x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2012 | |
OR | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the transition period from __________ to __________. | |
Commission File Number 001-31303 |
Black Hills Corporation | |
Incorporated in South Dakota | IRS Identification Number 46-0458824 |
625 Ninth Street | |
Rapid City, South Dakota 57701 | |
Registrant's telephone number (605) 721-1700 | |
Former name, former address, and former fiscal year if changed since last report | |
NONE |
Yes x | No o |
Yes x | No o |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company o |
Yes o | No x |
Class | Outstanding at April 30, 2012 |
Common stock, $1.00 par value | 44,089,428 shares |
TABLE OF CONTENTS | |||
Page | |||
Glossary of Terms and Abbreviations | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | ||
Condensed Consolidated Statements of Income and Comprehensive Income - unaudited | |||
Three Months Ended March 31, 2012 and 2011 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
March 31, 2012, December 31, 2011 and March 31, 2011 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Three Months Ended March 31, 2012 and 2011 | |||
Notes to Condensed Consolidated Financial Statements - unaudited | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II. | OTHER INFORMATION | ||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 4. | Mine Safety Disclosures | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
Signatures | |||
Exhibit Index |
AFUDC | Allowance for Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income (Loss) |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
Bbl | Barrel |
Bcf | Billion cubic feet |
Bcfe | Billion cubic feet equivalent |
BHC | Black Hills Corporation |
BHEP | Black Hills Exploration and Production, Inc., representing our Oil and Gas segment, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Black Hills Electric Generation | Black Hills Electric Generation, LLC, representing our Power Generation segment, a direct wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Black Hills Energy | The name used to conduct the business activities of Black Hills Utility Holdings |
Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of the Company |
Black Hills Power | Black Hills Power, Inc., a direct, wholly-owned subsidiary of the Company |
Black Hills Service Company | Black Hills Service Company, a direct wholly-owned subsidiary of the Company |
Black Hills Utility Holdings | Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of the Company |
Black Hills Wyoming | Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation |
Btu | British thermal unit |
Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of the Company |
Colorado Electric | Black Hills Colorado Electric Utility Company, LP (doing business as Black Hills Energy), an indirect, wholly-owned subsidiary of Black Hills Utility Holdings |
Colorado Gas | Black Hills Colorado Gas Utility Company, LP (doing business as Black Hills Energy), an indirect, wholly-owned subsidiary of Black Hills Utility Holdings |
Colorado IPP | Black Hills Colorado IPP, a direct wholly-owned subsidiary of Black Hills Electric Generation |
CPCN | Certificate of Public Convenience and Necessity |
CPUC | Colorado Public Utilities Commission |
CT | Combustion Turbine |
CVA | Credit Valuation Adjustment |
De-designated interest rate swaps | The $250 million notional amount interest rate swaps that were originally designated as cash flow hedges under accounting for derivatives and hedges but subsequently de-designated. |
Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act |
DRIP | Dividend Reinvestment and Stock Purchase Plan |
Dth | Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu) |
ECA | Energy Cost Adjustment |
Enserco | Enserco Energy Inc., representing our Energy Marketing segment, sold February 29, 2012 |
Equity Forward Instrument | Equity Forward Agreement with J.P. Morgan connected to a public offering of 4,413,519 shares of Black Hills Corporation common stock |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
FERC | Federal Energy Regulatory Commission |
GAAP | Generally Accepted Accounting Principles of the United States |
Global Settlement | Settlement with the utilities commission where the dollar figure is agreed upon, but the specific adjustments used by each party to arrive at the figure are not specified in public rate orders |
IFRS | International Financial Reporting Standards |
Iowa Gas | Black Hills Iowa Gas Utility Company, LLC (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
IPP | Independent Power Producer |
IRS | Internal Revenue Service |
Kansas Gas | Black Hills Kansas Gas Utility Company, LLC (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
LIBOR | London Interbank Offered Rate |
LOE | Lease Operating Expense |
Mcf | One thousand standard cubic feet |
Mcfe | One thousand standard cubic feet equivalent. Natural gas liquid is converted by dividing gallons by 7. Crude oil is converted by multiplying by 6. |
MMBtu | One million British thermal units |
MSHA | Mine Safety and Health Administration |
MW | Megawatt |
MWh | Megawatt-hour |
Nebraska Gas | Black Hills Nebraska Gas Utility Company, LLC (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
NGL | Natural Gas Liquids |
NPSC | Nebraska Public Service Commission |
NYMEX | New York Mercantile Exchange |
OTC | Over-the-counter |
PGA | Purchase Gas Adjustment |
PPA | Power Purchase Agreement |
Revolving Credit Facility | Our $500 million five-year revolving credit facility which commenced on February 1, 2012 and expires on February 1, 2017 |
S&P | Standard and Poor's |
SEC | United States Securities and Exchange Commission |
Twin Eagle | Twin Eagle Resource Management, LLC |
WPSC | Wyoming Public Service Commission |
WRDC | Wyodak Resources Development Corp., a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
(in thousands, except per share amounts) | ||||||
Revenue: | ||||||
Utilities | $ | 336,655 | $ | 374,696 | ||
Non-regulated energy | 29,196 | 26,139 | ||||
Total revenue | 365,851 | 400,835 | ||||
Operating expenses: | ||||||
Utilities - | ||||||
Fuel, purchased power and cost of gas sold | 157,183 | 210,511 | ||||
Operations and maintenance | 64,760 | 67,409 | ||||
Non-regulated energy operations and maintenance | 22,595 | 23,474 | ||||
Depreciation, depletion and amortization | 38,559 | 31,910 | ||||
Taxes - property, production and severance | 11,510 | 8,198 | ||||
Other operating expenses | 1,196 | 966 | ||||
Total operating expenses | 295,803 | 342,468 | ||||
Operating income | 70,048 | 58,367 | ||||
Other income (expense): | ||||||
Interest charges - | ||||||
Interest expense incurred (including amortization of debt issuance costs, premium, discount and realized settlements on interest rate swaps) | (29,914 | ) | (29,203 | ) | ||
Allowance for funds used during construction - borrowed | 518 | 3,363 | ||||
Capitalized interest | 161 | 2,434 | ||||
Unrealized gain (loss) on interest rate swaps, net | 12,045 | 5,465 | ||||
Interest income | 437 | 548 | ||||
Allowance for funds used during construction - equity | 277 | 295 | ||||
Other income, net | 1,472 | 731 | ||||
Total other income (expense) | (15,004 | ) | (16,367 | ) | ||
Income (loss) before equity in earnings (loss) of unconsolidated subsidiaries and income taxes | 55,044 | 42,000 | ||||
Equity in earnings (loss) of unconsolidated subsidiaries | (56 | ) | 993 | |||
Income tax benefit (expense) | (19,717 | ) | (13,925 | ) | ||
Income (loss) from continuing operations | 35,271 | 29,068 | ||||
Income (loss) from discontinued operations, net of tax | (5,484 | ) | (2,158 | ) | ||
Net income available for common stock | 29,787 | 26,910 | ||||
Other comprehensive income (loss), net of tax | (166 | ) | (1,579 | ) | ||
Comprehensive income (loss) | $ | 29,621 | $ | 25,331 | ||
Income (loss) per share, Basic - | ||||||
Income (loss) from continuing operations, per share | $ | 0.81 | $ | 0.74 | ||
Income (loss) from discontinued operations, per share | (0.13 | ) | (0.05 | ) | ||
Total income (loss) per share, Basic | $ | 0.68 | $ | 0.69 | ||
Income (loss) per share, Diluted - | ||||||
Income (loss) from continuing operations, per share | $ | 0.80 | $ | 0.73 | ||
Income (loss) from discontinued operations, per share | (0.12 | ) | (0.05 | ) | ||
Total income (loss) per share, Diluted | $ | 0.68 | $ | 0.68 | ||
Weighted average common shares outstanding: | ||||||
Basic | 43,731 | 39,059 | ||||
Diluted | 43,969 | 39,761 | ||||
Dividends paid per share of common stock | $ | 0.37 | $ | 0.365 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 56,132 | $ | 21,628 | $ | 26,418 | |||||
Restricted cash | 8,960 | 9,254 | 3,406 | ||||||||
Accounts receivable, net | 143,987 | 156,774 | 151,524 | ||||||||
Materials, supplies and fuel | 63,236 | 84,064 | 45,635 | ||||||||
Derivative assets, current | 17,877 | 18,583 | 7,812 | ||||||||
Income tax receivable, net | 10,399 | 9,344 | 20,173 | ||||||||
Deferred income tax assets, net, current | 23,710 | 37,202 | 20,491 | ||||||||
Regulatory assets, current | 56,282 | 59,955 | 36,834 | ||||||||
Other current assets | 26,546 | 21,266 | 17,486 | ||||||||
Assets of discontinued operations | — | 340,851 | 295,724 | ||||||||
Total current assets | 407,129 | 758,921 | 625,503 | ||||||||
Investments | 16,451 | 17,261 | 17,088 | ||||||||
Property, plant and equipment | 3,800,011 | 3,724,016 | 3,454,179 | ||||||||
Less accumulated depreciation and depletion | (980,944 | ) | (934,441 | ) | (886,401 | ) | |||||
Total property, plant and equipment, net | 2,819,067 | 2,789,575 | 2,567,778 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,787 | 3,843 | 4,011 | ||||||||
Derivative assets, non-current | 881 | 1,971 | 1,184 | ||||||||
Regulatory assets, non-current | 186,093 | 182,175 | 140,735 | ||||||||
Other assets, non-current | 21,132 | 19,941 | 19,655 | ||||||||
Total other assets | 565,289 | 561,326 | 518,981 | ||||||||
TOTAL ASSETS | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 59,793 | $ | 104,748 | $ | 104,742 | |||||
Accrued liabilities | 151,130 | 151,319 | 127,235 | ||||||||
Derivative liabilities, current | 76,389 | 84,367 | 59,972 | ||||||||
Regulatory liabilities, current | 35,414 | 16,231 | 15,004 | ||||||||
Notes payable | 225,000 | 345,000 | 287,000 | ||||||||
Current maturities of long-term debt | 8,977 | 2,473 | 4,254 | ||||||||
Liabilities of discontinued operations | — | 173,929 | 163,293 | ||||||||
Total current liabilities | 556,703 | 878,067 | 761,500 | ||||||||
Long-term debt, net of current maturities | 1,272,016 | 1,280,409 | 1,184,830 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 317,369 | 300,988 | 301,097 | ||||||||
Derivative liabilities, non-current | 43,169 | 49,033 | 15,790 | ||||||||
Regulatory liabilities, non-current | 112,516 | 108,217 | 90,923 | ||||||||
Benefit plan liabilities | 157,623 | 177,480 | 128,170 | ||||||||
Other deferred credits and other liabilities | 123,848 | 123,553 | 133,893 | ||||||||
Total deferred credits and other liabilities | 754,525 | 759,271 | 669,873 | ||||||||
Stockholders' equity: | |||||||||||
Common stockholders' — | |||||||||||
Common stock $1 par value: 100,000,000 shares authorized: issued 44,151,428; 43,957,502 and 39,434,304 shares, respectively | 44,151 | 43,958 | 39,434 | ||||||||
Additional paid-in capital | 725,512 | 722,623 | 601,021 | ||||||||
Retained earnings | 490,114 | 476,603 | 498,614 | ||||||||
Treasury stock at cost – 65,015; 32,766 and 26,075 shares, respectively | (2,041 | ) | (970 | ) | (762 | ) | |||||
Accumulated other comprehensive income (loss) | (33,044 | ) | (32,878 | ) | (25,160 | ) | |||||
Total stockholders' equity | 1,224,692 | 1,209,336 | 1,113,147 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Operating activities: | (in thousands) | ||||||
Net income (loss) | $ | 29,787 | $ | 26,910 | |||
(Income) loss from discontinued operations, net of tax | 5,484 | 2,158 | |||||
Income (loss) from continuing operations | 35,271 | 29,068 | |||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 38,559 | 31,910 | |||||
