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, 1996.
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, 1996
Common stock, $1.00 par value 14,446,167 shares
<PAGE>
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, 1996, December 31, 1995
and September 30, 1995
Consolidated Statements of Income- 4
Three, Nine and Twelve Months
Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows- 5
Three, Nine and Twelve Months
Ended September 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity- 6
Three, Nine and Twelve Months Ended
September 30, 1996 and 1995
Notes to Consolidated Financial Statements 7
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
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
September 30 December 31 September 30
1996 1995 1995
------------ ----------- ------------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 7,529 $ 8,179 $ 11,674
Securities available for sale 10,685 6,804 4,696
Receivables, net
Customers 12,177 13,339 13,004
Other 8,346 3,825 2,553
Materials, supplies,
and fuel 7,489 7,415 7,432
Prepaid expenses 2,422 1,247 1,595
-------- -------- --------
48,648 40,809 40,954
-------- -------- --------
Property and investments:
Electric 477,040 469,135 463,713
Coal mining 49,763 44,473 51,311
Oil and gas 43,861 40,704 38,755
Other 3,273 3,330 4,465
-------- -------- --------
573,937 557,642 558,244
Less accumulated depreciation
and depletion (180,713) (164,383) (168,248)
-------- -------- --------
Net property and
investments 393,224 393,259 389,996
-------- -------- --------
Deferred charges:
Federal income taxes 7,803 7,543 7,672
Regulatory asset 3,026 2,576 709
Other 8,632 4,643 5,198
-------- -------- --------
19,461 14,762 13,579
-------- -------- --------
Total $461,333 $448,830 $444,529
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
September 30 December 31 September 30
1996 1995 1995
------------ ----------- ------------
(in thousands)
LIABILITIES AND CAPITALIZATION
Current liabilities:
Current maturities of
long-term debt $ 1,534 $ 1,405 $ 2,070
Notes payable 1,348 618 4,403
Accounts payable 6,090 9,737 7,668
Accrued liabilities-
Taxes 6,823 7,046 6,612
Interest 3,011 4,089 2,959
Other 7,117 6,978 6,795
-------- -------- --------
25,923 29,873 30,507
-------- -------- --------
Deferred credits:
Federal income taxes 47,207 45,290 42,514
Investment tax credits 4,641 5,018 5,144
Reclamation costs 16,293 7,974 7,881
Regulatory liability 6,944 7,111 7,371
Other 5,667 5,153 5,157
-------- -------- --------
80,752 70,546 68,067
-------- -------- --------
Capitalization:
Common stock equity-
Common stock 14,446 14,425 14,417
Additional paid-in
capital 46,763 46,355 46,231
Retained earnings 128,746 121,562 119,377
-------- -------- --------
Total common stock equity 189,955 182,342 180,025
Long-term debt 164,703 166,069 165,930
-------- -------- --------
354,658 348,411 345,955
-------- -------- --------
Total $461,333 $448,830 $444,529
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Income
(unaudited)
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Operating revenues:
Electric $31,073 $29,596 $88,357 $79,608 $117,532 $104,791
Coal mining 8,262 6,755 23,749 21,490 32,128 29,887
Oil and gas 3,230 2,711 9,348 8,505 12,007 11,588
------- ------- ------- ------- ------- -------
42,565 39,062 121,454 109,603 161,667 146,266
------- ------- ------- ------- ------- -------
Operating expenses:
Fuel and purchased
power 9,034 10,186 25,780 29,956 35,090 40,090
Operations and
maintenance 7,190 6,662 22,276 19,492 31,086 26,649
Administrative and
general 2,301 2,433 6,239 6,896 8,776 9,000
Depreciation,
depletion,
and amortization 5,928 5,604 17,357 15,193 21,817 19,467
Taxes, other than
income taxes 3,193 2,549 9,506 7,920 12,575 10,618
------- ------- ------- ------- ------- -------
27,646 27,434 81,158 79,457 109,344 105,824
------- ------- ------- ------- ------- -------
Operating income:
Electric 10,828 8,980 29,057 20,169 37,129 26,041
Coal mining 3,304 2,668 9,604 9,238 12,591 12,927
Oil and gas 787 (20) 1,635 739 2,603 1,474
------- ------- ------- ------- ------- -------
14,919 11,628 40,296 30,146 52,323 40,442
------- ------- ------- ------- ------- -------
Other income and
(expense):
Interest expense (3,489) (3,524) (10,419) (10,537) (14,078) (13,679)
Investment income 400 295 982 953 1,398 1,471
Allowance for funds
used during
construction 111 1,014 360 5,840 387 7,698
Other, net 122 729 771 736 1,151 662
------- ------- ------- ------- ------- -------
(2,856) (1,486) (8,306) (3,008) (11,142) (3,848)
------- ------- ------- ------- ------- -------
Income before income
taxes 12,063 10,142 31,990 27,138 41,181 36,594
