EX-99.1 2 ex991pressreleaseq32013.htm PRESS RELEASE Ex 99.1 Press Release Q3 2013
NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 1


 
NorthWestern Corporation
d/b/a NorthWestern Energy
3010 W. 69th Street
Sioux Falls, SD 57108
www.northwesternenergy.com

NYSE: NWE
News Release
FOR IMMEDIATE RELEASE 
Media Contact:
Claudia Rapkoch (866) 622-8081
claudia.rapkoch@northwestern.com

Investor Relations Contact:
Travis Meyer (605) 978-2967
travis.meyer@northwestern.com

NORTHWESTERN REPORTS THIRD QUARTER 2013 FINANCIAL RESULTS

Company reports diluted earnings per share of $0.40 for third quarter 2013
Reaffirms full year 2013 guidance of $2.45 - $2.60 per diluted share
Declares a quarterly dividend of $0.38 per share, payable December 31, 2013

SIOUX FALLS, S.D. - October 24, 2013 - NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) reported financial results for the quarter ended September 30, 2013. Net income was $15.6 million or $0.40 per diluted share, for the quarter ended September 30, 2013, compared with a net loss of $3.8 million, or a loss of $0.10 per diluted share, for the quarter ended September 30, 2012.  The loss in the third quarter last year was primarily related to the impairment of the Mountain States Transmission Intertie (MSTI) project and the revenue deferral due to the FERC ALJ’s nonbinding decision regarding revenue allocation at our Dave Gates Generating Station (DGGS). 
 
“We are very excited about our recently announced $900 million hydro acquisition and the long-term benefits it will provide all of our stakeholders for decades to come. There is no resource better suited to serve the needs of our Montana customers. We continue to be keenly focused on our day-to-day responsibilities of delivering safe and reliable services to our customers while delivering a fair return to our investors,” said Bob Rowe, Chief Executive Officer. "This was another solid quarter demonstrating that commitment."
Summary Financial Results
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands, except per share amounts)
2013
 
2012
 
2013
 
2012
Total Revenues
$
262,248

 
$
235,866

 
$
835,429

 
$
789,569

Cost of Sales
104,298

 
93,061

 
343,407

 
327,884

Gross Margin
157,950

 
142,805

 
492,022

 
461,685

Operating Expenses
 
 
 
 
 
 
 
Operating, general and administrative
72,540

 
63,056

 
208,741

 
195,725

MSTI impairment
—

 
24,039

 
—

 
24,039

Property and other taxes
25,956

 
24,796

 
77,525

 
74,395

Depreciation
28,053

 
26,505

 
84,685

 
79,364

Total Operating Expenses
126,549

 
138,396

 
370,951

 
373,523

Operating Income
31,401

 
4,409

 
121,071

 
88,162

Interest Expense, net
(17,056
)
 
(17,743
)
 
(50,976
)
 
(49,598
)
Other Income
3,117

 
974

 
6,760

 
3,134

Income (Loss) Before Income Taxes
17,462

 
(12,360
)
 
76,855

 
41,698

Income Tax (Expense) Benefit
(1,815
)
 
8,588

 
(8,965
)
 
(1,989
)
Net Income (Loss)
$
15,647

 
$
(3,772
)
 
$
67,890

 
$
39,709

Average Common Shares Outstanding
38,459

 
37,201

 
37,983

 
36,723

Basic Earnings (Loss) per Average Common Share
$
0.41

 
$
(0.10
)
 
$
1.79

 
$
1.09

Diluted Earnings (Loss) per Average Common Share
$
0.40

 
$
(0.10
)
 
$
1.78

 
$
1.08

Dividends Declared per Common Share
$
0.38

 
$
0.37

 
$
1.14

 
$
1.11


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 2




Significant items during the third quarter
•
Entered into an agreement with PPL Montana, LLC (PPL Montana), a wholly owned subsidiary of PPL Corporation to purchase PPL Montana’s hydro-electric generating facilities and associated assets located in Montana, which includes approximately 633 megawatts of hydro-electric generation capacity, for a purchase price of $900 million (Hydro Transaction); and
•
An improvement in net income of approximately $19.4 million as compared with the same period in 2012, due primarily to:

◦
$15.1 Million - Improvement in gross margin primarily due to:
▪
Higher FERC DGGS revenue due to $11.4 million deferral recorded in the third quarter of 2012 related to the FERC ALJ nonbinding decision;
▪
Increased recovery of electric Demand Side Management (DSM) lost revenues;
▪
The acquisition of the Spion Kop wind farm in the fourth quarter of 2012;
▪
An increase in natural gas production margin due to the full period effect of the acquisition of production assets in the third quarter of 2012;
▪
An increase in Montana natural gas delivery rates implemented in April 2013; and
▪
An increase in property taxes included in a tracker.
▪
These increases were partly offset by a decrease in electric retail volumes due to cooler summer weather and less customer irrigation, lower revenues for operating expenses recovered in trackers and a decrease in electric transmission revenues due primarily to the outage at Colstrip Unit 4.
◦
$24.0 Million - Improvement from the absence of the MSTI impairment in the third quarter 2012.
◦
$0.6 Million - Reduced interest expense due to higher interest on DGGS accrued during the third quarter 2012 partially offset by higher debt outstanding in 2013.
◦
$2.1 Million - Increased other income due to the change in value of deferred shares held in trust for non-employee directors deferred compensation (offset in expense).