Deferred financing cost amortization | 2,719 | 1,528 | |||||
Derivative fair value adjustments | 1,594 | 2,010 | |||||
Stock compensation | 1,817 | 2,289 | |||||
Unrealized mark-to-market (gain) loss on interest rate swaps | (12,045 | ) | (5,465 | ) | |||
Deferred income taxes | 18,083 | 25,844 | |||||
Equity in (earnings) loss of unconsolidated subsidiaries | 56 | (993 | ) | ||||
Allowance for funds used during construction - equity | (277 | ) | (295 | ) | |||
Employee benefit plans | 5,246 | 3,642 | |||||
Other adjustments, net | 2,187 | (3,440 | ) | ||||
Changes in certain operating assets and liabilities: | |||||||
Materials, supplies and fuel | 20,828 | 17,280 | |||||
Accounts receivable and other current assets | 9,439 | (5,591 | ) | ||||
Accounts payable and other current liabilities | (42,368 | ) | (44,617 | ) | |||
Regulatory assets | (776 | ) | 33,966 | ||||
Regulatory liabilities | 18,938 | 9,984 | |||||
Contributions to defined benefit pension plans | (25,000 | ) | — | ||||
Other operating activities, net | 610 | 5,301 | |||||
Net cash provided by operating activities of continuing operations | 74,881 | 102,421 | |||||
Net cash provided by (used in) operating activities of discontinued operations | 21,184 | 8,850 | |||||
Net cash provided by operating activities | 96,065 | 111,271 | |||||
Investing activities: | |||||||
Property, plant and equipment additions | (67,652 | ) | (121,615 | ) | |||
Other investing activities | 1,105 | 786 | |||||
Net cash provided by (used in) investing activities of continuing operations | (66,547 | ) | (120,829 | ) | |||
Proceeds from sale of business operations | 108,837 | — | |||||
Net cash provided by (used in) investing activities of discontinued operations | (824 | ) | (929 | ) | |||
Net cash provided by (used in) investing activities | 41,466 | (121,758 | ) | ||||
Financing activities: | |||||||
Dividends paid on common stock | (16,276 | ) | (14,371 | ) | |||
Common stock issued | 764 | 605 | |||||
Short-term borrowings - issuances | 56,453 | 210,000 | |||||
Short-term borrowings - repayments | (176,453 | ) | (172,000 | ) | |||
Long-term debt - repayments | (1,897 | ) | (2,155 | ) | |||
Other financing activities | (2,758 | ) | (14 | ) | |||
Net cash provided by (used in) financing activities of continuing operations | (140,167 | ) | 22,065 | ||||
Net cash provided by (used in) financing activities of discontinued operations | — | — | |||||
Net cash provided by (used in) financing activities | (140,167 | ) | 22,065 | ||||
Net change in cash and cash equivalents | (2,636 | ) | 11,578 | ||||
Cash and cash equivalents, beginning of period* | 58,768 | 32,438 | |||||
Cash and cash equivalents, end of period* | $ | 56,132 | $ | 44,016 |
* | Cash and cash equivalents include cash of discontinued operations of $37.1 million, $17.6 million and $16.0 million at December 31, 2011, March 31, 2011 and December 31, 2010, respectively. |
Three Months Ended | |||||||
March 31, 2012 | March 31, 2011 | ||||||
(in thousands) | |||||||
Non-cash investing activities from continuing operations— | |||||||
Property, plant and equipment acquired with accrued liabilities | $ | 31,644 | $ | 32,220 | |||
Capitalized assets associated with retirement obligations | $ | 2,826 | $ | — | |||
Cash (paid) refunded during the period for continuing operations— | |||||||
Interest (net of amounts capitalized) | $ | (16,799 | ) | $ | (11,572 | ) | |
Income taxes, net | $ | (1,838 | ) | $ | 48 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||
Materials and supplies | $ | 44,361 | $ | 40,838 | $ | 34,129 | ||||||
Fuel - Electric Utilities | 7,812 | 8,201 | 9,307 | |||||||||
Natural gas in storage - gas utilities | 11,063 | 35,025 | 2,199 | |||||||||
Total materials, supplies and fuel | $ | 63,236 | $ | 84,064 | $ | 45,635 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2012 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 44,356 | $ | 19,381 | $ | (585 | ) | $ | 63,152 | |||
Gas | 44,287 | 18,502 | (936 | ) | 61,853 | |||||||
Oil and Gas | 15,014 | — | (105 | ) | 14,909 | |||||||
Coal Mining | 2,578 | — | — | 2,578 | ||||||||
Power Generation | 265 | — | — | 265 | ||||||||
Corporate | 1,230 | — | — | 1,230 | ||||||||
Total | $ | 107,730 | $ | 37,883 | $ | (1,626 | ) | $ | 143,987 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
December 31, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 42,773 | $ | 21,151 | $ | (545 | ) | $ | 63,379 | |||
Gas | 39,353 | 38,992 | (1,011 | ) | 77,334 | |||||||
Oil and Gas | 11,282 | — | (105 | ) | 11,177 | |||||||
Coal Mining | 4,056 | — | — | 4,056 | ||||||||
Power Generation | 282 | — | — | 282 | ||||||||
Corporate | 546 | — | — | 546 | ||||||||
Total | $ | 98,292 | $ | 60,143 | $ | (1,661 | ) | $ | 156,774 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
March 31, 2011 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric | $ | 46,077 | $ | 16,196 | $ | (728 | ) | $ | 61,545 | |||
Gas | 58,665 | 21,620 | (1,763 | ) | 78,522 | |||||||
Oil and Gas | 7,503 | — | (161 | ) | 7,342 | |||||||
Coal Mining | 982 | — | — | 982 | ||||||||
Power Generation | 2,050 | — | — | 2,050 | ||||||||
Corporate | 1,083 | — | — | 1,083 | ||||||||
Total | $ | 116,360 | $ | 37,816 | $ | (2,652 | ) | $ | 151,524 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||||||||
Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 75,000 | $ | 41,200 | $ | 195,000 | $ | 43,700 | $ | 187,000 | $ | 51,000 | ||||||
Term Loan due 2011* | — | — | — | — | 100,000 | — | ||||||||||||
Term Loan due 2012 | 150,000 | — | 150,000 | — | — | — | ||||||||||||
Total | $ | 225,000 | $ | 41,200 | $ | 345,000 | $ | 43,700 | $ | 287,000 | $ | 51,000 |
As of | Covenant | |||||||
March 31, 2012 | Requirement | |||||||
Consolidated Net Worth | $ | 1,224,692 | $ | 899,024 | ||||
Recourse Leverage Ratio | 56.4 | % | 65.0 | % |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Income (loss) from continuing operations | $ | 35,271 | $ | 29,068 | |||
Weighted average shares - basic | 43,731 | 39,059 | |||||
Dilutive effect of: | |||||||
Restricted stock | 147 | 132 | |||||
Stock options | 18 | 17 | |||||
Equity forward instruments | — | 460 | |||||
Other dilutive effects | 73 | 93 | |||||
Weighted average shares - diluted | 43,969 | 39,761 |
Three Months Ended March 31, | ||||
2012 | 2011 | |||
Stock options | 127 | 83 | ||
Restricted stock | 31 | 7 | ||
Other stock | 16 | — | ||
Anti-dilutive shares | 174 | 90 |
Three Months Ended March 31, 2012 | Pre-tax Amount | Tax (Expense) Benefit | Net-of-tax Amount | ||||||||
Fair value adjustment of derivatives designated as cash flow hedges | $ | 521 | $ | 55 | $ | 576 | |||||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) | (1,187 | ) | 445 | (742 | ) | ||||||
Other comprehensive income (loss) | $ | (666 | ) | $ | 500 | $ | (166 | ) |
Three Months Ended March 31, 2011 | Pre-tax Amount | Tax (Expense) Benefit | Net-of-tax Amount | ||||||||
Fair value adjustment of derivatives designated as cash flow hedges | $ | (3,785 | ) | $ | 1,637 | $ | (2,148 | ) | |||
Reclassification adjustments of cash flow hedges settled and included in net income (loss) | 861 | (292 | ) | 569 | |||||||
Other comprehensive income (loss) | $ | (2,924 | ) | $ | 1,345 | $ | (1,579 | ) |
Derivatives Designated as Cash Flow Hedges | Employee Benefit Plans | Total | |||||||
Balance as of December 31, 2011 | $ | (13,802 | ) | $ | (19,076 | ) | $ | (32,878 | ) |
Other comprehensive income (loss) | (166 | ) | — | (166 | ) | ||||
Ending Balance March 31, 2012 | $ | (13,968 | ) | $ | (19,076 | ) | $ | (33,044 | ) |
Derivatives Designated as Cash Flow Hedges | Employee Benefit Plans | Total | |||||||
Balance as of December 31, 2010 | $ | (12,439 | ) | $ | (11,142 | ) | $ | (23,581 | ) |
Other comprehensive income (loss) | (1,579 | ) | — | (1,579 | ) | ||||
Ending Balance March 31, 2011 | $ | (14,018 | ) | $ | (11,142 | ) | $ | (25,160 | ) |
• | We granted 66,690 target performance shares to certain officers and business unit leaders for the January 1, 2012 through December 31, 2014 performance period during the three months ended March 31, 2012. Actual shares are issued after the end of the performance plan period. Performance shares are awarded based on our total stockholder return over the designated performance period as measured against a selected peer group and can range from 0% to 200% of target. In addition, certain stock price performance must be achieved for a payout to occur. The final value of the performance shares will vary according to the number of shares of common stock that are ultimately granted based upon the actual level of attainment of the performance criteria. The performance awards are paid 50% in the form of cash and 50% in shares of common stock. The grant date fair value was $32.26 per share. |
• | We granted 139,550 shares of restricted common stock and restricted stock units during the three months ended March 31, 2012. The pre-tax compensation cost related to the awards of restricted stock and restricted stock units of approximately $4.9 million will be recognized over the vesting period. |
• | Stock options totaling 41,206 shares were exercised during the three months ended March 31, 2012 at a weighted-average exercise price of $28.28 per share, providing $1.2 million of proceeds. |
• | We issued 3,690 shares of common stock under our short-term incentive compensation plan during the three months ended March 31, 2012. Pre-tax compensation cost related to the awards was approximately $0.1 million, which was expensed in 2011. |
• | Our utilities are generally limited to the amount of dividends allowed to be paid to us as a utility holding company under the Federal Power Act and settlement agreements with state regulatory jurisdictions. As of March 31, 2012, the restricted net assets at our Utilities Group were approximately $81.4 million. |
• | As required by the covenant in the Black Hills Wyoming project financing, Black Hills Non-regulated Holdings has maintained restricted equity of at least $100.0 million. |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 1,430 | $ | 1,355 | ||
Interest cost | 3,687 | 3,732 | ||||
Expected return on plan assets | (4,084 | ) | (4,239 | ) | ||
Prior service cost | 22 | 25 | ||||
Net loss (gain) | 2,408 | 1,135 | ||||
Net periodic benefit cost | $ | 3,463 | $ | 2,008 |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 402 | $ | 375 | ||
Interest cost | 523 | 542 | ||||
Expected return on plan assets | (19 | ) | (41 | ) | ||
Prior service cost (benefit) | (125 | ) | (120 | ) | ||
Net loss (gain) | 222 | 169 | ||||
Net periodic benefit cost | $ | 1,003 | $ | 925 |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Service cost | $ | 246 | $ | 257 | ||
Interest cost | 331 | 324 | ||||
Prior service cost | 1 | 1 | ||||
Net loss (gain) | 202 | 127 | ||||
Net periodic benefit cost | $ | 780 | $ | 709 |
Contributions Made | |||||||||
Three Months Ended March 31, 2012 | Additional Contributions Anticipated for 2012 | Contributions Anticipated for 2013 | |||||||
Defined Benefit Pension Plans | $ | 25,000 | $ | — | $ | 4,500 | |||
Non-pension Defined Benefit Postretirement Healthcare Plans | $ | 1,063 | $ | 3,188 | $ | 4,380 | |||
Supplemental Non-qualified Defined Benefit Plans | $ | 278 | $ | 833 | $ | 1,090 |
• | Electric Utilities, which supplies electric utility service to areas in South Dakota, Wyoming, Colorado and Montana and natural gas utility service to Cheyenne, Wyoming and vicinity; and |
• | Gas Utilities, which supplies natural gas utility service to areas in Colorado, Iowa, Kansas and Nebraska. |
• | Oil and Gas, which acquires, explores for, develops and produces crude oil and natural gas interests located in the Rocky Mountain region and other states; |
• | Power Generation, which produces and sells power and capacity to wholesale customers from power plants located in Wyoming and Colorado; and |
• | Coal Mining, which engages in the mining and sale of coal from our mine near Gillette, Wyoming. |