Income taxes (3,820) (3,210) (9,861) (8,564) (12,035) (11,376)
------- ------- ------- ------- ------- -------
Net income available
for common stock $ 8,243 $ 6,932 $22,129 $18,574 $29,146 $25,218
======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding 14,443 14,414 14,437 14,404 14,433 14,400
======= ======= ======= ======= ======= =======
Earnings per share $0.57 $0.48 1.53 $1.29 $2.02 $1.75
======= ======= ======= ======= ======= =======
Dividends paid per
share of common stock $0.345 $0.335 $1.035 $1.005 $1.370 $1.335
======= ======= ======= ======= ======= =======
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Operating activities:
Net Income $ 8,243 $ 6,932 $22,129 $18,574 $29,146 $25,218
Principal non-cash items-
Depreciation, depletion,
and amortization 5,928 5,604 17,357 15,193 21,817 19,467
Deferred income taxes
and investment tax
credits, net 208 971 1,122 1,746 1,473 2,832
Allowance for other funds
used during construction (70) (643) (227) (3,625) (247) (4,895)
(Increase) decrease in
receivables, inventories,
and other current assets (3,422) (2,709) (4,608) 574 (5,850) (2,657)
Increase (decrease) in
other current
liabilities 3,737 (2,099) (4,809) (5,237) (993) (2,193)
Other, net 1,656 (322) 2,028 1,564 4,553 7,981
------- ------- ------- ------- ------- -------
16,280 7,734 32,992 28,789 49,899 45,753
------- ------- ------- ------- ------- -------
Investment activities:
Property additions,
excluding allowance
for other funds used
during construction (7,292) (9,514) (14,738) (38,966) (24,021) (80,601)
Available for sale
securities purchased (3,285) (2,637) (13,191) (11,071) (22,079) (25,211)
Available for sale
securities sold 3,198 7,775 9,310 30,391 16,090 49,722
------- ------- ------- ------- ------- -------
(7,379) (4,376) (18,619) (19,646) (30,010) (56,090)
------- ------- ------- ------- ------- -------
Financing activities:
Dividends paid (4,985) (4,830) (14,945) (14,481) (19,777) (19,228)
Common stock issued 126 140 429 522 561 604
Net short-term borrowings 270 835 730 (32,615) (3,055) (3,090)
Long-term debt issued - 15,121 - 46,765 - 46,765
Long-term debt retired (550) (7,517) (1,237) (9,834) (1,763) (9,859)
------- ------- ------- ------- ------- -------
(5,139) 3,749 (15,023) (9,643) (24,034) 15,192
------- ------- ------- ------- ------- -------
Increase (decrease)
in cash and cash
equivalents 3,762 7,107 (650) (500) (4,145) 4,855
Cash and cash
equivalents:
Beginning of period 3,767 4,567 8,179 12,174 11,674 6,819
------- ------- ------- ------- ------- -------
End of period $ 7,529 $11,674 $ 7,529 $11,674 $ 7,529 $11,674
======= ======= ======= ======= ======= =======
Supplemental disclosure
of cash flow information
Cash paid during the
period for:
Interest $ 4,524 $ 4,207 $11,495 $10,373 $14,026 $13,205
Income taxes $ 2,666 $ 1,550 $ 9,416 $ 5,695 $11,496 $ 7,460
Assumption of reclamation
liability in acquisition
of Clovis Point
properties $ 7,800 $ - $ 7,800 $ - $ 7,800 $ -
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Shareholders' Equity
(unaudited)
Three Months Nine Months Twelve Months
September 30 September 30 September 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Common stock:
Beginning of period $ 14,440 $ 14,409 $ 14,425 $ 14,386 $ 14,417 $ 14,382
Issuance of $1 par
value shares 6 8 21 31 29 35
-------- -------- -------- -------- --------- --------
End of period 14,446 14,417 14,446 14,417 14,446 14,417
-------- -------- -------- -------- --------- --------
Additional paid-in
capital:
Beginning of period 46,643 46,099 46,355 45,740 46,231 45,662
Net proceeds over
par value of
stock issued 120 132 408 491 532 569
-------- -------- -------- -------- -------- --------
End of period 46,763 46,231 46,763 46,231 46,763 46,231
-------- -------- -------- -------- -------- --------
Retained earnings:
Beginning of period 125,488 117,275 121,562 115,284 119,377 113,387
Net income 8,243 6,932 22,129 18,574 29,146 25,218
Cash dividends on
common stock (4,985) (4,830) (14,945) (14,481) (19,777) (19,228)
-------- ------- ------- ------- ------- -------
End of period 128,746 119,377 128,746 119,377 128,746 119,377
-------- ------- ------- ------- ------- -------
Total shareholders'
equity $189,955 $180,025 $189,955 $180,025 $189,955 $180,025
======== ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
<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 1995 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, 1996, December 31, 1995
and September 30, 1995, financial information and are of a normal recurring
nature. The results of operations for the three and nine months ended
September 30, 1996, are not necessarily indicative of the results to be
expected for the full year.
