UNITED STATESUnited States
SECURITIES AND EXCHANGE COMMISSIONSecurities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2005.
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
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625 Ninth Street | |
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.
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Yes No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
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Yes No
As of April 30,July 29, 2005, 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.
Reduced Disclosure
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
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PART I. |
| FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements | |||||||
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Three and Six Months Ended | 3 | |||||||
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| June 30, 2005 and December 31, 2004 | 4 | ||||||
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Three and Six Months Ended | 5 | |||||||
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| 6-9 | ||||||
| Results of Operations |
| 9-12 | |||||
| Controls and Procedures |
| 13 | |||||
PART II. | OTHER INFORMATION | |||||||
Item 1. |
| Legal Proceedings | 13 | |||||
Item 6. | Exhibits | 13 | ||||||
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| Signatures | 14 | ||||
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2
CONDENSED STATEMENTS OF INCOME
(unaudited)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
(in thousands) | ||||||||||||||
Operating revenue | $ | 42,261 | $ | 39,809 | $ | 85,408 | $ | 81,456 | ||||||
Operating expenses: | ||||||||||||||
Fuel and purchased power | 15,587 | 14,383 | 30,794 | 27,193 | ||||||||||
Operations and maintenance | 6,613 | 7,817 | 11,970 | 13,997 | ||||||||||
Administrative and general | 5,062 | 4,110 | 11,022 | 8,188 | ||||||||||
Depreciation and amortization | 4,759 | 4,803 | 9,697 | 9,746 | ||||||||||
Taxes, other than income taxes | 2,120 | 2,136 | 4,310 | 4,364 | ||||||||||
34,141 | 33,249 | 67,793 | 63,488 | |||||||||||
Operating income | 8,120 | 6,560 | 17,615 | 17,968 | ||||||||||
Other income (expense): | ||||||||||||||
Interest expense | (3,146 | ) | (4,218 | ) | (6,361 | ) | (8,406 | ) | ||||||
Interest income | 9 | 226 | 43 | 438 | ||||||||||
Other income, net | 134 | 42 | 275 | 141 | ||||||||||
(3,003 | ) | (3,950 | ) | (6,043 | ) | (7,827 | ) | |||||||
Income before income taxes | 5,117 | 2,610 | 11,572 | 10,141 | ||||||||||
Income taxes | (1,708 | ) | (794 | ) | (3,840 | ) | (3,289 | ) | ||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | ||||||
Three Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|
March 31 | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
Operating revenue | $ | 43,147 | $ | 41,647 | ||||
Operating expenses: | ||||||||
Fuel and purchased power | 15,207 | 12,809 | ||||||
Operations and maintenance | 5,357 | 6,180 | ||||||
Administrative and general | 5,960 | 4,078 | ||||||
Depreciation and amortization | 4,938 | 4,943 | ||||||
Taxes, other than income taxes | 2,190 | 2,229 | ||||||
33,652 | 30,239 | |||||||
Operating income | 9,495 | 11,408 | ||||||
Other income (expense): | ||||||||
Interest expense | (3,215 | ) | (4,188 | ) | ||||
Interest income | 34 | 213 | ||||||
Other expense | 183 | (51 | ) | |||||
Other income | (43 | ) | 149 | |||||
(3,041 | ) | (3,877 | ) | |||||
Income before income taxes | 6,454 | 7,531 | ||||||
Income taxes | (2,132 | ) | (2,494 | ) | ||||
Net income | $ | 4,322 | $ | 5,037 | ||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
3
CONDENSED BALANCE SHEETS
(unaudited)
(unaudited)
June 30 | December 31 | |||||||
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2005 | 2004 | |||||||
(in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6 | $ | 344 | ||||
Restricted cash | -- | 3,069 | ||||||
Receivables (net of allowance for doubtful accounts of $907 and $912, respectively) | 15,630 | 18,497 | ||||||
Receivables - affiliate | 1,173 | 891 | ||||||
Materials, supplies and fuel | 12,944 | 11,513 | ||||||
Deferred income taxes | 686 | -- | ||||||
Other current assets | 1,099 | 2,346 | ||||||
31,538 | 36,660 | |||||||
Investments | 3,283 | 3,275 | ||||||
Property, plant and equipment | 645,027 | 637,630 | ||||||
