EX-99.2 4 a2065702zex-99_2.txt EXHIBIT 99.2 Exhibit 99.2 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following presents our unaudited pro forma combined financial information as of September 30, 2001 and for the year ended December 31, 2000 and for the nine months ended September 30, 2001. The unaudited pro forma combined statements of income for the year ended December 31, 2000 and the nine months ended September 30, 2001 give effect to the following transactions as if each transaction had occurred as of the beginning of the period presented and the unaudited pro forma combined balance sheet as of September 30, 2001 gives effect to the following transactions as if each transaction had occurred on September 30, 2001: - the sale of 3,680,000 shares of our common stock issued in October 2001 at $21.25 per share and the use of the net proceeds therefrom; - the proposed sale of 8,000,000 shares of trust preferred securities, assuming an offering of $200 million aggregate amount of securities and assuming a dividend rate of 8% thereon and the use of the net proceeds therefrom; - our pending acquisition of the utility business of Montana Power (the "MPC Utility"), which includes regulated electric and natural gas distribution and transmission operations and certain unregulated, energy-related businesses that provide products and services to industrial, institutional and commercial customers, for a purchase price of $1.1 billion, including the assumption of approximately $488 million in existing debt and preferred stock of The Montana Power Company ("Montana Power"); and - our anticipated initial financing of the acquisition of the MPC Utility, assuming the equity purchase price is fully funded via an acquisition facility and assuming interest rates on such facility as of December 6, 2001. The unaudited pro forma combined financial information is based upon currently available information and assumptions that our management believes are reasonable. The unaudited pro forma combined financial information is prepared for illustrative purposes only and is not necessarily indicative of the operating results or financial condition of the company that would have occurred had the transactions occurred at the periods presented, nor is the unaudited pro forma combined financial information necessarily indicative of future operating results or the financial position of the combined companies. Pro forma results for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for a full year. You should read the following tables in conjunction with "Montana Power Company Utility Unaudited Pro Forma Combined Condensed Financial Data" included in Exhibit 99.3 hereto, the consolidated financial statements and notes thereto of NorthWestern and the combined financial statements and notes thereto of the Utility of The Montana Power Company included in Exhibit 99.1 hereto. S-58 NORTHWESTERN CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (in thousands, except for per share amounts)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 ----------------------------------------------- TRUST PREFERRED NORTHWESTERN COMMON STOCK SECURITIES CORPORATION OFFERING OFFERING ACTUAL ADJUSTMENT(1) ADJUSTMENT(2) ------------ -------------- --------------- OPERATING REVENUES........... $3,440,336 COST OF SALES................ 2,784,079 ----------- GROSS MARGIN................. 656,257 ----------- OPERATING EXPENSES: Selling, general and administrative expenses................. 607,596 Depreciation and amortization............. 91,300 ----------- 698,896 ----------- OPERATING INCOME (LOSS)...... (42,639) Interest expense............. (66,253) $1,325 $6,249 Investment income and other...................... 4,130 ----------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS.................. (104,762) 1,325 6,249 Benefit (provision) for income taxes............... 17,247 (517) 2,243 ----------- ---------- ---------- INCOME (LOSS) BEFORE MINORITY INTERESTS.................. (87,515) 808 8,492 Minority interests........... 126,956 ----------- ---------- ---------- NET INCOME................... 39,441 808 8,492 Minority interest on preferred securities of subsidiary trust........... (4,950) (12,000) Dividends on cumulative preferred stock............ (144) ----------- ---------- ---------- EARNINGS ON COMMON STOCK..... $34,347 $808 $(3,508) =========== ========== ========== AVERAGE COMMON SHARES OUTSTANDING................ 