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 June 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 July 31, 1996
Common stock, $1.00 par value 14,439,930 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
June 30, 1996, December 31, 1995
and June 30, 1995
Consolidated Statements of Income- 4
Three, Six and Twelve Months
Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows- 5
Three, Six and Twelve Months
Ended June 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity- 6
Three, Six and Twelve Months Ended
June 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)
June 30 December 31 June 30
1996 1995 1995
------- ----------- -------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 3,767 $ 8,179 $ 4,567
Securities available for sale 10,598 6,804 10,263
Receivables, net
Customers 11,092 13,339 10,537
Other 7,637 3,825 2,446
Materials, supplies,
and fuel 7,508 7,415 7,619
Prepaid expenses 775 1,247 1,273
-------- -------- --------
41,377 40,809 36,705
-------- -------- --------
Property and investments:
Electric 473,295 469,135 455,399
Coal mining 44,668 44,473 51,139
Oil and gas 42,991 40,704 37,072
Other 3,664 3,330 3,312
-------- -------- --------
564,618 557,642 546,922
Less accumulated depreciation
and depletion (174,836) (164,383) (162,764)
-------- -------- --------
Net property and
investments 389,782 393,259 384,158
-------- -------- --------
Deferred charges:
Federal income taxes 7,620 7,543 7,678
Regulatory asset 2,876 2,576 709
Other 4,544 4,643 5,060
-------- -------- --------
15,040 14,762 13,447
-------- -------- --------
Total $446,199 $448,830 $434,310
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
June 30 December 31 June 30
1996 1995 1995
------- ----------- -------
(in thousands)
LIABILITIES AND CAPITALIZATION
Current liabilities:
Current maturities of
long-term debt $ 1,468 $ 1,405 $ 2,034
Notes payable 1,078 618 3,568
Accounts payable 3,714 9,737 8,642
Accrued liabilities-
Taxes 5,857 7,046 6,240
Interest 4,046 4,089 3,642
Other 5,687 6,978 7,608
-------- -------- --------
21,850 29,873 31,734
-------- -------- --------
Deferred credits:
Federal income taxes 46,873 45,290 41,385
Investment tax credits 4,767 5,018 5,270
Reclamation costs 8,314 7,974 7,928
Regulatory liability 6,998 7,111 7,409
Other 5,507 5,153 4,439
-------- -------- --------
72,459 70,546 66,431
-------- -------- --------
Capitalization:
Common stock equity-
Common stock 14,440 14,425 14,409
Additional paid-in
capital 46,643 46,355 46,099
Retained earnings 125,488 121,562 117,275
-------- -------- --------
Total common stock equity 186,571 182,342 177,783
Long-term debt 165,319 166,069 158,362
-------- -------- --------
351,890 348,411 336,145
-------- -------- --------
Total $446,199 $448,830 $434,310
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Income
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Operating revenues:
Electric $26,978 $23,990 $57,283 $50,013 $116,054 $102,929
Coal mining 7,418 7,797 15,486 14,736 30,620 30,797
Oil and gas 3,387 2,816 6,118 5,794 11,487 12,068
------- ------- ------- ------- -------- --------
37,783 34,603 78,887 70,543 158,161 145,794
------- ------- ------- ------- -------- --------
Operating expenses:
Fuel and purchased
power 7,931 9,743 16,745 19,770 36,241 40,025
Operations and
maintenance 7,635 6,540 15,084 12,870 30,569 27,705
Administrative and
general 1,843 1,799 3,940 4,478 8,909 8,881
Depreciation,
depletion,
and amortization 6,023 4,900 11,429 9,648 21,493 18,437
Taxes, other than
income taxes 3,155 2,719 6,313 5,372 11,932 10,775
------- ------- ------- ------- -------- --------
26,587 25,701 53,511 52,138 109,144 105,823
------- ------- ------- ------- -------- --------
Operating income:
Electric 7,642 4,946 18,229 11,190 35,281 24,606
Coal mining 2,994 3,537 6,299 6,456 11,954 13,348
Oil and gas 560 419 848 759 1,782 2,017
------- ------- ------- ------- -------- --------
11,196 8,902 25,376 18,405 49,017 39,971
------- ------- ------- ------- -------- --------
Other income and
(expense):
Interest expense (3,462) (3,448) (6,930) (7,015) (14,113) (12,875)
Investment income 346 261 583 661 1,292 1,571
Allowance for funds
used during
construction 134 2,530 250 4,826 1,290 7,732
Other, net 127 50 650 120 1,774 260
------- ------- ------- ------- -------- --------
(2,855) (607) (5,447) (1,408) (9,757) (3,312)
------- ------- ------- ------- -------- --------
Income before income
taxes 8,341 8,295 19,929 16,997 39,260 36,659
Income taxes (2,454) (2,653) (6,043) (5,355) (11,424) (11,394)
------- ------- ------- ------- -------- --------
Net income available
for common stock $ 5,887 $ 5,642 $13,886 $11,642 $27,836 $25,265
======= ======= ======= ======= ======== ========
