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 September 30, 1994.
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 Corporation
Incorporated in South Dakota IRS Identification Number 46-0111677
625 Ninth Street
Rapid City, South Dakota 57709
Registrant's telephone number (605)-348-1700
NONE
Former name, former address, and former fiscal year if changed since
last report
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the last practicable date.
Class Outstanding at October 31, 1994
Common stock, $1.00 par value 14,382,228 shares
BLACK HILLS CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets- 2-3
September 30, 1994, December 31, 1993,
and September 30, 1993
Consolidated Statements of Income- 4
Three, Nine, and Twelve Months
Ended September 30, 1994 and 1993
Consolidated Statements of Cash Flows- 5
Three, Nine, and Twelve Months
Ended September 30, 1994 and 1993
Consolidated Statements of Shareholders' Equity- 6
Three, Nine, and Twelve Months Ended
September 30, 1994 and 1993
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 7-11
Financial Position and Consolidated
Statements of Earnings
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<TABLE> BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
<CAPTION>
September 30 December 31 September 30
1994 1993 1993
(in thousands)
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 6,819 $ 7,866 $ 2,962
Short-term investments 29,325 24,217 11,973
Receivables-
Customers 11,911 12,415 10,588
Other 2,546 901 2,221
Materials, supplies,
and fuel 6,527 6,765 6,438
Prepaid expenses 1,469 1,638 1,783
58,597 53,802 35,965
Property and investments:
Electric 391,809 341,852 330,723
Coal mining 51,708 51,670 46,022
Oil and gas 37,316 32,371 33,806
Other 2,506 7,250 22,396
483,339 433,143 432,947
Less accumulated depreciation
and depletion (153,196) (144,492) (143,096)
Net property and
investments 330,143 288,651 289,851
Deferred charges:
Federal income taxes 7,448 7,271 7,986
Other 4,505 3,129 3,592
11,953 10,400 11,578
Total $400,693 $352,853 $337,394
</TABLE>
<PAGE>
<TABLE> BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
<CAPTION>
September 30 December 31 September 30
1994 1993 1993
(in thousands)
Liabilities and Capitalization
<S> <C> <C> <C>
Current liabilities:
Current maturities of
long-term debt $ 2,144 $ 3,542 $ 3,542
Notes payable 7,493 11,768 13,819
Accounts payable 10,185 9,535 5,156
Accrued liabilities-
Income taxes 660 204 1,250
Other taxes 5,456 5,379 5,173
Interest 2,487 1,700 2,478
Fuel and purchased
power refunds 750 1,375 1,325
Other 6,689 6,023 6,303
35,864 39,526 39,046
Deferred credits:
Federal income taxes 38,549 36,705 38,416
Investment tax credits 5,648 6,027 2,788
Reclamation costs 7,713 7,290 7,129
Regulatory liability 6,912 6,912 8,159
Other 3,626 3,030 2,871
62,448 59,964 59,363
Capitalization:
Common stock equity-
Common stock 14,382 14,270 13,715
Additional paid-in
capital 45,662 43,420 30,608
Retained earnings 113,387 110,399 108,698
Total common stock equity 173,431 168,089 153,021
Long-term debt 128,950 85,274 85,964
302,381 253,363 238,985
Total $400,693 $352,853 $337,394
</TABLE>
<PAGE>
<TABLE> BLACK HILLS CORPORATION
Consolidated Statements of Income
(unaudited)
<CAPTION>
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Electric $27,734 $25,596 $79,574 $73,090 $104,638 $98,918
Coal mining 7,664 7,578 20,197 21,963 28,056 29,147
Oil and gas 3,191 3,130 8,969 8,550 11,816 10,886
38,589 36,304 108,740 103,603 144,510 138,951
Operating expenses:
Fuel and purchased
power 10,121 9,611 31,835 27,106 41,491 37,252
Operations and
maintenance 7,638 7,808 21,507 23,383 29,045 31,371
Administrative and
general 2,297 2,221 5,815 6,613 7,451 8,547
Depreciation,
depletion,
and amortization 4,441 4,155 13,327 11,542 17,837 15,167
Taxes, other than
income taxes 2,745 2,422 7,721 7,099 10,223 8,889
