[LOGO OMITTED] News Release
NYSE:NOR
Contacts:
Investors/Media:
Roger Schrum
605-978-2848
roger.schrum@northwestern.com
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NORTHWESTERN LOWERS GUIDANCE FOR ESTIMATED 2002 RESULTS
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YEAR-END CHARGES BEING REVIEWED
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UTILITY RESULTS TO MEET PERFORMANCE EXPECTATIONS
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SIOUX FALLS, S.D. - Dec. 13, 2002 - NorthWestern Corporation (NYSE:NOR) today
announced that it will miss previously disclosed earnings estimates for
full-year 2002 of between $1.50 to $1.60 per share from continuing operations.
The expected lower 2002 results stem from NorthWestern's need to significantly
increase reserves for accounts receivable and billing adjustments at its
communications services business, Expanets, and lower than expected operating
performance at Expanets and Blue Dot, the Company's heating, ventilation and air
conditioning business.
In connection with its year-end audit, NorthWestern is also undertaking SFAS
Nos. 142 and 144 reviews of the value of intangible assets of Expanets and Blue
Dot. Due to the increase in reserves at Expanets and current operating
performance of Expanets and Blue Dot, NorthWestern may recognize a substantial
impairment of goodwill and other intangible assets for these businesses and take
a noncash charge that would materially affect NorthWestern's 2002 operating
results. Until the Company completes its year-end closing and audit process,
NorthWestern will be unable to provide actual full-year 2002 results.
NorthWestern reaffirmed that it will meet its previously announced 2002
performance targets for its core regulated electric and natural gas utility
business, which comprises the substantial majority of its annual consolidated
operating income.
NorthWestern is currently evaluating the adequacy of reserves at Expanets
for the collection of accounts receivable and billing adjustments related to
previously disclosed billing lapses and data conversion issues in customer
accounts stemming from the implementation of Expanets' enterprise software
platform. In addition, Expanets expects to reflect a reduction in
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NorthWestern Provides Fourth Quarter 2002 Update
Dec. 13, 2002
Page 2
both maintenance and core services revenues in its fourth quarter 2002 results.
NorthWestern has determined it will increase receivable and other reserves at
Expanets by at least $50 million. The Company may determine after it has
completed its evaluation as a part of its year-end closing and audit process
that it is necessary to further increase reserves, as well as to determine the
impacts, if any, to prior reported quarterly results for 2002. The anticipated
increase in reserves, and any additional increases, will adversely affect
NorthWestern's and Expanets' results.
As previously reported, Expanets is in negotiations with Avaya, Inc., which
had previously been providing customer data and billing management services to
Expanets under transition service agreements, regarding certain outstanding
claims Expanets believes it has regarding, among other matters, acquired
maintenance contracts and data conversion issues. Resolution of Expanets' claims
may result in mitigation of portions of the damages reflected in the anticipated
increase in reserves.
As a result of continued soft market conditions in the communications sector
in the fourth quarter of 2002 and the anticipated increase in reserves,
NorthWestern expects earnings before interest, taxes, depreciation and
amortization (EBITDA) for Expanets for 2002 to fall substantially below the
previously announced range of $73 million to $80 million.
The Company also expects EBITDA at Blue Dot to be slightly lower than
previously anticipated for the fourth quarter of 2002 and, as a result, projects
that EBITDA for full-year 2002 will fall below the previously announced range of
$13 million to $16 million.
"We are disappointed with the ongoing implementation issues related to
Expanets' system conversion as well as weaker than expected results from
operations at Expanets and Blue Dot," said Merle D. Lewis, NorthWestern's
chairman and chief executive officer. "We will continue to focus on operational
excellence initiatives that we believe will lead to improved performance at
these subsidiaries in future periods."
Additional Year-End Adjustments - SFAS Nos. 142 and 144 Reviews
NorthWestern is in the process of conducting its annual assessment of
goodwill and other indefinite life intangible assets under Statement of
Financial Accounting Standards No. 142 and other intangible assets under
Statement of Financial Accounting Standards No. 144. The SFAS Nos. 142 and 144
analyses could result in a substantial impairment of goodwill and other
intangible assets at Blue Dot and Expanets and the incurrence of a significant
noncash charge relating to a write-down of goodwill and other intangible assets
as a result of lower than
NorthWestern Provides Fourth Quarter 2002 Update
Dec. 13, 2002
Page 3
previously anticipated earnings and increased reserves. The assessment and
determination under SFAS Nos. 142 and 144 will be made by the Company in
consultation with its independent valuation specialists and with its auditors in
connection with their audit of the Company's 2002 financial statements following
year-end. A significant noncash charge would adversely affect NorthWestern's net
income for 2002.