These improvements were partially offset by:
◦
$9.4 Million - Increased operating, general and administrative expenses primarily due to:
▪
Distribution System Infrastructure Project (DSIP) expense;
▪
Hydro Transaction legal and professional fees;
▪
Increased labor costs;
▪
Higher plant operator costs;
▪
Non-employee directors deferred compensation due to changes in our stock price (offset in other income); and
▪
Higher bad debt expense.
▪
These increases were partly offset by decreased pension expense (net of higher other employee benefit costs) and lower operating expenses recovered in trackers.
◦
$1.2 Million - Higher property and other taxes
◦
$1.6 Million - Increased depreciation expense
◦
$10.4 Million - Increased income tax expense








NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 3






















NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 4


Reconciliation of Primary Changes from 2012 to 2013
 
 
 
 
 
 
 
 
Three Months Ended Sept. 30,
 
 
Nine Months Ended Sept. 30,
 
 
Pre-tax
Net
EPS
 
 
Pre-tax
Net
EPS
 
($millions, except EPS)
Income
Income(1)
 Diluted
 
 
Income
Income(1)
 Diluted
 
2012 reported
$
(12.4
)
$
(3.8
)
$
(0.10
)
 
 
$
41.7

$
39.7

$
1.08

 
 
 
 
 
 
 
 
 
 
Gross Margin
 
 
 
 
 
 
 
 
 
DGGS
10.2

6.3

0.16

 
 
5.1

3.1

0.08

 
DSM lost revenues
5.0

3.1

0.08

 
 
—

—

—

 
Spion Kop
1.6

1.0

0.03

 
 
4.6

2.8

0.07

 
Natural gas production
1.2

0.7

0.02

 
 
7.0

4.3

0.11

 
Montana natural gas rate increase
1.2

0.7

0.02

 
 
2.1

1.3

0.03

 
Property tax trackers
0.9

0.6

0.02

 
 
1.9

1.2

0.03

 
Electric retail volumes
(3.5
)
(2.2
)
(0.06
)
 
 
(0.5
)
(0.3
)
(0.01
)
 
Operating expenses recovered in trackers
(1.9
)
(1.2
)
(0.03
)
 
 
(2.4
)
(1.5
)
(0.04
)
 
Electric transmission revenue
(0.4
)
(0.2
)
(0.01
)
 
 
3.6

2.3

0.06

 
Natural gas retail volumes
—

—

—

 
 
3.4

2.1

0.06

 
Natural gas transportation capacity
—

—

—

 
 
1.1

0.7

0.02

 
Electric QF supply costs
—

—

—

 
 
1.0

0.6

0.02

 
Other
0.8

0.5

0.01

 
 
3.6

2.2

0.06

 
Subtotal - Gross Margin
15.1

9.3

0.24

 
 
30.5

18.8

0.49

OG&A Expense
 
 
 
 
 
 
 
 
 
DSIP expenses
(3.3
)
(2.0
)
(0.05
)
 
 
(8.8
)
(5.4
)
(0.14
)
 
Hydro Transaction related legal and professional fees
(2.8
)
(1.7
)
(0.05
)
 
 
(3.3
)
(2.0
)
(0.05
)
 
Labor
(1.7
)
(1.0
)
(0.03
)
 
 
(2.8
)
(1.7
)
(0.04
)
 
Plant operator costs
(1.6
)
(1.0
)
(0.03
)
 
 
(3.0
)
(1.8
)
(0.05
)
 
Nonemployee directors deferred compensation
(1.5
)
(0.9
)
(0.02
)
 
 
(2.6
)
(1.6
)
(0.04
)
 
Bad debt expense
(0.6
)
(0.4
)
(0.01
)
 
 
(1.0
)
(0.6
)
(0.02
)
 
Pension and employee benefits
3.1

1.9

0.05

 
 
10.7

6.6

0.17

 
Operating expenses recovered in trackers
1.9

1.2

0.03

 
 
2.4

1.5

0.04

 
Natural gas production
—

—

—

 
 
(1.6
)
(1.0
)
(0.03
)
 
Other
(2.9
)
(1.8
)
(0.05
)
 
 
(3.0
)
(1.8
)
(0.05
)
 
Subtotal - OG&A Expense
(9.4
)
(5.7
)
(0.16
)
 
 
(13.0
)
(7.8
)
(0.21
)
Other
 
 
 
 
 
 
 
 
 
MSTI Impairment
24.0

14.8

0.40

 
 
24.0

14.8

0.40

 
Depreciation expense
(1.6
)
(1.0
)
(0.03
)
 
 
(5.3
)
(3.3
)
(0.09
)
 
Property and other taxes
(1.2
)
(0.7
)
(0.02
)
 
 
(3.1
)
(1.9
)
(0.05
)
 
Interest expense
0.6

0.4

0.01

 
 
(1.4
)
(0.9
)
(0.02
)
 
Other Income
2.1

1.3

0.03

 
 
3.7

2.2

0.06

Income tax and other items
 
 
 
 
 
 
 
 
 
Flow-through repairs deductions
 
1.3

0.03

 
 
 
3.4

0.09

 
Flow-through of state bonus depreciation deduction
0.5

0.01

 
 
 
1.1

0.03

 
Production tax credits
 
0.5

0.01

 
 
 
2.1

0.06

 
Prior year permanent return to accrual adjustments
(1.9
)
(0.05
)
 
 
 
(2.4
)
(0.06
)
 
Recognition of state NOL benefit / valuation allowance release
(0.1
)
—

 
 
 
(0.1
)
—

 
State income tax and other, net
 
(0.3
)
(0.01
)
 
 
 
1.2

0.03

 
Impact of higher share count
 
 
(0.02
)
 
 
 
 
(0.07
)
 
All other, net
0.3

1.0

0.06

 
 
(0.2
)
1.0

0.04

 
Total EPS impact of above items
 
 
0.50

 
 
 
 
0.70

 
2013 reported
$
17.5

$
15.6

$
0.40

 
 
$
76.9

$
67.9

$
1.78

(1) Income Tax Benefit (Expense) calculation on reconciling items assumes effective tax rate of 38.5%.