Three Months Ended March 31, 2012 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 156,133 | $ | 3,036 | $ | 8,746 | ||||||
Gas | 180,522 | — | 15,207 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 21,645 | — | 13 | |||||||||
Power Generation | 1,178 | 18,449 | 6,914 | |||||||||
Coal Mining | 6,373 | 8,616 | 1,000 | |||||||||
Corporate (a)(b) | — | — | 3,391 | |||||||||
Intercompany eliminations | — | (30,101 | ) | — | ||||||||
Total | $ | 365,851 | $ | — | $ | 35,271 |
Three Months Ended March 31, 2011 | External Operating Revenues | Intercompany Operating Revenues | Income (Loss) from Continuing Operations | |||||||||
Utilities: | ||||||||||||
Electric | $ | 144,430 | $ | 3,839 | $ | 10,249 | ||||||
Gas | 230,266 | — | 19,263 | |||||||||
Non-regulated Energy: | ||||||||||||
Oil and Gas | 17,906 | — | (715 | ) | ||||||||
Power Generation | 687 | 6,933 | 1,186 | |||||||||
Coal Mining | 7,614 | 7,881 | (1,298 | ) | ||||||||
Corporate (a)(b) | — | — | 451 | |||||||||
Intercompany eliminations | — | (18,721 | ) | (68 | ) | |||||||
Total | $ | 400,903 | $ | (68 | ) | $ | 29,068 |
(a) | Income (loss) from continuing operations includes $7.8 million and $3.6 million net after-tax mark-to-market gain on interest rate swaps for the three months ended March 31, 2012 and March 31, 2011, respectively. |
(b) | Certain direct corporate costs and inter-segment interest expense previously allocated to our Energy Marketing segment were not classified as discontinued operations but were included in the Corporate segment. See Note 17 for further information. |
Total Assets (net of inter-company eliminations) | March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||
Utilities: | |||||||||||
Electric (a) | $ | 2,268,524 | $ | 2,254,914 | $ | 1,868,600 | |||||
Gas | 717,185 | 746,444 | 683,927 | ||||||||
Non-regulated Energy: | |||||||||||
Oil and Gas | 430,851 | 425,970 | 355,357 | ||||||||
Power Generation (a) | 128,225 | 129,121 | 336,827 | ||||||||
Coal Mining | 87,139 | 88,704 | 94,416 | ||||||||
Corporate (b) | 176,012 | 141,079 | 94,499 | ||||||||
Discontinued operations (c) | — | 340,851 | 295,724 | ||||||||
Total assets | $ | 3,807,936 | $ | 4,127,083 | $ | 3,729,350 |
(a) | The PPA under which the new generating facility was constructed at our Pueblo Airport Generation site by Colorado IPP to support Colorado Electric customers is accounted for as a capital lease. Therefore, commencing December 31, 2011, assets previously at Power Generation are now accounted for at Colorado Electric under accounting for a capital lease. |
• | Commodity price risk associated with our natural long position with crude oil and natural gas reserves and production, fuel procurement for certain of our gas-fired generation assets and variability in revenue due to changes in gas usage at our regulated segment; and |
• | Interest rate risk associated with our variable rate credit facility, project financing floating rate debt and our derivative instruments. |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||||||||
Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | Crude Oil Swaps/ Options | Natural Gas Swaps | ||||||||||||||||||
Notional (a) | 522,000 | 5,001,750 | 528,000 | 5,406,250 | 487,500 | 5,974,800 | |||||||||||||||||
Maximum terms in years (b) | 1.25 | 1.50 | 1.25 | 1.75 | 1.00 | 0.25 | |||||||||||||||||
Derivative assets, current | $ | 406 | $ | 8,256 | $ | 729 | $ | 8,010 | $ | 108 | $ | 6,649 | |||||||||||
Derivative assets, non-current | $ | 46 | $ | 808 | $ | 771 | $ | 1,148 | $ | — | $ | 975 | |||||||||||
Derivative liabilities, current | $ | 2,904 | $ | — | $ | 2,559 | $ | — | $ | 4,688 | $ | — | |||||||||||
Derivative liabilities, non-current | $ | 1,084 | $ | — | $ | 811 | $ | 7 | $ | 2,678 | $ | 157 | |||||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (3,566 | ) | $ | 9,064 | $ | (1,928 | ) | $ | 9,152 | $ | (7,613 | ) | $ | 7,467 | ||||||||
Revenue (c) | $ | 30 | $ | — | $ | 58 | $ | — | $ | 355 | $ | — |
(a) | Crude oil in Bbls, gas in MMBtus |
(b) | Refers to the term of the derivative instrument. Assets and liabilities are classified as current or non-current based on the term of the hedged transaction and the corresponding settlement of the derivative instruments. |
(c) | Represents the amortization of put premiums. |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||
Notional (MMBtus) | Latest Expiration (months) | Notional (MMBtus) | Latest Expiration (months) | Notional (MMBtus) | Latest Expiration (months) | ||||||||||||
Natural gas futures purchased | 11,550,000 | 81 | 14,310,000 | 84 | 4,680,000 | 24 | |||||||||||
Natural gas options purchased | 670,000 | 12 | 1,720,000 | 3 | — | — | |||||||||||
Natural gas basis swaps purchased | 7,640,000 | 81 | 7,160,000 | 60 | — | — |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
Derivative assets, current | $ | 9,215 | $ | 9,844 | $ | 1,056 | |||||
Derivative assets, non-current | $ | 27 | $ | 52 | $ | 209 | |||||
Derivative liabilities, non-current | $ | 6,407 | $ | 7,156 | $ | — | |||||
Net unrealized gain (loss) included in Regulatory assets or liabilities | $ | 15,223 | $ | 17,556 | $ | 2,455 | |||||
Included in Derivatives: | |||||||||||
Cash collateral receivable (payable) | $ | 17,651 | $ | 19,416 | $ | 3,720 | |||||
Option premiums and commissions | $ | 407 | $ | 880 | $ | — |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||||||||
Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | ||||||||||||||||||
Notional | $ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | |||||||||||
Weighted average fixed interest rate | 5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | |||||||||||
Maximum terms in years | 4.75 | 1.75 | 5.00 | 2.00 | 5.75 | 0.75 | |||||||||||||||||
Derivative liabilities, current | $ | 6,777 | $ | 66,708 | $ | 6,513 | $ | 75,295 | $ | 6,769 | $ | 48,515 | |||||||||||
Derivative liabilities, non-current | $ | 18,441 | $ | 17,237 | $ | 20,363 | $ | 20,696 | $ | 12,955 | $ | — | |||||||||||
Pre-tax accumulated other comprehensive income (loss) | $ | (25,218 | ) | $ | — | $ | (26,876 | ) | $ | — | $ | (19,724 | ) | $ | — | ||||||||
Pre-tax gain (loss) | $ | — | $ | 12,045 | $ | — | $ | (42,010 | ) | $ | — | $ | 5,465 | ||||||||||
Cash collateral receivable (payable) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
* | Maximum terms in years reflect the amended early termination dates. If the early termination dates are not extended, the swaps will require cash settlement based on the swap value on the termination date. If extended, de-designated swaps totaling $100 million terminate in 7 years and de-designated swaps totaling $150 million terminate in 17 years. |
• | The commodity option contracts for the Oil and Gas segment are valued under the market approach and include calls and puts. Fair value was derived using quoted prices from third party brokers for similar instruments as to quantity and timing. The prices are then validated through multiple sources. |
• | The commodity basis swaps for the Oil and Gas segment are valued under the market approach using the instrument's current forward price strip hedged for the same quantity and date and discounted based on the three-month LIBOR. |
• | The commodity contracts for the Utilities, valued using the market approach, include exchange-traded futures, options and basis swaps (Level 2) and OTC basis swaps (Level 3) for natural gas contracts. For Level 2 assets and liabilities, fair value was derived using broker quotes validated by the Chicago Mercantile Exchange pricing for similar instruments. For Level 3 assets and liabilities, fair value was derived using average price quotes from the OTC contract broker and an independent third party market participant. |
• | The interest rate swaps are valued using the market valuation approach. The company establishes fair value by obtaining price quotes directly from the counterparty which are based on the floating three-month LIBOR curve for the term of the contract. The fair value obtained from the counterparty is then validated by utilizing a nationally recognized service that obtains observable inputs to compute fair value for the same instrument. In addition, the fair value for the interest rate swap derivatives includes a CVA component. The CVA considers the fair value of the interest rate swap and the probability of default based on the life of the contract. For the probability of a default component, we utilize observable inputs supporting Level 2 disclosure by using our credit default spread, if available, or a generic credit default spread curve that takes into account our credit ratings. |
As of March 31, 2012 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||||||
Options -- Oil | $ | — | $ | 404 | $ | — | $ | — | $ | — | $ | 404 | ||||||||||||
Basis Swaps -- Oil | — | 48 | — | — | — | 48 | ||||||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Basis Swaps -- Gas | — | 9,064 | — | — | — | 9,064 | ||||||||||||||||||
Commodity derivatives — Utilities | — | (8,412 | ) | 3 | — | 17,651 | 9,242 | |||||||||||||||||
Repurchase agreement (a) | 43,128 | — | — | — | — | 43,128 | ||||||||||||||||||
Money market funds and term deposits (a) | 12,791 | — | — | — | — | 12,791 | ||||||||||||||||||
Total | $ | 55,919 | $ | 1,104 | $ | 3 | $ | — | $ | 17,651 | $ | 74,677 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||||||||||
Options -- Oil | $ | — | $ | 1,347 | $ | — | $ | — | $ | — | $ | 1,347 | ||||||||||||
Basis Swaps -- Oil | — | 2,641 | — | — | — | 2,641 | ||||||||||||||||||
Options -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Basis Swaps -- Gas | — | — | — | — | — | — | ||||||||||||||||||
Commodity derivatives — Utilities | — | 6,359 | 48 | — | — | 6,407 | ||||||||||||||||||
Interest rate swaps | — | 109,163 | — | — | — | 109,163 | ||||||||||||||||||
Total | $ | — | $ | 119,510 | $ | 48 | $ | — | $ | — | $ | 119,558 |
As of December 31, 2011 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 9,885 | $ | 768 | $ | 5 | $ | — | $ | 10,658 | ||||||||||||
Commodity derivatives —Utilities | — | (9,520 | ) | — | — | 19,416 | 9,896 | |||||||||||||||||
Money market funds | 6,005 | — | — | — | — | 6,005 | ||||||||||||||||||
Total | $ | 6,005 | $ | 365 | $ | 768 | $ | 5 | $ | 19,416 | $ | 26,559 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 2,207 | $ | 1,165 | $ | 5 | $ | — | $ | 3,377 | ||||||||||||
Commodity derivatives — Utilities | — | 7,156 | — | — | — | 7,156 | ||||||||||||||||||
Interest rate swaps | — | 122,867 | — | — | — | 122,867 | ||||||||||||||||||
Total | $ | — | $ | 132,230 | $ | 1,165 | $ | 5 | $ | — | $ | 133,400 |
As of March 31, 2011 | ||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Counterparty Netting | Cash Collateral | Total | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 7,626 | $ | 106 | $ | — | $ | — | $ | 7,732 | ||||||||||||
Commodity derivatives — Utilities | — | (2,455 | ) | — | — | 3,720 | 1,265 | |||||||||||||||||
Money market funds | 9,050 | — | — | — | — | 9,050 | ||||||||||||||||||
Total | $ | 9,050 | $ | 5,171 | $ | 106 | $ | — | $ | 3,720 | $ | 18,047 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Commodity derivatives — Oil and Gas | $ | — | $ | 7,523 | $ | — | $ | — | $ | — | $ | 7,523 | ||||||||||||
Commodity derivatives — Utilities | — | — | — | — | — | — | ||||||||||||||||||
Interest rate swaps | — | 68,239 | — | — | — | 68,239 | ||||||||||||||||||
Total | $ | — | $ | 75,762 | $ | — | $ | — | $ | — | $ | 75,762 |
Fair Value at | Valuation | Unobservable | Range (Weighted | |||
March 31, 2012 | Technique | Input | Average) | |||
ASSETS | ||||||
Commodity derivatives - Utilities(a) | $ | 3 | Independent price quotes | Long-term natural gas prices | Not applicable | |
LIABILITIES | ||||||
Commodity derivatives - Utilities(a) | $ | 48 | Independent price quotes | Long-term natural gas prices | Not applicable |