27,242 26,217 80,205 75,743 106,047 101,226
Operating income:
Electric 7,544 6,457 19,205 17,547 25,641 24,358
Coal mining 3,280 3,177 8,209 8,905 11,664 11,896
Oil and gas 523 453 1,121 1,408 1,158 1,471
11,347 10,087 28,535 27,860 38,463 37,725
Other (income) and
expense:
Interest expense 2,718 2,230 7,195 6,641 9,372 8,823
Investment income (393) (452) (1,114) (1,302) (1,550) (2,246)
Allowance for funds
used during
construction (1,049) (139) (2,125) (357) (2,497) (504)
Other (137) (92) (167) (390) (250) (297)
1,139 1,547 3,789 4,592 5,075 5,776
Income before income
taxes 10,208 8,540 24,746 23,268 33,388 31,949
Income taxes (3,229) (2,529) (7,586) (6,580) (9,970) (9,068)
Net income available
for common stock $ 6,979 $ 6,011 $17,160 $16,688 $23,418 $22,881
Weighted average common
shares outstanding 14,360 13,713 14,323 13,709 14,271 13,706
Earnings per share $0.49 $0.44 $1.20 $1.22 $1.64 $1.67
Dividends paid per
share of common stock $0.33 $0.32 $0.99 $0.96 $1.31 $1.27
</TABLE>
<PAGE>
<TABLE> BLACK HILLS CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
<CAPTION>
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided
from (used for)
operating activities:
Net Income $ 6,979 $ 6,011 $17,160 $16,688 $23,418 $22,881
Principal non-cash items-
Depreciation, depletion,
and amortization 4,441 4,155 13,327 11,542 17,837 15,167
Deferred income taxes
and investment tax
credits, net 732 188 1,385 340 2,087 814
Allowance for other funds
used during construction (538) (82) (1,101) (180) (1,254) (168)
(Increase) decrease in
receivables, inventories,
and other current assets (210) (1,113) (734) (867) (1,423) 809
Increase (decrease) in
other current
liabilities 3,792 2,896 2,011 (5,093) 4,542 (3,558)
Other, net 762 676 (388) 1,711 2,150 2,978
15,958 12,731 31,660 24,141 47,357 38,923
Cash flows provided from
(used for) investment
activities:
Neil Simpson Unit #2
construction costs,
excluding allowance for
other funds used during
construction (24,226) (1,749) (42,314) (3,156) (51,829) (4,034)
Other property additions,
excluding allowance for
other funds used during
construction (7,250) (6,858) (16,738) (17,451) (26,573) (26,876)
Short-term investments
purchased (12,555) (3,456) (27,581) (14,538) (44,647) (21,817)
Short-term investments
sold 6,331 6,868 22,472 18,664 27,295 27,844
Proceeds from sale of
long-term investments 203 - 5,269 - 20,000 -
(37,497) (5,195) (58,892) (16,481) (75,754) (24,883)
Cash flows provided from
(used for) financing
activities:
Dividends paid (4,736) (4,389) (14,172) (13,162) (18,729) (17,410)
Common stock issued 758 98 2,354 338 15,721 468
Increase (decrease) in
short-term notes (25,668) (799) (4,275) 5,835 (6,326) 8,085
Long-term debt issued 45,795 - 45,795 - 45,795 -
Long-term debt retired (1,267) (552) (3,517) (3,476) (4,207) (5,021)
14,882 (5,642) 26,185 (10,465) 32,254 (13,878)
Increase (decrease)
in cash and cash
equivalents (6,657) 1,894 (1,047) (2,805) 3,857 162
Cash and cash
equivalents:
Beginning of period 13,476 1,068 7,866 5,767 2,962 2,800
End of period $ 6,819 $ 2,962 $ 6,819 $ 2,962 $ 6,819 $ 2,962
Supplemental disclosure
of cash flow information
Cash paid during the
period for:
Interest $ 1,822 $ 1,512 $ 6,410 $ 6,330 $ 8,949 $ 9,228
Income taxes $ 1,500 $ 1,425 $ 5,525 $ 5,675 $ 8,025 $ 8,325
</TABLE>
<PAGE>
<TABLE> BLACK HILLS CORPORATION
Statements of Shareholders' Equity
(unaudited)
<CAPTION>
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Common stock:
Beginning of period $ 14,345 $ 13,711 $ 14,270 $ 13,701 $ 13,715 $ 13,695
Issuance of $1 par
value shares 37 4 112 14 667 20
End of period 14,382 13,715 14,382 13,715 14,382 13,715
Additional paid-in
capital:
Beginning of period 44,941 30,514 43,420 30,284 30,608 30,160
Excess of proceeds
over par value of
stock issued 763 94 2,251 326 15,711 450
Expenses related to
issuance of stock (42) - (9) (2) (657) (2)