(2) FORMATION OF AN ENERGY MARKETING COMPANY
In August 1996, the Company announced the formation of a new energy
marketing company, Enserco Energy Inc., headquartered in Lakewood, Colorado.
The Company owns a 50 percent interest in Enserco with an option to increase
its ownership interest to 70 percent. Enserco will market natural gas and
electricity and related services to customers in the Rocky Mountain region
initially, expanding to national markets in the future. The results of
operations of Enserco for the periods ending September 30, 1996 were not
significant.
(3) AGREEMENT TO PURCHASE CLOVIS POINT MINE PROPERTIES
In September 1996, Wyodak Resources Development Corp., a subsidiary of the
Company, entered into an agreement to purchase a portion of the Clovis Point
and East Gillette Mine properties from Kerr-McGee Coal Corporation. The Clovis
Point Mine properties are located adjacent to Wyodak Resources' current
reserves in Campbell County, Wyoming, and consist of State of Wyoming and
federal leased coal reserves. The sale is subject to certain federal and state
approvals.
<PAGE>
Upon completion of the acquisition, Wyodak Resources will increase its coal
reserves from approximately 173 million tons to 300 million tons and will own a
train loadout facility. In addition, the acquisition includes the existing
Clovis Point maintenance and processing facilities and a developed open pit.
The purchase price for the acquisition consists of Wyodak Resources'
obligation to assume the responsibility for the reclamation of an existing
Clovis Point open pit and to pay Kerr-McGee overriding royalties if and when
coal is produced from the acquired properties without any obligation of Wyodak
Resources to mine the coal. As of September 30, Wyodak had recorded $7.8
million of mining assets and liabilities related to this transaction. An
independent study is currently being conducted to support the acquisition price
and related reclamation liability.
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 $12,000,000, which
provides for interim borrowings and the opportunity for timing of permanent
financing. The Company had borrowings outstanding of $680,000 under these
lines of credit on September 30, 1996. There are no compensating balance
requirements associated with these lines of credit.
In addition to the above lines of credit, Wyodak Resources Development Corp.
has guaranteed a $15,000,000 line of credit for Enserco Energy, Inc. to use to
guarantee letters of credit. Enserco pays a .125% facility fee on this line of
credit. At September 30, 1996, there were no balances outstanding on this line
of credit.
RESULTS OF OPERATIONS
Black Hills Corporation is an energy company consisting of three principal
businesses: electric, coal mining and oil and gas production.
Consolidated income was $8,243,000 for the three months ended, $22,129,000
for the nine months ended and $29,146,000 for the twelve months ended September
30, 1996, an increase of 19 percent for the three and nine month periods and 16
percent for the twelve month period. The increase in earnings was primarily
due to strong sales growth for the electric operations and increased oil and
gas prices.
<PAGE>
Consolidated revenue and income from continuing operations provided by the
three businesses as a percentage of the total were as follows:
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
REVENUE
Electric 73% 76% 73% 73% 73% 72%
Coal mining 19 17 20 20 20 20
Oil and gas 8 7 7 7 7 8
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
NET INCOME
Electric 64% 64% 62% 57% 61% 55%
Coal mining 29 35 33 40 33 41
Oil and gas 7 1 5 3 6 4
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
Capital expenditures and depreciation, depletion, and amortization by
industry segment were as follows:
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
CAPITAL EXPENDITURES
(includes AFDC)
Electric $ 3,866 $ 8,475 $ 8,665 $38,707 $14,420 $73,300
Coal mining 1,208 172 1,404 355 2,593 5,286
Oil and gas 2,236 1,510 4,836 3,529 7,195 6,438
Other 52 - 60 - 60 472
------- ------- ------- ------- ------- -------
$ 7,362 $10,157 $14,965 $42,591 $24,268 $85,496
======= ======= ======= ======= ======= =======
DEPRECIATION,
DEPLETION, AND
AMORTIZATION
Electric $4,092 $ 3,249 $11,896 $ 8,554 $15,285 $ 11,158
Coal mining 664 873 1,974 2,811 2,738 3,529
Oil and gas 1,172 1,482 3,487 3,828 3,794 4,780
------ ------- ------- ------- ------- --------
$5,928 $ 5,604 $17,357 $15,193 $21,817 $ 19,467
====== ======= ======= ======= ======= ========
ELECTRIC OPERATIONS
Electric revenue increased 5 percent, 11 percent and 12 percent for the
three, nine and twelve months ended September 30, 1996, primarily due to strong
growth in sales and earnings associated with the inclusion of NS #2 in the
Company's rate base. Firm kilowatthour sales increased 4 percent for the three
and nine months ended, and 3 percent for the twelve month period. Degree days,
which is a measure of weather trends, were 7 percent below normal for the third
quarter of 1996 and 7 percent below last year. Degree days for the nine month
period were 13 percent above last year and 11 percent above normal.