Less accumulated depreciation | (242,246 | ) | (232,401 | ) | ||||
402,781 | 405,229 | |||||||
Other assets: | ||||||||
Regulatory assets | 7,144 | 7,237 | ||||||
Other | 13,002 | 13,204 | ||||||
20,146 | 20,441 | |||||||
$ | 457,748 | $ | 465,605 | |||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 1,993 | $ | 1,991 | ||||
Accounts payable | 7,080 | 7,551 | ||||||
Accounts payable - affiliate | 485 | 331 | ||||||
Note payable - affiliate | 10,724 | 25,074 | ||||||
Accrued liabilities | 13,534 | 13,816 | ||||||
33,816 | 48,763 | |||||||
Long-term debt, net of current maturities | 155,240 | 157,215 | ||||||
Deferred credits and other liabilities: | ||||||||
Deferred income taxes | 70,149 | 69,233 | ||||||
Regulatory liabilities | 5,888 | 6,021 | ||||||
Other | 14,124 | 13,537 | ||||||
90,161 | 88,791 | |||||||
Stockholder's equity: | ||||||||
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued | 23,416 | 23,416 | ||||||
Additional paid-in capital | 39,549 | 39,549 | ||||||
Retained earnings | 117,039 | 109,307 | ||||||
Accumulated other comprehensive loss | (1,473 | ) | (1,436 | ) | ||||
178,531 | 170,836 | |||||||
$ | 457,748 | $ | 465,605 | |||||
March 31 2005 | December 31 2004 | |||||||
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(in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 550 | $ | 344 | ||||
Restricted cash | 3,069 | 3,069 | ||||||
Receivables (net of allowance for doubtful accounts of $913 and $912, respectively) | 15,968 | 18,497 | ||||||
Receivables - related party | 1,881 | 891 | ||||||
Materials, supplies and fuel | 10,892 | 11,513 | ||||||
Prepaid income taxes | -- | 1,872 | ||||||
Other current assets | 296 | 474 | ||||||
32,656 | 36,660 | |||||||
Investments | 3,411 | 3,275 | ||||||
Property, plant and equipment | 640,566 | 637,630 | ||||||
Less accumulated depreciation | (237,493 | ) | (232,401 | ) | ||||
403,073 | 405,229 | |||||||
Other assets: | ||||||||
Regulatory asset | 7,190 | 7,237 | ||||||
Other | 12,951 | 13,204 | ||||||
20,141 | 20,441 | |||||||
$ | 459,281 | $ | 465,605 | |||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 1,992 | $ | 1,991 | ||||
Accounts payable | 5,251 | 7,551 | ||||||
Accounts payable – affiliate | 351 | 331 | ||||||
Note payable – affiliate | 15,365 | 25,074 | ||||||
Accrued liabilities | 15,084 | 13,814 | ||||||
Deferred income taxes | 317 | 2 | ||||||
38,360 | 48,763 | |||||||
Long-term debt, net of current maturities | 157,205 | 157,215 | ||||||
Deferred credits and other liabilities: | ||||||||
Deferred income taxes | 68,940 | 69,233 | ||||||
Regulatory liability | 5,935 | 6,021 | ||||||
Other | 13,672 | 13,537 | ||||||
88,547 | 88,791 | |||||||
Stockholder’s equity: | ||||||||
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued | 23,416 | 23,416 | ||||||
Additional paid-in capital | 39,549 | 39,549 | ||||||
Retained earnings | 113,629 | 109,307 | ||||||
Accumulated other comprehensive loss | (1,425 | ) | (1,436 | ) | ||||
175,169 | 170,836 | |||||||
$ | 459,281 | $ | 465,605 | |||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
4
CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS
(unaudited)
(unaudited)
Six Months Ended | ||||||||
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June 30 | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
Operating activities: | ||||||||
Net income | $ | 7,732 | $ | 6,852 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 9,697 | 9,746 | ||||||
Deferred income tax | 230 | 897 | ||||||
Change in operating assets and liabilities - | ||||||||
Accounts receivable and other current assets | 2,406 | 3,296 | ||||||
Accounts payable and other current liabilities | (599 | ) | (7,149 | ) | ||||
Other operating activities | 707 | 1,672 | ||||||
20,173 | 15,314 | |||||||
Investing activities: | ||||||||
Property, plant and equipment additions | (7,249 | ) | (5,903 | ) | ||||
Change in notes receivable from associated companies, net | -- | 4,665 | ||||||
Change in investments and restricted cash | 3,061 | (264 | ) | |||||
(4,188 | ) | (1,502 | ) | |||||
Financing activities: | ||||||||
Changes in notes payable to associated companies, net | (14,350 | ) | -- | |||||
Dividends paid | -- | (12,000 | ) | |||||
Long-term debt - repayments | (1,973 | ) | (1,971 | ) | ||||
(16,323 | ) | (13,971 | ) | |||||
Decrease in cash and cash equivalents | (338 | ) | (159 | ) | ||||
