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, 1997.
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, 1997
Common stock, $1.00 par value 14,461,464 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, 1997, December 31, 1996
and June 30, 1996
Consolidated Statements of Income- 4
Three, Six and Twelve Months
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows- 5
Three, Six and Twelve Months
Ended June 30, 1997 and 1996
Consolidated Statements of Shareholders' Equity- 6
Three, Six and Twelve Months Ended
June 30, 1997 and 1996
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
1997 1996 1996
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 14,204 $ 13,340 $ 3,767
Securities available for sale 18,211 11,458 10,598
Receivables, net
Customers 11,636 12,961 11,092
Other 2,652 2,727 7,637
Materials, supplies,
and fuel 7,834 7,861 7,508
Prepaid expenses 688 2,650 775
-------- -------- --------
55,225 50,997 41,377
-------- -------- --------
Property and investments:
Electric 493,372 479,237 473,295
Coal mining 52,838 53,200 44,668
Oil and gas 49,291 45,336 42,991
Other 4,301 3,764 3,664
-------- -------- --------
599,802 581,537 564,618
Less accumulated depreciation
and depletion (200,189) (181,103) (174,836)
-------- -------- --------
Net property and
investments 399,613 400,434 389,782
-------- -------- --------
Deferred charges:
Federal income taxes 8,110 7,972 7,620
Regulatory asset 3,476 3,176 2,876
Other 4,931 4,775 4,544
-------- -------- --------
16,517 15,923 15,040
-------- -------- --------
Total $471,355 $467,354 $446,199
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Balance Sheets
(unaudited)
June 30 December 31 June 30
1997 1996 1996
(in thousands)
LIABILITIES AND CAPITALIZATION
Current liabilities:
Current maturities of
long-term debt $ 1,310 $ 1,534 $ 1,468
Notes payable 23 143 1,078
Accounts payable 5,397 7,332 3,714
Accrued liabilities-
Taxes 7,509 8,633 5,857
Interest 4,003 4,035 4,046
Other 6,986 6,438 5,687
-------- -------- --------
25,228 28,115 21,850
-------- -------- --------
Deferred credits:
Federal income taxes 49,995 48,262 46,873
Investment tax credits 4,265 4,516 4,767
Reclamation costs 16,614 16,267 8,314
Regulatory liability 6,485 6,692 6,998
Other 6,111 5,636 5,507
-------- -------- --------
83,470 81,373 72,459
-------- -------- --------
Capitalization:
Common stock equity-
Common stock 14,461 14,450 14,440
Additional paid-in
capital 47,065 46,841 46,643
Retained earnings 136,967 131,884 125,488
-------- -------- --------
Total common stock equity 198,493 193,175 186,571
Long-term debt 164,164 164,691 165,319
-------- -------- --------
362,657 357,866 351,890
-------- -------- --------
Total $471,355 $467,354 $446,199
======== ======== ========
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Income
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1997 1996 1997 1996 1997 1996
(in thousands)
Operating revenues:
Electric $ 29,347 $26,978 $61,381 $57,283 $122,815 $116,054
Coal mining 7,703 7,418 15,828 15,486 31,657 30,620
Oil and gas 3,209 3,387 6,929 6,118 13,366 11,487
------- ------- ------- ------- ------- -------
40,259 37,783 84,138 78,887 167,838 158,161
------- ------- ------- ------- ------- -------
Operating expenses:
Fuel and purchased
power 8,816 7,931 18,282 16,745 35,731 36,241
Operations and
maintenance 7,524 7,635 15,086 15,084 30,734 30,569
Administrative and
general 2,264 1,843 4,542 3,940 8,682 8,909
Depreciation,
depletion,
and amortization 5,699 6,023 11,293 11,429 22,685 21,493
Taxes, other than
income taxes 3,062 3,155 6,334 6,313 12,480 11,932
------- ------- ------- ------- ------- -------
27,365 26,587 55,537 53,511 110,312 109,144
