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NorthWestern Reports 2007 Year End Financial ResultsReports improvement in net income, gross margin and operating income
SIOUX FALLS, S.D., Feb. 26 /PRNewswire-FirstCall/ -- NorthWestern Corporation d/b/a NorthWestern Energy NASDAQ: NWEC today reported financial results for the year ended Dec. 31, 2007.
Highlights for the year:
-- Net income improved to $53.2 million in 2007 compared with
$37.9 million in 2006;
-- Gross margin improved to $531.7 million in 2007 compared with
$519.1 million in 2006;
-- Operating income improved to $141.1 million in 2007 compared with
$110.4 million in 2006;
-- Regulators in South Dakota and Nebraska approved natural gas rate
increases totaling $4.6 million annually;
-- Filed a proposed settlement with the Montana Public Service Commission
that, pending approval, will result in a rate increase of $15 million
annually for electric and natural gas rates, and also includes a
commitment of 21 MW's of unit contingent power from Colstrip Unit 4 at
Mid-Columbia Electricity Price Index minus $19 per MWh;
-- Reached a tentative settlement of the Company's transmission rate case
and recognized $1.6 million in interim rates in 2007. This proposed
settlement was filed with the Federal Energy Regulatory Commission
(FERC) in February 2008 and will result, pending approval, in an
annualized margin increase of approximately $3.0 million.
-- The purchase of our interest in Colstrip Unit 4 was completed,
resulting in a reduction of lease expense of $22.1 million, offset by
increased depreciation of $6.2 million and interest expense of
$11.1 million, annually; and
-- Standard & Poor's Rating Group upgraded the Company's credit outlook
to positive from stable.
Financial Results: Consolidated net income was $53.2 million or $1.45 per basic share and $1.44 per diluted share for the year ended Dec. 31, 2007, compared with consolidated net income of $37.9 million or $1.07 per basic share and $1.01 per diluted share for the year ended Dec. 31, 2006. "We are well poised to move forward on our strategic generation and transmission growth projects thanks to our continued financial progress," said Mike Hanson, NorthWestern Energy's President and CEO. "In 2007, we generated significant cash from core operations that was used to purchase our previously held leasehold interests in the Colstrip Unit 4 generating plant and to pay down our long-term debt to 49% of total capitalization." Consolidated gross margin for 2007 was $531.7 million compared with $519.1 million for 2006. Gross margin in the regulated electric segment increased $18.1 million in 2007. Gross margin in the regulated natural gas segment increased $8.7 million in 2007. Gross margin in the unregulated electric segment decreased $10.2 million. Gross margin in the other segment decreased $4.0 million in 2007. Consolidated operating, general and administrative expenses were $221.6 million in 2007 compared with $240.2 million in 2006. The $18.6 million decrease was primarily due to a $12.6 million recovery of environmental clean up costs included in our South Dakota rate case settlement, higher transaction costs of $12.3 million in 2006 related to the then proposed acquisition of the Company by Babcock and Brown Infrastructure, Ltd. and a reduction in 2007 of lease expense of $11.1 million for the Company's leased interest in Colstrip Unit 4 generating facility, offset by the inclusion in 2006 results of a $9.3 million reduction in expenses due to an insurance settlement. The Company reclassified the collection of property taxes through the Montana property tax tracker in 2007 resulting in an $11.5 increase to gross margin with a corresponding increase to property tax expense in the same amount. This 2007 reclassification had no impact on earnings comparing 2007 with 2006. Property and other taxes were $87.6 million in 2007 compared with $74.2 million in 2006. Depreciation expense was $82.4 million in 2007 compared with $75.3 million in 2006. The increase in depreciation expense was related primarily to increased property in service and a $2.0 million increase related to the purchase of the previously leased interest in Colstrip Unit 4. In February 2007, a jury verdict was rendered against the Company in Montana state court in a case called Ammondson, et al. v. NorthWestern Corporation, et al. Due to the verdict, the Company recognized a loss of $19.0 million in our 2006 results of operations to increase our recorded liability related to this claim. Interest expense was $56.9 million in 2007 compared with $56.0 million in 2006. The purchase of the leased interest in Colstrip Unit 4 is expected to add approximately $11.1 million in interest expense in 2008. Results from Regulated Operations