| NorthWestern Corporation d/b/a NorthWestern Energy 3010 W. 69th Street Sioux Falls, SD 57108 www.northwesternenergy.com |
News Release FOR IMMEDIATE RELEASE | NASDAQ-GS: NWEC |
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Media Contact: Bobbi Schroeppel (866) 622-8081 bobbi.schroeppel@northwestern.com | Investor Relations Contact: Dan Rausch (605) 978-2902 daniel.rausch@northwestern.com |
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NORTHWESTERN REPORTS FIRST QUARTER 2008 FINANCIAL RESULTS
Reports improvement in net income, gross margin and operating income
Sioux Falls, S.D. – April 23, 2008 – NorthWestern Corporation d/b/a NorthWestern Energy (NASDAQ-GS: NWEC) today reported financial results for the quarter ended March 31, 2008.
Highlights for the Quarter
| • | Net income improved to $23.5 million in the first quarter of 2008, an increase of 23.0 percent compared with $19.1 million in the first quarter of 2007; |
| • | Gross margin improved to $156.9 million in the first quarter of 2008, an increase of 6.5 percent compared with $147.3 million in the first quarter of 2007; |
| • | Operating income improved to $52.1 million in the first quarter of 2008, an increase of 17.3 percent compared with $44.4 million in the first quarter of 2007; |
| • | Reached a tentative settlement of the Company’s transmission rate case filed with the Federal Energy Regulatory Commission (FERC) in February 2008 resulting, pending approval, in an annualized margin increase of approximately $3.0 million. |
| • | Standard & Poor’s Rating Group upgraded the Company’s senior secured, senior unsecured and long-term corporate credit ratings resulting in a decrease in the interest rate, commitment fees and removal of certain covenants associated with the Company’s revolver. |
| • | Filed an application to list on the NYSE Euronext (“NYSE”) under ticker symbol NWE and will begin trading on the NYSE on May 1, 2008. |
Financial Results
Consolidated net income was $23.5 million or $.59 per diluted share for the quarter ended March 31, 2008, compared with consolidated net income of $19.1 million or $.51 per diluted share for the quarter ended March 31, 2007.
“We had a solid financial quarter where we benefited from rate relief, customer growth and colder weather than last year,” said Mike Hanson, NorthWestern Energy’s President and CEO. “We remain focused on our core operations and are well poised to move forward on our strategic generation and transmission growth projects.”
Consolidated gross margin for the first quarter of 2008 was $156.9 million compared with $147.3 million for the first quarter of 2007. Gross margin in the regulated electric segment increased $7.9 million from
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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the first quarter of 2007. Gross margin in the regulated natural gas segment increased $7.3 million from the first quarter of 2007. Gross margin in the unregulated electric segment decreased $4.6 million from the first quarter of 2007. Gross margin in the “other” segment decreased $1.0 million from the first quarter of 2007.
Consolidated operating, general and administrative expenses were $60.1 million for the first quarter of 2008 compared with $62.4 million for the first quarter of 2007. The decrease was due to reduced operating lease expense related to the purchase of our previously leased interest in Colstrip Unit 4 partly offset by higher legal and professional fees, which included a $1.8 million judgment related to the City of Livonia shareholder litigation.
Property and other taxes were $23.6 million in the first quarter of 2008 compared with $20.6 million in the same period of 2007. Depreciation expense was $21.1 million in the first quarter of 2008 compared with $19.9 million in the same period of 2007. The increase in depreciation expense was related primarily to the purchase of the previously leased interest in Colstrip Unit 4.
Interest expense was $16.1 million for the first quarter of 2008 compared with $13.2 million for the first quarter of 2007, primarily related to the additional debt incurred for the purchase of the previously leased interest in Colstrip Unit 4.
Results from Regulated Operations
Regulated electric gross margin for the first quarter of 2008 was $93.6 million, up 9.2 percent, compared with $85.7 million for the same period in 2007. This $7.9 million increase was primarily due to an interim increase in transmission and distribution rates in Montana, increased volumes from 1.5 percent customer growth and colder weather. Also contributing to the margin increase was an interim increase in our transmission rates and slightly higher wholesale margin due to increased generation plant availability.
Regulated retail electric volumes for the first quarter of 2008 totaled 2,634,000 megawatt hours compared with 2,533,000 megawatt hours for the first quarter of 2007, a 4.0 percent increase. The increase was due primarily to customer growth and colder weather. Wholesale electric volumes were 35,000 megawatt hours for the first quarter 2008, an increase from 32,000 megawatt hours for the same period of 2007 due primarily to increased plant availability in the South Dakota generation facilities.