(a) | The significant unobservable inputs used in the fair value measurement of the long-term OTC contracts are based on the average of price quotes from an independent third party market participant and the OTC contract broker. Significant changes to these inputs along with the contract term would impact the derivative asset/liability and regulatory asset/liability, but will not impact the results of operations until the contract is settled under the original terms of the contract. The contracts will be classified as Level 2 once settlement is within 60 months of maturity and quoted market prices from a market exchange are available. |
Three Months Ended March 31, 2012 | ||||||||||||
Assets: | Commodity Derivatives -- Oil | Commodity Derivatives -- Gas | Commodity Derivatives -- Utilities | Total | ||||||||
Balances as of beginning of period | $ | 768 | $ | — | $ | — | $ | 768 | ||||
Total gain (loss) included in revenue | — | — | — | — | ||||||||
Total gain (loss) included in AOCI | (360 | ) | — | — | (360 | ) | ||||||
Purchases | — | — | 3 | 3 | ||||||||
Issuances | — | — | — | — | ||||||||
Settlements | (4 | ) | — | — | (4 | ) | ||||||
Transfers into level 3 (a) | — | — | — | — | ||||||||
Transfers out of level 3(b)(c) | (404 | ) | — | — | (404 | ) | ||||||
Balances at end of period | $ | — | $ | — | $ | 3 | $ | 3 | ||||
Changes in unrealized gains (losses) relating to instruments still held as of period-end | $ | — | $ | — | $ | 3 | $ | 3 |
Three Months Ended March 31, 2012 | ||||||||||||
Liabilities: | Commodity Derivatives -- Oil | Commodity Derivatives -- Gas | Commodity Derivatives -- Utilities | Total | ||||||||
Balances as of beginning of period | $ | 1,165 | $ | — | $ | — | $ | 1,165 | ||||
Total gain (loss) included in revenue | — | — | — | — | ||||||||
Total gain (loss) included in AOCI | 182 | — | — | 182 | ||||||||
Purchases | — | — | 48 | 48 | ||||||||
Issuances | — | — | — | — | ||||||||
Settlements | — | — | — | — | ||||||||
Transfers into level 3 (a) | — | — | — | — | ||||||||
Transfers out of level 3(b)(c) | (1,347 | ) | — | — | (1,347 | ) | ||||||
Balances at end of period | $ | — | $ | — | $ | 48 | $ | 48 | ||||
Changes in unrealized gains (losses) relating to instruments still held as of period-end | $ | — | $ | — | $ | 48 | $ | 48 |
Three Months Ended March 31, 2011 | |||
Commodity Derivatives | |||
Balance as of beginning of period | $ | 266 | |
Unrealized losses | (160 | ) | |
Unrealized gains | — | ||
Settlements | — | ||
Transfers into level 3 (a) | — | ||
Transfers out of level 3(b) | — | ||
Balance at end of period | $ | 106 | |
Changes in unrealized gains (losses) relating to instruments still held as of period-end | $ | (159 | ) |
(a) | Transfers into Level 3 would occur when significant inputs used to value the derivative instruments become less observable such as a significant decrease in the frequency and volume in which the instrument is traded, negatively impacting the availability of observable pricing inputs. |
(b) | Transfers out of Level 3 would occur when the significant inputs become more observable such as the time between the valuation date and the delivery date of a transaction becomes shorter, positively impacting the availability of observable pricing inputs. |
As of March 31, 2012 | |||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | |||||||
Derivatives designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | 8,662 | $ | — | ||||
Commodity derivatives | Derivative assets — non-current | 854 | — | ||||||
Commodity derivatives | Derivative liabilities — current | — | 2,904 | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | 1,084 | ||||||
Interest rate swaps | Derivative liabilities — current | — | 6,777 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | 18,441 | ||||||
Total derivatives designated as hedges | $ | 9,516 | $ | 29,206 | |||||
Derivatives not designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | — | $ | 8,436 | ||||
Commodity derivatives | Derivative assets — non-current | — | (27 | ) | |||||
Commodity derivatives | Derivative liabilities — current | — | — | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | 6,407 | ||||||
Interest rate swaps | Derivative liabilities — current | — | 66,708 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | 17,237 | ||||||
Total derivatives not designated as hedges | $ | — | $ | 98,761 |
As of December 31, 2011 | |||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | |||||||
Derivatives designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | 8,739 | $ | — | ||||
Commodity derivatives | Derivative assets — non-current | 1,919 | — | ||||||
Commodity derivatives | Derivative liabilities — current | — | 2,559 | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | 818 | ||||||
Interest rate swaps | Derivative liabilities — current | — | 6,513 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | 20,363 | ||||||
Total derivatives designated as hedges | $ | 10,658 | $ | 30,253 | |||||
Derivatives not designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | — | $ | 9,572 | ||||
Commodity derivatives | Derivative assets — non-current | — | (52 | ) | |||||
Commodity derivatives | Derivative liabilities — current | — | — | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | 7,156 | ||||||
Interest rate swaps | Derivative liabilities — current | — | 75,295 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | 20,696 | ||||||
Total derivatives not designated as hedges | $ | — | $ | 112,667 |
As of March 31, 2011 | |||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | |||||||
Derivatives designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | 6,757 | $ | — | ||||
Commodity derivatives | Derivative assets — non-current | 975 | — | ||||||
Commodity derivatives | Derivative liabilities — current | — | 4,688 | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | 2,835 | ||||||
Interest rate swaps | Derivative liabilities — current | — | 6,769 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | 12,955 | ||||||
Total derivatives designated as hedges | $ | 7,732 | $ | 27,247 | |||||
Derivatives not designated as hedges: | |||||||||
Commodity derivatives | Derivative assets — current | $ | — | $ | 2,665 | ||||
Commodity derivatives | Derivative assets — non-current | — | (209 | ) | |||||
Commodity derivatives | Derivative liabilities — current | — | — | ||||||
Commodity derivatives | Derivative liabilities — non-current | — | — | ||||||
Interest rate swaps | Derivative liabilities — current | — | 48,515 | ||||||
Interest rate swaps | Derivative liabilities — non-current | — | — | ||||||
Total derivatives not designated as hedges | $ | — | $ | 50,971 |
Three Months Ended March 31, 2012 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | (762 | ) | Interest expense | $ | (1,822 | ) | $ | — | |||||||
Commodity derivatives | 1,283 | Revenue | 3,009 | — | ||||||||||||
Total | $ | 521 | $ | 1,187 | $ | — |
Three Months Ended March 31, 2011 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | 298 | Interest expense | $ | (1,892 | ) | $ | — | ||||||||
Commodity derivatives | (4,083 | ) | Revenue | 1,031 | — | |||||||||||
Total | $ | (3,785 | ) | $ | (861 | ) | $ | — |
Three Months Ended | |||||||
March 31, 2012 | |||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain/(Loss) on Derivatives Recognized in Income | Amount of Gain/(Loss) on Derivatives Recognized in Income | |||||
Interest rate swaps - unrealized | Unrealized gain (loss) on interest rate swaps, net | $ | 12,045 | ||||
Interest rate swaps - realized | Interest expense | (3,205 | ) | ||||
$ | 8,840 |
Three Months Ended | |||||||
March 31, 2011 | |||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain/(Loss) on Derivatives Recognized in Income | Amount of Gain/(Loss) on Derivatives Recognized in Income | |||||
Interest rate swaps - unrealized | Unrealized gain (loss) on interest rate swaps, net | $ | 5,465 | ||||
Interest rate swaps - realized | Interest expense | (3,352 | ) | ||||
$ | 2,113 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | ||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
Cash and cash equivalents (a) | $ | 56,132 | $ | 56,132 | $ | 21,628 | $ | 21,628 | $ | 26,418 | $ | 26,418 | ||||||||||||
Restricted cash (a) | $ | 8,960 | $ | 8,960 | $ | 9,254 | $ | 9,254 | $ | 3,406 | $ | 3,406 | ||||||||||||
Total derivative assets (b) | $ | 18,758 | $ | 18,758 | $ | 20,554 | $ | 20,554 | $ | 8,996 | $ | 8,996 | ||||||||||||
Total derivative liabilities (b) | $ | 119,558 | $ | 119,558 | $ | 133,400 | $ | 133,400 | $ | 75,762 | $ | 75,762 | ||||||||||||
Notes payable (a) | $ | 225,000 | $ | 225,000 | $ | 345,000 | $ | 345,000 | $ | 287,000 | $ | 287,000 | ||||||||||||
Long-term debt, including current maturities (c) | $ | 1,280,993 | $ | 1,439,724 | $ | 1,282,882 | $ | 1,464,289 | $ | 1,189,084 | $ | 1,260,539 |
(a) | Carrying value approximates fair value due to short-term maturities and therefore is classified in Level 1 in the fair value hierarchy. |
(b) | See Note 14 for information on classification within the fair value hierarchy. |
(c) | Long-term debt is valued based on observable inputs available either directly or indirectly for similar liabilities in active markets and therefore is classified in Level 2 in the fair value hierarchy. |
For the Three Months Ended | ||||||
March 31, 2012 | March 31, 2011 | |||||
Revenue | $ | (604 | ) | $ | 2,465 | |
Pre-tax income (loss) from discontinued operations | (5,836 | ) | (3,174 | ) | ||
Pre-tax gain (loss) on sale | (2,453 | ) | — | |||
Income tax (expense) benefit | 2,805 | 1,016 | ||||
Income (loss) from discontinued operations, net of tax | $ | (5,484 | ) | $ | (2,158 | ) |
December 31, 2011 | March 31, 2011 | |||||
Other current assets | $ | 280,221 | $ | 243,473 | ||
Derivative assets, current and non-current | 52,859 | 45,432 | ||||
Property, plant and equipment, net | 5,828 | 4,750 | ||||
Goodwill | 1,435 | 1,435 | ||||
Other non-current assets | 508 | 631 | ||||
Other current liabilities | (132,951 | ) | (129,706 | ) | ||
Derivative liabilities, current and non-current | (26,084 | ) | (30,932 | ) | ||
Other non-current liabilities | (14,894 | ) | (2,652 | ) | ||
Net assets | $ | 166,922 | $ | 132,431 |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Business Group | Financial Segment |
Utilities | Electric Utilities |
Gas Utilities | |
Non-regulated Energy* | Oil and Gas |
Power Generation | |
Coal Mining |
* | In February 2012, we sold Enserco, our Energy Marketing segment, through a stock purchase agreement and therefore classified the segment as discontinued operations. |
See Forward-Looking Information in the Liquidity and Capital Resources section of this Item 2, beginning on Page 49. |
Three Months Ended March 31, | |||||||||
2012 | 2011 | Increase (Decrease) | |||||||
(in thousands) | |||||||||
Revenue | |||||||||
Utilities | $ | 339,691 | $ | 378,535 | $ | (38,844 | ) | ||
Non-regulated Energy | 56,261 | 41,021 | 15,240 | ||||||
Corporate | — | — | — | ||||||
Intercompany eliminations | (30,101 | ) | (18,721 | ) | (11,380 | ) | |||
$ | 365,851 | $ | 400,835 | $ | (34,984 | ) | |||
Net income (loss) | |||||||||
Electric Utilities | $ | 8,746 | $ | 10,249 | $ | (1,503 | ) | ||
Gas Utilities | 15,207 | 19,263 | (4,056 | ) | |||||
Utilities | 23,953 | 29,512 | (5,559 | ) | |||||
Oil and Gas | 13 | (715 | ) | 728 | |||||
Power Generation | 6,914 | 1,186 | 5,728 | ||||||
Coal Mining | 1,000 | (1,298 | ) | 2,298 | |||||
Non-regulated Energy | 7,927 | (827 | ) | 8,754 | |||||
Corporate and Eliminations (a) | 3,391 | 383 | 3,008 | ||||||
Income from continuing operations | 35,271 | 29,068 | 6,203 | ||||||
Income (loss) from discontinued operations, net of tax | (5,484 | ) | (2,158 | ) | (3,326 | ) | |||
Net income (loss) | $ | 29,787 | $ | 26,910 | $ | 2,877 |
(a) | Financial results of our Energy Marketing segment have been classified as discontinued operations. Certain indirect corporate costs and inter-segment expenses previously charged to our Energy Marketing segment are reclassified to continuing operations and are included in the Corporate segment. See Note 17 of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. |
