United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2004.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number 1-7978
Black Hills Power, Inc.
Incorporated in South Dakota IRS Identification Number 46-0111677
625 Ninth Street
Rapid City, South Dakota 57701
Registrant’s telephone number (605) 721-1700
Former name, former address, and former fiscal year if changed since last report
NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No______
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes______ No X
As of July 31,October 29, 2004 there were issued and outstanding 23,416,396 shares of the Registrant’s common stock, $1.00 par value, all of which were held beneficially and of record by Black Hills Corporation.
The Registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
TABLE OF CONTENTS
Page | ||||||||
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PART I. | FINANCIAL INFORMATION | |||||||
Item 1. | Financial Statements | |||||||
Condensed Statements of Income - | ||||||||
Three and | 3 | |||||||
Condensed Balance Sheets - | ||||||||
| 4 | |||||||
Condensed Statements of Cash Flows - | ||||||||
| 5 | |||||||
Notes to Condensed Financial Statements | ||||||||
Item 2. | Results of Operations | 10-12 | ||||||
Item 4. | Controls and Procedures | 12 | ||||||
PART II. | OTHER INFORMATION | |||||||
Item 1. | Legal Proceedings | 13 | ||||||
Item 6. | Exhibits | 13 | ||||||
Signatures | 14 | |||||||
Exhibit Index | 15 |
2
Three months ended | Six months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30 | |||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||
Operating revenue | $ | 39,809 | $ | 39,207 | $ | 81,456 | $ | 82,970 | $ | 47,921 | $ | 46,268 | $ | 129,377 | $ | 129,238 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Fuel and purchased power | 14,383 | 11,445 | 27,193 | 25,881 | 18,506 | 15,545 | 45,698 | 41,426 | ||||||||||||||||||||
Operations and maintenance | 7,817 | 6,679 | 13,997 | 12,103 | 5,993 | 6,564 | 19,991 | 18,667 | ||||||||||||||||||||
Administrative and general | 4,110 | 3,665 | 8,188 | 7,103 | 4,533 | 2,837 | 12,721 | 9,940 | ||||||||||||||||||||
Depreciation and amortization | 4,803 | 4,809 | 9,746 | 9,537 | 4,703 | 4,809 | 14,448 | 14,346 | ||||||||||||||||||||
Taxes, other than income taxes | 2,136 | 2,012 | 4,364 | 4,097 | 1,680 | 2,018 | 6,044 | 6,114 | ||||||||||||||||||||
33,249 | 28,610 | 63,488 | 58,721 | 35,415 | 31,773 | 98,902 | 90,493 | |||||||||||||||||||||
Operating income | 6,560 | 10,597 | 17,968 | 24,249 | 12,506 | 14,495 | 30,475 | 38,745 | ||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||
Interest expense | (4,217 | ) | (4,301 | ) | (8,433 | ) | (8,604 | ) | (4,138 | ) | (4,499 | ) | (12,545 | ) | (12,704 | ) | ||||||||||||
Other income | 267 | 741 | 606 | 1,424 | 274 | 335 | 852 | 1,360 | ||||||||||||||||||||
(3,950 | ) | (3,560 | ) | (7,827 | ) | (7,180 | ) | (3,864 | ) | (4,164 | ) | (11,693 | ) | (11,344 | ) | |||||||||||||
Income before income taxes and | ||||||||||||||||||||||||||||
discontinued operations | 2,610 | 7,037 | 10,141 | 17,069 | 8,642 | 10,331 | 18,782 | 27,401 | ||||||||||||||||||||
Income taxes | (794 | ) | (2,315 | ) | (3,289 | ) | (5,648 | ) | (2,782 | ) | (3,559 | ) | (6,070 | ) | (9,208 | ) | ||||||||||||
Income from continuing operations | 1,816 | 4,722 | 6,852 | 11,421 | 5,860 | 6,772 | 12,712 | 18,193 | ||||||||||||||||||||
Discontinued operations, net of | ||||||||||||||||||||||||||||
income taxes (Note 3) | -- | -- | -- | 1,906 | -- | -- | -- | 1,906 | ||||||||||||||||||||
Net income | $ | 1,816 | $ | 4,722 | $ | 6,852 | $ | 13,327 | $ | 5,860 | $ | 6,772 | $ | 12,712 | $ | 20,099 | ||||||||||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
3
June 30 | December 31 | September 30 | December 31 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 893 | $ | 1,052 | $ | 607 | $ | 1,052 | ||||||||
Receivables (net of allowance for doubtful accounts of $905 and $898, respectively) | 16,036 | 17,012 | ||||||||||||||
Receivables (net of allowance for doubtful accounts of $909 and $898, respectively) | 15,145 | 17,012 | ||||||||||||||