Cash and cash equivalents: | ||||||||
Beginning of period | 344 | 1,052 | ||||||
End of period | $ | 6 | $ | 893 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid (received) during the period for: | ||||||||
Interest | $ | 7,508 | $ | 8,349 | ||||
Income taxes paid (refunded) | $ | 3,283 | $ | (3,111 | ) |
Three Months Ended | ||||||||
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March 31 | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
Operating activities: | ||||||||
Net income | $ | 4,322 | $ | 5,037 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,938 | 4,943 | ||||||
Deferred income tax | 22 | 370 | ||||||
Change in operating assets and liabilities - | ||||||||
Accounts receivable and other current assets | 4,209 | 3,459 | ||||||
Accounts payable and other current liabilities | (1,010 | ) | (7,402 | ) | ||||
Other operating activities | 361 | 125 | ||||||
12,842 | 6,532 | |||||||
Investing activities: | ||||||||
Property, plant and equipment additions | (2,782 | ) | (2,216 | ) | ||||
Change in notes receivable from associated companies, net | -- | 1,519 | ||||||
Increase in investments | (136 | ) | (124 | ) | ||||
(2,918 | ) | (821 | ) | |||||
Financing activities: | ||||||||
Changes in notes payable to associated companies, net | (9,709 | ) | -- | |||||
Dividends paid | -- | (6,000 | ) | |||||
Long-term debt – repayments | (9 | ) | (8 | ) | ||||
(9,718 | ) | (6,008 | ) | |||||
Increase (decrease) in cash and cash equivalents | 206 | (297 | ) | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 344 | 1,052 | ||||||
End of period | $ | 550 | $ | 755 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for- | ||||||||
Interest | $ | 3,374 | $ | 6,338 | ||||
Net income taxes (received) paid | $ | 688 | $ | (3,111 | ) |
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 2004 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 2004 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 March 31, 2005, December 31, 2004 and March 31, 2004, financial information and are of a normal recurring nature. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results to be expected for the full year.
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 2004 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 June 30, 2005, December 31, 2004 and June 30, 2004, financial information and are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2005, are not necessarily indicative of the results to be expected for the full year. |
(2) | COMPREHENSIVE INCOME |
The following table presents the components of the Company’s comprehensive income (in thousands):
| Three Months Ended | |||
| March 31 | |||
| 2005 | 2004 | ||
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Net income | $ | 4,322 | $ | 5,037 |
Other comprehensive income, net of tax: |
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Reclassification adjustment on interest rate swap included |
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in net income |
| 11 |
| 10 |
Comprehensive income | $ | 4,333 | $ | 5,047 |
The following table presents the components of the Company’s comprehensive income (in thousands): |
Three Months Ended | Six Months Ended | |||||||||||||
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June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | ||||||
Other comprehensive income, net of tax: | ||||||||||||||
Fair value adjustment on derivatives designated | ||||||||||||||
as cash flow hedges | (59 | ) | -- | (59 | ) | -- | ||||||||
Reclassification adjustment on interest rate | ||||||||||||||
swap included in net income | 11 | 11 | 22 | 21 | ||||||||||
Comprehensive income | $ | 3,361 | $ | 1,827 | $ | 7,695 | $ | 6,873 | ||||||
6
(3) | RELATED-PARTY TRANSACTIONS |
Receivables/Payables
The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $1.9 million and $0.9 million as of March 31, 2005 and December 31, 2004, respectively.
The Company also has a line of credit with its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were $15.4 million at March 31, 2005 and $25.1 million at December 31, 2004. Interest paid on the note was $0.2 million for the three-month period ended March 31, 2005. Advances under this note bear interest at 1.25 percent above the one-month average LIBOR rate (4.12 percent at March 31, 2005) and is payable monthly.
