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) April 27, 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 5.
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ITEM 5. Other Events
First Quarter Financial Results
The Montana Power Company reported consolidated net income of $0.60 per
share for the quarter ended March 31, 1999, compared to first-quarter earnings
of $0.64 per share a year earlier.
Importantly, a telecommunications customer exercised in January 1999 its
option to prepay the remaining 12-year initial term of a capacity agreement.
The $257 million prepayment is being recognized in revenues over the remaining
term of the agreement, but because the amount was discounted for early payment,
income in the first quarter of 1999 was approximately 3 cents per share lower
than the same period a year ago.
The prepayment improved first-quarter investment income for the
corporation by $2.5 million, but reduced Touch America's operating earnings for
the same period by approximately $5 million. Touch America's other long
distance, private line, and equipment services revenues increased more than 40
percent, but the increase was reduced by higher operations expenses, especially
increased payments to other carriers.
Utility earnings were lower than anticipated for the quarter and 28
percent below last year, principally because of weather 15 percent warmer than
normal for this year's primary heating months compared to weather that was 9
percent warmer than normal for the same period in 1998. Utility income also was
adversely impacted by lower than expected wholesale power prices in the Pacific
Northwest and an increased effective income tax rate.
Approximately 25 percent of the Utility's retail electric load and more
than 50 percent of its retail gas load have moved to choice. The company
expects to file electric and natural gas rate cases later this year with the
Montana Public Service Commission to resolve issues related to distribution
activities and to the sale of its generation assets in Montana (scheduled for
completion in September).
Operating income from independent power investments increased $6 million
in the first quarter of 1999 compared to the same period a year earlier due to
improved operations of generating plants in which Continental Energy Services
holds an equity interest, and lower project development costs. Coal, and oil
and gas operations income remained stable.
For the quarter, Utility earnings were 25 cents a share compared to 34
cents in the first quarter of 1998, while Nonutility earnings were 35 cents a
share compared to 30 cents a year earlier.
Natural gas earnings decreased due to the warmer weather; offset somewhat
by increased customer growth. Increases in electric utility earnings due to
higher sales of excess generation and more customers were offset by the warmer
weather and increased electric transmission expenses associated with the higher
off system sales.
Coal earnings increased slightly for the first quarter of 1999 when
compared to the same period in 1998. A 5 percent increase in volumes along with
a reduction in depreciation expenses contributed to the business unit's
improvement. Lower coal prices, resulting from last year's settlement of
disputes with buyers, offset most of the improvement.
Earnings from Nonutility oil and gas operations were flat as increased
gas volumes produced and prices received were offset by decreases in oil
production and prices, and increases in operating expenses.
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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, 1998 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
For comparative purposes, the following table shows the breakdown of
basic consolidated net income per share:
<TABLE>
<CAPTION> Quarter Ended
March 31, March 31,
1999 1998
<S> <C> <C>
Utility Operations $ 0.25 $ 0.34
Nonutility Operations 0.35 0.30
Consolidated $ 0.60 $ 0.64
Twelve Months Ended
March 31, March 31,
1999 1998
Utility Operations $ 0.84 $ 0.91
Nonutility Operations 2.07 1.18
Consolidated $ 2.91 $ 2.09
</TABLE>
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ITEM 7. Exhibits
99a Preliminary Consolidated Statements of Income for the Quarters Ended
March 31, 1999 and 1998 and for the Twelve Months Ended March 31, 1999
and 1998.
99b Preliminary Utility Operations Schedule of Revenues and Expenses for the
Quarters Ended March 31, 1999 and 1998 and for the Twelve Months Ended
March 31, 1999 and 1998.
99c Preliminary Nonutility Operations Schedule of Revenues and Expenses for
the Quarters Ended March 31, 1999 and 1998 and for the Twelve Months
Ended March 31, 1999 and 1998.
99d Preliminary Operating Statistics for the Quarters Ended March 31, 1999
and 1998.