23,604 3,680 EARNINGS PER AVERAGE COMMON SHARE Basic...................... $1.46 Diluted.................... 1.45 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 ----------------------------------------------------------- NORTHWESTERN NORTHWESTERN PRO FORMA AS PRO FORMA AS ADJUSTED FOR NORTHWESTERN FURTHER COMMON STOCK INITIAL MPC ADJUSTED FOR AND TRUST UTILITY MPC UTILITY PREFERRED PRO FORMA ACQUISITION ACQUISITION SECURITIES MPC UTILITY FINANCING AND OFFERINGS ADJUSTMENT(3) ADJUSTMENT(4) FINANCING ------------ ------------- ------------- ------------ OPERATING REVENUES........... $3,440,336 $490,651 $3,930,987 COST OF SALES................ 2,784,079 248,172 3,032,251 ----------- ---------- ----------- GROSS MARGIN................. 656,257 242,479 898,736 ----------- ---------- ----------- OPERATING EXPENSES: Selling, general and administrative expenses................. 607,596 124,617 732,213 Depreciation and amortization............. 91,300 42,765 134,065 ----------- ---------- ----------- 698,896 167,382 866,278 ----------- ---------- ----------- OPERATING INCOME (LOSS)...... (42,639) 75,097 32,458 Interest expense............. (58,679) (24,721) $(21,446) (104,846) Investment income and other...................... 4,130 1,707 5,837 ----------- ---------- ---------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS.................. (97,188) 52,083 (21,446) (66,551) Benefit (provision) for income taxes............... 18,973 (18,706) 8,364 8,631 ----------- ---------- ---------- ----------- INCOME (LOSS) BEFORE MINORITY INTERESTS.................. (78,215) 33,377 (13,082) (57,920) Minority interests........... 126,956 126,956 ----------- ---------- ---------- ----------- NET INCOME................... 48,741 33,377 (13,082) 69,036 Minority interest on preferred securities of subsidiary trust........... (16,950) (4,119) (21,069) Dividends on cumulative preferred stock............ (144) (144) ----------- ---------- ---------- ----------- EARNINGS ON COMMON STOCK..... $31,647 $29,258 $(13,082) $47,823 =========== ========== ========== =========== AVERAGE COMMON SHARES OUTSTANDING................ 27,284 27,284 EARNINGS PER AVERAGE COMMON SHARE Basic...................... $1.16 $1.75 Diluted.................... 1.16 1.75
The accompanying notes are an integral part of these pro forma combined financial statements S-59 NORTHWESTERN CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (in thousands, except for per share amounts)
FOR THE YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------- NORTHWESTERN PRO FORMA AS ADJUSTED FOR COMMON STOCK TRUST PREFERRED AND NORTHWESTERN COMMON STOCK SECURITIES TRUST PREFERRED CORPORATION OFFERING OFFERING SECURITIES ACTUAL ADJUSTMENT(1) ADJUSTMENT(2) OFFERINGS ------------ ------------- --------------- --------------- OPERATING REVENUES............ $7,132,090 $7,132,090 COST OF SALES................. 6,295,675 6,295,675 ----------- ----------- GROSS MARGIN.................. 836,415 836,415 ----------- ----------- OPERATING EXPENSES: Selling, general and administrative expenses... 686,814 686,814 Depreciation and amortization.............. 108,329 108,329 ----------- ----------- 795,143 795,143 ----------- ----------- OPERATING INCOME (LOSS)....... 41,272 41,272 Interest expense.............. (77,207) $2,986 $14,244 (59,977) Investment income and other... 8,981 8,981 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS................... (26,954) 2,986 14,244 (9,724) Benefit (provision) for income taxes....................... 4,117 (1,165) 685 3,637 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE MINORITY INTERESTS................... (22,837) 1,821 14,929 (6,087) Minority interests............ 73,436 73,436 ----------- ----------- ----------- ----------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........ 50,599 1,821 14,929 67,349 Cumulative effect on change in accounting principle, net of tax and minority interests................... (1,046) (1,046) ----------- ----------- ----------- ----------- NET INCOME.................... 49,553 1,821 14,929 66,303 Minority Interest on Preferred Securities of Subsidiary Trust....................... (6,601) (16,000) (22,601) Dividends on Cumulative Preferred Stock............. (191) (191) ----------- ----------- ----------- ----------- EARNINGS ON COMMON STOCK...... $42,761 $1,821 $(1,071) $43,511 =========== =========== =========== =========== AVERAGE COMMON SHARES OUTSTANDING................. 