6
Other Balances and Transactions
The Company received revenues of approximately $0.1 million and $0.5 million for each of the three-month periods ended March 31, 2005 and March 31, 2004, respectively, from Black Hills Wyoming, Inc., an indirect subsidiary of Black Hills Corporation, for the transmission of electricity.
Receivables/Payables |
The Company has accounts receivable balances related to transactions with other Black Hills Corporation subsidiaries. The balances were $1.2 million and $0.9 million as of June 30, 2005 and December 31, 2004, respectively. |
The Company also has a line of credit with its Parent, Black Hills Corporation (the Parent), which is due on demand. Outstanding advances were $10.7 million at June 30, 2005 and $25.1 million at December 31, 2004. Interest paid on the note was $0.1 million and $0.3 million for the three and six month periods ended June 30, 2005. Advances under this note bear interest at 1.25 percent above the one-month average LIBOR rate (4.59 percent at June 30, 2005) and is payable monthly. |
Other Balances and Transactions |
The Company received revenues of approximately $0.4 million and $0.2 million for each of the three month periods ended June 30, 2005 and June 30, 2004, respectively, and $0.4 million and $0.6 million for each of the six month periods ended June 30, 2005 and June 30, 2004, respectively, from Black Hills Wyoming, Inc., an indirect subsidiary of Black Hills Corporation, for the transmission of electricity. |
(4) | LONG TERM DEBT |
In May 2005, the Company’s parent, Black Hills Corporation, completed a new five year, $400 million revolving bank facility. As part of the new bank facility, Black Hills Corporation has agreed to reserve an aggregate amount equal to $3.1 million (the “BHP Reserve”) to fund, directly or indirectly, any liquidity needs arising under, or in connection with, the loan agreement between the City of Gillette, Campbell County, Wyoming and the Company pursuant to the Company’s $2.9 million Series 94A Floating Rate Environmental Improvement Revenue Bonds.
In May 2005, the Company’s parent, Black Hills Corporation, completed a new five year, $400 million revolving bank facility. As part of the new bank facility, Black Hills Corporation has agreed to reserve an aggregate amount equal to $3.1 million (the “BHP Reserve”) to fund, directly or indirectly, any liquidity needs arising under, or in connection with, the loan agreement between the City of Gillette, Campbell County, Wyoming and the Company pursuant to the Company’s $2.9 million Series 94A Floating Rate Environmental Improvement Revenue Bonds. |
(5) | EMPLOYEE BENEFIT PLANS |
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 three months ended March 31 are as follows (in thousands):
| 2005 | 2004 | ||
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Service cost | $ | 248 | $ | 240 |
Interest cost |
| 675 |
| 655 |
Expected return on plan assets |
| (870) |
| (855) |
Amortization of prior service cost |
| 39 |
| 41 |
Amortization of net loss |
| 213 |
| 270 |
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Net periodic benefit cost | $ | 305 | $ | 351 |
The Company does not anticipate that a contribution will be made to the Plan in the 2005 fiscal year.
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 are as follows (in thousands): |
Three Months Ended | Six Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Service cost | $ | 248 | $ | 240 | $ | 496 | $ | 480 | ||||||
Interest cost | 675 | 655 | 1,350 | 1,310 | ||||||||||
Expected return on plan assets | (870 | ) | (855 | ) | (1,740 | ) | (1,710 | ) | ||||||
Amortization of prior service cost | 39 | 41 | 78 | 82 | ||||||||||
Amortization of net loss | 213 | 270 | 426 | 540 | ||||||||||
Net periodic benefit cost | $ | 305 | $ | 351 | $ | 610 | $ | 702 | ||||||
The Company does not anticipate that it will need to make a contribution to the Plan in the 2005 fiscal year. |
7
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 three months ended March 31 are as follows (in thousands):
| 2005 | 2004 | ||
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|
Service cost | $ | — | $ | — |
Interest cost |
| 27 |
| 27 |
Amortization of net loss |
| 12 |
| 13 |
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|
|
Net periodic benefit cost | $ | 39 | $ | 40 |
The Company anticipates that contributions to the Plan for the 2005 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 participant’s 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.
