UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 26, 1999
THE MONTANA POWER COMPANY
(Exact name of registrant as specified in its charter)
Montana 1-4566 81-0170530
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
40 East Broadway, Butte, Montana 59701
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (406) 723-5421
Exhibit Index is found on page 4.
</PAGE>
<PAGE>
ITEM 5. Other Events.
Fourth Quarter Financial Results
The Montana Power Company reported consolidated net income of $2.95 per
share for the year ended December 31, 1998 -- an increase of 66 cents or 29
percent over 1997 earnings of $2.29 per share. Fourth-quarter earnings in 1998
were $1.26 per share, compared to 93 cents a share in the same quarter of 1997.
The financial performance in 1998 reflects the Nonutility business
successes the Company is having, which significantly offset the short-term
impacts of utility deregulation and very weak oil and gas prices. The
independent power and telecommunications businesses provided a significant
increase in both our fourth-quarter and annual earnings. Besides the impact of
deregulation, the utility operations were affected by weather that was 6
percent warmer than normal.
Montana Power's consolidated revenues for 1998 were $1.25 billion
compared to $1.02 billion in 1997. Net income available for common stock was
$161.9 million compared to $124.9 million the preceding year.
Approximately 65 cents of the fourth-quarter earnings resulted from two
events. An arbitration panel ruled that the Bonneville Power Administration
breached the power purchase agreement with an independent power project at
Frederickson, Washington, in which the company was an investor, resulting in
receipt of about $44 million. The sale of another independent power project
netted approximately $14 million.
The 1998 Utility earnings were adversely affected by warmer weather.
Increased rates, general business growth and increased secondary sales resulted
in an increase of $17 million in electric revenues, while natural gas revenues
decreased by $15 million. Although lower maintenance expenses reduced power-
supply costs, the Utility also was affected by charges associated with
curtailment of a benefit plan and a writedown of land which had been held for
future generating plant construction.
Nonutility earnings reflected the independent power transactions
mentioned earlier, as well as that group's settlement in the third quarter with
a power purchaser which increased earnings by 14 cents per share.
Touch America, the company's telecommunications subsidiary, benefited by
$11 million from sales of dark fiber on its Portland to Los Angeles expansion.
Telecommunications operations revenues increased to nearly $100 million from
around $48 million last year as a result of a full year's operation of its
expanded fiber-optic network linking Seattle and Minneapolis-St. Paul, and
Denver to Canada, dark fiber sales and increased long-distance revenue.
Coal tonnage sold was up by 6 percent, but prices were relatively flat
and higher revenues were mostly offset by increased operating expenses.
Oil and gas earnings were down when compared with 1997 primarily due to
production constraints and prices well below 1997 levels. However, the
division continued to increase its reserves, in anticipation of price
improvements.
In 1998, Nonutility earnings per share increased to $2.01 from $1.21; the
1997 figure had included the after-tax gain of $6 million from the sale of
properties in Brazil. Utility earnings decreased to $0.94 from $1.08.
This Form 8-K may contain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements should be read with the cautionary statements and important factors
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 at Item 7, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Safe Harbor for Forward-
Looking Statements." Forward-looking statements are all statements other than
statements of historical fact, including without limitation those that are
identified by the use of the words "expects," "believes," "anticipate" and
similar expressions
Further details of the Company's results of operations will be provided
in the Annual Report on Form 10-K which will be filed in March.
For comparative purposes, the following table shows the breakdown of
primary consolidated net income per share:
Quarter Ended
December 31,
1998 1997
Utility Operations $ 0.30 $ 0.47
Nonutility Operations 0.96 0.46
Consolidated $ 1.26 $ 0.93
Year Ended
December 31,
1998 1997
Utility Operations $ 0.94 $ 1.08
Nonutility Operations 2.01 1.21
Consolidated $ 2.95 $ 2.29
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<PAGE>
ITEM 7. Exhibits.
99a Preliminary Consolidated Statements of Income for the Quarters Ended
December 31, 1998 and 1997, and for the Years Ended December 31, 1998 and
1997.
99b Preliminary Utility Operations Schedule of Revenues and Expenses for the
Quarters Ended December 31, 1998 and 1997, and for the Years Ended
December 31, 1998 and 1997.
99c Preliminary Nonutility Operations Schedule of Revenues and Expenses for
the Quarters Ended December 31, 1998 and 1997, and for the Years Ended
December 31, 1998 and 1997.
99d Preliminary Operating Statistics
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.