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: April 27, 1999
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Exhibit Index
Exhibit Page
99a Preliminary Consolidated Statement of Income for the Quarters
Ended March 31, 1999 and 1998 and for the Twelve Months Ended
March 31, 1999 and 1998. 6
99b Preliminary Utility Operations Schedule of Revenues and
Expenses for the Quarters Ended March 31, 1999 and 1998 and
for the Twelve Months Ended March 31, 1999 and 1998. 7
99c Preliminary Nonutility Operations Schedule of Revenues and
Expenses for the Quarters Ended March 31, 1999 and 1998 and
for the Twelve Months Ended March 31, 1999 and 1998. 8-9
99d Preliminary Operations Statistics for the Quarters Ended
March 31, 1999 and 1998. 10
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<TABLE>
<CAPTION>
Exhibit 99a
THE MONTANA POWER COMPANY AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME
Quarter Ended Twelve Months Ended
March 31, March 31,
1999 1998 1999 1998
Thousands of Dollars
<S> <C> <C> <C> <C>
REVENUES $ 321,768 $ 294,050 $ 1,290,018 $ 1,036,277
EXPENSES:
Operations 153,560 128,427 561,905 442,557
Maintenance 19,630 19,782 80,913 81,448
Selling, general, and administrative 32,616 29,367 131,991 119,003
Taxes other than income taxes 25,768 25,525 96,424 95,889
Depreciation, depletion, and amortization 27,753 27,086 114,934 100,385
259,327 230,187 986,167 839,282
INCOME FROM OPERATIONS 62,441 63,863 303,851 196,995
INTEREST EXPENSE AND OTHER INCOME:
Interest 13,629 14,504 59,975 56,605
Distributions on mandatorily redeemable
preferred securities of subsidiary trust 1,373 1,373 5,492 5,496
Other (income) deductions - net (3,341) (1,729) (6,475) (31,071)
11,661 14,148 58,992 31,030
INCOME TAXES 16,956 13,848 81,282 47,673
NET INCOME 33,824 35,867 163,577 118,292
DIVIDENDS ON PREFERRED STOCK 923 923 3,690 3,690
NET INCOME AVAILABLE FOR COMMON STOCK $ 32,901 $ 34,944 $ 159,887 $ 114,602
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC (000) 55,073 54,875 55,030 54,709
BASIC EARNINGS PER SHARE OF COMMON STOCK $ 0.60 $ 0.64 $ 2.91 $ 2.09
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - DILUTED (000) 55,399 54,971 55,167 54,763
DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 0.59 $ 0.64 $ 2.90 $ 2.09
</TABLE>
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<PAGE>
<TABLE>
<CAPTION> Exhibit 99b
PRELIMINARY UTILITY OPERATIONS
Quarter Ended Twelve Months Ended
March 31, March 31,
1999 1998 1999 1998
Thousands of Dollars
ELECTRIC UTILITY:
<S> <C> <C> <C> <C>
REVENUES:
Revenues $ 116,534 $ 116,798 $ 450,735 $ 430,776
Intersegment revenues 3,690 996 9,990 4,344
120,224 117,794 460,725 435,120
EXPENSES:
Power supply 38,687 39,967 136,137 145,912
Transmission and distribution 11,677 8,584 43,274 36,010
Selling, general, and administrative 13,226 13,306 52,936 51,835
Taxes other than incomes taxes 12,754 12,097 46,974 46,692
Depreciation and amortization 13,679 13,185 57,019 52,103
90,023 87,139 336,340 332,552
INCOME FROM ELECTRIC OPERATIONS 30,201 30,655 124,385 102,568
NATURAL GAS UTILITY:
REVENUES:
Revenues (other than gas supply cost revenues) 26,293 26,666 74,786 91,658
Gas supply cost revenues 14,052 14,378 31,605 24,661
Intersegment revenues 199 130 734 485
40,544 41,174 107,125 116,804
EXPENSES:
Gas supply costs 14,052 14,378 31,605 24,661
Other production, gathering, and exploration 793 645 2,416 6,386
Transmission and distribution 3,636 3,635 15,557 13,780
Selling, general, and administrative 5,755 4,568 21,378 18,417
Taxes other than income taxes 3,817 3,372 14,529 14,976
Depreciation, depletion, and amortization 2,351 2,204 8,853 11,015
30,404 28,802 94,338 89,235
INCOME FROM GAS OPERATIONS 10,140 12,372 12,787 27,569
INTEREST EXPENSE AND OTHER INCOME:
Interest 14,438 13,445 57,351 53,497
Distributions on mandatorily redeemable
preferred securities of subsidiary trust 1,373 1,373 5,492 5,492
Other (income) deductions - net (757) (116) (4,367) (6,489)
15,054 14,702 58,476 52,500
INCOME BEFORE INCOME TAXES 25,287 28,325 78,696 77,637
INCOME TAXES 10,674 8,456 28,777 23,890
DIVIDENDS ON PREFERRED STOCK 923 923 3,690 3,690