The components of net periodic benefit cost for the Postretirement Healthcare Plan for the three months ended March 31 are as follows (in thousands):
| 2005 | 2004 | ||
|
|
|
|
|
Service cost | $ | 73 | $ | 75 |
Interest cost |
| 116 |
| 121 |
Amortization of net transition obligation |
| 29 |
| 29 |
Amortization of prior service cost |
| (5) |
| (5) |
Amortization of net loss |
| 19 |
| 36 |
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|
|
Net periodic benefit cost | $ | 232 | $ | 256 |
The Company anticipates that contributions to the Plan for the 2005 fiscal year will be approximately $0.2 million; the contributions are expected to be in the form of benefits paid.
Supplemental Nonqualified Defined Benefit Plan |
The Company has various supplemental retirement plans for outside directors and key executives of the Company (Supplemental Plans). The Supplemental Plans are nonqualified defined benefit plans. |
The components of net periodic benefit cost for the Supplemental Plans are as follows (in thousands): |
Three Months Ended | Six Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Service cost | $ | -- | $ | -- | $ | -- | $ | -- | ||||||
Interest cost | 27 | 27 | 54 | 54 | ||||||||||
Amortization of net loss | 12 | 13 | 24 | 26 | ||||||||||
Net periodic benefit cost | $ | 39 | $ | 40 | $ | 78 | $ | 80 | ||||||
The Company anticipates that it will need to make contributions to the Supplemental Plans for the 2005 fiscal year of 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 participant’s in the Company’s Postretirement Healthcare Plan (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 Healthcare Plan. |
The components of net periodic benefit cost for the Healthcare Plan are as follows (in thousands): |
Three Months Ended | Six Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Service cost | $ | 73 | $ | 75 | $ | 146 | $ | 150 | ||||||
Interest cost | 116 | 121 | 232 | 242 | ||||||||||
Amortization of net transition obligation | 29 | 29 | 58 | 58 | ||||||||||
Amortization of prior service cost | (5 | ) | (5 | ) | (10 | ) | (10 | ) | ||||||
Amortization of net loss | 19 | 36 | 38 | 72 | ||||||||||
Net periodic benefit cost | $ | 232 | $ | 256 | $ | 464 | $ | 512 | ||||||
The Company anticipates that it will need to make contributions to the Plan for the 2005 fiscal year of approximately $0.2 million. The contributions are expected to be in the form of benefits paid. |
8
(6) | LEGAL PROCEEDINGS |
The Company is subject to various legal proceedings, claims and litigation as described in Note 10 of the Company’s 2004 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 quarter of 2005.
8
The Company is subject to various legal proceedings, claims and litigation as described in Note 10 of the Notes to Consolidated Financial Statements in the Company’s 2004 Annual Report on Form 10-K. There have been no material developments in these proceedings or any new material proceedings that have developed or material proceedings that have terminated during the first six months of 2005. |
|
|
Electric Utility
| Three Months Ended | |||
| March 31 | |||
| 2005 | 2004 | ||
| (in thousands) | |||
|
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|
|
Revenue | $ | 43,147 | $ | 41,647 |
Operating expenses |
| 33,652 |
| 30,239 |
Operating income | $ | 9,495 | $ | 11,408 |
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Net income | $ | 4,322 | $ | 5,037 |
Three Months Ended | Six Months Ended | |||||||||||||
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June 30 | June 30 | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
(in thousands) | ||||||||||||||
Revenue | $ | 42,261 | $ | 39,809 | $ | 85,408 | $ | 81,456 | ||||||
Operating expenses | 34,141 | 33,249 | 67,793 | 63,488 | ||||||||||
Operating income | $ | 8,120 | $ | 6,560 | $ | 17,615 | $ | 17,968 | ||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | ||||||
The following table providestables provide certain operating statistics:
Electric Revenue
(in thousands)
| Three Months Ended | |
| March 31 | |
| 2005 | 2004 |
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Firm (system) sales – MWh | 517,962 | 513,234 |