Significant Drivers

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 5



Gross Margin
Consolidated gross margin for the quarter ended September 30, 2013 was $158.0 million compared with $142.9 million for the same period of 2012. Consolidated gross margin increased $15.1 million primarily due to the following:

•
Higher DGGS revenue primarily due to the inclusion in 2012 results of the deferral of $11.4 million related to the FERC ALJ nonbinding decision;
•
A $5.8 million increase in electric DSM lost revenues recovered through our supply trackers related to efficiency measures implemented by customers, offset in part by a decrease of $0.8 million related to natural gas DSM lost revenues. The three months ended September 30, 2013 included recognition of approximately $4.6 million in revenues related to prior periods (including $2.3 million related to calendar year 2012) that we had previously deferred pending approval of our electric tracker filing;
•
Gross margin from the acquisition of the Spion Kop wind farm in the fourth quarter of 2012;
•
An increase in natural gas production margin, primarily due to the full period effect of the acquisition of natural gas production assets in the third quarter of 2012;
•
An increase in Montana natural gas delivery rates implemented in April 2013; and
•
An increase in property taxes included in a tracker.

These increases were partly offset by:

•
A decrease in electric retail volumes due primarily to cooler summer weather and reduced customer irrigation;
•
Lower revenues for operating expenses recovered in trackers, primarily related to customer efficiency programs; and
•
A decrease in electric transmission revenues due primarily to an outage at Colstrip Unit 4 during the third quarter of 2013. We expect the outage at Colstrip Unit 4 to have a negative impact on transmission revenues for the remainder of 2013.

Consolidated gross margin for the nine months ended September 30, 2013 was $492.1 million compared with $461.6 million for the same period of 2012.

Operating, General and Administrative Expenses
Consolidated operating, general and administrative expenses were $72.5 million for the quarter ended September 30, 2013 as compared with $63.1 million during the same period of 2012. The increase in operating, general and administrative expenses of $9.4 million was primarily due to:

•
Incremental operating and maintenance costs related to the phase-in of DSIP during 2012 and 2011 were deferred in accordance with the Montana Public Service Commission's (MPSC) approval of an accounting order. Incremental DSIP costs for 2013 forward are being expensed as incurred and the amounts previously deferred are being amortized over five years. During the third quarter of 2013 we amortized approximately $0.8 million and incurred incremental DSIP expenses of approximately $2.5 million;
•
Legal and professional fees associated with the Hydro Transaction;
•
Increased labor costs due primarily to compensation increases and a larger number of employees;
•
Higher plant operator costs due primarily to the Spion Kop acquisition and higher maintenance and outage costs at Colstrip Unit 4;
•
Non-employee directors deferred compensation increased as compared to the prior year, primarily due to changes in our stock price. Directors may defer their board fees into deferred shares held in a rabbi trust. If the market value of our stock goes up, deferred

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 6


compensation expense increases; however, we account for the deferred shares as trading securities and their increase in value is reflected in other income with no impact on net income; and
•
Higher bad debt expense.

These increases were partly offset by:

•
Decreased pension expense, offset in part by higher other employee benefit costs. Our Montana pension costs are included in expense on a pay as you go (cash funding) basis. We received a pension accounting order from the MPSC in 2008, which based our Montana pension expense on an average of our funding requirements for calendar years 2005 through 2012 in order to smooth the impact of increased cash funding. We expect our 2013 Montana pension expense to be approximately $17.0 million to $20.0 million lower than 2012 on an annualized basis due to the expiration of this order and our current cash funding estimate; and
•
Lower operating expenses recovered in trackers, primarily related to customer efficiency programs.

Consolidated operating, general and administrative expenses were $208.7 million for the nine months ended September 30, 2013 as compared with $195.7 million during the same period of 2012.

Property and Other Taxes
Property and other taxes were $26.0 million for the quarter ended September 30, 2013, as compared with $24.8 million in the same period of 2012. This increase was primarily due to higher estimated property valuations in Montana and plant additions. We estimate property taxes throughout each year and update to the actual expense when we receive our Montana property tax bills in November.

Property and other taxes were $77.5 million for the nine months ended September 30, 2013, as compared with $74.4 million in the same period of 2012.

Depreciation Expense
Depreciation expense was $28.1 million for the quarter ended September 30, 2013, as compared with $26.5 million in the same period of 2012. This reflects an increase in depreciation expense due to plant additions, offset in part by a reduction in depreciation rates of approximately $1.5 million as a result of new depreciation studies conducted by an independent consultant and implemented during the second quarter of 2013. These studies reflect longer asset lives on our electric and natural gas assets in Montana, and electric assets in South Dakota. We expect depreciation expense to be reduced due to the change in rates by approximately $1.5 million for the remainder of 2013.

Depreciation expense was $84.7 million for the nine months ended September 30, 2013, as compared with $79.4 million in the same period of 2012.

Interest Expense
Consolidated interest expense was $17.1 million for the quarter ended September 30, 2013 as compared with $17.7 million during the same period of 2012. This decrease was primarily due to higher interest accrued on DGGS deferred revenues in 2012 due to the FERC ALJ nonbinding decision as discussed above partially offset by higher debt outstanding in 2013.


