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 March 31, 1995.
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 April 30, 1995
Common stock, $1.00 par value 14,399,499 shares
BLACK HILLS CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets- 2-3
March 31, 1995, December 31, 1994,
and March 31, 1994
Consolidated Statements of Income- 4
Three and Twelve Months
Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows- 5-6
Three and Twelve Months
Ended March 31, 1995 and 1994
Consolidated Statements of Shareholders' Equity- 7
Three and Twelve Months Ended
March 31, 1995 and 1994
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of 8-10
Financial Position and Consolidated
Statements of Earnings
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Signatures 12
<TABLE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
<CAPTION>
March 31 December 31 March 31
1995 1994 1994
(in thousands)
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 4,164 $ 12,174 $ 16,787
Short-term investments 18,225 24,134 26,225
Receivables-
Customers 12,661 12,409 10,931
Other 2,522 4,045 2,524
Materials, supplies,
and fuel 7,552 7,139 7,013
Prepaid expenses 1,286 1,564 1,409
-------- -------- --------
46,410 61,465 64,889
-------- -------- --------
Property and investments:
Electric 442,671 425,690 347,805
Coal mining 51,061 52,267 52,357
Oil and gas 36,022 38,842 32,993
Other 3,254 2,785 3,400
-------- -------- --------
533,008 519,584 436,555
Less accumulated depreciation
and depletion (158,442) (156,046) (148,704)
-------- -------- --------
Net property and
investments 374,566 363,538 287,851
-------- -------- --------
Deferred charges:
Federal income taxes 7,679 7,505 7,317
Other 4,904 4,369 3,407
-------- -------- --------
12,583 11,874 10,724
-------- -------- --------
Total $433,559 $436,877 $363,464
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
<CAPTION>
March 31 December 31 March 31
1995 1994 1994
(in thousands)
Liabilities and Capitalization
<S> <C> <C> <C>
Current liabilities:
Current maturities of
long-term debt $ 2,042 $ 2,144 $ 2,090
Notes payable 2,218 37,018 21,668
Accounts payable 9,131 12,018 6,257
Accrued liabilities-
Income taxes 2,604 572 2,818
Other taxes 6,964 5,759 6,671
Interest 2,833 2,795 2,200
Fuel and purchased
power refunds 1,175 1,025 1,200
Other 6,403 7,101 6,085
-------- -------- -------
33,370 68,432 48,989
-------- -------- -------
Deferred credits:
Federal income taxes 40,955 39,953 36,581
Investment tax credits 5,396 5,521 5,901
Reclamation costs 7,761 7,618 7,441
Regulatory liability 6,693 6,925 6,912
Other 4,206 4,093 3,180
-------- -------- -------
65,011 64,110 60,015
-------- -------- -------
Capitalization:
Common stock equity-
Common stock 14,400 14,386 14,307
Additional paid-in
capital 45,951 45,740 44,184
Retained earnings 116,459 115,284 111,485
Total common stock equity 176,810 175,410 169,976
Long-term debt 158,368 128,925 84,484
-------- -------- --------
335,178 304,335 254,460
-------- -------- --------
Total $433,559 $436,877 $363,464
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BLACK HILLS CORPORATION
Consolidated Statements of Income
(unaudited)
<CAPTION>
Three Months Twelve Months
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric $26,023 $25,870 $104,909 $ 99,385
Coal mining 6,939 7,179 28,353 29,682
Oil and gas 2,977 2,611 12,419 11,591
------- ------- -------- --------
35,939 35,660 145,681 140,658
------- ------- -------- --------
Operating expenses:
Fuel and purchased
power 10,027 9,994 42,002 37,961
Operations &
maintenance 6,306 6,917 28,092 29,880
Administrative and
general 2,704 1,967 8,657 7,935
Depreciation, depletion
and amortization 4,747 4,493 17,930 17,139
Taxes, other than
income taxes 2,652 2,610 10,422 10,259
------- ------- ------- -------
26,436 25,981 107,103 103,174
------- ------- ------- -------
Operating income:
Electric 6,245 6,605 24,717 23,976
Coal mining 2,918 2,963 11,776 12,398
Oil and gas 340 111 2,085 1,110
------- ------- ------- -------
9,503 9,679 38,578 37,484
------- ------- ------- -------
Other (income) and
expense:
Interest expense 3,566 2,147 11,758 8,798
Investment income (400) (347) (1,684) (1,668)
Allowance for
funds used during
construction (2,296) (360) (5,919) (935)
Other (69) 68 (308) (273)
------- ------- ------- -------
801 1,508 3,847 5,922
------- ------- ------- -------