Weighted average common
shares outstanding 14,437 14,405 14,433 14,400 14,425 14,386
======= ======= ======= ======= ======== =======
Earnings per share $0.41 $0.39 $0.96 $0.81 $1.93 $1.76
======= ======= ======= ======= ======== =======
Dividends paid per
share of common stock $0.345 $0.335 $0.690 $0.670 $1.360 $1.330
======= ======= ======= ======= ======== =======
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Operating activities:
Net Income $5,887 $5,642 $13,886 $11,642 $27,836 $25,265
Principal non-cash items-
Depreciation, depletion,
and amortization 6,023 4,900 11,429 9,648 21,493 18,437
Deferred income taxes
and investment tax
credits, net 384 179 913 522 2,235 2,088
Allowance for other funds
used during construction (83) (1,564) (156) (2,982) (819) (4,791)
(Increase) decrease in
receivables, inventories,
and other current assets (357) 2,146 (1,186) 3,283 (5,137) 369
Increase (decrease) in
other current
liabilities (5,690) (2,977) (8,546) (3,138) (6,829) 3,698
Other, net 91 242 373 2,081 2,146 9,222
------ ------ ------- ------- ------- -------
6,255 8,568 16,713 21,056 40,925 54,288
------ ------ ------- ------- ------- -------
Investment activities:
Property additions,
excluding allowance for
other funds used during
construction (5,041) (12,794) (7,447) (29,453) (26,243) (102,563)
Available for sale
securities purchased (233) (599) (9,905) (8,434) (20,799) (35,332)
Available for sale
securities sold 3,100 8,561 6,111 22,616 20,464 48,373
------ ------ ------- ------- ------- -------
(2,174) (4,832) (11,241) (15,271) (26,578) (89,522)
------ ------ ------- ------- ------- -------
Financing activities:
Dividends paid (4,982) (4,826) (9,960) (9,651) (19,623) (19,134)
Common stock issued 123 157 303 382 575 1,222
Net short-term borrowings 155 1,350 460 (33,450) (2,490) (29,593)
Long-term debt issued - - - 31,644 15,254 77,439
Long-term debt retired - (14) (687) (2,317) (8,863) (3,609)
------ ------ ------- ------- ------- -------
(4,704) (3,333) (9,884) (13,392) (15,147) 26,325
------ ------ ------- ------- ------- -------
Increase (decrease)
in cash and cash
equivalents (623) 403 (4,412) (7,607) (800) (8,909)
Cash and cash
equivalents:
Beginning of period 4,390 4,164 8,179 12,174 4,567 13,476
------- ------- ------- ------- ------- -------
End of period $ 3,767 $ 4,567 $ 3,767 $ 4,567 $ 3,767 $ 4,567
======= ======= ======= ======= ======= =======
Supplemental disclosure
of cash flow information
Cash paid during the
period for:
Interest $ 2,426 $ 2,639 $ 6,973 $ 6,168 $13,709 $10,822
Income taxes $ 6,150 $ 1,925 $ 6,750 $ 4,145 $10,380 $ 7,410
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Shareholders' Equity
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
Common stock:
Beginning of period $ 14,434 $ 14,400 $ 14,425 $ 14,386 $ 14,409 $ 14,345
Issuance of $1 par
value shares 6 9 15 23 31 64
-------- -------- -------- -------- -------- --------
End of period 14,440 14,409 14,440 14,409 14,440 14,409
-------- -------- -------- -------- -------- --------
Additional paid-in
capital:
Beginning of period 46,526 45,951 46,355 45,740 46,099 44,942
Net proceeds over
par value of
stock issued 117 148 288 359 544 1,157
-------- -------- ------- ------- ------- -------
End of period 46,643 46,099 46,643 46,099 46,643 46,099
-------- -------- ------- ------- ------- -------
Retained earnings:
Beginning of period 124,583 116,459 121,562 115,284 117,275 111,144
Net income 5,887 5,642 13,886 11,642 27,836 25,265
Cash dividends on
common stock (4,982) (4,826) (9,960) (9,651) (19,623) (19,134)
-------- ------- ------- ------- ------- -------
End of period 125,488 117,275 125,488 117,275 125,488 117,275
-------- ------- ------- ------- ------- -------
Total shareholders'
equity $186,571 $177,783 $186,571 $177,783 $186,571 $177,783
======== ======== ======== ======== ======== ========
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 June 30, 1996, December 31, 1995 and
June 30, 1995, financial information and are of a normal recurring nature. The
results of operations for the three and six months ended June 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
(2) JOINT DEVELOPMENT AGREEMENT
In April 1996, WYGEN, Inc., a subsidiary of the Company entered into a joint
development agreement with Calpine Corporation, a national electric power
company headquartered in San Jose, California. The joint plan is to secure
appropriate sales agreements and to develop the WYGEN Plant, an 80 MW mine-
mouth, coal fired, electric generating plant, to be constructed at the Wyodak
mine. The electricity will be marketed by Calpine's power marketing
subsidiary, Calpine Power Services Company, to customers throughout the West.