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 7


Consolidated interest expense was $51.0 million for the nine months ended September 30, 2013 as compared with $49.6 million during the same period of 2012.

Income Tax Expense
Consolidated income tax expense for the quarter ended September 30, 2013 was $1.8 million as compared with a $8.6 million benefit in the same period of 2012. Our effective tax rate for the quarter ended September 30, 2013 was 10.4% as compared with (69.5)% for the same period of 2012. The effective tax rate differs from the federal statutory tax rate of 35% primarily due to the regulatory impact of flowing through federal and state tax benefit of repairs deductions, state tax benefit of bonus depreciation deductions and production tax credits.

Consolidated income tax expense for the nine months ended September 30, 2013 was $9.0 million as compared with $2.0 million in same period of 2012. The effective tax rate for the nine months ended September 30, 2013 was 11.7% as compared with 4.8% for the same period of 2012.

The following table summarizes the significant differences from the federal statutory rate, which result in reduced income tax expense:

(in millions)
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Income (Loss) Before Income Taxes
$
17.5

 
$
(12.4
)
 
$
76.9

 
$
41.7

 
 
 
 
 
 
 
 
Income tax calculated at 35% federal statutory rate
6.1

 
(4.3
)
 
26.9

 
14.6

 
 
 
 
 
 
 
 
Permanent or flow through adjustments:
 
 
 
 
 
 
 
Flow-through repairs deductions
(3.1
)
 
(1.8
)
 
(12.9
)
 
(9.5
)
Flow-through of state bonus depreciation deduction
(0.8
)
 
(0.3
)
 
(3.3
)
 
(2.2
)
Production tax credits
(0.5
)
 
—

 
(2.1
)
 
—

Prior year permanent return to accrual adjustments
—

 
(1.9
)
 
0.5

 
(1.9
)
Recognition of state net operating loss benefit / valuation allowance release
—

 
(0.1
)
 
—

 
(0.1
)
State income tax and other, net
0.1

 
(0.2
)
 
(0.1
)
 
1.1

 
(4.3
)
 
(4.3
)
 
(17.9
)
 
(12.6
)
 
 
 
 
 
 
 
 
Income tax expense (benefit)
$
1.8

 
$
(8.6
)
 
$
9.0

 
$
2.0


Liquidity and Capital Resources
As of September 30, 2013, cash and cash equivalents were $10.9 million compared with $18.2 million at September 30, 2012. The Company had $197.0 million available from its revolving credit facility at September 30, 2013, compared with $294.0 million at September 30, 2012.

Dividend Declared
NorthWestern's Board of Directors declared a quarterly common stock dividend of $0.38 per share, payable December 31, 2013, to common shareholders of record as of December 13, 2013.
 

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 8


2013 Earnings Guidance Reaffirmed
NorthWestern reaffirms the updated 2013 earnings guidance range of $2.45 - $2.60 per diluted share. Basic assumptions incorporate the following expectations:

•
A consolidated income tax rate of approximately 12% of pre-tax income;
•
Normal weather in our electric and natural gas service territories for the remainder of 2013;
•
Excludes any potential additional impact as a result of the FERC decision regarding revenue allocation at our Dave Gates Generating Station; and
•
Diluted average shares outstanding of 38.3 million.
 
Significant Items Not Contemplated in Guidance
A reconciliation of items not factored into our updated 2013 and final 2012 earnings guidance of $2.45 - $2.60 and $2.30 - $2.40 per diluted share, respectively, is as follows. The amount below represents an after-tax non-GAAP measure that may provide users of this financial information with additional meaningful information regarding the impact of certain items on the Company's expected earnings.  More information on this measure can be found in the "Non-GAAP Financial Measures" section below.

2013
Q1 2013
Q2 2013
Q3 2013
Q4 2013
YTD 2013
 
 
 
 
 
 
Reported GAAP diluted EPS
$
1.01

$
0.37

$
0.40

 
$
1.78

 
 
 
 
 
 
Non-GAAP Adjustments:
 
 
 
 
 
 
 
 
 
 
 
Weather
 
(0.02
)
(0.02
)
 
(0.04
)
Hydro Transaction related legal and professional fees
 
 
0.05

 
0.05

DSM lost revenue recovery - portion related to 2012
 
 
(0.04
)
 
(0.04
)
 
 
 
 
 
 
Adjusted Diluted EPS
$
1.01

$
0.35

$
0.39

—

$
1.75

 
 
 
 
 
 
 
 
 
 
 
 
2012
Q1 2012
Q2 2012
Q3 2012
Q4 2012
FY 2012
 
 
 
 
 
 
Reported GAAP diluted EPS
$
0.88

$
0.31

$
(0.10
)
$
1.57

$
2.66

 
 
 
 
 
 
Non-GAAP Adjustments:
 
 
 
 
 
 
 
 
 
 
 
Weather
0.09

0.05

(0.06
)
0.06

0.14

Release of MPSC DGGS deferral
(0.05
)
 
 
 
(0.05
)
DSM Lost revenue recovery related to 2010/2011
(0.05
)
 
 
(0.05
)
DGGS FERC ALJ initial decision - portion related to 2011
 
0.12

 
0.12

MSTI Impairment
 
 
0.40

 
0.40

Favorable CELP arbitration decision
 
 
 
(0.79
)
(0.79
)
Income tax adjustment - benefit from MT NOL
 
 
(0.06
)
(0.06
)
 
 
 
 
 
 
Adjusted Diluted EPS
$
0.92

$
0.31

$
0.36

$
0.78

$
2.37


Company Hosting Investor Conference Call
As previously announced, NorthWestern will host an investor conference call and webcast today at 4:00 pm Eastern Time to review its financial results. The conference call will be webcast live on the Internet at http://www.northwesternenergy.com under the “Our Company / Investor Relations / Presentations and Webcasts” heading or by visiting www.videonewswire.com/event.asp?id=96365. 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.
 