Off-system sales – MWh | 231,314 | 202,294 |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||
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Percentage | Percentage | |||||||||||||||||||
Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Commercial | $ | 11,634 | 6 | % | $ | 10,987 | $ | 23,065 | 4 | % | $ | 22,162 | ||||||||
Residential | 8,649 | 9 | 7,936 | 19,207 | 5 | 18,356 | ||||||||||||||
Industrial | 4,910 | 1 | 4,870 | 9,764 | -- | 9,788 | ||||||||||||||
Municipal sales | 555 | 1 | 549 | 1,048 | 2 | 1,025 | ||||||||||||||
Contract wholesale | 5,672 | 12 | 5,049 | 11,657 | 6 | 10,977 | ||||||||||||||
Wholesale off-system | 9,171 | 5 | 8,697 | 17,284 | 15 | 15,002 | ||||||||||||||
Total electric sales | $ | 40,591 | 7 | % | $ | 38,088 | $ | 82,025 | 6 | % | $ | 77,310 | ||||||||
Other revenue | 1,670 | (3 | ) | 1,721 | 3,383 | (18 | ) | 4,146 | ||||||||||||
Total revenue | $ | 42,261 | 6 | % | $ | 39,809 | $ | 85,408 | 5 | % | $ | 81,456 | ||||||||
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Megawatt Hours
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||
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Percentage | Percentage | |||||||||||||||||||
Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Commercial | 152,644 | 5 | % | 145,802 | 310,162 | 4 | % | 298,407 | ||||||||||||
Residential | 102,692 | 9 | 94,311 | 240,639 | 4 | 232,056 | ||||||||||||||
Industrial | 103,695 | 5 | 98,745 | 202,093 | 2 | 197,266 | ||||||||||||||
Municipal sales | 6,827 | 1 | 6,756 | 13,290 | 2 | 13,027 | ||||||||||||||
Contract wholesale | 150,659 | 9 | 138,106 | 311,997 | 4 | 299,695 | ||||||||||||||
Wholesale off-system | 212,460 | (6 | ) | 226,099 | 400,074 | 4 | 384,887 | |||||||||||||
Total electric sales | 728,977 | 3 | % | 709,819 | 1,478,255 | 4 | % | 1,425,338 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
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Percentage | Percentage | |||||||||||||||||||
Resources | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Megawatt-hours generated: | ||||||||||||||||||||
Coal | 426,400 | 15 | % | 371,500 | 862,300 | 5 | % | 823,100 | ||||||||||||
Gas | 3,830 | (26 | ) | 5,200 | 5,500 | (35 | ) | 8,400 | ||||||||||||
430,230 | 14 | 376,700 | 867,800 | 4 | 831,500 | |||||||||||||||
Megawatt-hours purchased | 331,434 | (8 | ) | 358,592 | 653,105 | 2 | 639,531 | |||||||||||||
Total resources | 761,664 | 4 | % | 735,292 | 1,520,905 | 3 | % | 1,471,031 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
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June 30 | Percentage | June 30 | Percentage | |||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||
Heating and cooling degree days | ||||||||||||||||||||
Actual | ||||||||||||||||||||
Heating degree days | 933 | 940 | (1 | )% | 3,923 | 4,048 | (3 | )% | ||||||||||||
Cooling degree days | 148 | 59 | 151 | % | 148 | 59 | 151 | % | ||||||||||||
Variance from normal | ||||||||||||||||||||
Heating degree days | (6 | )% | (6 | )% | -- | (9 | )% | (6 | )% | -- | ||||||||||
Cooling degree days | 47 | % | (42 | )% | -- | 47 | % | (42 | )% | -- |
Three Months Ended March 31,June 30, 2005 Compared to Three Months Ended March 31,June 30, 2004. Electric utility revenues increased 46 percent for the three-monththree month period ended March 31,June 30, 2005, compared to the same period in the prior year. The increase in revenue was primarily due toFirm commercial, residential, industrial and contract wholesale sales increased 6 percent, 9 percent, 1 percent and 12 percent, respectively. Wholesale off-system sales increased 5 percent with a 14 percent increase in off-system electric megawatt-hour sales at an 812 percent increase in average prices received. Firm residential, commercial and wholesale sales increased 1price received, partially offset by a 6 percent 2 percent and 1 percent, respectively, and industrial sales declined 1 percent. Degreedecrease in megawatt-hours sold. Cooling degree days, which is a measure of weather trends, were 4151 percent below lasthigher than the same period in the prior year.