THE MONTANA POWER COMPANY
(Registrant)
By /s/ J. P. Pederson
J. P. Pederson
Vice President and Chief Financial
and Information Officer
Dated: January 26, 1999
</PAGE>
<PAGE>
Exhibit Index
Exhibit Page
99a Preliminary Consolidated Statements of Income for the
Quarters Ended December 31, 1998 and 1997, and for the
Years Ended December 31, 1998 and 1997. 6
99b Preliminary Utility Operations Schedule of Revenues and
Expenses for the Quarters Ended December 31, 1998 and 1997,
and for the Years Ended December 31, 1998 and 1997. 7
99c Preliminary Nonutility Operations Schedule of Revenues and
Expenses for the Quarters Ended December 31, 1998 and 1997,
and for the Years Ended December 31, 1998 and 1997. 8-9
99d Preliminary Operating Statistics 10
</PAGE>
<PAGE>
Exhibit 99a
<TABLE>
THE MONTANA POWER COMPANY AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Thousands of Dollars
<S> <C> <C> <C> <C>
REVENUES $ 392,400 $ 291,936 $ 1,253,724 $ 1,023,597
EXPENSES:
Operations 162,162 128,998 528,196 420,032
Maintenance 20,340 17,733 81,064 82,702
Selling, general and administrative 39,519 33,363 128,741 116,054
Taxes other than income taxes 23,598 20,044 96,181 92,967
Depreciation, depletion and amortization 26,593 26,564 112,665 95,340
272,212 226,702 946,847 807,095
INCOME FROM OPERATIONS 120,188 65,234 306,877 216,502
INTEREST EXPENSE AND OTHER:
Interest 17,288 15,273 60,851 54,667
Distributions on company obligated
mandatorily redeemable preferred
securities of subsidiary trust 1,373 1,373 5,492 5,492
Other (income) deductions - net (233) (20,417) (3,260) (34,159)
18,428 (3,771) 63,083 26,000
INCOME TAXES 31,361 17,572 78,174 61,870
NET INCOME 70,399 51,433 165,620 128,632
DIVIDENDS ON PREFERRED STOCK 921 921 3,690 3,690
NET INCOME AVAILABLE FOR COMMON STOCK $ 69,478 $ 50,512 $ 161,930 $ 124,942
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (000) 55,051 54,686 54,981 54,649
BASIC NET INCOME PER SHARE OF COMMON STOCK $ 1.26 $ 0.93 $ 2.95 $ 2.29
FULLY DILUTED EARNINGS PER SHARE OF
COMMON STOCK $ 1.26 $ 0.92 $ 2.94 $ 2.28
</TABLE>
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<PAGE>
Exhibit 99b
<TABLE>
PRELIMINARY UTILITY OPERATIONS
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Thousands of Dollars
<S> <C> <C> <C> <C>
ELECTRIC UTILITY:
REVENUES:
Revenues $ 122,620 $ 112,351 $ 450,719 $ 435,986
Intersegment revenues 3,144 1,282 7,576 4,685
125,764 113,633 458,295 440,671
EXPENSES:
Power supply 40,009 43,091 137,416 143,224
Transmission and distribution 13,146 10,282 40,182 38,359
Selling, general and administrative 14,624 12,722 53,017 50,872
Taxes other than income taxes 10,380 7,345 46,316 45,540
Depreciation and amortization 15,367 13,061 54,922 51,674
93,526 86,501 331,853 329,669
INCOME FROM ELECTRIC OPERATIONS 32,238 27,132 126,442 111,002
NATURAL GAS UTILITY:
REVENUES:
Revenues (other than including gas supply
cost revenues) 23,708 32,716 75,112 105,220
Gas supply cost revenues 9,178 6,000 31,940 17,135
Intersegment revenues 258 149 727 588
33,144 38,865 107,779 122,943
EXPENSES:
Gas supply costs 9,178 6,000 31,940 17,135
Other production, gathering and exploration 750 1,963 2,284 8,572
Transmission and distribution 4,465 3,551 15,556 14,163
Selling, general and administrative 5,314 5,041 20,191 17,889
Taxes other than income taxes 4,131 2,730 14,084 15,251
Depreciation, depletion and amortization 2,091 2,572 8,705 11,939
25,929 21,857 92,760 84,949
INCOME FROM GAS OPERATIONS 7,215 17,008 15,019 37,994
INTEREST EXPENSE AND OTHER INCOME:
Interest 15,662 14,084 56,357 52,191
Distributions on company obligated
mandatorily redeemable preferred
securities of subsidiary trust 1,374 1,373 5,493 5,492
Other (income) deductions - net (189) (6,744) (2,123) (7,128)
16,847 8,713 59,727 50,555
INCOME BEFORE INCOME TAXES 22,606 35,427 81,734 98,441
INCOME TAXES 5,098 8,949 26,559 35,643
DIVIDENDS ON PREFERRED STOCK 921 921 3,690 3,690
UTILITY NET INCOME AVAILABLE FOR
COMMON STOCK $ 16,587 $ 25,557 $ 51,485 $ 59,108
</TABLE>
</PAGE>
<PAGE>
Exhibit 99c
<TABLE>
PRELIMINARY NONUTILITY OPERATIONS
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Thousands of Dollars