------- ------- ------- ------- ------- -------
Operating income:
Electric 9,078 7,642 20,286 18,229 41,146 35,281
Coal mining 3,103 2,994 6,533 6,299 12,468 11,954
Oil and gas 713 560 1,782 848 3,912 1,782
------- ------- ------- ------- ------- -------
12,894 11,196 28,601 25,376 57,526 49,017
------- ------- ------- ------- ------- -------
Other income and
(expense):
Interest expense (3,465) (3,462) (6,946) (6,930) (13,958)(14,113)
Investment income 459 346 829 583 1,620 1,292
Allowance for funds
used during
construction 43 134 109 250 209 1,290
Other, net (32) 127 (215) 650 883 1,774
------- ------- ------- ------- ------- -------
(2,995) (2,855) (6,223) (5,447) (11,246) (9,757)
------- ------- ------- ------- ------- -------
Income before income
taxes 9,899 8,341 22,378 19,929 46,280 39,260
Income taxes (3,137) (2,454) (7,028) (6,043) (14,565) (11,424)
------- ------- ------- ------- ------- -------
Net income
available for
common stock $ 6,762 $ 5,887 $15,350 $13,886 $31,715 $27,836
======= ======= ======= ======= ======= =======
Weighted average
common shares
outstanding 14,459 14,437 14,457 14,433 14,451 14,425
Earnings per share $0.47 $0.41 $1.06 $0.96 $2.20 $1.93
Dividends paid
per share of
common stock $0.355 $0.345 $0.710 $0.690 $1.400 $1.360
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1997 1996 1997 1996 1997 1996
(in thousands)
Operating activities:
Net Income $ 6,762 $ 5,887 $15,350 $13,886 $31,715 $27,836
Principal non-cash items-
Depreciation, depletion,
and amortization 5,699 6,023 11,293 11,429 22,685 21,493
Deferred income taxes
and investment tax
credits, net 247 384 829 913 1,947 2,235
Allowance for other
funds used during
construction (23) (83) (58) (156) (90) (819)
(Increase) decrease in
receivables, inventories,
and other current
assets 1,635 (357) 3,389 (1,186) 4,202 (5,137)
Increase (decrease) in
other current
liabilities (3,240) (5,690) (2,544) (8,546) 4,590 (6,829)
Other, net 1,294 91 (440) 373 1,402 2,146
------- ------- ------- ------- ------- -------
12,374 6,255 27,819 16,713 66,451 40,925
------- ------- ------- ------- ------- -------
Investment activities:
Property additions,
excluding allowance for
other funds used during
construction (8,022) (5,041) (9,299) (7,447) (26,240)(26,243)
Available for sale
securities purchased (6,579) (233) (12,732) (9,905) (43,670)(20,799)
Available for sale
securities sold 3,638 3,100 5,979 6,111 36,057 20,464
------- ------- ------- ------- ------- -------
(10,963) (2,174) (16,052)(11,241) (33,853)(26,578)
------- ------- ------- ------- ------- -------
Financing activities:
Dividends paid (5,134) (4,982) (10,267) (9,960) (20,236)(19,623)
Common stock issued 96 123 235 303 443 575
Net short-term
borrowings - 155 (120) 460 (1,055) (2,490)
Long-term debt issued - - - - - 15,254
Long-term debt
retied - - (751) (687) (1,313) (8,863)
------- ------- ------- ------- ------- -------
(5,038) (4,704) (10,903) (9,884) (22,161)(15,147)
------- ------- ------- ------- ------- -------
Increase (decrease)
in cash and cash
equivalents (3,627) (623) 864 (4,412) 10,437 (800)
Cash and cash
equivalents:
Beginning of period 17,831 4,390 13,340 8,179 3,767 4,567
------- ------- ------- ------- ------- -------
End of period $14,204 $ 3,767 $14,204 $ 3,767 $14,204 $ 3,767
======= ======= ======= ======= ======= =======
Supplemental disclosure
of cash flow information
Cash paid during the
period for:
Interest $ 2,458 $ 2,426 $ 6,961 $ 6,973 $13,991 $13,709
Income taxes $ 6,500 $ 6,150 $ 6,500 $ 6,750 $12,366 $10,380
Assumption of reclamation
liability in acquisition
of Clovis Point
properties $ - $ - $ - $ - $ 7,957 $ -
See accompanying notes to consolidated financial statements.