Receivables - related party | 33,551 | 38,618 | 25,868 | 38,618 | ||||||||||||
Materials, supplies and fuel | 10,448 | 9,560 | 10,684 | 9,560 | ||||||||||||
Prepaid income taxes | -- | 2,813 | -- | 2,813 | ||||||||||||
Deferred income taxes | 108 | -- | ||||||||||||||
61,036 | 69,055 | 52,304 | 69,055 | |||||||||||||
Investments | 3,086 | 2,920 | 3,101 | 2,920 | ||||||||||||
Property and equipment | 631,216 | 623,197 | 635,278 | 623,197 | ||||||||||||
Less accumulated depreciation | (223,921 | ) | (212,041 | ) | (228,144 | ) | (212,041 | ) | ||||||||
407,295 | 411,156 | 407,134 | 411,156 | |||||||||||||
Other assets: | ||||||||||||||||
Regulatory asset | 4,320 | 4,320 | 4,172 | 4,320 | ||||||||||||
Other | 14,074 | 15,622 | 14,287 | 15,622 | ||||||||||||
18,394 | 19,942 | 18,459 | 19,942 | |||||||||||||
Total | $ | 489,811 | $ | 503,073 | $ | 480,998 | $ | 503,073 | ||||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 6,786 | $ | 6,929 | $ | 6,057 | $ | 6,929 | ||||||||
Accounts payable - related party | 569 | 7,909 | 873 | 7,909 | ||||||||||||
Accrued liabilities | 16,025 | 15,691 | 13,608 | 15,691 | ||||||||||||
Current maturities of long-term debt | 1,988 | 1,986 | 46,989 | 1,986 | ||||||||||||
Deferred income taxes | -- | 239 | 24 | 239 | ||||||||||||
25,368 | 32,754 | 67,551 | 32,754 | |||||||||||||
Long-term debt, net of current maturities | 208,083 | 210,056 | 157,224 | 210,056 | ||||||||||||
Deferred credits: | ||||||||||||||||
Deferred income taxes | 66,877 | 65,633 | 66,641 | 65,633 | ||||||||||||
Regulatory liability | 6,174 | 6,337 | 6,116 | 6,337 | ||||||||||||
Other | 12,867 | 12,724 | 13,154 | 12,724 | ||||||||||||
85,918 | 84,694 | 85,911 | 84,694 | |||||||||||||
Stockholder's equity: | ||||||||||||||||
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued | 23,416 | 23,416 | 23,416 | 23,416 | ||||||||||||
Additional paid-in capital | 39,549 | 39,549 | 39,549 | 39,549 | ||||||||||||
Retained earnings | 108,950 | 114,098 | 108,810 | 114,098 | ||||||||||||
Accumulated other comprehensive loss | (1,473 | ) | (1,494 | ) | (1,463 | ) | (1,494 | ) | ||||||||
170,442 | 175,569 | 170,312 | 175,569 | |||||||||||||
Total | $ | 489,811 | $ | 503,073 | $ | 480,998 | $ | 503,073 | ||||||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
4
Six months ended | Nine months ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30 | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 6,852 | $ | 13,327 | $ | 12,712 | $ | 20,099 | ||||||||
Adjustments to reconcile net income to cash provided by | ||||||||||||||||
operating activities: | ||||||||||||||||
Income from discontinued operations | -- | (1,906 | ) | -- | (1,906 | ) | ||||||||||
Depreciation and amortization | 9,746 | 9,537 | 14,448 | 14,346 | ||||||||||||
Deferred income tax | 897 | 5,679 | 793 | 4,312 | ||||||||||||
Change in operating assets and liabilities - | ||||||||||||||||
Accounts receivable and other current assets | 3,296 | 788 | 3,961 | 2,927 | ||||||||||||
Accounts payable and other current liabilities | (7,149 | ) | 4,979 | (9,991 | ) | 4,526 | ||||||||||
Other operating activities | 1,672 | (1,644 | ) | 1,734 | (5,983 | ) | ||||||||||
15,314 | 30,760 | 23,657 | 38,321 | |||||||||||||
Investing activities: | ||||||||||||||||
Property additions | (5,903 | ) | (11,724 | ) | (10,426 | ) | (21,992 | ) | ||||||||
Decrease in notes receivable from associated companies, net | 4,665 | 2,846 | 12,334 | 11,249 | ||||||||||||
Increase in investments | (264 | ) | (179 | ) | (181 | ) | (199 | ) | ||||||||
(1,502 | ) | (9,057 | ) | 1,727 | (10,942 | ) | ||||||||||
Financing activities | ||||||||||||||||
Dividends paid | (12,000 | ) | (17,727 | ) | (18,000 | ) | (23,728 | ) | ||||||||
Long-term debt - repayments | (1,971 | ) | (2,518 | ) | (7,829 | ) | (3,088 | ) | ||||||||
(13,971 | ) | (20,245 | ) | (25,829 | ) | (26,816 | ) | |||||||||
Increase (decrease) in cash and cash equivalents | (159 | ) | 1,458 | (445 | ) | 563 | ||||||||||
Cash and cash equivalents: | ||||||||||||||||
Beginning of period | 1,052 | 518 | 1,052 | 518 | ||||||||||||
