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| NorthWestern Corporation d/b/a NorthWestern Energy 025 S. Dakota Avenue Sioux Falls, SD 57004-6403 www.northwesternenergy.com |
News Release FOR IMMEDIATE RELEASE | NASDAQ-GS: NWEC |
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Media Contact: Claudia Rapkoch (866) 622-8081 claudia.rapkoch@northwestern.com | Investor Relations Contact: Dan Rausch (605) 978-2902 daniel.rausch@northwestern.com |
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NORTHWESTERN REPORTS THIRD QUARTER 2007 FINANCIAL RESULTS
Declares Dividend of 33 Cents per Share
SIOUX FALLS, S.D. – October 31, 2007 – NorthWestern Corporation d/b/a NorthWestern Energy (NASDAQ-GS: NWEC) today reported financial results for the quarter ended September 30, 2007.
Highlights for the quarter:
| • | Net income for the third quarter of 2007 improved 15.6% or $.04/share over the same period in 2006. Year-to-date net income improved by 15.9% or $.12/share over the same period in 2006. |
| • | Operating income for the third quarter of 2007 was $33.2 million. Year-to-date operating income improved by 14% to $95.8 million over the same period in 2006. |
| • | Earnings for 2007 expected to be in the range of $1.45 – $1.55 per share. |
| • | Quarterly dividend declared for 33 cents per share for shareholders of record on Dec. 15, 2007. |
| • | Electric and natural gas rate case is pending in Montana requesting a combined revenue increase of approximately $41.9 million, the first rate increase request since 2000. |
| • | The long-term corporate credit rating outlook from Standard and Poor’s Rating Group improved to positive from stable. |
“The financial results of the quarter reflect the Company’s continued operational focus,” said Michael J. Hanson, President and Chief Executive Officer. “In addition, our strong balance sheet and improving operational cash flow allow us to continue increasing our capital investment reflecting our growing service territory and commitment to reliable service.”
Consolidated net income for the quarter ended Sept. 30, 2007 was $13.2 million, compared with $11.4 million for the quarter of 2006. This improvement was primarily related to higher margins in the regulated electric and regulated natural gas segments and lower income tax expense, offset by increased property tax and depreciation expenses.
Consolidated net income for the nine months ended Sept. 30, 2007 was $34.8 million, an increase of $4.8 million over for the same period in 2006. This improvement was primarily related to higher margins, decreased operating, general and administrative expenses, offset by increased property taxes and depreciation expenses and a reduction in other income.
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NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 2
Consolidated gross margin for the three months ended Sept. 30, 2007 was $126.8 million, an increase of $3.1 million or 2.5%, as compared with consolidated gross margin of $123.7 million in the third quarter of 2006.
| o | Gross margin in the regulated electric segment increased $5.8 million due to volume increases driven by customer growth, warmer summer weather and implementation of interim transmission rates of approximately $0.6 million (subject to refund). |
| o | Gross margin in the regulated natural gas segment increased $1.6 million primarily due to the transfer of certain unregulated customers and a pipeline from the unregulated business into the regulated natural gas segment. |
| o | Gross margin in the unregulated electric segment decreased $3.4 million primarily due to lower average contracted prices, offset by higher volumes. |
Consolidated gross margin for the nine months ended Sept. 30, 2007 was $392.5 million, an increase of $12.5 million, or 3.3%, over consolidated gross margin in the first nine months of 2006.
Consolidated operating, general and administrative expenses were $52.5 million for the three months ended Sept. 30, 2007 as compared with $52.4 million in the third quarter of 2006. Compared to 2006, the Company realized a reduction of transaction-related costs pursuant to the terminated Babcock and Brown Infrastructure, Limited (“BBI”) acquisition by approximately $5.6 million and lease expense decreased by $3.1 million mainly due to our purchase of the owner participant interest in a portion of the Colstrip Unit 4 generating facility in March 2007. These improvements were offset by a $9.3 million insurance settlement received in the third quarter of 2006.
Consolidated operating, general and administrative expenses were $173.6 million for the nine months ended Sept. 30, 2007 as compared with $182.4 million in same period of 2006. This decrease was primarily due to $11.7 million in lower transaction-related costs for the terminated BBI acquisition.
Property taxes increased by $1.4 million and depreciation increased $1.9 million for the three months ended Sept. 30, 2007, as compared with the third quarter of 2006. For the nine months ended Sept. 30, 2007, property taxes increased by $4.5 million and depreciation increased $5.0 million, as compared with the same period of 2006, due to increasing plant assets and the Colstrip Unit 4 lease buyout.
