 megawatt hours for the same period of 2007 due primarily to increased plant availability in the South Dakota generation facilities.

 

Regulated natural gas gross margin was $50.3 million for the first quarter of 2008, compared with $43.0 million for the first quarter of 2007. The increase was primarily due to an increase in distribution rates and increased volumes due to 1.4 percent customer growth and colder weather. In addition, $0.7 million of the increase is due to the transfer of certain previously unregulated customers and pipelines into the regulated business and $0.4 million from higher storage utilization.

 

Regulated retail natural gas volumes were 14,172,000 dekatherms for the first quarter of 2008, compared with 13,037,000 dekatherms for the same period in 2007. The increase in volumes was primarily due to customer growth and colder winter weather.

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 3

 

 

Results from Unregulated Operations

 

Gross margin from unregulated electric operations was $13.4 million for the first quarter of 2008, a decrease from $18.0 million for the first quarter of 2007 primarily due to lower average contracted prices and higher fuel supply costs. In addition, the Company recorded an unrealized loss of $1.2 million during the first quarter of 2008 related to forward contracts executed during the period to economically hedge a portion of our Colstrip Unit 4 output through 2009. Unrealized gains and losses will be recorded, based on market prices through the duration of these contracts; however, they will ultimately reverse as the power is delivered.

 

Unregulated electric volumes were 476,000 megawatt hours in the first quarter of 2008, compared with 428,000 megawatt hours in the same period in 2007. Electric volumes at Colstrip Unit 4 increased primarily due to increased plant availability.

 

Liquidity and Capital Resources

 

As of March 31, 2008, cash and cash equivalents were $33.8 million compared with $12.8 million at Dec. 31, 2007. The Company had revolver availability of $173.9 million at March 31, 2008 compared with $158.7 million at Dec. 31, 2007.

 

Cash provided by continuing operating activities totaled $78.0 million during the first quarter 2008, compared with $104.1 million during the first quarter of 2007. This reduction was primarily due to a contribution of $21.9 million to the Company’s pension plan and lower collections of energy supply costs as compared with the first quarter of 2007.

 

The Company used $14.0 million for investment activities during the first quarter of 2008 compared with $60.6 million for the first quarter of 2007. Capital expenditures for the first quarter of 2008 were $14.0 million compared with $20.5 million for the first quarter of 2007. The Company also used $40.2 million in the first quarter of 2007 to purchase a previously leased interest in Colstrip Unit 4.

 

The Company used $43.0 million in financing activities during the first quarter of 2008 compared with $43.9 million for the first quarter of 2007. Uses of cash included dividends paid on common stock of $12.9 million during the first quarter of 2008 compared with $11.1 million during the first quarter of 2007 and long-term debt payments of $30.0 million in the first quarter of 2008.

 

2008 Earnings Outlook

 

NorthWestern reaffirms its estimate for earnings per share in 2008 to be in the range of $1.60 - $1.75 per fully diluted share. The guidance assumptions for 2008 include:

 

 

•

Impact of rate relief in the Company’s service territories, assuming we receive the regulatory approvals in Montana and at FERC;

 

•

Decreased lease expense and increased depreciation and interest expense related to the purchase of the previously leased interest in Colstrip Unit 4;

 

•

Lower average pricing on forward sales contracts and anticipated output volumes of 1.7 million MWH at Colstrip Unit 4;

 

•

Fully diluted average shares outstanding of 39.5 million; and

 

•

Normal weather in the Company’s electric and natural gas service territories for 2008.

 

Company Hosting Investor Conference Call

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 4

 

 

NorthWestern will host an investor conference call on Thursday April 24, 2008 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to review its financial results for the quarter ended March 31, 2008.

 

The conference call will be webcast live on the Internet at http://www.northwesternenergy.com under the “Investor Information” heading. To listen, please go to the site at least 10 minutes in advance of the call to register. An archived webcast will be available shortly after the call.

 

A telephonic replay of the call will be available beginning at noon ET on April 24, 2008, through May 24, 2008, at 800-475-6701, access code 919615.

 

About NorthWestern Energy

 

NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 650,000 customers in Montana, South Dakota and Nebraska. More information on NorthWestern Energy is available on the Company's Web site at www.northwesternenergy.com.

 

SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS

 

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, the information under “2008 Earnings Outlook.”  Forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.”  These statements are based upon our current expectations and speak only as of the date hereof.  Our actual future business and financial performance may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including, but not limited to:

 

•

our ability to avoid or mitigate adverse rulings or judgments against us in our pending litigation;

 

•

unanticipated changes in availability of trade credit, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments;

 

•

unscheduled generation outages or forced reductions in output, maintenance or repairs;

 

•

adverse changes in general economic and competitive conditions in our service territories; and

 

•

potential additional adverse federal, state, or local legislation or regulation or adverse determinations by regulators.

 

Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. 