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 9


A telephonic replay of the call will be available beginning at 6:00 p.m. ET on October 24, 2013 through November 24, 2013, at (888) 203-1112 access code 8605196.

About NorthWestern Energy

NorthWestern Energy provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 673,200 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 “2013 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:

•
potential adverse federal, state, or local legislation or regulation, including costs of compliance with existing and future environmental requirements, as well as adverse determinations by regulators, could have a material effect on our liquidity, results of operations and financial condition;
•
changes in availability of trade credit, creditworthiness of counterparties, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments, may reduce revenues or may increase operating costs, each of which could adversely affect our liquidity and results of operations;
•
unscheduled generation outages or forced reductions in output, maintenance or repairs, which may reduce revenues and increase cost of sales or may require additional capital expenditures or other increased operating costs; and
•
adverse changes in general economic and competitive conditions in the U.S. financial markets and in our service territories.

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. In addition, actual results may differ materially from those contemplated in any forward-looking statement due to the timing and likelihood of the closing of the purchase of PPL Montana LLC's hydro-electric generating facilities.

Non-GAAP Financial Measures
This press release includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and Adjusted Diluted EPS, that are considered “non-GAAP financial measures.”  Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Gross Margin (Revenues less Cost of Sales)

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 10


is a non-GAAP financial measure due to the exclusion of depreciation from the measure. Gross Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow recovery of operating costs. Adjusted Diluted EPS is another non-GAAP measure. The Company believes the presentation of Adjusted Diluted EPS is more representative of our normal earnings than the GAAP EPS due to the exclusion (or inclusion) of certain impacts that are not reflective of ongoing earnings.

The presentation of these non-GAAP measures is intended to supplement investors' understanding of our financial performance and not to replace other GAAP measures as an indicator of actual operating performance.  Our measures may not be comparable to other companies' similarly titled measures.



NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 11



NORTHWESTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
(in thousands, except per share amounts)
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
 
Electric
 
$
227,103

 
$
202,485

 
$
637,667

 
$
605,716

Gas
 
34,772

 
32,965

 
196,652

 
182,812

Other
 
373

 
416

 
1,110

 
1,041

Total Revenues
 
262,248

 
235,866

 
835,429

 
789,569

Operating Expenses
 
 
 
 
 
 
 
 
Cost of Sales
 
104,298

 
93,061

 
343,407

 
327,884

Operating, general and administrative
 
72,540

 
63,056

 
208,741

 
195,725

 MSTI Impairment
 
—

 
24,039

 
—

 
24,039

Property and other taxes
 
25,956

 
24,796

 
77,525

 
74,395

Depreciation
 
28,053

 
26,505

 
84,685

 
79,364

Total Operating Expenses
 
230,847

 
231,457

 
714,358

 
701,407

Operating Income
 
31,401

 
4,409

 
121,071

 
88,162

Interest Expense, net
 
(17,056
)
 
(17,743
)
 
(50,976
)
 
(49,598
)
Other Income
 
3,117

 
974

 
6,760

 
3,134

Income (Loss) Before Income Taxes
 
17,462

 
(12,360
)
 
76,855

 
41,698

Income Tax (Expense) Benefit
 
(1,815
)
 
8,588

 
(8,965
)
 
(1,989
)
Net Income (Loss)
 
$
15,647

 
$
(3,772
)
 
$
67,890

 
$
39,709

Average Common Shares Outstanding
 
38,459

 
37,201

 
37,983

 
36,723

Basic Earnings (Loss) per Average Common Share
 
$
0.41

 
$
(0.10
)
 
$
1.79

 
$
1.09

Diluted Earnings (Loss) per Average Common Share
 
$
0.40

 
$
(0.10
)
 
$
1.78

 
$
1.08

Dividends Declared per Average Share
 
$
0.38

 
$
0.37

 
$
1.14

 
$
1.11



Average shares used in computing the basic and diluted earnings per share are as follows:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2013
 
2012
 
2013
 
2012
Basic computation
 
38,459

 
37,201

 
37,983

 
36,723

Dilutive effect of
 
 
 
 
 
 
 
 
Restricted stock and performance share awards (1,2)
 
186

 
—

 
181

 
71

Diluted computation
 
38,645

 
37,201

 
38,164

 
36,794


(1) Performance share awards are included in diluted weighted average number of shares outstanding based upon what would be issued if the end of the most recent reporting period was the end of the term of the award.
(2) In periods in which a net loss has been incurred, all potentially dilutive shares are considered antidilutive and thus are
excluded from the calculation. For the three months ended September 30, 2012, we had 173,624 potentially dilutive restricted stock and performance share awards which were not included in the calculation.