Income before income
taxes 8,702 8,171 34,731 31,562
Income taxes (2,703) (2,371) (10,726) (8,920)
------- ------- -------- --------
Net income available
for common stock $ 5,999 $ 5,800 $ 24,005 $ 22,642
======= ======= ======== ========
Weighted average common
shares outstanding 14,395 14,275 14,366 13,954
======= ======= ======== ========
Earnings per share $ 0.42 $ 0.41 $ 1.67 $ 1.62
======= ======= ======== ========
Dividends paid per share
of common stock $ 0.335 $ 0.330 $ 1.325 $ 1.290
======= ======= ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BLACK HILLS CORPORATION
<CAPTION>
Consolidated Statements of Cash Flows
(unaudited)
Three Months Twelve Months
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Operating activities:
Net Income $ 5,999 $ 5,800 $24,005 $22,642
Principal non-cash items-
Depreciation, depletion,
and amortization 4,747 4,493 17,930 17,139
Deferred income taxes and
investment tax credits,
net 469 204 2,737 1,139
Allowance for other funds
used during construction (1,419) (162) (3,610) (434)
(Increase) decrease in
receivables, inventories,
and other current assets 1,137 (158) (2,144) (1,845)
Increase (decrease) in other
current liabilities (161) 1,015 3,879 (1,178)
Other, net 1,714 (484) 8,295 3,155
------- ------- ------- -------
12,486 10,708 51,092 40,618
------- ------- ------- -------
Investment activities:
Neil Simpson Unit #2
construction costs,
excluding allowance for
other funds used during
construction (13,567) (4,302) (81,558) (16,339)
Other property additions,
excluding allowance for
other funds used during
construction (3,091) (3,437) (28,426) (27,039)
Short-term investments
purchased (7,835) (7,525) (41,419) (31,012)
Short-term investments
sold 13,744 5,517 49,419 21,558
Proceeds from sale of
long-term investments 311 4,215 1,054 18,946
------- ------ -------- -------
(10,438) (5,532) (100,930) (33,886)
------- ------ -------- -------
Financing activities:
Dividends paid (4,824) (4,714) (19,031) (18,047)
Common stock issued 225 801 1,860 14,370
Net short-term borrowings (34,800) 9,900 (19,450) 14,484
Long-term debt issued 31,650 - 77,445 -
Long-term debt retired (2,309) (2,242) (3,609) (4,506)
------- ------ ------- -------
(10,058) 3,745 37,215 6,301
------- ------ ------- -------
Increase (decrease) in
cash and cash equivalents (8,010) 8,921 (12,623) 13,033
Cash and cash equivalents:
Beginning of period 12,174 7,866 16,787 3,754
------- ------- ------- -------
End of period $ 4,164 $16,787 $ 4,164 $16,787
======= ======= ======= =======
Supplemental disclosure
of cash flow information
Cash paid during the
period for:
Interest $ 3,527 $ 1,647 $11,125 $ 9,300
Income taxes $ 2,220 $ - $ 9,510 $ 7,825
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BLACK HILLS CORPORATION
Statements of Shareholders' Equity
(unaudited)
<CAPTION>
Three Months Twelve Months
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Common stock:
Beginning of period $ 14,386 $ 14,270 $ 14,307 $ 13,707
Issuance of $1 par
value shares 14 37 93 600
-------- -------- -------- --------
End of period 14,400 14,307 14,400 14,307
-------- -------- -------- --------
Additional paid-in
capital:
Beginning of period 45,740 43,420 44,184 30,414
Excess of proceeds
over par value of
stock issued 211 753 1,811 14,406
Expenses related to
issuance of stock - 11 (44) (636)
-------- -------- -------- --------
End of period 45,951 44,184 45,951 44,184
-------- -------- -------- --------
Retained earnings:
Beginning of period 115,284 110,399 111,485 106,890
Net income 5,999 5,800 24,005 22,642
Cash dividends on
common stock (4,824) (4,714) (19,031) (18,047)
-------- -------- -------- --------
End of period 116,459 111,485 116,459 111,485
-------- -------- -------- --------
Total shareholders'
equity $176,810 $169,976 $176,810 $169,976
======== ======== ======== ========
</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 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of. This statement
imposes stricter criteria for regulatory assets by requiring that such assets
be probable of future recovery at each balance sheet date. The Company
anticipates adopting this standard on January 1, 1996, and does not expect
that adoption will have a material impact on the financial position or
results of operations of the Company based on the current regulatory
structure in which the Company operates.