<PAGE>
Non-firm sales increased 66,530 megawatt hours for the three month period,
134,680 megawatt hours for the nine month period and 167,880 megawatt hours for
the twelve month period. Although the increase in non-firm sales generated an
$821,000, $1,362,000 and $1,680,000 increase in electric revenue, respectively,
they were low margin sales and generated minimal earnings.
Electric expenses remained relatively flat for the three and nine months
ended September 30, 1996. Although purchased power expense decreased,
depreciation and amortization expense increased. This increase was largely due
to the depreciation on Neil Simpson Unit #2 (NS #2) and the accelerated
depreciation on the Kirk Plant. The Kirk Power Plant was placed in cold
reserve in August 1995 and is expected to be fully depreciated in the fourth
quarter of 1996. Expenses for the twelve month period increased 2 percent,
also due to the inclusion of NS #2 in the Company's rate base and accelerated
depreciation taken on Kirk.
Non-operating income decreased for the three, nine and twelve month periods
due to a decrease in AFUDC of $0.9 million, $5.5 million and $7.3 million,
respectively. This was a reflection of the completion of construction on NS #2
and was offset by the increase in electric revenues.
MINING OPERATIONS
Mining revenue increased 22 percent, 11 percent and 8 percent for the three,
nine and twelve month periods ended September 30, 1996, compared to the same
periods last year. Tons of coal sold increased 23 percent, 13 percent and 10
percent for the three, nine and twelve month periods. This increase was a
reflection of the sale of coal to NS #2. Mining expenses increased 21 percent
for the third quarter and 15 percent for the nine and twelve months ended
September 30, 1996. The increase in expense is related to the increase in tons
of coal sold as well as an increase in royalty expense offset by lower
depletion expense. Last year a portion of the coal mined was fee coal which
does not carry a federal royalty, whereas this year the coal mined was all
Federal coal.
OIL AND GAS PRODUCTION OPERATIONS
Oil and gas production revenue, which represents less than 10 percent of
consolidated revenue, increased 19 percent, 10 percent and 4 percent for the
three, nine and twelve months ended September 30, 1996, respectively. This
increase was directly related to an increase in oil and gas prices offset by a
decrease in equivalent barrels of oil sold.
Operating expenses decreased 11 percent, .9 percent and 7 percent for the
three, nine and twelve month periods ended September 30, 1996, when compared to
the same periods last year.
<PAGE>
BLACK HILLS CORPORATION
Part II - Other Information
Item 1. LEGAL PROCEEDINGS
There are no legal proceedings to be reported on for the quarter ending
September 30, 1996.
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 27, 1996, reporting
participation in a new Energy Marketing Company named Enserco Energy
Inc.
The Registrant filed a Form 8-K on September 20, 1996, reporting
Wyodak Resources Development Corp., a subsidiary of Black Hills
Corporation, has agreed to purchase Clovis Point Mine properties from
Kerr-McGee Coal Corporation.
<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: November 13, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 338,294,000
<OTHER-PROPERTY-AND-INVEST> 54,930,000
<TOTAL-CURRENT-ASSETS> 48,648,000
<TOTAL-DEFERRED-CHARGES> 19,461,000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 461,333,000
<COMMON> 14,446,000
<CAPITAL-SURPLUS-PAID-IN> 46,763,000
<RETAINED-EARNINGS> 128,746,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 189,955,000
0
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<LONG-TERM-DEBT-NET> 164,703,000
<SHORT-TERM-NOTES> 1,348,000
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<GROSS-OPERATING-REVENUE> 121,454,000
<INCOME-TAX-EXPENSE> 9,861,000
<OTHER-OPERATING-EXPENSES> 81,158,000
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<OPERATING-INCOME-LOSS> 30,435,000
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<EARNINGS-AVAILABLE-FOR-COMM> 22,129,000
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