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 12



NORTHWESTERN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
(in thousands)
 
September 30, 2013
 
December 31, 2012
 
 
 
 
ASSETS
 
 
 
Current assets
$
280,661

 
$
303,128

Property, plant, and equipment, net
2,573,562

 
2,435,590

Goodwill
355,128

 
355,128

Regulatory assets
395,746

 
367,890

Other noncurrent assets
28,553

 
23,797

Total Assets
$
3,633,650

 
$
3,485,533

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current maturities of long-term debt and capital leases
$
1,659

 
$
1,612

Short-term borrowings
102,980

 
122,934

Other current liabilities
313,325

 
324,719

Long-term capital leases
30,315

 
31,562

Long-term debt
1,055,091

 
1,055,074

Deferred income taxes
397,856

 
363,928

Noncurrent regulatory liabilities
343,597

 
276,618

Other noncurrent liabilities
384,545

 
375,054

Total Liabilities
2,629,368

 
2,551,501

Total Shareholders' Equity
1,004,282

 
934,032

Total Liabilities and Shareholders' Equity
$
3,633,650

 
$
3,485,533




NORTHWESTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Nine Months Ended
September 30,
 
2013
 
2012
Operating Activities
 
 
 
Net income
$
67,890

 
$
39,709

Non-cash items
$
123,627

 
$
123,995

Changes in operating assets and liabilities
$
(20,179
)
 
$
58,924

Cash Provided by Operating Activities
$
171,338

 
$
222,628

 
 
 
 
Cash Used in Investing Activities
$
(150,064
)
 
$
(175,981
)
 
 
 
 
Cash Used in Financing Activities
$
(20,175
)
 
$
(34,379
)
 
 
 
 
Increase in Cash and Cash Equivalents
$
1,099

 
$
12,268

Cash and Cash Equivalents, beginning of period
$
9,822

 
$
5,928

Cash and Cash Equivalents, end of period
$
10,921

 
$
18,196




NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 13


NORTHWESTERN CORPORATION
REGULATED ELECTRIC SEGMENT
Three Months Ended
September 30,
(Unaudited)

 
Results
 
2013
 
2012
 
Change
 
% Change
 
(dollars in millions)
Retail revenue
$
201.5

 
$
203.3

 
$
(1.8
)
 
(0.9
)%
Regulatory Amortization
11.8

 
(5.2
)
 
17.0

 
(326.9
)
   Total Retail Revenue
213.3

 
198.1

 
15.2

 
7.7

Transmission
11.2

 
11.6

 
(0.4
)
 
(3.4
)
Ancillary services
0.4

 
(9.2
)
 
9.6

 
(104.3
)
Wholesale
0.8

 
0.8

 
—

 
—

Other
1.4

 
1.2

 
0.2

 
16.7

Total Revenues
$
227.1

 
$
202.5

 
$
24.6

 
12.1

Total Cost of Sales
95.3

 
83.8

 
11.5

 
13.7

Gross Margin
$
131.8

 
$
118.7

 
$
13.1

 
11.0
 %


 
Revenues
 
Megawatt Hours (MWH)
 
Avg. Customer Counts
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
 
 
 
 
Retail Electric
 
 
 
 
 
 
 
 
 
 
 
Montana
$
65,455

 
$
63,951

 
$
575

 
$
587

 
$
274,835

 
$
273,130

South Dakota
12,698

 
13,947

 
146

 
158

 
49,350

 
48,940

Residential 
78,153

 
77,898

 
721

 
745

 
324,185

 
322,070

Montana
83,624

 
83,605

 
823

 
867

 
62,639

 
62,179

South Dakota
18,502

 
19,643

 
255

 
259

 
12,154

 
12,235

Commercial
102,126

 
103,248

 
1,078

 
1,126

 
74,793

 
74,414

Industrial
10,105

 
10,011

 
737

 
806

 
74

 
74

Other
11,131

 
12,148

 
91

 
103

 
7,813

 
7,816

Total Retail Electric
$
201,515

 
$
203,305

 
$
2,627

 
$
2,780

 
$
406,865

 
$
404,374

Total Wholesale Electric
$
845

 
$
781

 
$
39

 
$
41

 
$
—

 
$
—



 
Degree Days
 
2013 as compared with:
Cooling Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
393
 
395
 
259

 
1% cooler
 
52% warmer
South Dakota
702
 
911
 
639

 
23% cooler
 
10% warmer
 
 
 
 
 
 
 
 
 
 
 
Degree Days
 
2013 as compared with:
Heating Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
231

 
244

 
357

 
5% warmer
 
35% warmer
South Dakota
60

 
65

 
90

 
8% warmer
 
33% warmer


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 14



NORTHWESTERN CORPORATION
REGULATED ELECTRIC SEGMENT
Nine Months Ended
September 30,
(Unaudited)

 
Results
 
2013
 
2012
 
Change
 
% Change
 
(dollars in millions)
Retail revenue
$
581.5

 
$
561.9

 
$
19.6

 
3.5
 %
Regulatory Amortization
11.9

 
10.8

 
1.1

 
10.2

   Total Retail Revenue
593.4

 
572.7

 
20.7

 
3.6

Transmission
37.3

 
33.7

 
3.6

 
10.7

Ancillary Services
1.1

 
(6.5
)
 
7.6

 
(116.9
)
Wholesale
2.0

 
2.4

 
(0.4
)
 
(16.7
)
Other
3.9

 
3.4

 
0.5

 
14.7

Total Revenues
$
637.7

 
$
605.7

 
$
32.0

 
5.3

Total Cost of Sales
260.9

 
244.9

 
16.0

 
6.5

Gross Margin
$
376.8

 
$
360.8

 
$
16.0

 
4.4
 %


 
Revenues
 
Megawatt Hours (MWH)
 
Avg. Customer Counts
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
 
 
 
 
Retail Electric
 
 
 
 
 
 
 
 
 
 
 