Consolidated operating income for the three months ended Sept. 30, 2007 was $33.2 million, as compared with $33.5 million for the third quarter of 2006. Consolidated operating income for the nine months ended Sept. 30, 2007 was $95.8 million, as compared with $84.0 million for the same period of 2006.
Dividend Declared
NorthWestern’s Board of Directors declared a quarterly common stock dividend of 33 cents per share, payable on Dec. 31, 2007, to common shareholders of record as of Dec. 15, 2007.
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 3
2007 Earnings Outlook
NorthWestern estimates its basic earnings for 2007 to be between $1.45 - $1.55 per share. The upper range has been revised down $.05 per share because interim rate increases have yet to be approved in our state jurisdictions.
The guidance assumes normal weather in the Company's electric and natural gas service areas for the rest of 2007.
Company Hosting Investor Conference Call
NorthWestern will host an investor conference call on Friday, Nov. 2, 2007 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to review its financial results for the quarter ended Sept. 30, 2007.
The conference call will be webcast live on the Internet at http://www.northwesternenergy.com. To listen, please go to the site at least 10 minutes in advance of the call to register. An archived webcast will be available shortly after the call.
A telephonic replay of the call will be available beginning at 2:30 ET on Nov. 2, 2007, through Dec. 2, 2007, at 800-475-6701, access code 892085.
About NorthWestern Energy
NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 640,000 customers in Montana, South Dakota and Nebraska. More information on NorthWestern Energy is available on the Company's Web site at www.northwesternenergy.com.
SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” These statements are based upon our current expectations and speak only as of the date hereof. Our actual future business and financial performance may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including, but not limited to:
| • | our ability to avoid or mitigate adverse rulings or judgments against us in our pending litigation; |
| • | unanticipated changes in availability of trade credit, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments, may reduce revenues or may increase operating costs, |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 4
each of which would adversely affect our liquidity;
| • | unscheduled generation outages or forced reductions in output, maintenance or repairs, which may reduce revenues and increase cost of sales or may require additional capital expenditures or other increased operating costs; |
| • | adverse changes in general economic and competitive conditions in our service territories; and |
| • | potential additional adverse federal, state, or local legislation or regulation or adverse determinations by regulators could have a material adverse effect on our liquidity, results of operations and financial condition. |
Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors that may affect our business, results of operations and financial condition.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 5
NORTHWESTERN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | September 30, 2007 | | | December 31, 2006 | |
| | | (Unaudited) | | | | |
ASSETS | | | | | | | |
Current Assets | | | 252,406 | | | 268,474 | |
Property, Plant, and Equipment, Net | | | 1,597,404 | | | 1,491,855 | |
Goodwill | | | 355,128 | | | 435,076 | |
Regulatory Assets | | | 143,748 | | | 159,715 | |