• | Utility results were unfavorably impacted by warmer weather. During 2012, we experienced the warmest March on record for our jurisdictions causing reduced heating degree days. Heating degree days during the period were 13% and 19% lower than weighted average norms for our Electric and Gas Utilities, respectively. When compared to colder than normal weather during the same quarter in 2011, heating degree days were 20% and 24% lower than the same period in 2011 for our Electric Utilities and our Gas Utilities, respectively. |
• | Colorado Electric’s new $230 million, 180 MW power plant near Pueblo, Colorado began commercial operations and started serving utility customers on January 1, 2012. New rates were effective January 1, 2012 and provided an additional $5.8 million in gross margins at Colorado Electric for the three months ended March 31, 2012. |
• | On November 1, 2011, Cheyenne Light and Black Hills Power filed a joint request with the WPSC for a CPCN to construct and operate a new $237 million natural gas-fired electric generation facility and related gas and electric transmission in Cheyenne, WY. The proposed facility includes construction of one simple-cycle, 37 MW combustion turbine that will be wholly owned by Cheyenne Light and one combined-cycle, 95 MW unit that would be jointly owned by Cheyenne Light and Black Hills Power. Cheyenne Light would own 40 MW and Black Hills Power would own 55 MW of the combined cycle unit. Pending WPSC approval, and the timely receipt of necessary environmental and industrial siting permits, commercial operation would be expected to commence in 2014. A hearing with the WPSC is scheduled in July 2012. |
• | Construction by Colorado Electric is progressing on a 29 MW wind turbine project as part of its plan to meet Colorado's Renewable Energy Standard. Colorado Electric's 50% share of this project will cost approximately $26.5 million, and the project is expected to begin serving Colorado Electric customers no later than December 31, 2012. Our 50% of the total expenditures on the project were $15.4 million as of March 31, 2012. |
• | On April 13, 2012, the Colorado Public Utilities Commission issued its final order denying Colorado Electric's request for a certificate of public convenience and necessity to construct a third utility-owned, 88 MW natural gas-fired turbine at the existing Pueblo Airport generating location. Colorado Electric retains the right under the Colorado Clean Air – Clean Jobs Act to own the 42 megawatts of replacement generation for the W.N. Clark plant that is required to be retired on or before December 13, 2013. Colorado Electric is expected to file an electric resource plan by July 30, 2012 that will identify an alternative replacement resource for the W.N. Clark plant. |
• | In February 2012, we sold the outstanding stock of Enserco, our Energy Marketing segment. Net pre-tax cash proceeds were $166.3 million, subject to final post-closing adjustments that are expected to be settled during the second quarter of 2012. The proceeds represent $108.8 million received from Twin Eagle and $57.5 million cash retained from Enserco prior to close. We recorded an after-tax loss on sale of $1.6 million, including costs to sell of $2.2 million. The activities of the Energy Marketing segment have been reclassified to discontinued operations. |
• | Colorado IPP’s new $261 million, 200 MW power plant near Pueblo, Colorado began serving customers on Jan. 1, 2012, with its output sold under a 20-year power purchase agreement to Colorado Electric. |
• | On February 1, 2012, we entered into a new $500 million Revolving Credit Facility expiring February 1, 2017 at favorable terms. Deferred financing costs of $1.5 million were written off during the first quarter of 2012 relating to the previous credit facility. |
• | We recognized a non-cash unrealized mark-to-market gain related to certain interest rate swaps of $12.0 million for the three months ended March 31, 2012 compared to a $5.5 million unrealized mark-to-market gain on these swaps for the same period in 2011. |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
(in thousands) | |||||||
Revenue — electric | $ | 146,281 | $ | 134,870 | |||
Revenue — Cheyenne Light gas | 12,888 | 13,399 | |||||
Total revenue | 159,169 | 148,269 | |||||
Fuel, purchased power and cost of gas — electric | 65,598 | 65,678 | |||||
Purchased gas — Cheyenne Light gas | 8,118 | 8,396 | |||||
Total fuel, purchased power and cost of gas | 73,716 | 74,074 | |||||
Gross margin — electric | 80,683 | 69,192 | |||||
Gross margin — Cheyenne Light gas | 4,770 | 5,003 | |||||
Total gross margin | 85,453 | 74,195 | |||||
Operations and maintenance | 39,230 | 37,114 | |||||
Depreciation and amortization | 18,932 | 12,824 | |||||
Total operating expenses | 58,162 | 49,938 | |||||
Operating income | 27,291 | 24,257 | |||||
Interest expense, net | (13,220 | ) | (9,944 | ) | |||
Other income (expense), net | 718 | 409 | |||||
Income tax benefit (expense) | (6,043 | ) | (4,473 | ) | |||
Income (loss) from continuing operations | $ | 8,746 | $ | 10,249 |
Three Months Ended March 31, | |||||||
Revenue - Electric (in thousands) | 2012 | 2011 | |||||
Residential | $ | 46,562 | $ | 45,677 | |||
Commercial | 49,892 | 46,442 | |||||
Industrial | 18,321 | 16,243 | |||||
Municipal | 3,788 | 4,061 | |||||
Total Retail Revenue - Electric | 118,563 | 112,423 | |||||
Contract Wholesale - Black Hills Power | 4,905 | 4,620 | |||||
Off-system Wholesale (a) | 14,019 | 9,840 | |||||
Other Revenue | 8,794 | 7,987 | |||||
Total Revenue - Electric | $ | 146,281 | $ | 134,870 |
(a) | Off-system sales revenue during 2011 was deferred until a sharing mechanism was approved by the CPUC in December 2011, and recognition of 25% of the revenue commenced January 2, 2012. As a result, Colorado Electric deferred $2.9 million in off-system revenue during the three months ended March 31, 2011. |
Three Months Ended March 31, | |||||
Quantities Generated and Purchased (in MWh) | 2012 | 2011 | |||
Generated — | |||||
Coal-fired | 684,252 | 665,884 | |||
Gas and Oil-fired | 1,995 | 1,024 | |||
Total Generated | 686,247 | 666,908 | |||
Total Purchased | 1,147,280 | 1,055,566 | |||
Total Generated and Purchased | 1,833,527 | 1,722,474 |
Three Months Ended March 31, | |||||
Quantity Sold (in MWh) | 2012 | 2011 | |||
Residential | 376,317 | 404,633 | |||
Commercial | 485,423 | 489,570 | |||
Industrial | 221,751 | 213,486 | |||
Municipal | 35,319 | 38,493 | |||
Total Retail Quantity Sold | 1,118,810 | 1,146,182 | |||
Contract Wholesale - Black Hills Power | 89,048 | 89,959 | |||
Total Off-system Wholesale | 527,547 | 404,844 | |||
Total Losses and Company Use | 98,122 | 81,489 | |||
Total Quantity Sold | 1,833,527 | 1,722,474 |
Three Months Ended March 31, | |||||||||||
Degree Days | 2012 | 2011 | |||||||||
Heating Degree Days: | Actual | Variance from 30-Year Average | Actual | Variance from 30-Year Average | |||||||
Actual — | |||||||||||
Black Hills Power | 2,711 | (16 | )% | 3,707 | 12 | % | |||||
Cheyenne Light | 2,761 | (8 | )% | 3,123 | — | % | |||||
Colorado Electric | 2,294 | (13 | )% | 2,781 | 5 | % | |||||
Cooling Degree Days: | |||||||||||
Actual — | |||||||||||
Black Hills Power | — | — | % | — | — | % | |||||
Cheyenne Light | — | — | % | — | — | % | |||||
Colorado Electric | — | — | % | — | — | % |
Electric Utilities Power Plant Availability | Three Months Ended March 31, | |||||
2012 | 2011 | |||||
Coal-fired plants (a) | 90.8 | % | 91.3 | % | ||
Other plants | 95.0 | % | 98.6 | % | ||
Total availability | 92.9 | % | 93.9 | % |
(a) | 2012 includes planned overhauls at Wygen II. 2011 includes a major overhaul and an unplanned outage at the PacifiCorp operated Wyodak plant. |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Revenue - Gas (in thousands): | |||||||
Residential | $ | 7,630 | $ | 7,978 | |||
Commercial | 3,810 | 3,807 | |||||
Industrial | 1,237 | 1,276 | |||||
Other Sales Revenue | 211 | 338 | |||||
Total Revenue - Gas | $ | 12,888 | $ | 13,399 | |||
Gross Margin (in thousands): | |||||||
Residential | $ | 3,226 | $ | 3,388 | |||
Commercial | 1,173 | 1,212 | |||||
Industrial | 164 | 177 | |||||
Other Gross Margin | 207 | 226 | |||||
Total Gross Margin | $ | 4,770 | $ | 5,003 | |||
Volumes Sold (Dth): | |||||||
Residential | 969,678 | 1,068,461 | |||||
Commercial | 580,940 | 623,723 | |||||
Industrial | 237,140 | 256,521 | |||||
Total Volumes Sold | 1,787,758 | 1,948,705 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
(in thousands) | |||||||
Natural gas — regulated | $ | 172,169 | $ | 223,032 | |||
Other — non-regulated services | 8,353 | 7,234 | |||||
Total revenue | 180,522 | 230,266 | |||||
Natural gas — regulated | 108,116 | 149,503 | |||||
Other — non-regulated services | 3,869 | 3,626 | |||||
Total cost of sales | 111,985 | 153,129 | |||||
Gross margin | 68,537 | 77,137 | |||||
Operations and maintenance | 31,299 | 34,560 | |||||
Depreciation and amortization | 6,157 | 6,021 | |||||
Total operating expenses | 37,456 | 40,581 | |||||
Operating income (loss) | 31,081 | 36,556 | |||||
Interest expense, net | (6,540 | ) | (6,972 | ) | |||
Other income (expense), net | 11 | 25 | |||||
Income tax benefit (expense) | (9,345 | ) | (10,346 | ) | |||
Income (loss) from continuing operations | $ | 15,207 | $ | 19,263 |
Revenue (in thousands) | Three Months Ended March 31, | ||||||
2012 | 2011 | ||||||
Residential | $ | 118,933 | $ | 156,769 | |||
Commercial | 40,802 | 54,730 | |||||
Industrial | 2,008 | 2,145 | |||||
Transportation | 7,263 | 8,079 | |||||
Other Sales Revenue | 3,163 | 1,309 | |||||
Total Regulated Revenue | 172,169 | 223,032 | |||||
Non-regulated Services | 8,353 | 7,234 | |||||
Total Revenue | $ | 180,522 | $ | 230,266 |
Gross Margin (in thousands) | Three Months Ended March 31, | ||||||
2012 | 2011 | ||||||
Residential | $ | 42,592 | $ | 51,396 | |||
Commercial | 10,766 | 12,571 | |||||
Industrial | 384 | 407 | |||||
Transportation | 7,264 | 8,079 | |||||
Other Sales Margins | 3,048 | 1,076 | |||||
Total Regulated Gross Margin | 64,054 | 73,529 | |||||
Non-regulated Services | 4,483 | 3,608 | |||||
Total Gross Margin | $ | 68,537 | $ | 77,137 |
Volumes Sold (in Dth) | Three Months Ended March 31, | ||||
2012 | 2011 | ||||
Residential | 13,767,358 | 17,534,411 | |||
Commercial | 5,528,225 | 7,073,483 | |||
Industrial | 369,492 | 334,991 | |||
Transportation | 18,050,184 | 16,286,552 | |||
Other Volumes | 24,450 | 44,985 | |||
Total Volumes Sold | 37,739,709 | 41,274,422 |
Three Months Ended March 31, 2012 | |||||
Heating Degree Days: | Actual | Variance From Normal | |||
Colorado | 2,350 | (16 | )% | ||
Nebraska | 2,400 | (21 | )% | ||
Iowa | 2,799 | (20 | )% | ||
Kansas (a) | 2,040 | (18 | )% | ||
Combined (b) | 2,432 | (19 | )% |
Three Months Ended March 31, 2011 | |||||
Heating Degree Days: | Actual | Variance From Normal | |||
Colorado | 2,761 | (4 | )% | ||
Nebraska | 3,281 | 2 | % | ||
Iowa | 3,694 | — | % | ||
Kansas (a) | 2,625 | 2 | % | ||
Combined (b) | 3,212 | 1 | % |
(a) | Our gross margin in Kansas utilizes normal degree days due to an approved weather normalization mechanism. |
(b) | The combined heating degree days are calculated based on a weighted average of total customers by state. |
Revenue | Revenue | Approved Capital Structure | |||||||||||||||||||||
Type of Service | Date Requested | Date Effective | Amount Requested | Amount Approved | Return on Equity | Equity | Debt | ||||||||||||||||
Nebraska Gas (1) | Gas | 12/2009 | 9/2010 | $ | 12.1 | $ | 8.3 | 10.1 | % | 52.0 | % | 48.0 | % | ||||||||||
Iowa Gas (2) | Gas | 6/2010 | 2/2011 | $ | 4.7 | $ | 3.4 | Global Settlement | Global Settlement | Global Settlement | |||||||||||||
Colorado Electric (2) | Electric | 4/2011 | 1/2012 | $ | 40.2 | $ | 28.0 | 9.8% - 10.2% | 49.1 | % | 50.9 | % | |||||||||||
Cheyenne Light (3) | Electric/Gas | 12/2011 | Pending | $ | 8.5 | Pending | Pending | Pending | Pending | ||||||||||||||
Black Hills Power (2) | Electric | 1/2011 | 6/2011 | Not Applicable | $ | 3.1 | Not Applicable | Not Applicable | Not Applicable |