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 5

 

 

NORTHWESTERN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

 

 

 

 

March 31,
2008

 

 

December 31,
2007

 

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

$

271,137

 

$

278,354

 

Property, Plant, and Equipment, Net

 

 

1,785,079

 

 

1,770,880

 

Goodwill

 

 

355,128

 

 

355,128

 

Regulatory Assets

 

 

117,616

 

 

123,041

 

Other Noncurrent Assets

 

 

19,346

 

 

19,977

 

Total Assets

 

$

2,548,306

 

$

2,547,380

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Maturities of Long-term Debt and Capital Leases

 

$

21,036

 

$

21,006

 

Current Liabilities

 

 

300,631

 

 

300,833

 

Long-term Capital Leases

 

 

37,701

 

 

38,002

 

Long-term Debt

 

 

757,352

 

 

787,360

 

Noncurrent Regulatory Liabilities

 

 

215,383

 

 

194,959

 

Deferred Income Taxes

 

 

89,315

 

 

74,046

 

Other Noncurrent Liabilities

 

 

292,460

 

 

308,150

 

Total Liabilities

 

 

1,713,878

 

 

1,724,356

 

Total Shareholders’ Equity

 

 

834,428

 

 

823,024

 

Total Liabilities and Shareholders’ Equity

 

$

2,548,306

 

$

2,547,380

 

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 6

 

 

NORTHWESTERN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended

March 31,

 

 

 

2008

 

2007

OPERATING REVENUES

 

$

385,975

 

$

366,565

 

COST OF SALES

 

 

229,084

 

 

219,278

 

GROSS MARGIN

 

 

156,891

 

 

147,287

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Operating, general and administrative

 

 

60,071

 

 

62,448

 

Property and other taxes

 

 

23,640

 

 

20,592

 

Depreciation

 

 

21,091

 

 

19,894

 

TOTAL OPERATING EXPENSES

 

 

104,802

 

 

102,934

 

OPERATING INCOME

 

 

52,089

 

 

44,353

 

Interest Expense

 

 

(16,080

)

 

(13,220

)

Other Income

 

 

662

 

 

378

 

Income Before Income Taxes

 

 

36,671

 

 

31,511

 

Income Tax Expense

 

 

(13,220

)

 

(12,369

)

Net Income

 

$

23,451

 

$

19,142

 

Average Common Shares Outstanding

 

 

38,972

 

 

35,720

 

Basic Earnings per Average Common Share

 

$

0.60

 

$

0.54

 

Diluted Earnings per Average Common Share

 

$

0.59

 

$

0.51

 

Dividends Declared per Average Common Share

 

$

0.33

 

$

0.31

 

 

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 7

 

 

NORTHWESTERN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2008

 

 

 

2007

 

Operating Activities:

 

 

 

 

 

 

 

Net Income

$

23,451

 

 

$

19,142

 

Noncash Items

 

35,181

 

 

 

34,025

 

Changes in Operating Assets and Liabilities

 

19,323

 

 

 

50,922

 

Cash Provided by Operating Activities

 

77,955

 

 

 

104,089

 

 

 

 

 

 

 

 

 

Cash Used in Investing Activities

 

(13,954

)

 

 

(60,608

)

 

 

 

 

 

 

 

 

Cash Used in Financing Activities

 

(43,019

)

 

 

(43,865

)

 

 

 

 

 

 

 

 

Increase (decrease) in Cash and Cash Equivalents

 

20,982

 

 

 

(384

)

Cash and Cash Equivalents, beginning of period

 

12,773

 

 

 

1,930

 

Cash and Cash Equivalents, end of period

$

33,755

 

 

$

1,546

 

 

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 8

 

 

NORTHWESTERN CORPORATION

REGULATED ELECTRIC

THREE MONTHS ENDED MARCH 31

(Unaudited)

 

 

 

 

Results

 

 

2008

 

 

2007

 

 

Change

 

% Change

 

 

(in  millions)

 

 

Total Revenues

 

$

196.7

 

$

178.5

 

$

18.2

 

10.2

 

%

Total Cost of Sales

 

 

103.1

 

 

92.8

 

 

10.3

 

11.1

 

 

Gross Margin

 

$

93.6

 

$

85.7

 

$

7.9

 

9.2

 

%

% GM/Rev

 

47.6

%

 

48.0

%

 

 

 

 

 

 

 

 

 

 

Volumes  MWH

 

 

2008

 

2007

 

Change

 

% Change

 

 

(in  thousands)

 

 

Retail Electric

 

 

 

 

 

 

 

 

 

 

Montana

 

668

 

635

 

33

 

5.2

 

%

South Dakota

 

160

 

148

 

12

 

8.1

 

 

Residential

 

828

 

783

 

45

 

5.7

 

 

Montana

 

799

 

788

 

11

 

1.4

 

 

South Dakota

 

222

 

203

 

19

 

9.4

 

 

Commercial

 

1,021

 

991

 

30

 

3.0

 

 

Industrial

 

761

 

735

 

26

 

3.5

 

 

Other

 

24

 

24

 

—

 

—

 

 

Total Retail Electric

 

2,634

 

2,533

 

101

 

4.0

 

%

Wholesale Electric

 

35

 

32

 

3

 

9.4

 

%

 

 

 