Other Noncurrent Assets | | | 37,022 | | | 40,817 | |
Total Assets | | $ | 2,385,708 | | $ | 2,395,937 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Current Maturities of Long-term Debt and Capital Leases | | $ | 12,499 | | $ | 7,693 | |
Current Liabilities | | | 287,684 | | | 271,243 | |
Long-term Capital Leases | | | 38,338 | | | 40,383 | |
Long-term Debt | | | 671,607 | | | 699,041 | |
Noncurrent Regulatory Liabilities | | | 191,637 | | | 182,103 | |
Deferred Income Taxes | | | 74,425 | | | 113,355 | |
Other Noncurrent Liabilities | | | 336,407 | | | 339,348 | |
Total Liabilities | | | 1,612,597 | | | 1,653,166 | |
Total Shareholders’ Equity | | | 773,111 | | | 742,771 | |
Total Liabilities and Shareholders’ Equity | | $ | 2,385,708 | | $ | 2,395,937 | |
| | | | | | | | | |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 6
NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | | | | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
OPERATING REVENUES | | $ | 265,863 | | $ | 234,637 | | $ | 892,036 | | $ | 828,305 | |
COST OF SALES | | | 139,021 | | | 110,914 | | | 499,555 | | | 448,312 | |
GROSS MARGIN | | | 126,842 | | | 123,723 | | | 392,481 | | | 379,993 | |
OPERATING EXPENSES | | | | | | | | | | | | | |
Operating, general and administrative | | | 52,486 | | | 52,412 | | | 173,611 | | | 182,384 | |
Property and other taxes | | | 20,393 | | | 18,968 | | | 61,645 | | | 57,146 | |
Depreciation | | | 20,725 | | | 18,853 | | | 61,412 | | | 56,433 | |
TOTAL OPERATING EXPENSES | | | 93,604 | | | 90,233 | | | 296,668 | | | 295,963 | |
OPERATING INCOME | | | 33,238 | | | 33,490 | | | 95,813 | | | 84,030 | |
Interest Expense | | | (14,633 | ) | | (13,777 | ) | | (42,380 | ) | | (42,835 | ) |
Other Income (Expense) | | | 909 | | | (397 | ) | | 1,646 | | | 8,020 | |
Income From Continuing Operations Before Income Taxes | | | 19,514 | | | 19,316 | | | 55,079 | | | 49,215 | |
Income Tax Expense | | | (6,337 | ) | | (7,918 | ) | | (20,326 | ) | | (19,656 | ) |
Income From Continuing Operations | | | 13,177 | | | 11,398 | | | 34,753 | | | 29,559 | |
Discontinued Operations, Net of Taxes | | | — | | | — | | | — | | | 418 | |
Net Income | | $ | 13,177 | | $ | 11,398 | | $ | 34,753 | | $ | 29,977 | |
Average Common Shares Outstanding | | | 36,471 | | | 35,510 | | | 36,063 | | | 35,535 | |
Basic Earnings per Average Common Share | | | | | | | | | | | | | |
Continuing operations | | $ | 0.36 | | $ | 0.32 | | $ | 0.96 | | $ | 0.83 | |
Discontinued operations | | | 0.00 | | | 0.00 | | | 0.00 | | | 0.01 | |
Basic | | $ | 0.36 | | $ | 0.32 | | $ | 0.96 | | $ | 0.84 | |
Diluted Earnings per Average Common Share | | | | | | | | | | | | | |
Continuing operations | | $ | 0.35 | | $ | 0.31 | | $ | 0.93 | | $ | 0.80 | |
Discontinued operations | | | 0.00 | | | 0.00 | | | 0.00 | | | 0.01 | |
Diluted | | $ | 0.35 | | $ | 0.31 | | $ | 0.93 | | $ | 0.81 | |
Dividends Declared per Average Common Share | | $ | 0.33 | | $ | 0.31 | | $ | 0.95 | | $ | 0.93 | |
| | | | | | | | | | | | | | | |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 7
NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| | Nine Months Ended September 30, | |
| | 2007 | | | | 2006 | |
Operating Activities: | | | | | | | |
Net Income | $ | 34,753 | | | $ | 29,977 | |
Noncash Items | | 85,925 | | | | 88,081 | |
Changes in Operating Assets and Liabilities | | 53,193 | | | | 17,429 | |
Cash Provided by Continuing Operating Activities | | 173,871 | | | | 135,487 | |
| | | | | | | |
Cash Used in Continuing Investing Activities | | (116,686 | ) | | | (46,727 | ) |
| | | | | | | |