(1) | In December 2009, Nebraska Gas filed a rate case with the NPSC and interim rates went into effect on March 1, 2010. In August 2010, NPSC issued a decision approving an annual revenue increase of approximately $8.3 million, based on a return on equity of 10.1% with a capital structure of 52% equity effective on September 1, 2010. A refund to customers for the difference between interim rates and approved rates was completed in the first quarter of 2011. The Nebraska Public Advocate filed an appeal with the District Court which has been denied. Subsequently, the Nebraska Public Advocate filed a notice of appeal in the Court of Appeals. On March 20, 2012 the Court of Appeals affirmed the earlier decision of the District Court. However, the Nebraska Public Advocate petitioned the Nebraska Supreme Court to hear an appeal in April 2012. |
(2) | These rate cases were previously described in our 2011 Annual Report filed on Form 10-K. |
(3) | Cheyenne Light filed requests on December 2, 2011, for electric and natural gas revenue increases with the WPSC seeking a $5.9 million increase in annual electric revenue and a $2.6 million increase in annual natural gas revenue. A procedural schedule has been published and a public hearing with the WPSC is scheduled for the week of June 18, 2012. |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
(in thousands) | |||||||
Revenue | $ | 21,645 | $ | 17,906 | |||
Operations and maintenance | 10,834 | 10,567 | |||||
Depreciation, depletion and amortization | 9,323 | 7,321 | |||||
Total operating expenses | 20,157 | 17,888 | |||||
Operating income (loss) | 1,488 | 18 | |||||
Interest expense | (1,605 | ) | (1,383 | ) | |||
Other income (expense), net | 29 | (185 | ) | ||||
Income tax benefit (expense) | 101 | 835 | |||||
Income (loss) from continuing operations | $ | 13 | $ | (715 | ) |
Three Months Ended March 31, | |||||
2012 | 2011 | ||||
Production: | |||||
Bbls of oil sold | 145,477 | 103,550 | |||
Mcf of natural gas sold | 2,388,475 | 2,011,167 | |||
Gallons of NGL sold | 814,585 | 864,440 | |||
Mcf equivalent sales | 3,377,706 | 2,755,958 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
Average price received: (a) | |||||||
Oil/Bbl | $ | 77.99 | $ | 66.83 | |||
Gas/Mcf | $ | 3.61 | $ | 4.65 | |||
NGL/gallon | $ | 0.95 | $ | 0.92 | |||
Depletion expense/Mcfe | $ | 2.47 | $ | 2.36 |
Three Months Ended March 31, 2012 | Three Months Ended March 31, 2011 | ||||||||||||||||||||||||
Producing Basin | LOE | Gathering, Compression and Processing | Production Taxes | Total | LOE | Gathering, Compression and Processing | Production Taxes | Total | |||||||||||||||||
San Juan | $ | 0.97 | $ | 0.32 | $ | 0.36 | $ | 1.65 | $ | 1.25 | $ | 0.46 | $ | 0.55 | $ | 2.26 | |||||||||
Piceance | (0.03 | ) | 0.49 | 0.15 | 0.61 | 0.68 | 0.80 | 0.25 | 1.73 | ||||||||||||||||
Powder River | 1.38 | — | 1.31 | 2.69 | 1.31 | — | 1.29 | 2.60 | |||||||||||||||||
Williston | 0.71 | — | 1.25 | 1.96 | 0.26 | — | 1.50 | 1.76 | |||||||||||||||||
All other properties | 1.68 | — | 0.08 | 1.76 | 1.66 | — | 0.40 | 2.06 | |||||||||||||||||
Total weighted average | $ | 0.89 | $ | 0.21 | $ | 0.60 | $ | 1.70 | $ | 1.18 | $ | 0.28 | $ | 0.74 | $ | 2.20 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
(in thousands) | |||||||
Revenue | $ | 14,989 | $ | 15,495 | |||
Operations and maintenance | 11,478 | 14,572 | |||||
Depreciation, depletion and amortization | 3,696 | 4,618 | |||||
Total operating expenses | 15,174 | 19,190 | |||||
Operating income (loss) | (185 | ) | (3,695 | ) | |||
Interest income, net | 755 | 960 | |||||
Other income | 881 | 569 | |||||
Income tax benefit (expense) | (451 | ) | 868 | ||||
Income (loss) from continuing operations | $ | 1,000 | $ | (1,298 | ) |
Three Months Ended March 31, | |||||
2012 | 2011 | ||||
Tons of coal sold | 1,103 | 1,370 | |||
Cubic yards of overburden moved | 2,642 | 3,455 |
Three Months Ended March 31, | |||||||
2012 | 2011 | ||||||
(in thousands) | |||||||
Revenue | $ | 19,627 | $ | 7,620 | |||
Operating, general and administrative costs | 7,132 | 4,188 | |||||
Depreciation and amortization | 1,114 | 1,064 | |||||
Total operating expense (income) | 8,246 | 5,252 | |||||
Operating income | 11,381 | 2,368 | |||||
Interest expense, net | (4,743 | ) | (1,791 | ) | |||
Other (expense) income | 5 | 1,204 | |||||
Income tax (expense) benefit | 271 | (595 | ) | ||||
Income (loss) from continuing operations | $ | 6,914 | $ | 1,186 |
Three Months Ended March 31, | ||||
2012 | 2011 | |||
Contracted power plant fleet availability: | ||||
Coal-fired plant | 100.0 | % | 100.0 | % |
Natural gas-fired plants | 99.6 | % | 100.0 | % |
Total availability | 99.7 | % | 100.0 | % |
Cash provided by (used in): | 2012 | 2011 | Increase (Decrease) | ||||||
Operating activities | $ | 96,065 | $ | 111,271 | $ | (15,206 | ) | ||
Investing activities | $ | 41,466 | $ | (121,758 | ) | $ | 163,224 | ||
Financing activities | $ | (140,167 | ) | $ | 22,065 | $ | (162,232 | ) |
• | Cash earnings (net income plus non-cash adjustments) were $7.1 million higher for the three months ended March 31, 2012 than for the same period the prior year. |
• | Net inflows from operating assets and liabilities were $6.1 million for the three months ended March 31, 2012, a decrease of $5.0 million from the same period in the prior year. In addition to normal working capital changes, the decrease primarily related to decreased gas volumes due to warmer weather and to lower gas prices. |
• | Cash contributions to the defined benefit pension plan were $25.0 million in 2012 compared to $0.0 million in 2011. |
• | Our utility subsidiaries are generally limited in the amount of dividends allowed by state regulatory authorities they can pay the utility holding company and also may have further restrictions under the Federal Power Act. As of March 31, 2012, the restricted net assets at our Electric and Gas Utilities were approximately $81.4 million. |
• | As required by the covenants in the Black Hills Wyoming project financing, Black Hills Non-regulated Holdings has restricted equity of at least $100.0 million. In addition, Black Hills Wyoming holds $9.0 million of restricted cash associated with the project financing requirements. |
Rating Agency | Rating | Outlook |
Fitch | BBB- | Stable |
Moody's | Baa3 | Stable |
S&P | BBB- | Stable |
Rating Agency | Rating | Outlook |
Fitch | A- | Stable |
Moody's | A3 | Stable |
S&P | BBB+ | Stable |
Expenditures for the | Total | Total | Total | ||||||||||||
Three Months Ended March 31, 2012 | 2012 Planned Expenditures | 2013 Planned Expenditures | 2014 Planned Expenditures | ||||||||||||
Utilities: | |||||||||||||||
Electric Utilities (1) | $ | 29,513 | $ | 221,600 | $ | 304,500 | $ | 187,000 | |||||||
Gas Utilities | 5,318 | 46,000 | 54,700 | 43,800 | |||||||||||
Non-regulated Energy: | |||||||||||||||
Oil and Gas (2) | 16,444 | 86,500 | 83,900 | 122,600 | |||||||||||
Power Generation | 3,433 | 2,900 | 4,900 | 6,700 | |||||||||||
Coal Mining | 2,202 | 18,800 | 7,200 | 10,800 | |||||||||||
Corporate | 4,856 | 10,300 | 6,000 | 4,700 | |||||||||||
$ | 61,766 | $ | 386,100 | $ | 461,200 | $ | 375,600 |
(1) | Planned expenditures in 2012 and 2013 for the proposed 88 MW of gas-fired generation at Colorado Electric have been removed from the forecasted expenditures reported in our Annual Report filed on Form 10-K as a result of the denial of our request for a CPCN. |
• | We anticipate that our existing credit capacity and available cash will be sufficient to fund our working capital needs and our maintenance capital requirements. Some important factors that could cause actual results to differ materially from those anticipated include: |
• | Our access to revolving credit capacity depends on maintaining compliance with loan covenants. If we violate these covenants, we may lose revolving credit capacity and therefore may not have sufficient cash available for our peak winter needs and other working capital requirements, and our forecasted capital expenditure requirements. |
• | Counterparties may default on their obligations to supply commodities, return collateral to us, or otherwise meet their obligations under commercial contracts, including those designed to hedge against movements in commodity prices. |
• | We expect to fund a portion of our forecasted capital requirements through a combination of long-term debt and equity issuances however capital market conditions and market uncertainties related to interest rates may affect our ability to raise capital on favorable terms. |
• | We expect to make approximately $386.1 million, $461.2 million and $375.6 million of capital expenditures in 2012, 2013 and 2014, respectively. Some important factors that could cause actual expenditures to differ materially from those anticipated include: |
• | The timing of planned generation, transmission or distribution projects for our Utilities Group is influenced by state and federal regulatory authorities and third parties. The occurrence of events that impact (favorably or unfavorably) our ability to make planned or unplanned capital expenditures could cause our forecasted capital expenditures to change. |
• | Forecasted capital expenditures associated with our Oil and Gas segment are driven, in part, by current product prices. Changes in crude oil and natural gas prices may cause us to change our planned capital expenditures related to our oil and gas operations. |
• | Our ability to complete our planned capital expenditures associated with our Oil and Gas segment may be impacted by our ability to obtain necessary drilling permits, and other necessary contract services and equipment such as drilling rigs, hydraulic fracturing services and other support services. Our plans may also be negatively impacted by weather conditions and existing or proposed regulations, including possible hydraulic fracturing regulations. |
• | Our ability to complete the planning, permitting, construction, start-up and operation of power generation facilities in a cost-efficient and timely manner. |
• | We expect contributions to our defined benefit pension plans to be approximately $0.0 million and $4.5 million for the remainder of 2012 and for 2013, respectively. Some important factors that could cause actual contributions to differ materially from anticipated amounts include: |
• | The actual value of the plans' invested assets. |
• | The discount rate used in determining the funding requirement. |
• | The outcome of pending labor negotiations relating to benefit participation of our collective bargaining agreements. |
• | We expect the goodwill related to our utility assets to fairly reflect the long-term value of stable, long-lived utility assets. Some important factors that could cause us to revisit the fair value of this goodwill include: |
• | A significant and sustained deterioration of the market value of our common stock. |
• | Negative regulatory orders, condemnation proceedings or other events that materially impact our Utilities Groups' ability to generate sufficient stable cash flow over an extended period of time. |
• | The effects of changes in the market including significant changes in the risk-adjusted discount rate or growth rates. |
• | The timing, volatility, and extent of changes in energy and commodity prices, supply or volume, the cost and availability of transportation of commodities, changes in interest rates, and the demand for our services, any of which can affect our earnings, our financial liquidity and the underlying value of our assets, including the possibility that we may be required to take future impairment charges under the SEC's full cost ceiling test for natural gas and crude oil reserves. |
• | Federal and state laws concerning climate change and air emissions, including emission reduction mandates, carbon emissions and renewable energy portfolio standards, may materially increase our generation and production costs and could render some of our generating units uneconomical to operate and maintain or which could mandate or require closure of one or more of our generating units. |