End of period 45,662 30,608 45,662 30,608 45,662 30,608
Retained earnings:
Beginning of period 111,144 107,076 110,399 105,172 108,698 103,227
Net income 6,979 6,011 17,160 16,688 23,418 22,881
Cash dividends on
common stock (4,736) (4,389) (14,172) (13,162) (18,729) (17,410)
End of period 113,387 108,698 113,387 108,698 113,387 108,698
Total shareholders'
equity $173,431 $153,021 $173,431 $153,021 $173,431 $153,021
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BLACK HILLS CORPORATION
Notes to Consolidated Financial Statements
(Reference is made to Notes to Consolidated Financial Statements
included in the Company's Annual Report)
(1) Management's Statement
The financial statements included herein have been prepared by Black
Hills Corporation (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 generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however, the
Company believes that the footnotes adequately disclose the information
presented. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto, included in
the Company's 1993 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 September 30, 1994,
December 31, 1993, and September 30, 1993, financial information and are of
a normal recurring nature. The results of operations for the three and nine
months ended September 30, 1994, are not necessarily indicative of the
results to be expected for the full year.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity, Capital Resources, and Commitments
In the past the Company has depended upon internally generated funds,
issuance of short and long-term debt, and sales of common stock to finance
its activities. It is expected future activities will also be financed by
the most appropriate mix of these various sources of funds.
The Company currently has bank lines of credit totaling $65,000,000
which provides for interim borrowings and the opportunity for timing of
permanent financing. At September 30, 1994, the Company had borrowings of
$7,450,000 outstanding under these lines of credit. There are no
compensating balance requirements associated with these lines of credit. The
Company pays a 0.125% facility fee on $25,000,000 of the existing lines.
The Company completed the refinancing of the $12,200,000 City of
Gillette Pollution Control Revenue Bonds during the third quarter. In 1992
the Company entered into a forward refunding on the $12,200,000,
10.5 percent, City of Gillette Pollution Control Revenue Bonds. The new
bonds were issued in July 1994 at 7.5 percent.
The Company filed a Form S-3, shelf registration for $100,000,000 first
mortgage bonds, with the Securities and Exchange Commission on June 28, 1994.
The registration statement became effective on July 13, 1994. The Company
issued $45,000,000 of bonds under this filing on September 1, 1994. The
bonds have a 30 year life and carry an 8.3 percent interest rate. The bonds
were used to finance Neil Simpson Unit #2, an 80 MW coal fired generating
plant, located adjacent to Wyodak Resources Development Corp's coal mine.
The Company also issued $3,000,000, City of Gillette, Campbell County,
Wyoming, Environmental Improvement Revenue Bonds on June 15, 1994. The
proceeds from the issue are held in a project fund to be disbursed to the
Company periodically to reimburse expenditures on certain facilities under
construction on Neil Simpson Unit #2. The bonds carry a variable rate of
interest which is currently set weekly. These additional financings have
increased the debt component of the Company's capital structure from
33 percent at June 30, 1994, to approximately 43 percent at
September 30, 1994.
Additional long-term financing will be needed in 1994 and 1995 to
finance Neil Simpson Unit #2. The Company estimates that an additional
$30,000,000 to $40,000,000 of debt will need to be issued for the new plant.