Cash Used in Continuing Financing Activities | | (54,436 | ) | | | (97,461 | ) |
| | | | | | | |
Change in Net Assets of Discontinued Operations | | — | | | | 7,695 | |
| | | | | | | |
(Decrease) Increase in Cash and Cash Equivalents | | 2,749 | | | | (1,006 | ) |
Cash and Cash Equivalents, beginning of period | | 1,930 | | | | 2,691 | |
Cash and Cash Equivalents, end of period | $ | 4,679 | | | $ | 1,685 | |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 8
NORTHWESTERN CORPORATION
(Unaudited)
(in millions)
REGULATED ELECTRIC SEGMENT
| | Three Months Ended September 30, |
| | 2007 | | | 2006 | | | Change | | % Change |
| | (in millions) | | |
Electric supply revenue | | $ | 106.3 | | $ | 83.9 | | $ | 22.4 | | 26.7 | | % |
Transmission & distribution revenue | | | 78.5 | | | 74.1 | | | 4.4 | | 5.9 | | |
Rate schedule revenue | | | 184.8 | | | 158.0 | | | 26.8 | | 17.0 | | |
Transmission | | | 13.0 | | | 10.8 | | | 2.2 | | 20.4 | | |
Wholesale | | | 2.2 | | | 2.4 | | | (0.2 | ) | (8.3 | ) | |
Miscellaneous | | | 2.1 | | | 2.0 | | | 0.1 | | 5.0 | | |
Total Revenues | | | 202.1 | | | 173.2 | | | 28.9 | | 16.7 | | % |
Supply costs | | | 105.5 | | | 83.8 | | | 21.7 | | 25.9 | | |
Wholesale | | | 0.7 | | | 0.9 | | | (0.2 | ) | (22.2 | ) | |
Other cost of sales | | | 3.7 | | | 2.1 | | | 1.6 | | 76.2 | | |
Total Cost of Sales | | | 109.9 | | | 86.8 | | | 23.1 | | 26.6 | | % |
Gross Margin | | $ | 92.2 | | $ | 86.4 | | $ | 5.8 | | 6.7 | | % |
% GM/Rev | | | 45.6 | % | | 49.9 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2007 | | | 2006 | | | Change | | % Change |
| | (in millions) | | |
Electric supply revenue | | $ | 282.5 | | $ | 234.5 | | $ | 48.0 | | 20.5 | | % | |
Transmission & distribution revenue | | | 221.5 | | | 210.2 | | | 11.3 | | 5.4 | | | |
Rate schedule revenue | | | 504.0 | | | 444.7 | | | 59.3 | | 13.3 | | | |
Transmission | | | 36.8 | | | 34.6 | | | 2.2 | | 6.4 | | | |
Wholesale | | | 4.5 | | | 6.8 | | | (2.3 | ) | (33.8 | ) | | |
Miscellaneous | | | 5.9 | | | 6.2 | | | (0.3 | ) | (4.8 | ) | | |
Total Revenues | | | 551.2 | | | 492.3 | | | 58.9 | | 12.0 | | % | |
Supply costs | | | 279.2 | | | 237.0 | | | 42.2 | | 17.8 | | | |
Wholesale | | | 1.5 | | | 2.4 | | | (0.9 | ) | (37.5 | ) | | |
Other cost of sales | | | 9.9 | | | 8.0 | | | 1.9 | | 23.8 | | | |
Total Cost of Sales | | | 290.6 | | | 247.4 | | | 43.2 | | 17.5 | | % | |
Gross Margin | | $ | 260.6 | | $ | 244.9 | | $ | 15.7 | | 6.4 | | % | |
% GM/Rev | | | 47.3 | % | | 49.7 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Volumes MWH |
| | 2007 | | 2006 | | Change | | % Change |
| | (in thousands) | | |
Retail Electric | | | | | | | | | | |
Residential | | 2,046 | | 1,964 | | 82 | | 4.2 | | % |
Commercial | | 3,040 | | 2,935 | | 105 | | 3.6 | | |
Industrial | | 2,250 | | 2,273 | | (23 | ) | (1.0 | ) | |
Other | | 164 | | 167 | | (3 | ) | (1.8 | ) | |
Total Retail Electric | | 7,500 | | 7,339 | | 161 | | 2.2 | | % |
Wholesale Electric | | 119 | | 176 | | (57 | ) | (32.4 | ) | % |
| | | | | | | | | | | | | | | | | | |
| | 2007 as compared to: | |
Cooling Degree-Days | | 2006 | | Historic Average | |
Montana | | 17% Warmer | | 74% Warmer | |
South Dakota | | 15% Warmer | | 56% Warmer | |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 9
REGULATED NATURAL GAS SEGMENT
| | Three Months Ended September 30, | |
| | 2007 | | | 2006 | | | Change | | % Change |
| | (in millions) | | | |
Gas supply revenue | | $ | 14.3 | | $ | 14.2 | | $ | 0.1 | | 0.7 | | % |
Transportation, distribution & storage revenue | | | 13.7 | | | 13.0 | | | 0.7 | | 5.4 | | |