• | We are evaluating financing options including senior notes, first mortgage bonds, term loans, project financing and equity issuance. Some important factors that could cause actual results to differ materially from those anticipated include: |
• | Our ability to access the bank loan and debt and equity capital markets depends on market conditions beyond our control. If the capital markets deteriorate, we may not be able to permanently refinance some short-term debt and fund our capital projects on reasonable terms, if at all. |
• | Our ability to raise capital in the debt capital markets depends upon our financial condition and credit ratings, among other things. If our financial condition deteriorates unexpectedly, or our credit ratings are lowered, we may not be able to refinance some short-term debt and fund our power generation projects on reasonable terms, if at all. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||
Net derivative (liabilities) assets | $ | (14,816 | ) | $ | (16,676 | ) | $ | (2,455 | ) | ||
Cash collateral | 17,651 | 19,416 | 3,720 | ||||||||
$ | 2,835 | $ | 2,740 | $ | 1,265 |
Location | Transaction Date | Hedge Type | Term | Volume | Price | |||||||
(MMBtu/day) | ||||||||||||
San Juan El Paso | 3/19/2010 | Swap | 04/12 - 06/12 | 7,000 | $ | 5.27 | ||||||
CIG | 3/19/2010 | Swap | 04/12 - 06/12 | 1,500 | $ | 5.17 | ||||||
NWR | 3/19/2010 | Swap | 04/12 - 06/12 | 1,500 | $ | 5.20 | ||||||
AECO | 3/19/2010 | Swap | 04/12 - 06/12 | 250 | $ | 5.15 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 04/12 - 06/12 | 1,000 | $ | 3.58 | ||||||
San Juan El Paso | 2/22/2012 | Swap | 04/12 - 10/12 | 2,500 | $ | 2.71 | ||||||
San Juan El Paso | 6/28/2010 | Swap | 07/12 - 09/12 | 3,500 | $ | 5.19 | ||||||
NWR | 6/28/2010 | Swap | 07/12 - 09/12 | 1,500 | $ | 5.01 | ||||||
CIG | 6/28/2010 | Swap | 07/12 - 09/12 | 1,500 | $ | 4.98 | ||||||
San Juan El Paso | 4/19/2011 | Swap | 07/12 - 09/12 | 2,000 | $ | 4.45 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 07/12 - 09/12 | 1,000 | $ | 3.77 | ||||||
CIG | 2/18/2011 | Swap | 10/12 - 12/12 | 500 | $ | 4.42 | ||||||
San Juan El Paso | 2/18/2011 | Swap | 10/12 - 12/12 | 2,500 | $ | 4.46 | ||||||
NWR | 2/18/2011 | Swap | 10/12 - 12/12 | 1,000 | $ | 4.44 | ||||||
San Juan El Paso | 4/19/2011 | Swap | 10/12 - 12/12 | 2,000 | $ | 4.62 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 10/12 - 12/12 | 1,000 | $ | 3.94 | ||||||
San Juan El Paso | 12/9/2011 | Swap | 10/12 - 12/12 | 1,000 | $ | 3.59 | ||||||
San Juan El Paso | 2/22/2012 | Swap | 11/2012 | 2,500 | $ | 3.03 | ||||||
San Juan El Paso | 2/22/2012 | Swap | 12/2012 | 2,500 | $ | 3.32 | ||||||
San Juan El Paso | 4/19/2011 | Swap | 01/13 - 03/13 | 2,500 | $ | 5.03 | ||||||
San Juan El Paso | 6/6/2011 | Swap | 01/13 - 03/13 | 2,500 | $ | 5.18 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 01/13 - 03/13 | 1,000 | $ | 4.32 | ||||||
San Juan El Paso | 12/9/2011 | Swap | 01/13 - 03/13 | 1,000 | $ | 3.91 | ||||||
NWR | 12/9/2011 | Swap | 01/13 - 03/13 | 1,000 | $ | 4.02 | ||||||
San Juan El Paso | 4/19/2011 | Swap | 04/13 - 06/13 | 2,500 | $ | 4.64 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 04/13 - 06/13 | 1,000 | $ | 4.13 | ||||||
San Juan El Paso | 12/9/2011 | Swap | 04/13 - 06/13 | 1,000 | $ | 3.77 | ||||||
NWR | 12/9/2011 | Swap | 04/13 - 06/13 | 1,000 | $ | 3.83 | ||||||
San Juan El Paso | 10/31/2011 | Swap | 07/13 - 09/13 | 1,000 | $ | 4.27 | ||||||
San Juan El Paso | 12/9/2011 | Swap | 07/13 - 09/13 | 1,000 | $ | 3.95 | ||||||
NWR | 12/9/2011 | Swap | 07/13 - 09/13 | 1,000 | $ | 3.97 | ||||||
San Juan El Paso | 12/9/2011 | Swap | 10/13 - 12/13 | 1,000 | $ | 4.05 | ||||||
NWR | 12/9/2011 | Swap | 10/13 - 12/13 | 1,000 | $ | 4.08 |
Location | Transaction Date | Hedge Type | Term | Volume | Price | |||||||
(Bbls/month) | ||||||||||||
NYMEX | 3/4/2011 | Swap | 01/12 - 12/12 | 2,000 | $ | 104.60 | ||||||
NYMEX | 3/19/2010 | Swap | 04/12 - 06/12 | 5,000 | $ | 84.00 | ||||||
NYMEX | 3/31/2010 | Put | 04/12 - 06/12 | 5,000 | $ | 75.00 | ||||||
NYMEX | 5/13/2010 | Swap | 04/12 - 06/12 | 5,000 | $ | 87.85 | ||||||
NYMEX | 8/17/2010 | Swap | 04/12 - 06/12 | 3,000 | $ | 82.60 | ||||||
NYMEX | 6/28/2010 | Swap | 07/12 - 09/12 | 5,000 | $ | 83.80 | ||||||
NYMEX | 8/17/2010 | Swap | 07/12 - 09/12 | 5,000 | $ | 82.85 | ||||||
NYMEX | 9/16/2010 | Swap | 07/12 - 09/12 | 5,000 | $ | 84.60 | ||||||
NYMEX | 4/20/2011 | Swap | 07/12 - 06/13 | 2,000 | $ | 106.80 | ||||||
NYMEX | 10/17/2011 | Put | 07/12 - 09/13 | 2,000 | $ | 80.00 | ||||||
NYMEX | 10/17/2011 | Call | 07/12 - 09/13 | 2,000 | $ | 95.00 | ||||||
NYMEX | 11/9/2010 | Swap | 10/12 - 12/12 | 5,000 | $ | 91.10 | ||||||
NYMEX | 1/6/2011 | Swap | 10/12 - 12/12 | 5,000 | $ | 93.40 | ||||||
NYMEX | 2/17/2011 | Swap | 10/12 - 03/13 | 5,000 | $ | 97.85 | ||||||
NYMEX | 1/20/2011 | Swap | 01/13 - 03/13 | 5,000 | $ | 94.20 | ||||||
NYMEX | 3/4/2011 | Swap | 01/13 - 03/13 | 3,000 | $ | 103.35 | ||||||
NYMEX | 11/2/2011 | Call | 01/13 - 12/13 | 3,000 | $ | 100.00 | ||||||
NYMEX | 11/2/2011 | Put | 01/13 - 12/13 | 3,000 | $ | 77.50 | ||||||
NYMEX | 6/3/2011 | Swap | 04/13 - 06/13 | 5,000 | $ | 100.90 | ||||||
NYMEX | 7/27/2011 | Swap | 04/13 - 06/13 | 5,000 | $ | 102.72 | ||||||
NYMEX | 12/9/2011 | Call | 04/13 - 06/13 | 2,000 | $ | 100.50 | ||||||
NYMEX | 12/9/2011 | Put | 04/13 - 06/13 | 2,000 | $ | 90.00 | ||||||
NYMEX | 10/17/2011 | Swap | 07/13 - 09/13 | 2,000 | $ | 88.50 | ||||||
NYMEX | 12/9/2011 | Call | 07/13 - 09/13 | 3,000 | $ | 99.00 | ||||||
NYMEX | 12/9/2011 | Put | 07/13 - 09/13 | 3,000 | $ | 90.00 | ||||||
NYMEX | 7/27/2011 | Swap | 07/13 - 09/13 | 5,000 | $ | 102.75 | ||||||
NYMEX | 2/22/2012 | Swap | 07/13 - 09/13 | 5,000 | $ | 103.02 | ||||||
NYMEX | 12/9/2011 | Call | 10/13 - 12/13 | 4,000 | $ | 98.00 | ||||||
NYMEX | 12/9/2011 | Put | 10/13 - 12/13 | 4,000 | $ | 90.00 | ||||||
NYMEX | 2/22/2012 | Swap | 10/13 - 12/13 | 5,000 | $ | 101.75 | ||||||
NYMEX | 2/22/2012 | Swap | 01/14 - 03/14 | 10,000 | $ | 100.20 |
March 31, 2012 | December 31, 2011 | March 31, 2011 | |||||||||||||||||||||
Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | Designated Interest Rate Swaps | De-designated Interest Rate Swaps* | ||||||||||||||||||
Notional | $ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | $ | 150,000 | $ | 250,000 | |||||||||||
Weighted average fixed interest rate | 5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | 5.04 | % | 5.67 | % | |||||||||||
Maximum terms in years | 4.75 | 1.75 | 5.00 | 2.00 | 5.75 | 0.75 | |||||||||||||||||
Derivative liabilities, current | $ | 6,777 | $ | 66,708 | $ | 6,513 | $ | 75,295 | $ | 6,769 | $ | 48,515 | |||||||||||
Derivative liabilities, non-current | $ | 18,441 | $ | 17,237 | $ | 20,363 | $ | 20,696 | $ | 12,955 | $ | — | |||||||||||
Pre-tax accumulated other comprehensive loss included in Condensed Consolidated Balance Sheets | $ | (25,218 | ) | $ | — | $ | (26,876 | ) | $ | — | $ | (19,724 | ) | $ | — | ||||||||
Pre-tax (loss) gain included in Condensed Consolidated Statements of Income and Comprehensive Income | $ | — | $ | 12,045 | $ | — | $ | (42,010 | ) | $ | — | $ | 5,465 | ||||||||||
Cash collateral receivable (payable) included in accounts receivable | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
* | Maximum terms in years for our de-designed interest rate swaps reflect the amended early termination dates. If the early termination dates are not extended, the swaps will require cash settlement based on the swap value on the termination date. When extended annually, de-designated swaps totaling $100 million terminate in 7 years and de-designated swaps totaling $150 million terminate in 17 years. |
ITEM 1. | Legal Proceedings |
ITEM 1A. | Risk Factors |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans for Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs | |||||||||
January 1, 2012 - | |||||||||||||
January 31, 2012 | 8,854 | $ | 33.58 | — | — | ||||||||
February 1, 2012 - | |||||||||||||
February 29, 2012 | 22,180 | $ | 34.77 | — | — | ||||||||
March 1, 2012 - | |||||||||||||
March 31, 2012 | — | $ | — | — | — | ||||||||
Total | 31,034 | $ | 34.43 | — | — |
(1) | Shares were acquired from certain officers and key employees under the share withholding provisions of the Omnibus Incentive Plan for the payment of taxes associated with the vesting of shares of restricted stock. |
ITEM 5. | Other Information |
ITEM 6. | Exhibits |
Exhibit 10.1 | Stock Purchase Agreement by and between Twin Eagle Resource Management, LLC and Black Hills Non-regulated Holdings LLC for the purchase of capital stock of Enserco Energy Inc., dated January 18, 2012. | |
Exhibit 10.2 * | Credit Agreement, dated February 1, 2012, among Black Hills Corporation, as Borrower, U.S. Bank, National Association, in its capacity as administrative agent for the Banks under the Credit Agreement, and as a Bank, and the other banks party thereto (filed as Exhibit 10 to the Registrant's Form 8-K filed on February 3, 2012). | |
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. | |
Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. | |
Exhibit 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. | |
Exhibit 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. | |
Exhibit 95 | Mine Safety and Health Administration Safety Data | |
Exhibit 101 | Financial Statements for XBRL Format |
/s/ David R. Emery | ||
David R. Emery, Chairman, President and | ||
Chief Executive Officer | ||
/s/ Anthony S. Cleberg | ||
Anthony S. Cleberg, Executive Vice President and | ||
Chief Financial Officer | ||
Dated: | May 4, 2012 |
Exhibit Number | Description |
Exhibit 10.1 | Stock Purchase Agreement by and between Twin Eagle Resource Management, LLC and Black Hills Non-regulated Holdings LLC for the purchase of capital stock of Enserco Energy Inc., dated January 18, 2012. |
Exhibit 10.2 * | Credit Agreement, dated February 1, 2012, among Black Hills Corporation, as Borrower, U.S. Bank, National Association, in its capacity as administrative agent for the Banks under the Credit Agreement, and as a Bank, and the other banks party thereto (filed as Exhibit 10 to the Registrant's Form 8-K filed on February 3, 2012). |
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. |
Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. |
Exhibit 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. |
Exhibit 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. |
Exhibit 95 | Mine Safety and Health Administration Safety Data |
Exhibit 101 | Financial Statements for XBRL Format |
ARTICLE 1 | PURCHASE OF SHARES 1 |
1.1 | Sale of Shares 1 |
ARTICLE 2 | PURCHASE PRICE AND ADJUSTMENTS 1 |
2.1 | Purchase Price Determination 1 |
2.2 | Valuation Methodology 2 |
2.3 | Estimated Purchase Price 4 |
2.4 | Distributable Cash 5 |
2.5 | Payment of Estimated Purchase Price 5 |
2.6 | Post-Closing Adjustment 6 |
2.7 | Miscellaneous Purchase Price Provisions 8 |
2.8 | Foreign Tax Credit 8 |
ARTICLE 3 | REPRESENTATIONS AND WARRANTIES OF SELLER 8 |
3.1 | Organization and Good Standing 8 |
3.2 | Capitalization 9 |
3.3 | Authority and Authorization; Conflicts; Consents 10 |
3.4 | Financial Statements and Undisclosed Liabilities 11 |
3.5 | Taxes 12 |
3.6 | Litigation and Orders 13 |
3.7 | Compliance with Law 13 |
3.8 | Contracts 14 |
3.9 | Certain Assets 16 |
3.10 | Certain Accounts 16 |
3.11 | Real Property 16 |
3.12 | Environmental Matters 16 |
3.13 | Intellectual Property 18 |
3.14 | Absence of Certain Events 19 |
3.15 | Insurance 19 |
3.16 | Employee Benefits 19 |
3.17 | Employees and Labor Relations 20 |
3.18 | Credit Support; Pre-Paid Deposits 20 |
3.19 | Commodities 21 |
3.20 | Brokers 22 |
3.21 | Accounts Receivable 22 |
ARTICLE 4 | REPRESENTATIONS AND WARRANTIES OF BUYER 22 |
4.1 | Organization and Good Standing 22 |
4.2 | Authority and Authorization; Conflicts; Consents 22 |
4.3 | Litigation and Orders 23 |
4.4 | Availability of Funds 23 |
4.5 | Securities 23 |
4.6 | Brokers 23 |
ARTICLE 5 | CERTAIN COVENANTS 24 |