Regulated electric gross margin for 2007 was $347.0 million, up 5.5 percent, compared with $328.9 million in 2006. This $18.1 million increase was primarily due to increased collections on the Montana property tax tracker, which is offset by a corresponding increase in property tax expense, and increased volumes driven by customer growth and warmer summer weather in Montana. Regulated retail electric volumes for 2007 totaled 9,953,000 megawatt hours compared with 9,742,000 megawatt hours for 2006. The increase was due primarily to customer growth and warmer summer weather in Montana. Wholesale electric volumes were 155,000 megawatt hours for 2007, an decrease from 248,000 megawatt hours for 2006 due primarily to planned and unplanned maintenance outages in the South Dakota generation facilities. Regulated natural gas gross margin was $127.6 million for 2007, compared with $118.9 million for 2006. The increase was primarily due to increased amounts collected through the Montana property tax tracker, which is offset by a corresponding increase in property tax expense, increased volumes due to customer growth and colder winter weather in South Dakota and Nebraska and the transfer of certain of our previously unregulated natural gas customers and piplines to the regulated natural gas business. Regulated retail natural gas volumes were 28,894,000 dekatherms for 2007, compared with 28,093,000 dekatherms for 2006. The increase in volumes was primarily due to customer growth and colder winter weather in South Dakota and Nebraska. Results from Unregulated Operations Gross margin from unregulated electric operations was $56.2 million for 2007, a decrease from $66.4 million for 2006 primarily due to lower average contracted prices and higher fuel supply costs in 2007, partially offset by an increase in electric volumes. Unregulated electric volumes were 1,638,000 megawatt hours in 2007, compared with 1,504,000 megawatt hours in 2006. Electric volumes at Colstrip Unit 4 increased in 2007 compared with 2006 primarily due to strong hydro generation in the Pacific Northwest in 2006 resulting in reduced demand for the Company's Colstrip power and also in 2006, Colstrip experienced more planned and unplanned outages than in 2007. During 2007, the Company transferred certain customers and contracts from the unregulated natural gas operations to the regulated natural gas operations. In addition, during 2007 the Company sold a number of unregulated natural gas customer contracts. Therefore, the unregulated natural gas business unit is no longer a reportable segment under FASB Statement No. 131. Liquidity and Capital Resources As of Dec. 31, 2007, cash and cash equivalents were $12.8 million compared with $1.9 million at Dec. 31, 2006. In addition, the Company had revolver availability of $158.7 million as of Dec. 31, 2007. Cash provided by continuing operating activities totaled $202.0 million during 2007, compared with $165.1 million during 2006. This improvement in operating cash flows was primarily due to overcollections in the electric tracker, a decrease in purchases of storage gas and an increase in net income from 2006. The Company's financing activities provided $65.4 million in 2007. Sources of cash included $68.8 million in proceeds from the exercise of warrants and issuance of $100 million in debt in connection with purchase of the previously leased interest in Colstrip Unit 4. Uses of cash included dividends paid on common stock of $47.3 million during 2007 compared with $44.1 million during 2006 and pay-down of long-term debt in the amount of $53.5 million. The Company had capital expenditures of $117.1 million during 2007 compared with $101.0 million in 2006. Also, the Company completed the purchase of its leased interest in Colstrip Unit 4 for $141.3 million plus the assumption of $53.7 million in debt. 2008 Earnings Outlook Northwestern estimates its earnings per share for 2008 to be between $1.60 and $1.75 per fully diluted share. The guidance assumptions for 2008 include:
-- Impact of 2007 rate cases 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 NorthWestern will host an investor conference call on Thursday Feb. 28, 2008 at 11:00 am Eastern Time (10:00 a.m. Central Time) to review its financial results for the year ended Dec. 31, 2007. 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 Feb. 28, 2008, through March 28, 2008, at 800-475-6701, access code 912551. 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 http://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.
NORTHWESTERN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2007 2006
ASSETS
Current Assets 278,354 268,474
Property, Plant, and Equipment, Net 1,770,880 1,491,855
Goodwill 355,128 435,076
Regulatory Assets 123,041 159,715