End of period | $ | 893 | $ | 1,976 | $ | 607 | $ | 1,081 | ||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid (received) during the period for: | ||||||||||||||||
Interest | $ | 8,349 | $ | 8,529 | $ | 14,745 | $ | 14,996 | ||||||||
Income taxes refunded, net | $ | (3,111 | ) | $ | (3,886 | ) | ||||||||||
Income taxes paid (refunded), net | $ | (3,111 | ) | $ | (4 | ) | ||||||||||
Stock dividend distribution to Black Hills Corporation, the | ||||||||||||||||
parent company of Black Hills Power, Inc. (Note 3) | $ | -- | $ | 45,687 | $ | -- | $ | 45,687 |
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
5
BLACK HILLS POWER, INC.
Notes to Condensed Financial Statements
(unaudited)
(Reference is made to Notes to Financial Statements
included in the Company’s Annual Report on Form 10-K)
(1) | MANAGEMENT’S STATEMENT |
The financial statements included herein have been prepared by Black Hills Power, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the footnotes adequately disclose the information presented. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the |
(2) | RECLASSIFICATIONS |
Certain 2003 amounts in the financial statements have been reclassified to conform to the 2004 presentation. These reclassifications did not have an effect on the Company’s total stockholder’s equity or net income as previously reported. |
(3) | NON-CASH DIVIDEND AND DISCONTINUED OPERATIONS |
During the quarter ended March 31, 2003, the Company distributed a non-cash dividend to its parent company, Black Hills Corporation (Parent). The dividend consisted of 10,000 common shares of Black Hills Generation, Inc., formerly known as Black Hills Energy Capital, Inc., (Generation), which represents 100 percent ownership of Generation. |
Revenues and net income from the discontinued operations are as follows (in thousands): |
Six months ended | Nine months ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
June 30, | September 30, | |||||||||
2003 | 2003 | |||||||||
Revenue | $ | 41,485 | $ | 41,485 | ||||||
Income before income taxes | $ | 2,833 | $ | 2,833 | ||||||
Income taxes | (927 | ) | (927 | ) | ||||||
Net income from discontinued operations | $ | 1,906 | $ | 1,906 | ||||||
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(4) | RECENTLY |
In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (FSP 106-2), which provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (2003 Medicare Act) for employers that sponsor postretirement healthcare plans that provide prescription drug benefits. FSP 106-2 supersedes FSP 106-1 that was issued in January 2004 under the same title. |
(5) | COMPREHENSIVE INCOME |
The following table presents the components of the Company’s comprehensive income (in thousands): |
Three months ended | Six months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30 | |||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
Net income | $ | 1,816 | $ | 4,722 | $ | 6,852 | $ | 13,327 | $ | 5,860 | $ | 6,772 | $ | 12,712 | $ | 20,099 | ||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||
Fair value adjustment on derivatives | ||||||||||||||||||||||||||||
designated as cash flow hedges included | ||||||||||||||||||||||||||||
in discontinued operations | -- | -- | -- | (360 | ) | -- | -- | -- | (360 | ) | ||||||||||||||||||
Reclassification adjustment on interest rate | ||||||||||||||||||||||||||||
swap included in net income | 11 | 10 | 21 | 20 | 10 | 10 | 31 | 31 | ||||||||||||||||||||
Comprehensive income | $ | 1,827 | $ | 4,732 | $ | 6,873 | $ | 12,987 | $ | 5,870 | $ | 6,782 | $ | 12,743 | $ | 19,770 | ||||||||||||
(6) | CHANGES IN LONG-TERM DEBT |
On August 31, 2004, the Company effected a call on $5.9 million, 6.7 percent Pollution Control Revenue Bonds issued through Lawrence County, South Dakota. The bonds had a maturity date of 2010. |
On September 21, 2004, the Company initiated a notice to call, effective October 21, 2004, the entire $45 million Series AB 8.3 percent bonds. The bonds had a maturity date of 2024. Due to the notice to call, the bonds have been classified to current maturities of long-term debt on the September 30, 2004 Balance Sheet. |