Construction of the WYGEN Plant will not commence and WYGEN will not incur
substantial costs unless long-term power sale contracts are obtained,
justifying the construction.
In conjunction with the above agreement the Company also entered into a
Power Sales Enabling agreement with Calpine Corporation whereby the parties may
enter into transactions pursuant to which power can be made available by one
party to the other at one or more delivery points.
<PAGE>
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 no borrowings outstanding under these lines of
credit on June 30, 1996. There are no compensating balance requirements
associated with these lines of credit.
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 $5,887,000 for the three months ended, $13,886,000
for the six months ended and $27,836,000 for the twelve months ended June 30,
1996, an increase of 4 percent, 19 percent and 10 percent, respectively. The
increase in earnings was primarily due to increased sales volumes for the
electric operations, the inclusion of Neil Simpson Unit #2 (NS #2), an 80 MW
coal-fired power plant which began commercial operation on August 1, 1995, into
the Company's rate base, and increased oil and gas prices.
Consolidated revenue and income from continuing operations provided by the
three businesses as a percentage of the total were as follows:
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
REVENUE
Electric 71% 69% 73% 71% 74% 71%
Coal mining 20 23 20 21 19 21
Oil and gas 9 8 7 8 7 8
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
NET INCOME
Electric 56% 50% 60% 53% 60% 53%
Coal mining 37 45 36 43 35 41
Oil and gas 7 5 4 4 5 6
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
=== === === === === ===
<PAGE>
Capital expenditures and depreciation, depletion, and amortization by
industry segment were as follows:
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in thousands)
CAPITAL EXPENDITURES
(includes AFDC)
Electric $ 3,738 $13,250 $ 4,800 $30,232 $19,030 $ 94,361
Coal mining 53 80 196 182 1,558 5,135
Oil and gas 1,327 1,027 2,599 2,020 6,468 7,385
Other 6 1 8 1 7 473
------- ------- ------- ------- ------- --------
$ 5,124 $14,358 $ 7,603 $32,435 $27,063 $107,354
======= ======= ======= ======= ======= ========
DEPRECIATION,
DEPLETION, AND
AMORTIZATION
Electric $ 4,099 $ 2,661 $ 7,803 $ 5,305 $14,442 $ 10,473
Coal mining 647 1,090 1,310 1,997 2,947 3,366
Oil and gas 1,277 1,149 2,316 2,346 4,104 4,598
------ ------- ------- ------- ------- --------
$ 6,023 $ 4,900 $11,429 $ 9,648 $21,493 $ 18,437
====== ======= ======= ======= ======= ========
ELECTRIC OPERATIONS
Electric revenue increased 12 percent, 15 percent and 13 percent for the
three, six and twelve months ended June 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 3 percent, 4 percent and 2
percent for the three, six and twelve month periods, respectively. Degree
days, which is a measure of weather trends, were 12 percent above normal for
the second quarter of 1996 and 7 percent below last year. Degree days for the
six month period were 17 percent above last year and 14 percent above normal.
Electric expenses remained relatively flat for the three and six months
ended June 30, 1996. Although purchased power expense decreased, depreciation
and amortization expense increased due to the commercial operation of NS #2.
Expenses for the twelve month period increased 3 percent, also due to the
inclusion of NS #2 in the Company's rate base.
Non-operating income decreased for the three, six and twelve month periods
due to a decrease in AFUDC of $2.4 million, $4.6 million and $6.4 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 decreased 5 percent and 1 percent for the three and twelve
month periods and increased 5 percent for the six month period ended June 30,
1996, compared to the same periods last year. Tons of coal sold decreased
slightly for the quarter, while increasing 9 percent and 2 percent for the six
and twelve month periods. This increase was a reflection of the sale of coal
to NS #2. Mining expenses increased 5 percent, 13 percent and 8 percent for
the three, six and twelve months ended June 30, 1996. The increase in expense
is related to the increase in tons of coal sold as well as an
<PAGE>
increase in royalty 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 20 percent and 6 percent for the three and six
months ended and decreased 5 percent for the twelve months ended June 30, 1996,
directly related to an increase in oil and gas prices offset by a decrease in
equivalent barrels of oil sold.
Operating expenses increased 18 percent and 5 percent for the three and six
month periods ended June 30, 1996, due to increased production expense.
Operating expenses for the twelve month period decreased 3 percent when
compared to the same period 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
June 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 May 30, 1996, reporting the items
voted on at the Annual Meeting of Shareholders.
<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
/S/ GARY R. FISH
Gary R. Fish, Controller
(Principal Accounting Officer)
Dated: August 8, 1996
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<TOTAL-NET-UTILITY-PLANT> 338,729,000
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