Regulated natural gas gross margin was $50.3 million for the first quarter of 2008, compared with $43.0 million for the first quarter of 2007. The increase was primarily due to an increase in distribution rates and increased volumes due to 1.4 percent customer growth and colder weather. In addition, $0.7 million of the increase is due to the transfer of certain previously unregulated customers and pipelines into the regulated business and $0.4 million from higher storage utilization.
Regulated retail natural gas volumes were 14,172,000 dekatherms for the first quarter of 2008, compared with 13,037,000 dekatherms for the same period in 2007. The increase in volumes was primarily due to customer growth and colder winter weather.
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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Results from Unregulated Operations
Gross margin from unregulated electric operations was $13.4 million for the first quarter of 2008, a decrease from $18.0 million for the first quarter of 2007 primarily due to lower average contracted prices and higher fuel supply costs. In addition, the Company recorded an unrealized loss of $1.2 million during the first quarter of 2008 related to forward contracts executed during the period to economically hedge a portion of our Colstrip Unit 4 output through 2009. Unrealized gains and losses will be recorded, based on market prices through the duration of these contracts; however, they will ultimately reverse as the power is delivered.
Unregulated electric volumes were 476,000 megawatt hours in the first quarter of 2008, compared with 428,000 megawatt hours in the same period in 2007. Electric volumes at Colstrip Unit 4 increased primarily due to increased plant availability.
Liquidity and Capital Resources
As of March 31, 2008, cash and cash equivalents were $33.8 million compared with $12.8 million at Dec. 31, 2007. The Company had revolver availability of $173.9 million at March 31, 2008 compared with $158.7 million at Dec. 31, 2007.
Cash provided by continuing operating activities totaled $78.0 million during the first quarter 2008, compared with $104.1 million during the first quarter of 2007. This reduction was primarily due to a contribution of $21.9 million to the Company’s pension plan and lower collections of energy supply costs as compared with the first quarter of 2007.
The Company used $14.0 million for investment activities during the first quarter of 2008 compared with $60.6 million for the first quarter of 2007. Capital expenditures for the first quarter of 2008 were $14.0 million compared with $20.5 million for the first quarter of 2007. The Company also used $40.2 million in the first quarter of 2007 to purchase a previously leased interest in Colstrip Unit 4.
The Company used $43.0 million in financing activities during the first quarter of 2008 compared with $43.9 million for the first quarter of 2007. Uses of cash included dividends paid on common stock of $12.9 million during the first quarter of 2008 compared with $11.1 million during the first quarter of 2007 and long-term debt payments of $30.0 million in the first quarter of 2008.
2008 Earnings Outlook
NorthWestern reaffirms its estimate for earnings per share in 2008 to be in the range of $1.60 - $1.75 per fully diluted share. The guidance assumptions for 2008 include:
| • | Impact of rate relief in the Company’s service territories, assuming we receive the regulatory approvals in Montana and at FERC; |
| • | Decreased lease expense and increased depreciation and interest expense related to the purchase of the previously leased interest in Colstrip Unit 4; |
| • | Lower average pricing on forward sales contracts and anticipated output volumes of 1.7 million MWH at Colstrip Unit 4; |
| • | Fully diluted average shares outstanding of 39.5 million; and |
| • | Normal weather in the Company’s electric and natural gas service territories for 2008. |
Company Hosting Investor Conference Call
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NorthWestern will host an investor conference call on Thursday April 24, 2008 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to review its financial results for the quarter ended March 31, 2008.
The conference call will be webcast live on the Internet at http://www.northwesternenergy.com under the “Investor Information” heading. 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 noon ET on April 24, 2008, through May 24, 2008, at 800-475-6701, access code 919615.