7
(7) | RELATED-PARTY TRANSACTIONS |
Receivables |
The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $0.5 million and $0.9 million as of |
The Company also has extended a line of credit to its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were |
7
Other Balances and Transactions |
In addition to the above transactions, in order to fuel its combustion turbine, the Company purchased natural gas from Enserco Energy, an indirect subsidiary of the Parent. The amount purchased during the three month periods ended |
The Company also received revenues of approximately $0.2 million and |
EMPLOYEE BENEFIT PLAN |
Defined Benefit Pension Plan |
The Company has a noncontributory defined benefit pension plan (Plan) covering the employees of the Company who meet certain eligibility requirements. |
The components of net periodic benefit cost for the Plan for the periods ended |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
Service cost | $ | 240 | $ | 178 | $ | 480 | $ | 356 | $ | 240 | $ | 178 | $ | 720 | $ | 534 | ||||||||||||
Interest cost | 655 | 625 | 1,310 | 1,250 | 655 | 625 | 1,965 | 1,875 | ||||||||||||||||||||
Expected return on plan assets | (855 | ) | (618 | ) | (1,710 | ) | (1,236 | ) | (855 | ) | (618 | ) | (2,565 | ) | (1,854 | ) | ||||||||||||
Amortization of prior service cost | 41 | 41 | 82 | 82 | 41 | 41 | 123 | 123 | ||||||||||||||||||||
Amortization of net loss | 270 | 276 | 540 | 552 | 270 | 276 | 810 | 828 | ||||||||||||||||||||
Net periodic benefit cost | $ | 351 | $ | 502 | $ | 702 | $ | 1,004 | $ | 351 | $ | 502 | $ | 1,053 | $ | 1,506 | ||||||||||||
The Company does not anticipate that a contribution will be made to the Plan in the 2004 fiscal year. |
8
Supplemental Nonqualified Defined Benefit Plan |
The Company has various supplemental retirement plans for outside directors and key executives of the Company. The Plans are nonqualified defined benefit plans. |
The components of net periodic benefit cost for the supplemental nonqualified plans for the periods ended |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
Service cost | $ | -- | $ | 1 | $ | -- | $ | 2 | $ | -- | $ | 1 | $ | -- | $ | 3 | ||||||||||||
Interest cost | 27 | 26 | 54 | 52 | 27 | 26 | 81 | 78 | ||||||||||||||||||||
Amortization of prior service credit | -- | (1 | ) | -- | (2 | ) | -- | (1 | ) | -- | (3 | ) | ||||||||||||||||
Amortization of net loss | 13 | 11 | 26 | 22 | 13 | 11 | 39 | 33 | ||||||||||||||||||||
Net periodic benefit cost | $ | 40 | $ | 37 | $ | 80 | $ | 74 | $ | 40 | $ | 37 | $ | 120 | $ | 111 | ||||||||||||
The Company anticipates that contributions to the supplemental retirement plans for the 2004 fiscal year will be approximately $0.1 million; the contributions are expected to be in the form of benefit payments. |
Non-pension Defined Benefit Postretirement Plan |
Employees who are participants in the Company’s postretirement healthcare plan and who retire from the Company on or after attaining age 55 after completing at least five years of service to the Company are entitled to postretirement healthcare benefits. These financial statements and this Note do not reflect the effects of the 2003 Medicare Act on the postretirement benefit plan (see Note 4). |
The components of net periodic benefit cost for the postretirement healthcare plan for the periods ended |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
Service cost | $ | 75 | $ | 50 | $ | 150 | $ | 100 | $ | 75 | $ | 50 | $ | 225 | $ | 150 | ||||||||||||
Interest cost | 121 | 109 | 242 | 218 | 121 | 109 | 363 | 327 | ||||||||||||||||||||
Amortization of net transition obligation | 29 | 29 | 58 | 58 | 29 | 29 | 87 | 87 | ||||||||||||||||||||
Amortization of prior service credit | (5 | ) | (5 | ) | (10 | ) | (10 | ) | (5 | ) | (5 | ) | (15 | ) | (15 | ) | ||||||||||||
Amortization of net loss | 36 | 19 | 72 | 38 | 36 | 19 | 108 | 57 | ||||||||||||||||||||
Net periodic benefit cost | $ | 256 | $ | 202 | $ | 512 | $ | 404 | $ | 256 | $ | 202 | $ | 768 | $ | 606 | ||||||||||||