Total construction costs of the plant are estimated to be less than
$125,000,000. The Company has incurred approximately $58,000,000 of costs
related to the plant and such costs are reflected in the Company's Balance
Sheet at September 30, 1994. The plant will be fueled by coal from the
Wyodak mine, air cooled, and is expected to meet all Clean Air Act
requirements. Construction commenced at the plant site in August 1993 and is
scheduled to be completed by the end of 1995.
Results of Operations
Black Hills Corporation is an energy services company consisting of
three principal businesses: electric, coal mining, and oil and gas
production.
Consolidated income was $6,979,000 for the three months ended,
$17,160,000 for the nine months ended, and $23,418,000 for the twelve months
ended September 30, 1994, an increase of $968,000, $472,000, and $537,000 for
the three, nine, and twelve month periods, respectively. Although
consolidated net income increased for all three periods presented, earnings
per share decreased for the nine and twelve months ended September 30, 1994
due to a four percent increase in the average shares outstanding.
The increase in consolidated net income for the three periods presented
was primarily due to an increase in firm kilowatt-hour sales and allowance
for funds used during construction offset by a decrease in coal sales caused
by the Wyodak Plant maintenance overhaul in the second quarter of 1994.
Consolidated revenue and income from continuing operations provided by
the three businesses as a percentage of the total were as follows:
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
Revenue
<S> <C> <C> <C> <C> <C> <C>
Electric 72% 70% 73% 71% 72% 71%
Coal mining 20 21 19 21 20 21
Oil and gas 8 9 8 8 8 8
100% 100% 100% 100% 100% 100%
Net Income
Electric 57% 50% 56% 48% 55% 50%
Coal mining 37 45 41 46 42 46
Oil and gas 6 5 3 6 3 4
100% 100% 100% 100% 100% 100%
</TABLE>
Capital expenditures and depreciation, depletion, and amortization by
industry segment were as follows:
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures
(includes AFDC)
Neil Simpson
Unit #2 $24,668 $1,777 $43,217 $ 3,184 $52,825 $ 4,063
Other electric 4,868 3,760 10,360 10,511 12,989 17,916
Coal mining 22 633 509 1,747 6,186 2,365
Oil and gas 2,456 2,519 6,068 5,345 7,656 6,734
$32,014 $8,689 $60,154 $20,787 $79,656 $31,078
Depreciation,
Depletion, and
Amortization
Electric $2,564 $2,516 $7,710 $7,447 $10,216 $ 9,855
Coal mining 577 460 1,710 1,378 2,285 1,702
Oil and gas 1,300 1,179 3,907 2,717 5,336 3,610
$4,441 $4,155 $13,327 $11,542 $17,837 $15,167
</TABLE>
Electric Operations
Electric revenue increased 8 percent, 9 percent, and 6 percent for the
three, nine, and twelve months ended September 30, 1994, respectively, due to
an increase in purchased power costs flowed through to the electric customers
and an increase in firm kilowatt-hour sales. Firm kilowatt-hour sales
increased ten percent in the third quarter and four percent for the nine and
twelve month periods. Cooling degree days, which is a measure of weather
trends, were 158 percent more in the third quarter compared to last year and
12 percent above normal. Purchased power expense was abnormally low for the
nine and twelve months ended September, 1993 due to a refund received on the
Colstrip purchased power contract which was flowed back to customers in 1993.
Electric expenses increased 5 percent, 9 percent, and 6 percent for the
three, nine, and twelve months ended September 30, 1994, compared to the same
periods last year. The increase in expenses was primarily due to the
increase in purchased power costs, depreciation, and property taxes offset by
a decrease in administrative and general expenses.
Non-operating income increased for the three, nine, and twelve months
ended September 30, 1994, primarily due to the allowance for funds used
during construction recorded on the Neil Simpson Unit #2 construction
project. Allowance for funds used during construction increased $910,000,
$1,768,000, and $1,993,000 for the three, nine, and twelve months ended
September 30, 1994 while interest expense increased $523,000, $665,000, and
$676,000, respectively.