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, 1995, December 31, 1994,
and March 31, 1994, financial information and are of a normal recurring
nature. The results of operations for the three months ended March 31, 1995,
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 $45,000,000 which
provides for interim borrowings and the opportunity for timing of permanent
financing. At March 31, 1995, the Company had borrowings of $2,175,000
outstanding under these lines of credit. There are no compensating balance
requirements associated with these lines of credit.
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 and
$30,000,000 of bonds on February 3, 1995. The $30,000,000 bond issue has a
15 year life and carries an 8.06 percent interest rate. The bondholders have
a one-time option to cause the Company to redeem the bonds. 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.
Management believes that this issue will complete the long-term debt
financing associated with Neil Simpson Unit #2. The remaining expenditures
related to the project will be financed by existing cash balances, short-term
investments, and short-term lines of credit.
Construction of the Plant is proceeding ahead of schedule and costs
incurred to date are under the initial project budget. Total construction
costs of the plant are estimated to be approximately $121,000,000. The
Company has incurred approximately $104,000,000 of costs related to the plant
and such costs are reflected in the Company's Balance Sheet at March 31,
1995. 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
September 1, 1995.
The Company filed applications with the South Dakota Public Utilities
Commission and Wyoming Public Service Commission during the first quarter of
1995, requesting authority to increase rates approximately 9.96% when Neil
Simpson Unit #2 begins commercial operation, scheduled to occur September 1,
1995. Rate hearings have been scheduled for July 17-19 in South Dakota and
August 14-15 in Wyoming. See the Company's 1994 Annual Report on Form 10-K
for more information on the Rate Applications.
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 $5,999,000 for the three months ended and
$24,005,000 for the twelve months ended March 31, 1995, an increase of
$199,000 and $1,363,000 for the three and twelve month periods, respectively.
The increase in consolidated net income for the first quarter was
primarily due to a $365,000 increase in earnings from the oil and gas
operations. The increase in earnings for the twelve month period was the
result of increased electric and oil and gas earnings caused by increased
electric sales and an increase in oil and gas production.
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 Twelve Months Ended
March 31 March 31
1995 1994 1995 1994
Revenue
<S> <C> <C> <C> <C>
Electric 73% 73% 72% 71%
Coal mining 19 20 19 21
Oil and gas 8 7 9 8
--- --- --- ---
100% 100% 100% 100%
=== === === ===
Net Income
Electric 56% 59% 53% 50%
Coal mining 40 43 41 47
Oil and gas 4 (2) 6 3
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
Capital expenditures and depreciation, depletion, and amortization by
industry segment were as follows:
<TABLE>
<CAPTION> Three Months Ended Twelve Months Ended
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Capital Expenditures
(includes AFDC)
Neil Simpson
Unit #2 $14,942 $4,454 $ 84,808 $16,608
Other electric 2,039 1,859 14,391 13,040
Coal mining 103 687 5,326 7,758
Oil and gas 993 901 9,069 6,406
------- ------ -------- -------
$18,077 $7,901 $113,594 $43,812
======= ====== ======== =======
Depreciation,
Depletion, and
Amortization
Electric $2,644 $2,588 $10,370 $10,103
Coal mining 906 573 2,836 2,065
Oil and gas 1,197 1,332 4,724 4,971
------ ------ ------- -------
$4,747 $4,493 $17,930 $17,139
====== ====== ======= =======
</TABLE>
Electric Operations
Electric revenue increased 0.6 percent and 6 percent for the three and
twelve months ended March 31, 1995, respectively. Revenue for the three
month period was relatively flat due to flat kilowatthour sales. The flat
kilowatthour sales were the result of mild weather. Degree days, which is a
measure of weather trends were 10 percent below normal for the first quarter
of 1995 and 9 percent below last year. The increase in electric revenue for
the twelve month period was the result of a 3 percent increase in firm
kilowatthour sales and an increase in purchased power expense. Purchased
power expense was abnormally low for the twelve months ended March 1994 due
to a refund received on the Colstrip purchased power contract which was
flowed back to customers in 1993.