23,141 3,680 26,821 EARNINGS PER AVERAGE COMMON SHARE Basic before cumulative effect...................... $1.89 $1.66 Cumulative effect of change in accounting principle... (0.04) (0.04) Basic....................... 1.85 1.62 Diluted before cumulative effect.................... 1.87 1.64 Cumulative effect of change in accounting principle... (0.04) (0.04) Diluted..................... 1.83 1.60 FOR THE YEAR ENDED DECEMBER 31, 2000 -------------------------------------------- NORTHWESTERN PRO FORMA NORTHWESTERN AS FURTHER INITIAL MPC ADJUSTED FOR PRO FORMA UTILITY MPC UTILITY MPC ACQUISITION ACQUISITION UTILITY FINANCING AND ADJUSTMENT(3) ADJUSTMENT(4) FINANCING ------------- ------------- ------------ OPERATING REVENUES............ $628,144 $7,760,234 COST OF SALES................. 319,505 6,615,180 ---------- ----------- GROSS MARGIN.................. 308,639 1,145,054 ---------- ----------- OPERATING EXPENSES: Selling, general and administrative expenses... 186,183 872,997 Depreciation and amortization.............. 54,123 162,452 ---------- ----------- 240,306 1,035,449 ---------- ----------- OPERATING INCOME (LOSS)....... 68,333 109,605 Interest expense.............. (35,880) $(28,595) (124,452) Investment income and other... 14,481 23,462 ---------- ---------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS................... 46,934 (28,595) 8,615 Benefit (provision) for income taxes....................... (16,162) 11,152 (1,373) ---------- ---------- ----------- INCOME (LOSS) BEFORE MINORITY INTERESTS................... 30,772 (17,443) 7,242 Minority interests............ 73,436 ---------- ---------- ----------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........ 30,772 (17,443) 80,678 Cumulative effect on change in accounting principle, net of tax and minority interests................... (1,046) ---------- ---------- ----------- NET INCOME.................... 30,772 (17,443) 79,632 Minority Interest on Preferred Securities of Subsidiary Trust....................... (5,492) (28,093) Dividends on Cumulative Preferred Stock............. (191) ---------- ---------- ----------- EARNINGS ON COMMON STOCK...... $25,280 $(17,443) $51,348 ========== ========== =========== AVERAGE COMMON SHARES OUTSTANDING................. 26,821 EARNINGS PER AVERAGE COMMON SHARE Basic before cumulative effect...................... $1.95 Cumulative effect of change in accounting principle... (0.04) Basic....................... 1.91 Diluted before cumulative effect.................... 1.93 Cumulative effect of change in accounting principle... (0.04) Diluted..................... 1.89
The accompanying notes are an integral part of these pro forma combined financial statements S-60 NORTHWESTERN CORPORATION UNAUDITED PRO FORMA COMBINED BALANCE SHEET (in thousands)
AT SEPTEMBER 30, 2001 ---------------------------------------------------------------------------------- NORTHWESTERN PRO FORMA AS ADJUSTED FOR COMMON STOCK TRUST PREFERRED AND NORTHWESTERN COMMON STOCK SECURITIES TRUST PREFERRED PRO FORMA CORPORATION OFFERING OFFERING SECURITIES MPC UTILITY ACTUAL ADJUSTMENT(5) ADJUSTMENT(6) OFFERINGS ADJUSTMENT(7) ------------ --------------- --------------- --------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents... $84,496 $30,072 $114,568 $6,504 Accounts receivable, net.... 388,243 388,243 54,439 Inventories................. 89,290 89,290 11,508 Other....................... 83,556 83,556 106,381 ----------- ------------ ------------- ----------- 645,585 30,072 675,657 178,832 ----------- ------------ ------------- ----------- PROPERTY, PLANT AND EQUIPMENT, NET......................... 806,236 806,236 1,092,178 GOODWILL AND OTHER INTANGIBLE ASSETS, NET................. 994,721 994,721 7,561 OTHER ASSETS: Investments................. 96,733 96,733 25,439 Other assets................ 80,009 $6,800 86,809 226,471 ----------- ------------ ------------- ----------- 176,742 6,800 183,542 251,910 ----------- ------------ ------------ ------------- ----------- $2,623,284 $30,072 $6,800 $2,660,156 $1,530,481 =========== ============ ============ ============= =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long- term debt................. $5,000 $5,000 $3,399 Current maturities of long- term debt--nonrecourse.... 106,522 106,522 Short-term debt............. 8,000 $(8,000) Short-term debt of subsidiaries--nonrecourse... 167,723 167,723 Accounts payable............ 269,002 269,002 37,162 Accrued expenses............ 