The Company anticipates that contributions to the postretirement healthcare plan for the 2004 fiscal year will be approximately $0.5 million; the contributions are expected to be in the form of benefits and administrative costs paid. |
9
LEGAL PROCEEDINGS |
The Company is subject to various legal proceedings, claims and litigation as described in Note 6 of the Company’s 2003 Annual Report on Form 10-K. There have been no material developments in these proceedings or any new material proceedings that have developed during the first |
9
(10) | SUBSEQUENT EVENT |
On October 21, 2004, the Company effected a call on its Series AB, $45 million 8.3 percent First Mortgage Bonds. The bonds had a maturity date of 2024. |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30 | |||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||
Revenue | $ | 39,809 | $ | 39,207 | $ | 81,456 | $ | 82,970 | $ | 47,921 | $ | 46,268 | $ | 129,377 | $ | 129,238 | ||||||||||||
Operating expenses | 33,249 | 28,610 | 63,488 | 58,721 | 35,415 | 31,773 | 98,902 | 90,493 | ||||||||||||||||||||
Operating income | $ | 6,560 | $ | 10,597 | $ | 17,968 | $ | 24,249 | $ | 12,506 | $ | 14,495 | $ | 30,475 | $ | 38,745 | ||||||||||||
Income from continuing operations | $ | 1,816 | $ | 4,722 | $ | 6,852 | $ | 11,421 | $ | 5,860 | $ | 6,772 | $ | 12,712 | $ | 18,193 | ||||||||||||
The following table provides certain operating statistics:
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30 | |||||||||||||||||||||||||||
2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||
Firm (system) sales - MWh | 451,000 | 447,400 | 964,300 | 952,900 | 511,800 | 545,300 | 1,476,000 | 1,498,100 | ||||||||||||||||||||
Off-system sales - MWh | 259,600 | 234,100 | 461,900 | 479,800 | 335,500 | 204,700 | 797,400 | 684,500 |
Three Months Ended JuneSeptember 30, 2004 Compared to Three Months Ended JuneSeptember 30, 2003. Electric utility revenues increased 24 percent for the three-month period ended JuneSeptember 30, 2004, compared to the same period in the prior year. The increase in revenue was primarily due to an 11a 64 percent increase in off-system electric MWhmegawatt-hour sales offset by a 1an 11 percent decrease in average prices received. Revenues were impacted in part by plant availability resultingreceived from unscheduled and scheduled maintenance outages during the three month period ended June 30, 2004.off-system sales. Firm commercial and residential electricity revenues decreased 5 percent and 12 percent, respectively, and industrial electricity revenues increased 1 percent and 2 percent, respectively, offset by a slight decrease in residential revenues.percent. Degree days, which is a measure of weather trends, were 337 percent below last year.
Electric operating expenses increased 1611 percent for the three-month period ended JuneSeptember 30, 2004, compared to the same period in the prior year. Purchased power increased $3.7$4.3 million due to a 4051 percent increase in megawatt-hours purchased, at a 75 percent increasedecrease in the average cost per megawatt-hour. Megawatt-hours purchased increased due to replacement power needed because of scheduled and unscheduled plant outages and uneconomic dispatch of our gas turbines.turbines and to support the increase in off-system sales. Gas costs decreased 1955 percent due to a 7864 percent decrease in megawatt-hours generated with our gas turbines, as prevailing prices made it more economical for us to purchase power for our peaking needs when it was available rather than generate energy from our gas turbines. The average cost per megawatt-hour of our gas generation was $81.89$67.03 for the three months ended JuneSeptember 30, 2004, compared to $31.34while the average cost for purchased power was $35.25 per megawatt-hour for purchased power for the same time period. The decrease in fuel expense was offset by increased maintenancepower marketing costs, for scheduled and unscheduled plant outages, increased health insurance costs and an increase in allocated corporate costs.
