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Management's Statement (Policies)

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

We conduct our operations through the following reportable segments: Electric Utilities, Gas Utilities, Power Generation and Mining. Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products, services and regulation. All of our operations and assets are located within the United States.

Accounting standards for presentation of segments requires an approach based on the way we organize the segments for making operating decisions and how the chief operating decision maker (CODM) assesses performance. We have changed our segment performance metrics and concluded that adjusted operating income, instead of net income available for common stock which was used previously, is the most relevant metric for measuring segment performance.

The CODM assesses the performance of our segments by using adjusted operating income, which considers the power sales arrangement between Colorado IPP and Colorado Electric be treated as an executory contract. Adjusted operating income adjusts this power sales arrangement from being accounted for as a capital lease to being accounted for as an executory contract on an accrual basis. This adjustment impacts Electric Utilities and Power Generation segments and Corporate and Other. There were no adjustments to Gas Utilities and Mining segments and this adjustment had no effect on our consolidated operating income.

The change to our segment performance measure resulted in a revision of the Company’s segment disclosures for all periods to report adjusted operating income as the measure of segment profit and adjust revenues, operating income, and total assets for the power sales agreement to an executory contract and not a capital lease. See Notes 2 and 3 for more information.

On November 1, 2017, the BHC board of directors approved a complete divestiture of our Oil and Gas segment. We completed the divestiture of our Oil and Gas segment in 2018. The Oil and Gas segment assets and liabilities have been classified as held for sale and the results of operations are shown in income (loss) from discontinued operations, except for certain general and administrative costs and interest expense which do not meet the criteria for income (loss) from discontinued operations. At the time the assets were classified as held for sale, depreciation, depletion and amortization expenses were no longer recorded. Unless otherwise noted, the amounts presented in the accompanying notes to the Condensed Consolidated Financial Statements relate to the Company’s continuing operations. See Note 17 for more information on discontinued operations.

Use of Estimates and Basis of Presentation

The information furnished in the accompanying Condensed Consolidated Financial Statements reflects certain estimates required and all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the March 31, 2019, December 31, 2018, and March 31, 2018 financial information and are of a normal recurring nature. Certain industries in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Demand for electricity and natural gas is sensitive to seasonal cooling, heating and industrial load requirements. In particular, the normal peak usage season for electric utilities is June through August while the normal peak usage season for gas utilities is November through March. Significant earnings variances can be expected between the Gas Utilities segment’s peak and off-peak seasons. Due to this seasonal nature, our results of operations for the three months ended March 31, 2019 and March 31, 2018, and our financial condition as of March 31, 2019, December 31, 2018, and March 31, 2018, are not necessarily indicative of the results of operations and financial condition to be expected for any other period. All earnings per share amounts discussed refer to diluted earnings per share unless otherwise noted.

Recently Issued and Adopted Accounting Standards

Recently Issued Accounting Standards

Simplifying the Test for Goodwill Impairment, 2017-04

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment by eliminating step 2 from the goodwill impairment test. Under the new guidance, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit. The new standard is effective for interim and annual reporting periods beginning after December 1, 2019, applied on a prospective basis with early adoption permitted. We do not anticipate the adoption of this guidance to have any impact on our financial position, results of operations or cash flows.

Recently Adopted Accounting Standards

Leases, ASU 2016-02

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet for most leases, whereas previously only financing-type lease liabilities (capital leases) were recognized on the balance sheet. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

We adopted the standard effective January 1, 2019. We elected not to recast comparative periods coinciding with the new lease standard transition and will report these comparative periods as presented under previous lease guidance. In addition, we elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for existing land easement agreements.

Adoption of the new standard resulted in the recording of an operating lease right-of-use asset of $3.1 million, an operating lease obligation liability of $3.2 million, and an accrued rent receivable of $4.5 million, as of January 1, 2019. The cumulative effect of the adoption, net of tax impact, was $3.4 million, which was recorded as an adjustment to retained earnings.

Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, ASU 2017-12

Effective January 1, 2019, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This standard better aligns risk management activities and financial reporting for hedging relationships, simplifies hedge accounting requirements and improves disclosures of hedging arrangements. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

Revenue Recognition

As of January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and its related amendments (collectively known as ASC 606). Revenue is recognized in an amount that reflects the consideration we expect to receive in exchange for goods or services, when control of the promised goods or services is transferred to our customers. The following tables depict the disaggregation of revenue, including intercompany revenue, from contracts with customers by customer type and timing of revenue recognition for each of the reporting segments, for the three months ended March 31, 2019 and 2018. Sales tax and other similar taxes are excluded from revenues.



Three Months Ended March 31, 2019	Electric Utilities		Gas Utilities				Power Generation ^(a)		Mining		Inter-company Revenues ^(a)			Total
Customer types:	(in thousands)
Retail	$	153,463	$	354,275			$	—	$	15,829	$	(8,128	)	$	515,439
Transportation	—		44,517				—		—		(432		)	44,085
Wholesale	8,343		—				15,469		—		(13,213		)	10,599
Market - off-system sales	6,692		217				—		—		(2,224		)	4,685
Transmission/Other	14,175		13,190				—		—		(4,203		)	23,162
Revenue from contracts with customers	182,673		412,199				15,469		15,829		(28,200		)	597,970
Other revenues	254		(1,119		)	^(b)	9,776		600		(9,671		)	(160		)
Total revenues	$	182,927	$	411,080			$	25,245	$	16,429	$	(37,871	)	$	597,810

Timing of revenue recognition:
Services transferred at a point in time	$	—	$	—			$	—	$	15,829	$	(8,128	)	$	7,701
Services transferred over time	182,673		412,199				15,469		—		(20,072		)	590,269
Revenue from contracts with customers	$	182,673	$	412,199			$	15,469	$	15,829	$	(28,200	)	$	597,970



Three Months Ended March 31, 2018	Electric Utilities		Gas Utilities			Power Generation ^(a)		Mining		Inter-company Revenues ^(a)			Total
Customer Types:
Retail	$	147,057	$	341,394		$	—	$	16,557	$	(7,842	)	$	497,166
Transportation	—		41,669			—		—		(409		)	41,260
Wholesale	9,050		—			14,769		—		(13,049		)	10,770
Market - Off-System Sales	4,144		427			—		—		(2,522		)	2,049
Transmission/Other	13,071		12,670			—		—		(3,631		)	22,110
Revenue from contracts with customers	$	173,322	$	396,160		$	14,769	$	16,557	$	(27,453	)	$	573,355
Other Revenues	233		1,184		^(b)	9,170		571		(9,124		)	2,034
Total Revenues	$	173,555	$	397,344		$	23,939	$	17,128	$	(36,577	)	$	575,389

Timing of Revenue Recognition:
Services transferred at a point in time	$	—	$	—		$	—	$	16,557	$	(7,842	)	$	8,715
Services transferred over time	173,322		396,160			14,769		—		(19,611		)	564,640
Revenue from contracts with customers	$	173,322	$	396,160		$	14,769	$	16,557	$	(27,453	)	$	573,355

(a)

Due to changes to our segment performance measure as disclosed in Note 1, Power Generation Wholesale revenue was recast for the three months ended March 31, 2018 which resulted in a change of $0.8 million. For the three months ended March 31, 2019, the impact to Power Generation Wholesale revenue was $3.4 million. The changes to Power Generation were offset by changes to eliminations in Inter-company Revenues and there was no impact to our consolidated Total Revenues.


(b)	Other revenues in the Gas Utilities segment include alternative revenue programs related to weather normalization mechanisms for Arkansas Gas and Kansas Gas that are considered out of scope for ASC 606.

Contract Balances

The nature of our primary revenue contracts provides an unconditional right to consideration upon service delivery; therefore, no customer contract assets or liabilities exists. The unconditional right to consideration is represented by the balance in our Accounts Receivable further discussed in Note 4. We do not typically incur costs that would be capitalized to obtain or fulfill a revenue contract.