Mining Operations
Mining revenue increased one percent for the three months ended and
decreased 8 percent and 4 percent for the nine and twelve month periods ended
September 30, 1994, compared to the same periods last year. Tons of coal
sold increased one percent for the three month period and decreased 11
percent and 9 percent for the nine and twelve month periods,
respectively. The Wyodak Plant was out of service for 35 days for
maintenance during the second quarter thereby reducing the tons of coal sold
significantly.
Mining operating expenses were relatively flat for the three month
period and decreased 8 percent and 5 percent for the nine and twelve
month periods ended September 30, 1994, primarily due to the decrease in tons
of coal sold offset by an increase in depreciation expense.
Non-operating income decreased $30,000, $166,000, and $200,000 for the
three, nine, and twelve months ended September 30, 1994, primarily due to a
decrease in interest income attributable to lower interest rates.
Oil and Gas Production Operations
Oil and gas production revenue which represents less than 10 percent of
consolidated revenue increased 2 percent, 5 percent, and 9 percent for the
three, nine, and twelve months ended September 30, 1994, directly related to
an increase in equivalent barrels of oil sold as a result of the Company's
1993 and 1994 drilling program offset by lower oil prices. Equivalent
barrels of oil sold increased 8 percent, 25 percent, and 34 percent for the
three, nine, and twelve month periods. A decrease in the price of oil offset
the impact of increased production.
Operating expenses were relatively flat for the three month period and
increased approximately 10 percent and 13 percent for the nine and twelve
months ended September 30, 1994, primarily due to an increase in depletion
expense resulting from the increase in production and lower oil prices.
<PAGE>
BLACK HILLS CORPORATION
Part II - Other Information
Item 1. Legal Proceedings
There are no legal proceedings to be reported on for the quarter
ended September 30, 1994.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
The Registrant filed a Form 8-K on August 16, 1994,
announcing the formation of a new subsidiary named WYGEN, an exempt wholesale
generator.
The Registrant filed a Form 8-K on September 2, 1994,
reporting the issuance and sale of $45,000,000 First Mortgage Bonds,
Series AB, 8.3 percent, due September 1, 2024 under a Registration Statement
on Form S-3 (Registration No. 33-54329).
The Registrant filed a Form 8-K on September 12, 1994,
reporting the Company entered into a Power Integration Agreement with
Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc. The
Agreement provides that for a period of 10 years commencing January 1, 1997,
the Company will supply all electric power and energy required by MDU for its
electric service area in and around Sheridan, Wyoming.
BLACK HILLS CORPORATION
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 CORPORATION
/s/ Dale E. Clement
Dale E. Clement, Senior Vice President-Finance
(Principal Financial Officer)
/s/ Gary R. Fish
Gary R. Fish, Controller
(Principal Accounting Officer)
Dated: November 14, 1994
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 277,631,000
<OTHER-PROPERTY-AND-INVEST> 52,512,000
<TOTAL-CURRENT-ASSETS> 58,597,000
<TOTAL-DEFERRED-CHARGES> 11,953,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 400,693,000
<COMMON> 14,382,000
<CAPITAL-SURPLUS-PAID-IN> 45,662,000
<RETAINED-EARNINGS> 113,387,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 173,431,000
0
0
<LONG-TERM-DEBT-NET> 128,950,000
<SHORT-TERM-NOTES> 7,493,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,144,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 88,675,000
<TOT-CAPITALIZATION-AND-LIAB> 400,693,000
<GROSS-OPERATING-REVENUE> 108,740,000
<INCOME-TAX-EXPENSE> 7,586,000
<OTHER-OPERATING-EXPENSES> 80,205,000
<TOTAL-OPERATING-EXPENSES> 87,791,000
<OPERATING-INCOME-LOSS> 20,949,000
<OTHER-INCOME-NET> 3,406,000
<INCOME-BEFORE-INTEREST-EXPEN> 24,355,000
<TOTAL-INTEREST-EXPENSE> 7,195,000
<NET-INCOME> 17,160,000
0
<EARNINGS-AVAILABLE-FOR-COMM> 17,160,000
<COMMON-STOCK-DIVIDENDS> 14,172,000
<TOTAL-INTEREST-ON-BONDS> 6,127,000
<CASH-FLOW-OPERATIONS> 31,660,000
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