<PAGE>
BLACK HILLS CORPORATION
Consolidated Statements of Shareholders' Equity
(unaudited)
Three Months Six Months Twelve Months
June 30 June 30 June 30
1997 1996 1997 1996 1997 1996
(in thousands)
Common stock:
Beginning of
period $ 14,457 $ 14,434 $ 14,450 $ 14,425 $ 14,440 $ 14,409
Issuance of
$1 par value
shares 4 6 11 15 21 31
-------- -------- -------- -------- -------- --------
End of period 14,461 14,440 14,461 14,440 14,461 14,440
-------- -------- -------- -------- -------- --------
Additional paid-in
capital:
Beginning of
period 46,973 46,526 46,841 46,355 46,643 46,099
Net proceeds over
par value of
stock issued 92 117 224 288 422 544
-------- -------- -------- -------- -------- --------
End of period 47,065 46,643 47,065 46,643 47,065 46,643
-------- -------- -------- -------- -------- --------
Retained earnings:
Beginning of
period 135,339 124,583 131,884 121,562 125,488 117,275
Net income 6,762 5,887 15,350 13,886 31,715 27,836
Cash dividends on
common stock (5,134) (4,982) (10,267) (9,960) (20,236) (19,623)
-------- -------- -------- -------- -------- --------
End of period 136,967 125,488 136,967 125,488 136,967 125,488
-------- -------- -------- -------- -------- --------
Total shareholders'
equity $198,493 $186,571 $198,493 $186,571 $198,493 $186,571
======== ======== ======== ======== ======== ========
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 1996 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, 1997, December 31, 1996 and June 30, 1996, 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) NEW ACCOUNTING STANDARD
During March 1997, the Financial Accounting Standards Board
released Statement of Financial Accounting Standards No. 128, Earnings
Per Share, (SFAS 128) which requires the disclosure of basic earnings
per share and diluted earnings per share. The company must adopt
SFAS 128 in the fourth quarter of 1997 and anticipates it will not
have a material impact on the financial position or the results of
operations of the Company.
(3) SUBSEQUENT EVENT
On July 25, 1997, Black Hills Corporation purchased the assets
of a wholesale natural gas and crude oil marketing company. The
purchase agreement required fixed cash payments of $7,000,000 at the
closing date and additionally allows for contingent payments up to
$1,600,000. The contingent payments are dependent on certain profit
thresholds of the acquired company. The acquisition will be
accounted for under the purchase method of accounting and as such, the
results of operations will be included in the Company's
consolidated financials from July 25, 1997 forward.