About NorthWestern Energy
NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 650,000 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, including, without limitation, the information under “2008 Earnings Outlook.” 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; |
| • | unscheduled generation outages or forced reductions in output, maintenance or repairs; |
| • | 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. |
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 First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
| | | March 31,
2008 | | | December 31,
2007 | |
| | | (Unaudited) | | | | |
ASSETS | | | | | | | |
Current Assets | | $ | 271,137 | | $ | 278,354 | |
Property, Plant, and Equipment, Net | | | 1,785,079 | | | 1,770,880 | |
Goodwill | | | 355,128 | | | 355,128 | |
Regulatory Assets | | | 117,616 | | | 123,041 | |
Other Noncurrent Assets | | | 19,346 | | | 19,977 | |
Total Assets | | $ | 2,548,306 | | $ | 2,547,380 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Current Maturities of Long-term Debt and Capital Leases | | $ | 21,036 | | $ | 21,006 | |
Current Liabilities | | | 300,631 | | | 300,833 | |
Long-term Capital Leases | | | 37,701 | | | 38,002 | |
Long-term Debt | | | 757,352 | | | 787,360 | |
Noncurrent Regulatory Liabilities | | | 215,383 | | | 194,959 | |
Deferred Income Taxes | | | 89,315 | | | 74,046 | |
Other Noncurrent Liabilities | | | 292,460 | | | 308,150 | |
Total Liabilities | | | 1,713,878 | | | 1,724,356 | |
Total Shareholders’ Equity | | | 834,428 | | | 823,024 | |
Total Liabilities and Shareholders’ Equity | | $ | 2,548,306 | | $ | 2,547,380 | |
| | | | | | | | | |
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
| | | Three Months Ended March 31, |
| | | 2008 | | 2007 |
OPERATING REVENUES | | $ | 385,975 | | $ | 366,565 | |
COST OF SALES | | | 229,084 | | | 219,278 | |
GROSS MARGIN | | | 156,891 | | | 147,287 | |
OPERATING EXPENSES | | | | | | | |
Operating, general and administrative | | | 60,071 | | | 62,448 | |
Property and other taxes | | | 23,640 | | | 20,592 | |
Depreciation | | | 21,091 | | | 19,894 | |
TOTAL OPERATING EXPENSES | | | 104,802 | | | 102,934 | |
OPERATING INCOME | | | 52,089 | | | 44,353 | |
Interest Expense | | | (16,080 | ) | | (13,220 | ) |
Other Income | | | 662 | | | 378 | |
Income Before Income Taxes | | | 36,671 | | | 31,511 | |
Income Tax Expense | | | (13,220 | ) | | (12,369 | ) |
Net Income | | $ | 23,451 | | $ | 19,142 | |
Average Common Shares Outstanding | | | 38,972 | | | 35,720 | |
Basic Earnings per Average Common Share | | $ | 0.60 | | $ | 0.54 | |
Diluted Earnings per Average Common Share | | $ | 0.59 | | $ | 0.51 | |
Dividends Declared per Average Common Share | | $ | 0.33 | | $ | 0.31 | |
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| | Three Months Ended March 31, | |
| | 2008 | | | | 2007 | |
Operating Activities: | | | | | | | |
Net Income | $ | 23,451 | | | $ | 19,142 | |
Noncash Items | | 35,181 | | | | 34,025 | |
Changes in Operating Assets and Liabilities | | 19,323 | | | | 50,922 | |
Cash Provided by Operating Activities | | 77,955 | | | | 104,089 | |
| | | | | | | |
Cash Used in Investing Activities | | (13,954 | ) | | | (60,608 | ) |
| | | | | | | |
Cash Used in Financing Activities | | (43,019 | ) | | | (43,865 | ) |
| | | | | | | |
Increase (decrease) in Cash and Cash Equivalents | | 20,982 | | | | (384 | ) |
Cash and Cash Equivalents, beginning of period | | 12,773 | | | | 1,930 | |
Cash and Cash Equivalents, end of period | $ | 33,755 | | | $ | 1,546 | |
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
REGULATED ELECTRIC
THREE MONTHS ENDED MARCH 31
(Unaudited)
| | Results |
| | 2008 | | | 2007 | | | Change | | % Change |
| | (in millions) | | |
Total Revenues | | $ | 196.7 | | $ | 178.5 | | $ | 18.2 | | 10.2 | | % |
Total Cost of Sales | | | 103.1 | | | 92.8 | | | 10.3 | | 11.1 | | |
Gross Margin | | $ | 93.6 | | $ | 85.7 | | $ | 7.9 | | 9.2 | | % |
% GM/Rev | | 47.6 | % | | 48.0 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Volumes MWH |
| | 2008 | | 2007 | | Change | | % Change |
| | (in thousands) | | |
Retail Electric | | | | | | | | | | |
Montana | | 668 | | 635 | | 33 | | 5.2 | | % |