UTILITY NET INCOME AVAILABLE FOR COMMON STOCK $ 13,690 $ 18,946 $ 46,229 $ 50,057
</TABLE>
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<TABLE>
<CAPTION> Exhibit 99c
PRELIMINARY NONUTILTY OPERATIONS
Quarter Ended Twelve Months Ended
March 31, March 31,
1999 1998 1999 1998
Thousands of Dollars
COAL:
<S> <C> <C> <C> <C>
REVENUES:
Revenues $ 43,438 $ 43,426 $ 177,973 $ 168,677
Intersegment revenues 9,904 10,198 38,502 36,283
53,342 53,624 216,475 204,960
EXPENSES:
Operations and maintenance 32,332 31,765 133,531 121,141
Selling, general and administrative 5,022 5,052 20,559 21,468
Taxes other than income taxes 6,357 6,689 23,718 24,325
Depreciation, depletion and amortization 1,885 2,736 5,744 10,614
45,596 46,242 183,552 177,548
INCOME FROM COAL OPERATIONS 7,746 7,382 32,923 27,412
OIL AND NATURAL GAS:
REVENUES:
Revenues 68,809 48,627 240,986 169,927
Intersegment revenues 4,400 4,746 19,629 11,882
73,209 53,373 260,615 181,809
EXPENSES:
Operations and maintenance 58,951 38,809 205,190 136,727
Selling, general and administrative 4,228 4,362 20,791 12,836
Taxes other than income taxes 1,024 1,351 4,581 4,346
Depreciation, depletion and amortization 5,565 5,377 22,446 17,999
69,768 49,899 253,008 171,908
INCOME FROM OIL AND NATURAL GAS
OPERATIONS 3,441 3,474 7,607 9,901
INDEPENDENT POWER GROUP:
REVENUES:
Revenues 18,234 18,576 73,364 72,310
Earnings from unconsolidated investments 5,333 1,553 93,306 13,508
Intersegment revenues 238 569 1,683 1,572
23,805 20,698 168,353 87,390
EXPENSES:
Operations and maintenance 15,734 18,673 62,070 66,606
Selling, general and administrative 830 974 4,602 4,175
Taxes other than income taxes 463 466 1,764 1,838
Depreciation, depletion and amortization 777 919 8,863 3,389
17,804 21,032 77,299 76,008
INCOME (LOSS) FROM INDEPENDENT POWER OPERATIONS $ 6,001 $ (334) $ 91,054 $ 11,382
</TABLE>
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<TABLE>
<CAPTION> Exhibit 99c
PRELIMINARY NONUTILITY OPERATIONS
Quarter Ended Twelve Months Ended
March 31, March 31,
1999 1998 1999 1998
Thousands of Dollars
TELECOMMUNICATIONS:
<S> <C> <C> <C> <C>
REVENUES:
Revenues $ 19,775 $ 20,680 $ 86,841 $ 60,066
Earnings from unconsolidated investments 1,423 2,080 10,253 2,492
Intersegment revenues 228 251 1,276 867
21,426 23,011 98,370 63,425
EXPENSES:
Operations and maintenance 8,446 6,187 29,369 23,518
Selling, general and administrative 2,782 2,464 12,490 9,446
Taxes other than income taxes 1,040 1,245 3,418 3,402
Depreciation, depletion and amortization 2,415 1,542 7,963 3,772
14,683 11,438 53,240 40,138
INCOME FROM TELECOMMUNICATIONS OPERATIONS 6,743 11,573 45,130 23,287
OTHER OPERATIONS:
REVENUES:
Revenues 7,876 1,266 50,169 5,563
Intersegment revenues 441 264 1,228 12,613
8,317 1,530 51,397 18,176
EXPENSES:
Operations and maintenance 7,431 1,516 52,257 15,499
Selling, general and administrative 1,324 (154) 3,689 5,997
Taxes other than income taxes 313 304 1,440 310
Depreciation, depletion and amortization 1,081 1,123 4,046 1,494
10,149 2,789 61,432 23,300
INCOME (LOSS) FROM OTHER OPERATIONS (1,832) (1,259) (10,035) (5,124)
INTEREST EXPENSE AND OTHER INCOME:
Interest 2,104 2,229 11,295 7,723
Other (income) deductions - net (5,497) (2,783) (10,779) (29,192)
(3,393) (554) 516 (21,469)
INCOME BEFORE INCOME TAXES 25,492 21,390 166,163 88,327
INCOME TAXES 6,281 5,392 52,505 23,782
NONUTILITY NET INCOME AVAILABLE FOR COMMON STOCK $ 19,211 $ 15,998 $ 113,658 $ 64,545
</TABLE>
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<TABLE>
<CAPTION>
Exhibit 99d
PRELIMINARY OPERATING STATISTICS
Quarter Ended
March 30,
1999 1998 Change %
<S> <C> <C> <C> <C>
ELECTRIC UTILITY GENERATON (Mwhs):
Hydroelectric 870,200 817,989 52,211 6%
Coal Fired 1,269,107 1,021,820 247,287 24%
Total 2,139,307 1,839,809 299,498 16%
HEATING DEGREE DAYS: 2,950 3,247 (297) ( 9%)
Normal 7,952
COAL SALES (thousand of tons):
Montana 2,725 2,742 (17) ( 1%)
Texas 2,167 1,895 272 14%
Total 4,892 4,637 255 5%
NONUTILITY OIL & GAS PRODUCTION SALES VOLUMES:
Oil (Bbls) 125,798 163,918 (38,120) (23%)
Natural Gas (Mcfs) 6,745,439 6,301,633 443,806 7%
N G Liquids (Bbls) 126,029 161,249 (35,220) (22%)
</TABLE>
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