Average Customer Counts

 

 

2008

 

2007

 

Change

 

% Change

 

 

(in  thousands)

 

 

Retail Electric

 

 

 

 

 

 

 

 

 

 

Montana

 

266,104

 

262,172

 

3,932

 

1.5

 

%

South Dakota

 

47,908

 

47,666

 

242

 

0.5

 

 

Residential

 

314,012

 

309,838

 

4,174

 

1.3

 

 

Montana

 

59,148

 

57,719

 

1,429

 

2.5

 

 

South Dakota

 

11,331

 

11,185

 

146

 

1.3

 

 

Commercial

 

70,479

 

68,904

 

1,575

 

2.3

 

 

Industrial

 

72

 

71

 

1

 

1.4

 

 

Other

 

4,653

 

4,593

 

60

 

1.3

 

 

Total Retail Electric

 

389,216

 

383,406

 

5,810

 

1.5

 

%

 

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 9

 

 

NORTHWESTERN CORPORATION

REGULATED NATURAL GAS

THREE MONTHS ENDED MARCH 31

 

(Unaudited)

 

 

 

Results

 

 

2008

 

 

2007

 

 

Change

 

% Change

 

 

(in  millions)

 

 

Total Revenues

 

$

171.6

 

$

158.2

 

$

13.4

 

8.5

 

%

Total Cost of Sales

 

 

121.3

 

 

115.2

 

 

6.1

 

5.3

 

 

Gross Margin

 

$

50.3

 

$

43.0

 

$

7.3

 

17.0

 

%

% GM/Rev

 

 

29.3

%

 

27.2

%

 

 

 

 

 

 

 

 

 

Volumes  Dekatherms

 

 

2008

 

2007

 

Change

 

% Change

 

 

(in  thousands)

 

 

Retail Gas

 

 

 

 

 

 

 

 

 

 

Montana

 

5,568

 

5,035

 

533

 

10.6

 

%

South Dakota

 

1,607

 

1,526

 

81

 

5.3

 

 

Nebraska

 

1,405

 

1,382

 

23

 

1.7

 

 

Residential

 

8,580

 

7,943

 

637

 

8.0

 

 

Montana

 

2,757

 

2,528

 

229

 

9.1

 

 

South Dakota

 

1,378

 

1,181

 

197

 

16.7

 

 

Nebraska

 

1,284

 

1,224

 

60

 

4.9

 

 

Commercial

 

5,419

 

4,933

 

486

 

9.9

 

 

Industrial

 

119

 

73

 

46

 

63.0

 

 

Other

 

54

 

88

 

(34

)

(38.6

)

 

Total Retail Gas

 

14,172

 

13,037

 

1,135

 

8.7

 

%

 

 

 

Average Customer Counts

 

 

2008

 

2007

 

Change

 

% Change

 

 

(in  thousands)

 

 

Retail Gas

 

 

 

 

 

 

 

 

 

 

Montana

 

155,758

 

152,938

 

2,820

 

1.8

 

%

South Dakota

 

36,912

 

36,890

 

22

 

0.1

 

 

Nebraska

 

36,888

 

36,773

 

115

 

0.3

 

 

Residential

 

229,558

 

226,601

 

2,957

 

1.3

 

 

Montana

 

21,685

 

21,185

 

500

 

2.4

 

 

South Dakota

 

5,839

 

5,795

 

44

 

0.8

 

 

Nebraska

 

4,593

 

4,584

 

9

 

0.2

 

 

Commercial

 

32,117

 

31,564

 

553

 

1.8

 

 

Industrial

 

306

 

318

 

(12

)

(3.8

)

 

Other

 

141

 

139

 

2

 

1.4

 

 

Total Retail Gas

 

262,122

 

258,622

 

3,500

 

1.4

 

%

 

 

 

2008  as  compared  with:

 

Heating Degree-Days

 

2007

 

Historic  Average

 

Montana

 

8% colder

 

Remained Flat

 

South Dakota

 

4% colder

 

2% colder

 

Nebraska

 

4% colder

 

3% colder

 

 

 

– More –

 

NorthWestern Reports First Quarter 2008 Financial Results

April 23, 2008

Page 10

 

 

NORTHWESTERN CORPORATION

UNREGULATED ELECTRIC

THREE MONTHS ENDED MARCH 31

(Unaudited)

 

 

 

Results

 

 

 

2008

 

 

2007

 

 

Change

 

% Change

 

 

(in  millions)

 

 

Total Revenues

 

 

20.4

 

$

22.3

 

$

(1.9

)

(8.5

)

%

Total Cost of Sales

 

 

7.0

 

 

4.3

 

 

2.7

 

62.8

 

 

Gross Margin

 

$

13.4

 

$

18.0

 

$

(4.6

)

(25.6

)

%

% GM/Rev

 

 

65.7

%

 

80.7

%

 

 

 

 

 

 

 

 

 

Volumes  MWH

 

 

2008

 

2007

 

Change

 

% Change

 

 

(in  thousands)

 

 

Wholesale Electric

 

476

 

428

 

48

 

11.2

 

%