<S> <C> <C> <C> <C>
COAL:
REVENUES:
Revenues $ 49,092 $ 45,371 $ 177,961 $ 167,623
Intersegment revenues 10,295 10,292 38,796 34,164
59,387 55,663 216,757 201,787
EXPENSES:
Operations and maintenance 35,933 32,310 132,963 119,085
Selling, general and administrative 7,504 6,162 20,588 21,355
Taxes other than income taxes 7,043 6,850 24,050 23,455
Depreciation, depletion and amortization (666) 4,341 6,596 9,043
49,814 49,663 184,197 172,938
INCOME FROM COAL OPERATIONS 9,573 6,000 32,560 28,849
OIL AND NATURAL GAS:
REVENUES:
Revenues 61,020 47,542 204,142 163,656
Intersegment revenues 9,036 2,890 24,597 3,120
70,056 50,432 228,739 166,776
EXPENSES:
Operations and maintenance 57,695 41,354 173,408 118,266
Selling, general and administrative 6,542 3,203 20,925 10,723
Taxes other than income taxes 1,295 992 4,908 4,555
Depreciation, depletion and amortization 6,332 4,154 22,259 16,922
71,864 49,703 221,500 150,466
INCOME FROM OIL AND NATURAL
GAS OPERATIONS (1,808) 729 7,239 16,310
INDEPENDENT POWER:
REVENUES:
Revenues 19,173 18,706 73,707 70,932
Earnings from unconsolidated investments 60,346 7,042 89,525 14,980
Intersegment revenues 389 248 2,014 1,820
79,908 25,996 165,246 87,732
EXPENSES:
Operations and maintenance 17,100 16,562 65,009 63,837
Selling, general and administrative 1,718 1,198 4,746 4,290
Taxes other than income taxes 404 400 1,767 1,868
Depreciation, depletion and amortization 776 860 9,005 2,774
19,998 19,020 80,527 72,769
INCOME FROM INDEPENDENT POWER OPERATIONS $ 59,910 $ 6,976 $ 84,719 $ 14,963
</PAGE>
<PAGE>
Exhibit 99c
PRELIMINARY NONUTILITY OPERATIONS (continued)
Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Thousands of Dollars
TELECOMMUNICATIONS:
REVENUES:
Revenues $ 23,970 $ 21,043 $ 87,748 $ 45,932
Earnings from unconsolidated investments 4,036 381 10,909 435
Intersegment revenues 352 922 1,298 1,558
28,358 22,346 99,955 47,925
EXPENSES:
Operations and maintenance 7,173 6,198 27,110 22,385
Selling, general and administrative 4,083 3,212 12,172 8,825
Taxes other than income taxes (251) 1,723 3,623 2,294
Depreciation, depletion and amortization 1,805 1,452 7,090 2,494
12,810 12,585 49,995 35,998
INCOME FROM TELECOMMUNICATIONS
OPERATIONS 15,548 9,761 49,960 11,927
OTHER OPERATIONS:
REVENUES:
Revenues 19,007 73 47,988 939
Intersegment revenues 861 2,924 2,314 5,719
19,868 2,997 50,302 6,658
EXPENSES:
Operations and maintenance 19,812 1,510 51,634 3,780
Selling, general and administrative 1,060 3,728 2,211 6,922
Taxes other than income taxes 596 6 1,431 6
Depreciation, depletion and amortization 886 123 4,089 493
22,354 5,367 59,365 11,201
LOSS FROM OTHER OPERATIONS (2,486) (2,370) (9,063) (4,543)
INTEREST EXPENSE AND OTHER INCOME:
Interest 4,384 2,371 11,420 6,605
Other (income) deductions - net (2,803) (14,854) (8,065) (31,160)
1,581 (12,483) 3,355 (24,555)
INCOME BEFORE INCOME TAXES 79,156 33,579 162,060 92,061
INCOME TAXES 26,265 8,624 51,615 26,227
NONUTILITY NET INCOME AVAILABLE FOR
COMMON STOCK $ 52,891 $ 24,955 $ 110,445 $ 65,834
</TABLE>
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<PAGE>
Exhibit 99d
<TABLE>
PRELIMINARY OPERATING STATISTICS
<CAPTION>
Quarter Ended Year To Date
December 31, December 31,
1998 1997 Change % 1998 1997 Change %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRIC UTILITY GENERATON (Mwhs):
Hydroelectric 863,325 1,031,063 (167,738) (16%) 3,741,873 4,126,090 (384,217) (9%)
Coal Fired 1,251,771 1,192,928 58,843 5% 4,515,132 4,290,131 225,001 5%
Total 2,115,096 2,223,991 (108,895) (5%) 8,257,005 8,416,221 (159,216) (2%)
HEATING DEGREE DAYS: 2,795 2,813 (18) (1%) 7,488 7,944 (456) (6%)
Normal 7,952
COAL SALES (thousand of tons):
Montana 2,680 2,700 (20) (1%) 10,499 9,127 1,372 15%
Texas 2,437 2,390 47 2% 8,832 9,187 (355) (4%)
Total 5,117 5,090 27 1% 19,331 18,314 1,017 6%
NONUTILITY OIL & GAS PRODUCTION SALES VOLUMES:
Oil (Bbls) 143,717 146,618 (2,901) (2%) 605,657 974,072 (368,415) (38%)
Natural Gas (Mcfs) 6,737,952 3,976,497 2,761,455 69% 25,871,265 14,242,251 11,629,014 82%
N G Liquids (Bbls)) 141,165 126,863 14,302 11% 602,354 453,965 148,389 33%
</TABLE>
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