Montana
$
198,375

 
$
188,768

 
$
1,751

 
$
1,749

 
$
275,913

 
$
273,711

South Dakota
37,150

 
36,993

 
447

 
424

 
49,250

 
48,887

Residential 
235,525

 
225,761

 
2,198

 
2,173

 
325,163

 
322,598

Montana
238,482

 
230,498

 
2,356

 
2,416

 
62,638

 
62,046

South Dakota
52,009

 
52,887

 
722

 
712

 
12,168

 
12,116

Commercial
290,491

 
283,385

 
3,078

 
3,128

 
74,806

 
74,162

Industrial
31,089

 
28,185

 
2,194

 
2,217

 
74

 
74

Other
24,352

 
24,600

 
168

 
178

 
6,129

 
6,101

Total Retail Electric
$
581,457

 
$
561,931

 
$
7,638

 
$
7,696

 
$
406,172

 
$
402,935

Total Wholesale Electric
$
2,022

 
$
2,382

 
$
97

 
$
137

 
$
—

 
$
—



 
Degree Days
 
2013 as compared with:
Cooling Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
438

 
450

 
300

 
3% cooler
 
46% warmer
South Dakota
752

 
1,061

 
696

 
29% cooler
 
8% warmer
 
 
 
 
 
 
 
 
 
 
 
Degree Days
 
2013 as compared with:
Heating Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
4,721

 
4,488

 
4,947

 
5% colder
 
5% warmer
South Dakota
6,174

 
4,375

 
5,573

 
41% colder
 
11% colder


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 15


 

NORTHWESTERN CORPORATION
REGULATED NATURAL GAS SEGMENT
Three Months Ended
September 30,
(Unaudited)
 
Results
 
2013
 
2012
 
Change
 
% Change
 
(dollars in millions)
Retail revenues
$
22.8

 
$
19.9

 
$
2.9

 
14.6
 %
Regulatory amortization
3.2

 
5.1

 
(1.9
)
 
(37.3
)
     Total retail revenues
26.0

 
25.0

 
1.0

 
4.0

Wholesale and other
8.8

 
8.0

 
0.8

 
10.0

Total Revenues
34.8

 
33.0

 
1.8

 
5.5

Total Cost of Sales
9.0

 
9.2

 
(0.2
)
 
(2.2
)
Gross Margin
$
25.8

 
$
23.8

 
$
2.0

 
8.4
 %
 
 
 
 
 
 
 
 

 
Revenue
 
Dekatherms (Dkt)
 
Avg. Customer Counts
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
 
 
 
 
Retail Gas
 
 
 
 
 
 
 
 
 
 
 
Montana
$
9,770

 
$
8,795

 
807

 
758

 
159,197

 
158,524

South Dakota
1,916

 
1,757

 
124

 
113

 
37,846

 
37,551

Nebraska
2,257

 
1,887

 
157

 
149

 
36,315

 
36,222

Residential
13,943

 
12,439

 
1,088

 
1,020

 
233,358

 
232,297

Montana
6,042

 
5,171

 
581

 
515

 
22,271

 
22,181

South Dakota
1,296

 
1,130

 
171

 
171

 
5,971

 
5,931

Nebraska
1,281

 
985

 
185

 
187

 
4,538

 
4,517

Commercial
8,619

 
7,286

 
937

 
873

 
32,780

 
32,629

Industrial
145

 
93

 
12

 
10

 
262

 
269

Other
94

 
68

 
10

 
8

 
156

 
150

Total Retail Gas
$
22,801

 
$
19,886

 
2,047

 
1,911

 
266,556

 
265,345



 
Degree Days
 
2013 as compared with:
Heating Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
231
 
244
 
357
 
5% warmer
 
35% warmer
South Dakota
60
 
65
 
90
 
8% warmer
 
33% warmer
Nebraska
21
 
27
 
49
 
22% warmer
 
57% warmer


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 16


NORTHWESTERN CORPORATION
REGULATED NATURAL GAS SEGMENT
Nine Months Ended
September 30,
(Unaudited)
 
Results
 
2013
 
2012
 
Change
 
% Change
 
(dollars in millions)
Retail revenues
$
173.5

 
$
150.0

 
$
23.5

 
15.7
 %
Regulatory amortization
(6.3
)
 
7.3

 
(13.6
)
 
(186.3
)
     Total retail revenues
167.2

 
157.3

 
9.9

 
6.3

Wholesale and other
29.5

 
25.5

 
4.0

 
15.7

Total Revenues
196.7

 
182.8

 
13.9

 
7.6

Total Cost of Sales
82.5

 
83.0

 
(0.5
)
 
(0.6
)
Gross Margin
$
114.2

 
$
99.8

 
$
14.4

 
14.4
 %
 
 
 
 
 
 
 
 



 
Revenue
 
Dekatherms (Dkt)
 
Avg. Customer Counts
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(in thousands)
 
 
 
 
Retail Gas
 
 
 
 
 
 
 
 
 
 
 
Montana
$
72,171

 
$
67,049

 
8,014

 
7,656

 
160,330

 
159,316

South Dakota
20,227

 
15,447

 
2,354

 
1,709

 
38,146

 
37,792

Nebraska
18,774

 
14,234

 
2,012

 
1,578

 
36,656

 
36,520

Residential
111,172

 
96,730

 
12,380

 
10,943

 
235,132

 
233,628

Montana
37,338

 
34,409

 
4,252

 
4,004

 
22,443

 
22,329

South Dakota
13,498

 
9,656

 
2,119

 
1,545

 
6,028

 
5,961

Nebraska
10,016

 
7,880

 
1,496

 
1,279

 
4,596

 
4,571

Commercial
60,852

 
51,945

 
7,867

 
6,828

 
33,067

 
32,861

Industrial
776

 
672

 
88

 
80

 
264

 
273

Other
720

 
641

 
97

 
85

 
157

 
150

Total Retail Gas
$
173,520

 
$
149,988

 
20,432

 
17,936

 
268,620

 
266,912



 
Degree Days
 
2013 as compared with:
Heating Degree-Days
2013
 
2012
 
Historic Average
 
2012
 
Historic Average
Montana
4,721
 
4,488
 
4,947
 
5% colder
 
5% warmer
South Dakota
6,174
 
4,375
 
5,573
 
41% colder
 
11% colder
Nebraska
4,741
 
3,611
 
4,584
 
31% colder
 
3% colder


NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 17


NORTHWESTERN CORPORATION
SEGMENT RESULTS
Three Months Ended
September 30,
(Unaudited)
(in thousands)
Three Months Ended
 