South Dakota | | 160 | | 148 | | 12 | | 8.1 | | |
Residential | | 828 | | 783 | | 45 | | 5.7 | | |
Montana | | 799 | | 788 | | 11 | | 1.4 | | |
South Dakota | | 222 | | 203 | | 19 | | 9.4 | | |
Commercial | | 1,021 | | 991 | | 30 | | 3.0 | | |
Industrial | | 761 | | 735 | | 26 | | 3.5 | | |
Other | | 24 | | 24 | | — | | — | | |
Total Retail Electric | | 2,634 | | 2,533 | | 101 | | 4.0 | | % |
Wholesale Electric | | 35 | | 32 | | 3 | | 9.4 | | % |
| | | | | | | | | | | | | |
| | Average Customer Counts |
| | 2008 | | 2007 | | Change | | % Change |
| | (in thousands) | | |
Retail Electric | | | | | | | | | | |
Montana | | 266,104 | | 262,172 | | 3,932 | | 1.5 | | % |
South Dakota | | 47,908 | | 47,666 | | 242 | | 0.5 | | |
Residential | | 314,012 | | 309,838 | | 4,174 | | 1.3 | | |
Montana | | 59,148 | | 57,719 | | 1,429 | | 2.5 | | |
South Dakota | | 11,331 | | 11,185 | | 146 | | 1.3 | | |
Commercial | | 70,479 | | 68,904 | | 1,575 | | 2.3 | | |
Industrial | | 72 | | 71 | | 1 | | 1.4 | | |
Other | | 4,653 | | 4,593 | | 60 | | 1.3 | | |
Total Retail Electric | | 389,216 | | 383,406 | | 5,810 | | 1.5 | | % |
| | | | | | | | | | | | | |
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
REGULATED NATURAL GAS
THREE MONTHS ENDED MARCH 31
(Unaudited)
| | Results |
| | 2008 | | | 2007 | | | Change | | % Change |
| | (in millions) | | |
Total Revenues | | $ | 171.6 | | $ | 158.2 | | $ | 13.4 | | 8.5 | | % |
Total Cost of Sales | | | 121.3 | | | 115.2 | | | 6.1 | | 5.3 | | |
Gross Margin | | $ | 50.3 | | $ | 43.0 | | $ | 7.3 | | 17.0 | | % |
% GM/Rev | | | 29.3 | % | | 27.2 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Volumes Dekatherms |
| | 2008 | | 2007 | | Change | | % Change |
| | (in thousands) | | |
Retail Gas | | | | | | | | | | |
Montana | | 5,568 | | 5,035 | | 533 | | 10.6 | | % |
South Dakota | | 1,607 | | 1,526 | | 81 | | 5.3 | | |
Nebraska | | 1,405 | | 1,382 | | 23 | | 1.7 | | |
Residential | | 8,580 | | 7,943 | | 637 | | 8.0 | | |
Montana | | 2,757 | | 2,528 | | 229 | | 9.1 | | |
South Dakota | | 1,378 | | 1,181 | | 197 | | 16.7 | | |
Nebraska | | 1,284 | | 1,224 | | 60 | | 4.9 | | |
Commercial | | 5,419 | | 4,933 | | 486 | | 9.9 | | |
Industrial | | 119 | | 73 | | 46 | | 63.0 | | |
Other | | 54 | | 88 | | (34 | ) | (38.6 | ) | |
Total Retail Gas | | 14,172 | | 13,037 | | 1,135 | | 8.7 | | % |
| | | | | | | | | | | | | | |
| | Average Customer Counts |
| | 2008 | | 2007 | | Change | | % Change |
| | (in thousands) | | |
Retail Gas | | | | | | | | | | |
Montana | | 155,758 | | 152,938 | | 2,820 | | 1.8 | | % |
South Dakota | | 36,912 | | 36,890 | | 22 | | 0.1 | | |
Nebraska | | 36,888 | | 36,773 | | 115 | | 0.3 | | |
Residential | | 229,558 | | 226,601 | | 2,957 | | 1.3 | | |
Montana | | 21,685 | | 21,185 | | 500 | | 2.4 | | |
South Dakota | | 5,839 | | 5,795 | | 44 | | 0.8 | | |
Nebraska | | 4,593 | | 4,584 | | 9 | | 0.2 | | |
Commercial | | 32,117 | | 31,564 | | 553 | | 1.8 | | |
Industrial | | 306 | | 318 | | (12 | ) | (3.8 | ) | |
Other | | 141 | | 139 | | 2 | | 1.4 | | |
Total Retail Gas | | 262,122 | | 258,622 | | 3,500 | | 1.4 | | % |
| | | | | | | | | | | | | | |
| | 2008 as compared with: | |
Heating Degree-Days | | 2007 | | Historic Average | |
Montana | | 8% colder | | Remained Flat | |
South Dakota | | 4% colder | | 2% colder | |
Nebraska | | 4% colder | | 3% colder | |
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NorthWestern Reports First Quarter 2008 Financial Results
April 23, 2008
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NORTHWESTERN CORPORATION
UNREGULATED ELECTRIC
THREE MONTHS ENDED MARCH 31
(Unaudited)
| | Results |
| | | 2008 | | | 2007 | | | Change | | % Change |
| | (in millions) | | |
Total Revenues | | | 20.4 | | $ | 22.3 | | $ | (1.9 | ) | (8.5 | ) | % |
Total Cost of Sales | | | 7.0 | | | 4.3 | | | 2.7 | | 62.8 | | |
Gross Margin | | $ | 13.4 | | $ | 18.0 | | $ | (4.6 | ) | (25.6 | ) | % |
% GM/Rev | | | 65.7 | % | | 80.7 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Volumes MWH |
| | 2008 | | 2007 | | Change | | % Change |
| | (in thousands) | | |
Wholesale Electric | | 476 | | 428 | | 48 | | 11.2 | | % |
| | | | | | | | | | | |