5.1 | Certain Actions to Close Transactions 24 |
5.2 | Pre-Closing Conduct of Business 24 |
5.3 | HSR Act Compliance; FPA Approval 26 |
5.4 | Access to Information. 27 |
5.5 | Further Assurances 28 |
5.6 | Confidentiality and Publicity 28 |
5.7 | [Intentionally Omitted] 29 |
5.8 | Certain Tax Matters 29 |
5.9 | Employee Matters 31 |
5.10 | Company Credit Support; Company Credit Facility 31 |
5.11 | Calgary Lease 32 |
5.12 | Sublease for the Denver Office 32 |
5.13 | Trading and Support Software 32 |
5.14 | Accounts 32 |
5.15 | Conversion to an LLC 32 |
5.16 | Transition Services Agreement 33 |
ARTICLE 6 | CLOSING; CLOSING DELIVERIES; TERMINATION 33 |
6.1 | Closing 33 |
6.2 | Closing Deliveries by Seller 33 |
6.3 | Closing Deliveries by Buyer 34 |
6.4 | Termination of Agreement 35 |
6.5 | Effect of Termination 35 |
6.6 | Failure to Consummate Transactions; Liquidated Damages 36 |
ARTICLE 7 | CONDITIONS TO OBLIGATIONS TO CLOSE 37 |
7.1 | Conditions to Obligation of Buyer to Close 37 |
7.2 | Conditions to Obligation of Seller to Close 38 |
ARTICLE 8 | INDEMNIFICATION AND RESOLUTION OF CERTAIN DISPUTES 39 |
8.1 | Indemnification by Seller 39 |
8.2 | Indemnification by Buyer 39 |
8.3 | Certain Limitations and Other Matters Regarding Claims 39 |
8.4 | Certain Survival Periods 40 |
8.5 | Notice of Claims and Procedures 40 |
8.6 | Materiality Qualifiers 41 |
8.7 | Reduction for Insurance, Taxes and Other Offsets 41 |
8.8 | Effect of Purchase Price Adjustment 42 |
8.9 | Indemnification Adjusts Purchase Price for Tax Purposes 42 |
8.10 | Certain Disclaimers 42 |
ARTICLE 9 | CERTAIN GENERAL TERMS AND OTHER AGREEMENTS 42 |
9.1 | Notices 42 |
9.2 | Expenses 43 |
9.3 | Interpretation; Construction 43 |
9.4 | Parties in Interest; Third-Party Beneficiaries 44 |
9.5 | Governing Law 44 |
9.6 | Sole and Exclusive Remedies 45 |
9.7 | Jurisdiction, Venue and Waiver of Jury Trial 45 |
9.8 | Entire Agreement; Amendment; Waiver 45 |
9.9 | Assignment; Binding Effect 46 |
9.10 | Severability 46 |
9.11 | Counterparts 46 |
9.12 | Schedules 46 |
Annex A | Certain Definitions |
(a) | Trade Book Value. |
(b) | Net Working Capital. |
(c) | Net Book Value of Non-Current Assets and Liabilities. |
If to Seller, to: | with copies to: | ||
Black Hills Non-regulated Holdings LLC | Black Hills Corporation | ||
PO Box 1400 | PO Box 1400 | ||
625 Ninth Street | 625 Ninth Street | ||
Rapid City, SD 57709 | Rapid City, SD 57709 | ||
Attn: | Richard W. Kinzley, Vice President - | Attn: | Steven J. Helmers, Senior Vice |
Strategic Planning and Development | President and General Counsel | ||
Fax: | (605) 721-2599 | Fax: | (605) 721-2550 |
E-mail: | Rich.Kinzley@blackhillscorp.com | E-mail: | Steven.Helmers@blackhillscorp.com |
and | |||
Faegre Baker Daniels LLP | |||
1470 Walnut Street, Suite 300 | |||
Boulder, CO 80302 | |||
Attn: | John R. Marcil | ||
Fax: | (303) 447-7800 | ||
Email: | john.marcil@faegrebd.com |
if to Buyer, to: | |||
Twin Eagle Resource Management, LLC | |||
5120 Woodway, Suite 10010 | |||
Houston, TX 77056 | |||
Attn: | Griffin E. Jones, President and | ||
Chief Executive Officer | |||
Fax: | (713) 341-7324 | ||
E-Mail: | gjones@termna.com | ||
BUYER: TWIN EAGLE RESOURCE MANAGEMENT, LLC By: /s/ Griffen E. Jones Name: Griffin E. Jones Its: President and Chief Executive Officer | SELLER: Black Hills Non-regulated Holdings, LLC By: /s/ David R. Emery Name: David R. Emery Its: President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Black Hills Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: | May 4, 2012 | ||
/S/ DAVID R. EMERY | |||
David R. Emery | |||
Chairman, President and | |||
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Black Hills Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: | May 4, 2012 | ||
/S/ ANTHONY S. CLEBERG | |||
Anthony S. Cleberg | |||
Executive Vice President and | |||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | |
Date: | May 4, 2012 | ||
/S/ DAVID R. EMERY | |||
David R. Emery | |||
Chairman, President and | |||
Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | |
Date: | May 4, 2012 | ||
/S/ ANTHONY S. CLEBERG | |||
Anthony S. Cleberg | |||
Executive Vice President and | |||
Chief Financial Officer |
• | Total number of violations of mandatory health and safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under section 104 of the Mine Act for which we have received a citation from MSHA; |
• | Total number of orders issued under section 104(b) of the Mine Act; |
• | Total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health and safety standards under section 104(d) of the Mine Act; |
• | Total number of imminent danger orders issued under section 107(a) of the Mine Act; and |
• | Total dollar value of proposed assessments from MSHA under the Mine Act. |
Mine/ MSHA Identification Number | Mine Act Section 104 S&S Citations issued during three months ended March 31, 2012 | Mine Act Section 104(b) Orders (#) | Mine Act Section 104(d) Citations and Orders (#) | Mine Act Section 110(b)(2) Violations (#) | Mine Act Section 107(a) Imminent Danger Orders (#) | Total Dollar Value of Proposed MSHA Assessments (a) | Total Number of Mining Related Fatalities (#) | Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) | Legal Actions Pending as of Last Day of Period (#) (b) | Legal Actions Initiated During Period (#) | Legal Actions Resolved During Period (#) | ||
Wyodak Coal Mine - 4800083 | 1 | — | — | — | — | $ | 524 | — | No | 1 | — | — |
Fair Value Measurements Fair Value Measures (Details) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2012
|
Dec. 31, 2011
|
Mar. 31, 2011
|
|||
---|---|---|---|---|---|---|
Derivatives Designated as Hedges
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value, Net | $ 9,516 | $ 10,658 | $ 7,732 | |||
Derivative Liability, Fair Value, Net | 29,206 | 30,253 | 27,247 | |||
Derivatives Not Designated as Hedges
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value, Net | 0 | 0 | 0 | |||
Derivative Liability, Fair Value, Net | 98,761 | 112,667 | 50,971 | |||
Commodity Derivatives | Derivatives Designated as Hedges | Derivative Assets, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value | 8,662 | 8,739 | 6,757 | |||
Derivative Asset, Fair Value, Gross Liability | 0 | 0 | 0 | |||
Commodity Derivatives | Derivatives Designated as Hedges | Derivative Assets, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value | 854 | 1,919 | 975 | |||
Derivative Asset, Fair Value, Gross Liability | 0 | 0 | 0 | |||
Commodity Derivatives | Derivatives Designated as Hedges | Derivative Liabilities, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 2,904 | 2,559 | 4,688 | |||
Commodity Derivatives | Derivatives Designated as Hedges | Derivative Liabilities, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 1,084 | 818 | 2,835 | |||
Commodity Derivatives | Derivatives Not Designated as Hedges | Derivative Assets, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value | 0 | 0 | 0 | |||
Derivative Asset, Fair Value, Gross Liability | 8,436 | 9,572 | 2,665 | |||
Commodity Derivatives | Derivatives Not Designated as Hedges | Derivative Assets, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Asset, Fair Value | 0 | 0 | 0 | |||
Derivative Asset, Fair Value, Gross Liability | (27) | (52) | (209) | |||
Commodity Derivatives | Derivatives Not Designated as Hedges | Derivative Liabilities, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 0 | 0 | 0 | |||
Commodity Derivatives | Derivatives Not Designated as Hedges | Derivative Liabilities, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 6,407 | 7,156 | 0 | |||
Interest Rate Swap [Member] | Derivatives Designated as Hedges | Derivative Liabilities, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 6,777 | 6,513 | 6,769 | |||
Interest Rate Swap [Member] | Derivatives Designated as Hedges | Derivative Liabilities, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 18,441 | 20,363 | 12,955 | |||
Interest Rate Swap [Member] | Derivatives Not Designated as Hedges | Derivative Liabilities, Current
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 66,708 | 75,295 | 48,515 | |||
Interest Rate Swap [Member] | Derivatives Not Designated as Hedges | Derivative Liabilities, Noncurrent
|
||||||
Derivatives, Fair Value | ||||||
Derivative Liability, Fair Value, Gross Asset | 0 | 0 | 0 | |||
Derivative Liability, Fair Value | 17,237 | 20,696 | 0 | |||
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member]
|
||||||
Derivatives, Fair Value | ||||||
Derivative Financial Instruments, Liabilities, Fair Value Disclosure | 0 | 0 | 0 | |||
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Utilities Group [Member] | Commodity Derivatives
|
||||||
Derivatives, Fair Value | ||||||
Derivative Financial Instruments, Liabilities, Fair Value Disclosure | $ 48 | [1] | $ 0 | $ 0 | ||
|
Employee Benefit Plans Employee Benefit Plans (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Pension Plans, Defined Benefit
|
||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 1,430 | $ 1,355 |
Interest cost | 3,687 | 3,732 |
Expected return on plan assets | (4,084) | (4,239) |
Prior service cost | 22 | 25 |
Net loss (gain) | 2,408 | 1,135 |
Net periodic benefit cost | 3,463 | 2,008 |
Contributions Made | 25,000 | |
Contributions Remaining in Current Fiscal Year | 0 | |
Contributions Anticipated in Next Fiscal Year | 4,500 | |
Non-pension Postretirement Healthcare Plans, Defined Benefit
|
||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 402 | 375 |
Interest cost | 523 | 542 |
Expected return on plan assets | (19) | (41) |
Prior service cost | (125) | (120) |
Net loss (gain) | 222 | 169 |
Net periodic benefit cost | 1,003 | 925 |
Contributions Made | 1,063 | |
Contributions Remaining in Current Fiscal Year | 3,188 | |
Contributions Anticipated in Next Fiscal Year | 4,380 | |
Supplemental Non-qualified Plans, Defined Benefit
|
||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 246 | 257 |
Interest cost | 331 | 324 |
Prior service cost | 1 | 1 |
Net loss (gain) | 202 | 127 |
Net periodic benefit cost | 780 | 709 |
Contributions Made | 278 | |
Contributions Remaining in Current Fiscal Year | 833 | |
Contributions Anticipated in Next Fiscal Year | $ 1,090 |
Fair Value Measurements Hedging Activities (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Cash Flow Hedging [Member]
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | $ 521 | $ (3,785) |
Amount of Reclassfied Gain/(Loss) from AOCI into Income (Effective Portion) | 1,187 | (861) |
Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | 0 | 0 |
Cash Flow Hedging [Member] | Commodity Derivatives
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | 1,283 | (4,083) |
Cash Flow Hedging [Member] | Commodity Derivatives | Operating Revenue
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Reclassfied Gain/(Loss) from AOCI into Income (Effective Portion) | 3,009 | 1,031 |
Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | 0 | 0 |
Cash Flow Hedging [Member] | Interest Rate Swap [Member]
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | (762) | 298 |
Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | 0 | 0 |
Cash Flow Hedging [Member] | Interest Rate Swap [Member] | Interest Expense
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Reclassfied Gain/(Loss) from AOCI into Income (Effective Portion) | (1,822) | (1,892) |
Derivatives Not Designated as Hedge Instruments
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) on Derivatives Recognized in Income | 8,840 | 2,113 |
Derivatives Not Designated as Hedge Instruments | Interest Rate Swap [Member] | Interest Rate Swap - Unrealized (Loss) Gain
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) on Derivatives Recognized in Income | 12,045 | 5,465 |
Derivatives Not Designated as Hedge Instruments | Interest Rate Swap [Member] | Interest Expense
|
||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain/(Loss) on Derivatives Recognized in Income | $ (3,205) | $ (3,352) |
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