10
Income from continuing operations decreased $2.9$0.9 million primarily due to increases in purchased power expense, maintenance expense,costs associated with the increase in off-system sales, health insurance expense and allocated corporate costs, partially offset by an increase in firm system and off-system electric sales and athe decrease in fuel expense.gas costs.
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SixNine Months Ended JuneSeptember 30, 2004 Compared to SixNine Months Ended JuneSeptember 30, 2003. Electric utility revenues decreased 2 percentwere flat for the six-monthnine-month period ended JuneSeptember 30, 2004, compared to the same period in the prior year. The decrease in revenue was primarily due toOff-system electric megawatt-hour sales increased 16 percent at a 4 percent decrease in off-system electric MWh sales and a 45 percent decrease in average prices received. Revenues were impacted in part by reduced Open Access Transmission Tariff rates and plant availability resulting from unscheduled and scheduled maintenance outages during the sixnine month period ended JuneSeptember 30, 2004. The decreaseincrease in revenue from off-system sales was partially offset by strongdecreased retail sales. Residential and commercial revenues decreased 3 percent and 2 percent, respectively, and industrial revenues increased 2 percent, 1 percent and 4 percent, respectively, while degree3 percent. Degree days, which is a measure of weather trends, were 612 percent below last year.
Electric operating expenses increased 89 percent for the six-monthnine-month period ended JuneSeptember 30, 2004, compared to the same period in the prior year. Purchased power increased $4.9$9.2 million due to a 3138 percent increase in megawatt-hours purchased. Megawatt-hours purchased increased primarily due to replacement power needed because of scheduleda 16 percent increase in off-system megawatt-hour sales and unscheduled plant outages andthe uneconomic dispatch of our gas turbines. Gas costs decreased 3570 percent due to a 90an 83 percent decrease in megawatt-hours generated with our gas turbines as prevailing prices made it more economical for us to purchase power for our peaking needs when it was available rather than generate energy from our gas turbines. The average cost per megawatt-hour of our gas generation was $95.22$76.33 for the sixnine months ended JuneSeptember 30, 2004, compared to $32.20while the average cost for purchased power was $33.38 per megawatt-hour for purchased power for the same time period. The decrease in fuel expense was offset by increased plant maintenance costs, for scheduled and unscheduled plant outages, increasedpower marketing costs, health insurance costs and an increase in allocated corporate costs.
Income from continuing operations decreased $4.6$5.5 million primarily due to a decrease in off-system electric revenue and increases in purchased power expense, maintenance expense, costs associated with the increase in off-system sales, health insurance expense and allocated corporate costs, partially offset by an increase in firm systemoff-system electric sales and athe decrease in fuel expense.gas costs.
Some of the statements in this Form 10-Q include “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are based on assumptions, which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including:
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New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of JuneSeptember 30, 2004. Based on their evaluation, they have concluded that our disclosure controls and procedures are adequate and effective to ensure that material information relating to us that is included in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods.
During the period covered by this Quarterly Report on Form 10-Q, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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BLACK HILLS POWER, INC.
Part II — Other Information
Item 1. | Legal Proceedings |
For information regarding legal proceedings, see Note 6 in Item 8 of the Company’s 2003 Annual Report on Form 10-K and Note |
Item 6. | Exhibits |
(a) Exhibits— |
Exhibit 31.1 Certification pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 31.2 Certification pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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BLACK HILLS POWER, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BLACK HILLS POWER, INC. |
/s/ David R. Emery David R. Emery, President and Chief Executive Officer |
/s/ Mark T. Thies Mark T. Thies, Executive Vice President and Chief Financial Officer |
Dated: August 10,November 12, 2004
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EXHIBIT INDEX
Exhibit Number | Description |
Exhibit 31.1 | Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002. |
Exhibit 31.2 | Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002. |
Exhibit 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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