226,195 226,195 133,556 ----------- ------------ ------------- ----------- 782,442 (8,000) 774,442 174,117 ----------- ------------ ------------- ----------- LONG-TERM LIABILITIES: Long-term debt.............. 586,350 (1,800) $(193,200) 391,350 419,601 Long-term debt of subsidiaries--nonrecourse... 491,765 491,765 Deferred income taxes....... 46,663 46,663 Other noncurrent liabilities............... 58,469 58,469 380,947 ----------- ------------ ------------ ------------- ----------- 1,183,247 (1,800) (193,200) 988,247 800,548 ----------- ------------ ------------ ------------- ----------- MINORITY INTERESTS............ 234,552 (35,000) 199,552 PREFERRED STOCK, PREFERENCE STOCK AND PREFERRED SECURITIES: Preferred stock--4 1/2% series.................... 2,600 2,600 Redeemable preferred stock-- 6 1/2% series............. 1,150 1,150 Preference stock............ Company obligated manditorily redeemable security of trust holding solely parent debentures................ 87,500 200,000 287,500 65,000 ----------- ------------ ------------- ----------- 91,250 200,000 291,250 65,000 ----------- ------------ ------------- ----------- SHAREHOLDERS' EQUITY: Common stock................ 41,502 6,440 47,942 Paid-in capital............. 172,954 68,432 241,386 490,816 Retained earnings........... 117,838 117,838 Accumulated other comprehensive income...... (501) (501) ----------- ------------ ------------- ----------- 331,793 74,872 406,665 490,816 ----------- ------------ ------------ ------------- ----------- $2,623,284 $30,072 $6,800 $2,660,156 $1,530,481 =========== ============ ============ ============= =========== AT SEPTEMBER 30, 2001 ------------------------------- NORTHWESTERN NORTHWESTERN PRO FORMA AS INITIAL MPC FURTHER UTILITY ADJUSTED FOR ACQUISITION MPC UTILITY FINANCING ACQUISITION ADJUSTMENT(8) AND FINANCING -------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents... $121,072 Accounts receivable, net.... 442,682 Inventories................. 100,798 Other....................... 189,937 ------------ 854,489 ------------ PROPERTY, PLANT AND EQUIPMENT, NET......................... 1,898,414 GOODWILL AND OTHER INTANGIBLE ASSETS, NET................. $111,184 1,113,466 OTHER ASSETS: Investments................. 122,172 Other assets................ 313,280 ------------ ------------ 435,452 ------------ ------------ $111,184 $4,301,821 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long- term debt................. $8,399 Current maturities of long- term debt--nonrecourse.... 106,522 Short-term debt............. -- Short-term debt of subsidiaries--nonrecourse... 167,723 Accounts payable............ 306,164 Accrued expenses............ 359,751 ------------ 948,559 ------------ LONG-TERM LIABILITIES: Long-term debt.............. $602,000 1,412,951 Long-term debt of subsidiaries--nonrecourse... 491,765 Deferred income taxes....... 46,663 Other noncurrent liabilities............... 439,416 ------------ ------------ 602,000 2,390,795 ------------ ------------ MINORITY INTERESTS............ 199,552 PREFERRED STOCK, PREFERENCE STOCK AND PREFERRED SECURITIES: Preferred stock--4 1/2% series.................... 2,600 Redeemable preferred stock-- 6 1/2% series............. 1,150 Preference stock............ Company obligated manditorily redeemable security of trust holding solely parent debentures................ 352,500 ------------ 356,250 ------------ SHAREHOLDERS' EQUITY: Common stock................ 47,942 Paid-in capital............. (490,816) 241,386 Retained earnings........... 117,838 Accumulated other comprehensive income...... (501) ------------ ------------ (490,816) 406,665 ------------ ------------ $111,184 $4,301,821 ============ ============
The accompanying notes are an integral part of these pro forma combined financial statements. S-61 NORTHWESTERN CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The Unaudited Pro Forma Combined Financial Information is based on the following assumptions: (1) Reflects the receipt of $74.9 million net proceeds, after deducting offering expenses, from the sale of 3,680,000 shares of common stock issued in October 2001 at $21.25 per share and the application of the proceeds therefrom. Approximately $35.0 million of these net proceeds were contributed to NorthWestern's Blue Dot Services, Inc. subsidiary for the redemption of certain preferred stock and common stock pursuant to existing agreements, and the remainder was used for general corporate purposes, including reducing short-term debt and amounts drawn under