Rate schedule revenue | | | 28.0 | | | 27.2 | | | 0.8 | | 2.9 | | |
Transportation & storage | | | 6.0 | | | 5.0 | | | 1.0 | | 20.0 | | |
Wholesale revenue | | | 1.6 | | | 2.1 | | | (0.5 | ) | (23.8 | ) | |
Miscellaneous | | | 1.5 | | | 1.5 | | | — | | — | | |
Total Revenues | | | 37.1 | | | 35.8 | | | 1.3 | | 3.6 | | % |
Supply costs | | | 14.3 | | | 14.2 | | | 0.1 | | 0.7 | | |
Wholesale supply costs | | | 1.6 | | | 2.1 | | | (0.5 | ) | (23.8 | ) | |
Other cost of sales | | | 0.4 | | | 0.3 | | | 0.1 | | 33.3 | | |
Total Cost of Sales | | | 16.3 | | | 16.6 | | | (0.3 | ) | (1.8 | ) | % |
Gross Margin | | $ | 20.8 | | $ | 19.2 | | $ | 1.6 | | 8.3 | | % |
% GM/Rev | | | 56.1 | % | | 53.6 | % | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2007 | | | 2006 | | | Change | | % Change |
| | (in millions) | | |
Gas supply revenue | | $ | 148.1 | | $ | 161.3 | | $ | (13.2 | ) | (8.2 | ) | % |
Transportation, distribution & storage revenue | | | 69.6 | | | 63.6 | | | 6.0 | | 9.4 | | |
Rate schedule revenue | | | 217.7 | | | 224.9 | | | (7.2 | ) | (3.2 | ) | |
Transportation & storage | | | 17.5 | | | 14.9 | | | 2.6 | | 17.4 | | |
Wholesale revenue | | | 18.1 | | | 8.0 | | | 10.1 | | 126.3 | | |
Miscellaneous | | | 4.0 | | | 5.7 | | | (1.7 | ) | (29.8 | ) | |
Total Revenues | | | 257.3 | | | 253.5 | | | 3.8 | | 1.5 | | % |
Supply costs | | | 148.1 | | | 161.3 | | | (13.2 | ) | (8.2 | ) | |
Wholesale supply costs | | | 18.1 | | | 8.0 | | | 10.1 | | 126.3 | | |
Other cost of sales | | | 2.2 | | | 2.1 | | | 0.1 | | 4.8 | | |
Total Cost of Sales | | | 168.4 | | | 171.4 | | | (3.0 | ) | (1.8 | ) | % |
Gross Margin | | $ | 88.9 | | $ | 82.1 | | $ | 6.8 | | 8.3 | | % |
% GM/Rev | | | 34.6 | % | | 32.4 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Volumes Dekatherms |
| | 2007 | | 2006 | | Change | | % Change |
| | (in thousands) | | |
Retail Gas | | | | | | | | | | |
Residential | | 11,951 | | 11,163 | | 788 | | 7.1 | | % |
Commercial | | 7,859 | | 7,237 | | 622 | | 8.6 | | |
Industrial | | 111 | | 101 | | 10 | | 9.9 | | |
Other | | 114 | | 116 | | (2 | ) | (1.7 | ) | |
Total Retail Gas | | 20,035 | | 18,617 | | 1,418 | | 7.6 | | % |
| | | | | | | | | | | | |
| | 2007 as compared to: | |
Heating Degree-Days | | 2006 | | Historic Average | |
Montana | | 1% Colder | | 10% Warmer | |
South Dakota | | 15% Colder | | 3% Warmer | |
Nebraska | | 17% Colder | | 5% Warmer | |
NorthWestern Reports Third Quarter 2007 Financial Results
October 31, 2007
Page 10
NORTHWESTERN CORPORATION
UNREGULATED ELECTRIC SEGMENT
(Unaudited)
(in millions)
| | Three Months Ended September 30, |
| | | 2007 | | | 2006 | | | Change | | Change % | | |
Total Revenues | | $ | 18.8 | | | 22.7 | | | (3.9 | ) | (17.2 | )% | |
| | | | | | | | | | | | | |
Total Cost of Sales | | | 5.2 | | | 5.7 | | | (0.5 | ) | (8.8 | ) | |
| | | | | | | | | | | | | |
Gross Margin | | $ | 13.6 | | $ | 17.0 | | $ | (3.4 | ) | (20.0 | )% | |
% Gross Margin/Revenue | | | 72.3 | % | 74.9 | % | | | | | |
| | Nine Months Ended September 30, |
| | | 2007 | | | 2006 | | | Change | | Change % | | |
Total Revenues | | $ | 55.7 | | | 61.2 | | | (5.5 | ) | (9.0 | )% | |
| | | | | | | | | | | | | |
Total Cost of Sales | | | 13.7 | | | 12.1 | | | 1.6 | | 13.2 | | |
| | | | | | | | | | | | | |
Gross Margin | | $ | 42.0 | | $ | 49.1 | | $ | (7.1 | ) | (14.5 | )% | |
% Gross Margin/Revenue | | | 75.4 | % | 80.2 | % | | | | | |
| | Volumes MWH |
| | 2007 | | 2006 | | Change | | % Change |
| | (in thousands) | | |
Wholesale Electric | | 1,189 | | 1,076 | | 113 | | 10.5 | | % |
| | | | | | | | | | | | | |
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