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Electric operating expenses increased 113 percent for the three-monththree month period ended March 31,June 30, 2005, compared to the same period in the prior year. PurchasedHigher operating expenses were primarily the result of a $0.6 million increase in fuel and purchased power increased $2.7costs. The increase in fuel and purchased power was due to a $0.4 million increase in purchased power, resulting from a 12 percent increase in average price per megawatt-hour partially offset by an 8 percent decrease in megawatt-hours purchased, and a $0.2 million increase in fuel costs due to a 14 percent increase in megawatt-hours generated partially offset by a 7 percent decrease in average cost. Megawatt-hours produced through coal-fired generation increased in the three months ended June 30, 2005, as we incurred scheduled and unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs, rather than generate energy from our gas turbines. The increase in operating expense was also affected by increased legal expense and compensation costs, partially offset by lower maintenance costs.
Income from continuing operations increased $1.6 million primarily due to increased revenues, lower maintenance costs and lower interest expense, due to the pay down of debt, partially offset by increased fuel and purchased at a 13power costs, legal expense and compensation costs.
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004. Electric utility revenues increased 5 percent for the six month period ended June 30, 2005 compared to the same period in the prior year. Firm commercial, residential and contract wholesale sales increased 4 percent, 5 percent and 6 percent, respectively. Wholesale off-system sales increased 15 percent due to an 11 percent increase in average price received and a 4 percent increase in megawatt-hours sold. Cooling degree days for the average cost per megawatt-hour.six month period were 151 percent higher than the same period in 2004 and heating degree days were 3 percent lower than the same period in 2004.
Electric operating expenses increased 7 percent for the six month period ended June 30, 2005, compared to the same period in the prior year. Higher operating expenses were primarily the result of a $3.0 million increase in fuel and purchased power costs. The increase in fuel and purchased power was due to a $3.1 million increase in purchased power, resulting from a 12 percent increase in average price per megawatt-hour and a 3 percent increase in megawatt-hours purchased, offset by a nominal decrease in fuel costs was primarily due to the increased off-system sales and 18 days of unscheduled plant outages at the Wyodak plant and wasa 6 percent decrease in average cost, partially offset by a $0.3 million decrease4 percent increase in fuel costsmegawatt-hours generated. Megawatt-hours produced through coal-fired generation increased in the six months ended June 30, 2005, as prevailingwe incurred scheduled and unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs and increased off-system sales, rather than generate energy utilizingfrom our gas turbines. The increase in operating expense was also affected by increased legal expense and health insurancecompensation costs, partially offset by lower maintenance costs.
Net income decreased $0.7Income from continuing operations increased $0.9 million primarily due to the increase in purchased power expense, legal expenseincreased revenues, lower maintenance costs and health insurance expense, partially offset by an increase in electric sales and a decrease inlower interest expense, primarily due to the pay down of debt.debt, partially offset by increased fuel and purchased power costs, legal expense and compensation costs.
In July 2005, the electric utility experienced an unscheduled outage at its 90 megawatt Neil Simpson II power plant. That plant is expected to be out of service for the month of August. To meet our forecasted needs, we have obtained supplemental purchased power and additional natural gas supplies, which will negatively affect third quarter 2005 financial results. The economic impact of this outage is expected to be in the range of $2.5 million to $3.0 million pre-tax, taking into account increased fuel costs, higher purchased power expenses and reduced coal sales.
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SAFE HARBOR FOR FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q includes “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 the risk factors described in Items 1 and 2 of our 2004 Annual Report on Form 10-K filed with the SEC, and the following:
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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.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
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 March 31,June 30, 2005. 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 required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods.
Internal Control Over Financial Reporting
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.
BLACK HILLS POWER, INC.
Part II – Other Information
Item 1. | Legal Proceedings |
For information regarding legal proceedings, see Note 10 in Item 8 of the Company’s 2004 Annual Report on Form 10-K and Note 6 of our Notes to Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 6 is incorporated by reference into this item.
For information regarding legal proceedings, see Note 10 of Notes to Consolidated Financial Statements in Item 8 of the Company’s 2004 Annual Report on Form 10-K and Note 6 of our Notes to Financial Statements in this Quarterly Report on Form 10-Q, which information from Note 6 is incorporated by reference into this item. |
Item 6. | Exhibits |
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Exhibit 31.1 | Certification pursuant to Rule 13a |
Exhibit 31.2 | Certification pursuant to Rule 13a |
Exhibit 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 |
Exhibit 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 |
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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 | |||||
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/s/ Mark T. Thies | |||||
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Dated: August 15, 2005
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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 |
Exhibit 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the |
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