NorthWestern's existing credit facility. (2) Reflects the receipt of $193.2 million of net proceeds, after paying the underwriting commission and the estimated offering expenses of approximately $500,000, from the proposed sale of NorthWestern's trust preferred securities, assuming an offering of 8,000,000 trust preferred securities and assuming a dividend rate of 8% and the use of proceeds from the sale for general corporate purposes and to repay a portion of the amounts outstanding under NorthWestern's existing credit facility. A change of 1/8% in interest rates on the trust preferred securities would increase or decrease pre-tax interest expense by $250,000 per annum. (3) Reflects the results of operations of the MPC Utility for a purchase price of $1.1 billion, including the assumption of approximately $488 million in existing Montana Power debt and preferred stock. (4) Reflects NorthWestern's anticipated initial financing of the acquisition of the MPC Utility. The initial financing assumes the equity purchase price is fully funded via an acquisition facility and assuming interest rates on such acquisition facility as of December 6, 2001. We currently intend to issue a combination of long term debt and equity following the closing of the acquisition of the MPC Utility to refinance the initial financing and provide working capital. A change of 1/8% in interest rates would increase or decrease pre-tax interest expense by $753,000 per annum. (5) Reflects the receipt of $74.9 million of net proceeds, after deducting offering expenses, from the sale of 3,680,000 shares of common stock issued in October 2001 at $21.25 per share and the application of the proceeds therefrom. Approximately $35.0 million of these net proceeds were contributed to NorthWestern's Blue Dot Services, Inc. subsidiary for the redemption of certain preferred stock and common stock pursuant to existing agreements, and the remainder was used for general corporate purposes, including reducing short-term debt and amounts drawn under NorthWestern's existing credit facility. (6) Reflects the receipt of $193.2 million of net proceeds, after paying the underwriting commission and the estimated offering expenses of approximately $500,000, from the proposed sale of NorthWestern's trust preferred securities, assuming an offering of $200 million aggregate amount of trust preferred securities and the use of proceeds from the sale for general corporate purposes and to repay a portion of the amounts outstanding under NorthWestern's existing credit facility. (7) Reflects the balances of the MPC Utility. Purchase adjustments have been made to the assets and liabilities of the MPC Utility to reflect the effect of the pending acquisition accounted for under the purchase method of accounting. Certain pro forma adjustments are based, in part, on the impact of the terms and conditions of the Unit Purchase Agreement governing our acquisition of the MPC Utility and we cannot assure you that such terms and conditions will remain unchanged. Pro forma adjustments exclude certain cash accounts representing excess proceeds from the MPC Utility's previous sale of generation assets, which cash will be applied to reduce transition and stranded costs under the jurisdiction of the MPSC and FERC. (8) Reflects NorthWestern's anticipated initial financing of the acquisition of the MPC Utility. We currently intend to issue a combination of long term debt and equity following the closing of the acquisition of the MPC Utility to refinance the acquisition term loan and provide working capital. Goodwill will be recognized, representing the portion of the purchase price in excess of the fair value of identified assets and liabilities. No amortization of goodwill is included in the Unaudited Pro Forma Combined Financial Information, as provided in Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," for business combinations completed after June 30, 2001. The allocation of the purchase price will be based on the fair value of identified assets and liabilities as of the date the business combination is completed. Accordingly, goodwill will be adjusted as a result of the determination of such fair value and thus will differ from the amount reported in the Unaudited Pro Forma Combined Condensed Balance Sheet. While we believe the historical assets and liabilities approximate fair value, if we identify any intangible assets separate from goodwill, they will be subject to amortization. S-62