Electric expenses increased 3 percent and 6 percent for the three and
twelve months ended March 31, 1995, compared to the same periods last year.
The increase in expenses was primarily due to an increase in administrative
and general expenses for both periods and an increase in purchased power cost
for the twelve month period.
Non-operating income increased for the three and twelve months ended
March 31, 1995, 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 $1,936,000 and
$4,984,000 for the three and twelve months ended March 31, 1995, while
interest expense increased $1,392,000 and $3,052,000, respectively.
Mining Operations
Mining revenue decreased 3 percent and 4 percent for the three and twelve
month periods ended March 31, 1995, compared to the same periods last year.
Tons of coal sold decreased 6 percent and 7 percent for the three and twelve
month periods, respectively. The Wyodak Plant was out of service for
maintenance for 13 days during the first quarter of 1995 and 35 days during
the second quarter of 1994 thereby reducing the tons of coal sold
significantly.
Mining operating expenses decreased 6 percent and 5 percent for the three
and twelve month periods ended March 31, 1995, primarily due to the decrease
in tons of coal sold offset by an increase in depreciation expense.
Non-operating income increased $256,000 and $226,000 for the three and
twelve months ended March 31, 1995.
Oil and Gas Production Operations
Oil and gas production revenue which represents less than 10 percent of
consolidated revenue increased 14 percent and 7 percent for the three and
twelve months ended March 31, 1995, directly related to an increase in
equivalent barrels of oil sold as a result of the Company's 1993 and 1994
drilling program, along with an increase in oil prices. Equivalent barrels
of oil sold increased 31 percent and 29 percent for the three and twelve
month periods.
Operating expenses increased 6 percent for the three month period and
decreased 1 percent for the twelve months ended March 31, 1995, due to the
increase in production offset by lower depletion expense.
<PAGE>
BLACK HILLS CORPORATION
Part II - Other Information
Item 1. Legal Proceedings
The Company filed a complaint with the Federal Energy Regulatory
Commission seeking refunds related to alleged overbillings by PacifiCorp
under a 40 year contract for the purchase of power. The complaint requests
a refund of approximately $3,936,000 plus interest of $1,630,000 related to
prior periods and a 2.5% reduction of future costs or $492,000 per year for
the next 24 years under the contract. The overbillings relate to income tax
benefits that the Company alleges have not been properly reflected in the
calculation of contract costs. This matter will not impact the earnings of
the Company because the Company is obligated, if successful, to return any
refunds related to this complaint to its customers under existing fuel and
purchase power adjustment tariffs.
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 February 3, 1995, reporting
the issuance and sale of $30,000,000 First Mortgage Bonds, Series AC, 8.06
percent, due February 1, 2010 under a Registration Statement on Form S-3
(Registration No. 33-54329).
<PAGE>
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: May 10, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 323,520,000
<OTHER-PROPERTY-AND-INVEST> 51,046,000
<TOTAL-CURRENT-ASSETS> 46,410,000
<TOTAL-DEFERRED-CHARGES> 12,583,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 433,559,000
<COMMON> 14,400,000
<CAPITAL-SURPLUS-PAID-IN> 45,951,000
<RETAINED-EARNINGS> 116,459,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 176,810,000
0
0
<LONG-TERM-DEBT-NET> 158,368,000
<SHORT-TERM-NOTES> 2,218,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,042,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 94,121,000
<TOT-CAPITALIZATION-AND-LIAB> 433,559,000
<GROSS-OPERATING-REVENUE> 35,939,000
<INCOME-TAX-EXPENSE> 2,703,000
<OTHER-OPERATING-EXPENSES> 26,436,000
<TOTAL-OPERATING-EXPENSES> 29,139,000
<OPERATING-INCOME-LOSS> 6,800,000
<OTHER-INCOME-NET> 2,765,000
<INCOME-BEFORE-INTEREST-EXPEN> 9,565,000
<TOTAL-INTEREST-EXPENSE> 3,566,000
<NET-INCOME> 5,999,000
0
<EARNINGS-AVAILABLE-FOR-COMM> 5,999,000
<COMMON-STOCK-DIVIDENDS> 4,824,000
<TOTAL-INTEREST-ON-BONDS> 3,137,000
<CASH-FLOW-OPERATIONS> 12,486,000
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