<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 $500,000 outstanding under these
lines of credit on June 30, 1997. 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 June 30, 1997, there were no
balances outstanding on this line 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 $6,762,000 for the three months ended,
$15,350,000 for the six months ended and $31,715,000 for the twelve
months ended June 30, 1997, an increase of 15 percent, 11 percent and
14 percent, respectively. The increase in earnings was primarily
due to increased sales volumes for the electric operations, resulting
from the sale to Montana- Dakota Utilities, Sheridan, Wyoming load,
which commenced January 1, 1997, and 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
1997 1996 1997 1996 1997 1996
REVENUE
Electric 73% 71% 73% 73% 73% 74%
Coal mining 19 20 19 20 19 19
Oil and gas 8 9 8 7 8 7
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1997 1996 1997 1996 1997 1996
NET INCOME
Electric 62% 56% 63% 60% 62% 60%
Coal mining 33 38 31 36 30 35
Oil and gas 7 7 8 4 9 5
Other (2) (1) (2) - (1) -
--- --- --- --- --- ---
100% 100% 100% 100% 100% 100%
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
1997 1996 1997 1996 1997 1996
(in thousands)
CAPITAL EXPENDITURES
(includes AFDC)
Electric $4,666 $3,738 $4,711 $4,800 $12,734 $19,030
Coal mining 1,335 53 1,445 196 3,367 1,558
Oil and gas 1,981 1,327 3,107 2,599 10,093 6,468
Other 63 6 94 8 136 7
------ ------ ------ ----- ------ -------
$8,045 $5,124 $9,357 $7,603 $26,330 $27,063
DEPRECIATION,
DEPLETION, AND
AMORTIZATION
Electric $3,821 $4,099 $7,642 $7,803 $15,942 $14,442
Coal mining 787 647 1,549 1,310 3,220 2,947
Oil and gas 1,091 1,277 2,102 2,316 3,523 4,104
------ ------ ------ ------ ------- -------
$5,699 $6,023 $11,293 $11,429 $22,685 $21,493
ELECTRIC OPERATIONS
Electric revenue increased 28 percent, 16 percent and 17 percent
for the three, six and twelve months ended June 30, 1997 primarily due to
strong growth in sales. Firm kilowatthour sales increased 14 percent
for the three and six month periods and increased 9 percent for the
twelve month period directly related to serving the Montana-Dakota
Utilities, Sheridan, Wyoming Load.
Electric expenses remained relatively flat for the three and six
months ended June 30, 1997. Fuel and purchased power expense increased
11 percent for the second quarter, 9 percent for the year to date, and
decreased slightly for the twelve month period. The increase in fuel and
purchased power expense for the three and six month periods was
directly related to the increase in kilowatthour sales.
<PAGE>
Non-operating income increased $191,000 and $211,000 for the three
and six month periods due to an increase in interest income from
marketable securities and decreased $453,000 for the twelve month
period due to a decrease in allowance for funds used during
construction (AFUDC). The decrease in AFUDC 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 4 percent, 2 percent and 3 percent for the
three, six and twelve month periods ending June 30, 1997, directly
related to an increase in tons of coal sold of 3 percent, 2
percent and 7 percent, respectively. Mining expenses increased 4
percent, 3 percent and 1 percent for the three, six and twelve months
ended June 30, 1997. The increase in expense is related to the increase
in tons of coal sold.
OIL AND GAS PRODUCTION OPERATIONS
Oil and gas earnings increased $86,000 for the second quarter and
$617,000 and $1,406,000 for the six month and twelve month periods ending
June 30, 1997. The earnings increase is due to an increase in barrels
of oil equivalents sold and an increase in gas prices.
Operating expenses decreased 12 percent for the second quarter
due to a decrease in production expense. Operating expenses increased
2 percent and 7 percent for the six month and twelve month periods
compared to the same periods last year.
Depletion expense decreased 17 percent, 11 percent and 14 percent
for the three, six and twelve month periods directly due to the
increase in gas prices and reserve values.
Nonoperating income decreased $190,000, $679,000 and $556,000 for the
three, six and twelve month periods ending June 30, 1997 as a result
of a $500,000 gain recorded from the sale and retirement of property in
the first quarter of 1996 offset by increases in interest income on
marketable securities.
<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, 1997.
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 July 25, 1997,
reporting the purchase of the assets of Jomax Partners, L.P., as
successor to and survivor of Wickford Energy Marketing, L.C., and
Wickford Energy Marketing Canada Company.
<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/ MARK T. THIES
Mark T. Thies, Controller
(Principal Accounting Officer)
Dated: August 8, 1997
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<TOTAL-NET-UTILITY-PLANT> 335,278,000
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