 
 
 
 
 
 
 
 
September 30, 2013
Electric
 
Gas
 
Other
 
Eliminations
 
Total
Operating revenues
$
227,103

 
$
34,772

 
$
373

 
$
—

 
$
262,248

Cost of sales
95,264

 
9,034

 
—

 
—

 
104,298

Gross margin
131,839

 
25,738

 
373

 
—

 
157,950

Operating, general and administrative
49,155

 
18,521

 
4,864

 
—

 
72,540

Property and other taxes
19,381

 
6,572

 
3

 
—

 
25,956

Depreciation
22,150

 
5,895

 
8

 
—

 
28,053

Operating income (loss)
41,153

 
(5,250
)
 
(4,502
)
 
—

 
31,401

Interest expense
(14,302
)
 
(2,560
)
 
(194
)
 
—

 
(17,056
)
Other income
2,213

 
878

 
26

 
—

 
3,117

Income tax (expense) benefit
(8,412
)
 
3,520

 
3,077

 
—

 
(1,815
)
Net income (loss)
$
20,652

 
$
(3,412
)
 
$
(1,593
)
 
$
—

 
$
15,647



Three Months Ended
 
 
 
 
 
 
 
 
 
September 30, 2012
Electric
 
Gas
 
Other
 
Eliminations
 
Total
Operating revenues
$
202,485

 
$
32,965

 
$
416

 
$
—

 
$
235,866

Cost of sales
83,814

 
9,247

 
—

 
—

 
93,061

Gross margin
118,671

 
23,718

 
416

 
—

 
142,805

Operating, general and administrative
44,711

 
17,452

 
893

 
—

 
63,056

MSTI Impairment
24,039

 
—

 
—

 
—

 
24,039

Property and other taxes
18,621

 
6,172

 
3

 
—

 
24,796

Depreciation
21,636

 
4,860

 
9

 
—

 
26,505

Operating income (loss)
9,664

 
(4,766
)
 
(489
)
 
—

 
4,409

Interest expense
(15,181
)
 
(2,363
)
 
(199
)
 
—

 
(17,743
)
Other income
405

 
541

 
28

 
—

 
974

Income tax benefit (expense)
5,762

 
3,102

 
(276
)
 
—

 
8,588

Net income (loss)
$
650

 
$
(3,486
)
 
$
(936
)
 
$
—

 
$
(3,772
)

NorthWestern Reports Third Quarter 2013 Financial Results
October 24, 2013
Page 18


NORTHWESTERN CORPORATION
SEGMENT RESULTS
Nine Months Ended
September 30,
(Unaudited)
(in thousands)

Nine Months Ended
 
 
 
 
 
 
 
 
 
September 30, 2013
Electric
 
Gas
 
Other
 
Eliminations
 
Total
Operating revenues
$
637,667

 
$
196,652

 
$
1,110

 
$
—

 
$
835,429

Cost of sales
260,879

 
82,528

 
—

 
—

 
343,407

Gross margin
376,788

 
114,124

 
1,110

 
—

 
492,022

Operating, general and administrative
142,594

 
56,899

 
9,248

 
—

 
208,741

Property and other taxes
57,549

 
19,968

 
8

 
—

 
77,525

Depreciation
67,454

 
17,206

 
25

 
—

 
84,685

Operating income (loss)
109,191

 
20,051

 
(8,171
)
 
—

 
121,071

Interest expense
(42,840
)
 
(7,553
)
 
(583
)
 
—

 
(50,976
)
Other income
4,926

 
1,753

 
81

 
—

 
6,760

Income tax (expense) benefit
(12,792
)
 
(153
)
 
3,980

 
—

 
(8,965
)
Net income (loss)
$
58,485

 
$
14,098

 
$
(4,693
)
 
$
—

 
$
67,890




Nine Months Ended
 
 
 
 
 
 
 
 
 
September 30, 2012
Electric
 
Gas
 
Other
 
Eliminations
 
Total
Operating revenues
$
605,716

 
$
182,812

 
$
1,041

 
$
—

 
$
789,569

Cost of sales
244,902

 
82,982

 
—

 
—

 
327,884

Gross margin
360,814

 
99,830

 
1,041

 
—

 
461,685

Operating, general and administrative
137,753

 
55,397

 
2,575

 
—

 
195,725

MSTI impairment
24,039

 
—

 
—

 
—

 
24,039

Property and other taxes
55,628

 
18,759

 
8

 
—

 
74,395

Depreciation
64,770

 
14,569

 
25

 
—

 
79,364

Operating income (loss)
78,624

 
11,105

 
(1,567
)
 
—

 
88,162

Interest expense
(42,257
)
 
(6,660
)
 
(681
)
 
—

 
(49,598
)
Other income
1,818

 
1,235

 
81

 
—

 
3,134

Income tax (expense) benefit
(3,322
)
 
522

 
811

 
—

 
(1,989
)
Net income (loss)
$
34,863

 
$
6,202

 
$
(1,356
)
 
$
—

 
$
39,709