Utility Results to Meet Performance Expectations
According to Lewis, NorthWestern's strategy continues to focus on
opportunities in its core regulated electric and natural gas utility business,
which is performing well against its 2002 plan.
NorthWestern Energy, the Company's core utility business, remains on target
to meet its EBITDA objective for the fourth quarter of 2002 as well as its
previously announced EBITDA target for 2002 of between $225 million and $235
million, which excludes $22 million in EBITDA from January 2002 pre-acquisition
results from Montana operations.
"NorthWestern has been focused on its core regulated utility business for
nearly 80 years. With the acquisition of the Montana utility operations earlier
this year, we have built one of the strongest electric and natural gas delivery
businesses in the Upper Midwest," said Lewis. "This strategy has resulted in the
development of a balanced energy business that possesses consistent, predictable
earnings and cash flow. Under current market conditions, we believe this lower
risk business profile provides our shareholders with the best opportunity for
value creation going forward."
Webcast Delayed
NorthWestern's previously planned Dec. 19, 2002, investor conference call
webcast will be delayed due to the pending year-end reviews. A future investor
conference webcast to discuss the Company's strategy will be held in early 2003.
About NorthWestern
NorthWestern Corporation is a leading provider of services and solutions to
more than 2 million customers across America in the energy and communications
sectors. NorthWestern's partner businesses include NorthWestern Energy, a
provider of electricity, natural gas and related services to customers in
Montana, South Dakota and
NorthWestern Provides Fourth Quarter 2002 Update
Dec. 13, 2002
Page 4
Nebraska; Expanets, the largest mid-market provider of networked communications
solutions and services in the United States; and Blue Dot, a leading provider of
air conditioning, heating, plumbing and related services.
Forward-Looking Statements
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: All
statements contained herein, as well as statements made in press releases and
oral statements that may be made by us or by officers, directors or employees
acting on our behalf, that are not statements of historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that could cause our actual
results to be materially different from historical results or from any future
results expressed or implied by such forward-looking statements. Among the
factors that could cause our actual results or outcomes to differ materially
are: the adverse impact of weather conditions and seasonal fluctuations;
unscheduled generation outages, maintenance or repairs; unanticipated changes to
fossil fuel or gas supply costs or availability due to higher demand, shortages,
transportation problems or other developments; developments in the federal and
state regulatory environment and the terms associated with obtaining regulatory
approval and rate orders; costs associated with environmental liabilities and
compliance with environmental laws; the rate of growth and economic conditions
in our service territories and those of our subsidiaries; the speed and degree
to which competition enters the industries and markets in which our businesses
operate; the timing and extent of changes in interest rates and fluctuations in
energy-related commodity prices; risks associated with acquisitions, transition
and integration of acquired companies, including NorthWestern Energy, L.L.C. and
the Growing and Emerging Markets Division of Lucent Technologies, Inc., and the
implementation of information systems and realization of efficiencies in excess
of any related restructuring charges; a lack of minority interest basis, which
requires us to recognize an increased share of operating losses at certain of
our subsidiaries; our ability to recover transition costs; disallowance by the
Montana Public Service Commission of the recovery of the costs incurred in
entering into our default supply portfolio contracts while we are required to
act as the "default supplier"; disruptions and adverse effects in the capital
market due to the changing economic
NorthWestern Provides Fourth Quarter 2002 Update
Dec. 13, 2002
Page 5
environment; our credit ratings with Moody's, Standard & Poor's and Fitch;
potential delays in financings or Securities and Exchange Commission filings
because we changed auditors; our substantial indebtedness, which could limit our
operating flexibility and ability to borrow additional funds; our ability to
obtain additional capital to refinance our indebtedness that is scheduled to
mature and for working capital purposes; changes in customer usage patterns and
preferences; possible future actions and developments of CornerStone Propane
Partners L.P.; and changing conditions in the economy and capital markets and
other factors identified from time to time in our filings with the SEC. This
news release should be read in conjunction with our Annual Report on Form 10-K
for 2001, as amended, and any subsequent quarterly reports on Form 10-Q and
current reports on Form 8-K, which can be located at www.sec.gov or requested
from the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and, except as required by law, we undertake no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for management to predict all such factors.
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