Other Noncurrent Assets 19,977 40,817
Total Assets $2,547,380 $2,395,937
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long-term Debt
and Capital Leases $21,006 $7,693
Current Liabilities 300,833 271,243
Long-term Capital Leases 38,002 40,383
Long-term Debt 787,360 699,041
Noncurrent Regulatory Liabilities 194,959 182,103
Deferred Income Taxes 74,046 113,355
Other Noncurrent Liabilities 308,150 339,348
Total Liabilities 1,724,356 1,653,166
Total Shareholders' Equity 823,024 742,771
Total Liabilities and Shareholders' Equity $2,547,380 $2,395,937
NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Year Ended December 31,
2007 2006 2005
OPERATING REVENUES $1,200,060 $1,132,653 $1,165,750
COST OF SALES 668,405 613,582 641,755
GROSS MARGIN 531,655 519,071 523,995
OPERATING EXPENSES
Operating, general and
administrative 221,566 240,215 225,514
Property and other taxes 87,581 74,187 72,087
Depreciation 82,415 75,305 74,413
Ammondson verdict - 19,000 -
Reorganization items - - 7,529
TOTAL OPERATING EXPENSES 391,562 408,707 379,543
OPERATING INCOME 140,093 110,364 144,452
Interest Expense (56,942) (56,016) (61,295)
Loss on Debt Extinguishment - - (548)
Other Income 2,428 9,065 17,448
Income From Continuing
Operations Before Income
Taxes 85,579 63,413 100,057
Income Tax Expense (32,388) (25,931) (38,510)
Income From Continuing
Operations 53,191 37,482 61,547
Discontinued Operations,
Net of Taxes - 418 (2,080)
Net Income $53,191 $37,900 $59,467
Average Common Shares
Outstanding 36,623 35,554 35,630
Basic Income per Average
Common Share
Continuing operations $1.45 $1.06 $1.73
Discontinued operations - 0.01 (0.06)
Basic $1.45 $1.07 $1.67
Diluted Income per Average
Common Share
Continuing operations $1.44 $1.00 $1.71
Discontinued operations - 0.01 (0.06)
Diluted $1.44 $1.01 $1.65
Dividends Declared per
Average Common Share $1.28 $1.24 $1.00
NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2007 2006
Operating Activities:
Net Income $53,191 $37,900
Noncash Items 113,083 114,299
Changes in Operating Assets
and Liabilities 35,690 12,879
Cash Provided by Continuing Operating
Activities 201,964 165,078
Cash Used in Continuing Investing
Activities (256,499) (71,522)
Cash Provided by (Used in) Continuing
Financing Activities 65,378 (102,012)
Change in Net Assets of Discontinued
Operations - 7,695
Increase (decrease) in Cash and Cash
Equivalents 10,843 (761)
Cash and Cash Equivalents, beginning
of period 1,930 2,691
Cash and Cash Equivalents, end of period $12,773 $1,930
NORTHWESTERN CORPORATION
REGULATED SEGMENTS
REGULATED ELECTRIC SEGMENT
Results
2007 2006 Change % Change
(in millions)
Total Revenues 736.7 661.7 75.0 11.3%
Total Cost of Sales 389.7 332.8 56.9 17.1%
Gross Margin $347.0 $328.9 $18.1 5.5%
% GM/Rev 47.1% 49.7%
Volumes MWH
2007 2006 Change % Change
(in thousands)
Retail Electric
Montana 2,235 2,184 51 2.3%
South Dakota 505 474 31 6.5
Residential 2,740 2,658 82 3.1
Montana 3,213 3,125 88 2.8
South Dakota 827 776 51 6.6
Commercial 4,040 3,901 139 3.6
Industrial 2,992 2,998 (6) (0.2)
Other 181 185 (4) (2.2)
Total Retail Electric 9,953 9,742 211 2.2%
Wholesale Electric 155 248 (93) (37.5)%
Average Customer Counts 2007 2006 Change % Change
Montana 326,248 320,401 5,847 1.8%
South Dakota 59,474 58,968 506 0.9%
Total 385,722 379,369 6,353 1.7%
2007 as compared with:
Cooling Degree-Days 2006 Historic Average
Montana 25% warmer 82% warmer
South Dakota Remained Flat 23% warmer
REGULATED NATURAL GAS SEGMENT
Results
2007 2006 Change % Change
(in millions)
Total Revenues 363.6 359.7 3.9 1.1%
Total Cost of Sales 236.0 240.8 (4.8) (2.0)%
Gross Margin $127.6 $118.9 $8.7 7.3%
% GM/Rev 35.1% 33.1%
Volumes Dekatherms
2007 2006 Change % Change
(in thousands)
Retail Gas
Montana 12,101 12,036 65 0.5%
South Dakota 2,771 2,596 175 6.7
Nebraska 2,519 2,371 148 6.2
Residential 17,391 17,003 388 2.3
Montana 6,091 6,025 66 1.1
South Dakota 2,444 2,189 255 11.6
Nebraska 2,655 2,546 109 4.3
Commercial 11,190 10,760 430 4.0
Industrial 169 177 (8) (4.5)
Other 144 153 (9) (5.9)
Total Retail Gas 28,894 28,093 801 2.9%
Average Customer Counts 2007 2006 Change % Change
Montana 174,651 170,873 3,778 2.2%
South Dakota 42,427 41,842 585 1.4
Nebraska 40,866 40,781 85 0.2
Total 257,944 253,496 4,448 1.8%
2007 as compared with:
Heating Degree-Days 2006 Historic Average
Montana 1% warmer 8% warmer
South Dakota 8% colder 6% warmer
Nebraska 7% colder 8% warmer
NORTHWESTERN CORPORATION
UNREGULATED ELECTRIC SEGMENT
Results
2007 2006 Change % Change
(in millions)
Total Revenues $74.2 $83.0 $(8.8) (10.6)%
Total Cost of Sales $18.0 $16.6 $1.4 8.4%
Gross Margin $56.2 $66.4 $(10.2) (15.4)%
% GM/Rev 75.7% 80.0%
Volumes MWH
2007 2006 Change % Change
(in thousands)
Wholesale Electric 1,638 1,504 134 8.9%
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