Exhibit 99.1
[GRAPHIC OMITTED] News Release
Contacts:
Investors/Media:
Roger Schrum
605-978-2848
roger.schrum@northwestern.com
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NORTHWESTERN REPORTS 2003 FINANCIAL RESULTS
REPORTS LOSS OF $128.7 MILLION IN 2003 VERSUS LOSS OF $892.9 MILLION IN 2002
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SIOUX FALLS, S.D. - March 15, 2004 - NorthWestern Corporation (OTC Pink Sheets:
NTHWQ) today reported financial results for 2003 and filed the Company's Annual
Report on Form 10-K with the Securities and Exchange Commission.
Special Note: On Sept. 14, 2003, NorthWestern filed a voluntary petition for
relief under Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware under case number 03-12872. The
Company's subsidiaries, including Netexit, Inc., formerly Expanets, Inc., and
Blue Dot Services Inc., are not party to the Chapter 11 case. Pursuant to the
Chapter 11 filing, NorthWestern retains control of its assets and is authorized
to operate its business as a debtor-in-possession while being subject to the
jurisdiction of the Bankruptcy Court. The Company's consolidated financial
statements have been prepared in accordance with the American Institute of
Certified Public Accountants Statement of Position (SOP) 90-7, Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code. Under SOP
90-7, certain liabilities existing prior to the Chapter 11 filing are classified
as liabilities subject to compromise. In addition, the extent to which reported
interest expense differs from the contractual rate of interest is disclosed in
the Company's Consolidated Statements of Loss.
Consolidated Financial Results and Liquidity
Consolidated losses on common stock in 2003 were $128.7 million, compared with
consolidated losses on common stock of $892.9 million in 2002. The decrease is
primarily due to impairment and other charges of $878.5 million in 2002 and
decreased losses after impairment and other charges from the Company's
discontinued communications segment of approximately $32 million in 2003.
However, results were adversely affected by a $31 million increase in operating
expenses in 2003, primarily due to increased legal and other professional fees
related to the Company's reorganization efforts and Chapter 11 bankruptcy
filing, along with a $49.6 million increase in interest expense.
Revenues from continuing operations in 2003 were $1.03 billion, compared with
$783.7 million in 2002. Revenues in 2003 included 12 full months of Montana
utility operations while results for 2002 included only 11 months of Montana
utility operations. In addition, revenues also increased during 2003 due to
higher recovered purchased energy costs and increased retail and wholesale
electricity and natural gas sales volumes.
As of Dec. 31, 2003, cash and cash equivalents were $15.2 million, compared with
$26.6 million as of Dec. 31, 2002. Cash flows used in continuing operations
during 2003 were $105.7 million, compared with cash provided by continuing
operations of $125.6 million during 2002. NorthWestern continues to maintain
access of up to $85 million in debtor-in-possession (DIP) financing provided by
Bank One, N.A. As of March 13, 2004, no borrowings have been made on the
facility. However, the Company had issued letters of credit of $15.2 million
against the facility as of Dec. 31, 2003. The DIP facility expires on Sept. 12,
2004.
Results from Continuing Utility Operations
NorthWestern's electric and natural gas utility operations reported 2003
operating income of $144.4 million, compared with operating income of $143.6
million in 2002. Operating income from electric operations in 2003 was $121.4
million, an increase of 10.6 percent, compared with $109.7 million in 2002. The
increase was due primarily to the inclusion in 2003 of 12 months of Montana
operations as compared with 11 months in 2002 and increased margins in 2003.
Operating income from natural gas operations in 2003 was $23.0 million, compared
with operating income of $33.9 million in 2002. While the inclusion of January
2003 results from Montana operations contributed $6.4 million in increased
operating income in 2003, it was offset by the Montana Public Service
Commission's disallowance of $6.2 million in gas supply costs and an increase to
the Company's environmental reserves.
Electric revenues for 2003 were $673.1 million, a 26.1 percent increase from
revenues of $533.9 million in 2002. The increase in revenues was due to the
inclusion in 2003 of 12 months of Montana operations compared with 11 months in
2002, which contributed $47.8 million. In addition, revenues from February
through December 2003 increased approximately $91.3 million, compared with the
same period in 2002, due to an $80.2 million increase in revenues recovered for
purchase power supply costs, which are reflected in the Company's cost of sales
and have no margin impact. Revenues also increased $10.8 million in 2003 due to
a 3.8 percent increase in retail volumes and the addition of Montana customers
that moved back to NorthWestern as the default supplier from customer choice.
Wholesale revenues increased $1.8 million in 2003 due to a 0.7 percent increase
in wholesale volumes and higher wholesale prices. This increase was offset by a
$1.4 million decrease in wholesale revenue in 2003 due to Montana choice
customers moving back to NorthWestern as the default supplier.
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Natural gas revenues during 2003 were $344.8 million, an increase of 43.8
percent, compared with $239.8 million in 2002. The increase was due to the
inclusion in 2003 of January operating results from Montana operations which
contributed $20.4 million. Revenues for February through December 2003 increased
$84.6 million, compared with the same period in 2002 due in part to a $25.3
million increase in gas supply costs, which are reflected in the cost of sales
and have no impact on gross margins. Also contributing to this increase was a
$59.9 million increase in wholesale and retail revenues. Wholesale revenues
increased in 2003 due to a 10.0 percent increase in volumes resulting from the
addition of new ethanol plant customers and higher natural gas prices.
Electric volumes in 2003 totaled approximately 10.1 million megawatt hours, an
increase of 3.2 percent, compared with volumes of approximately 9.8 million
megawatt hours in 2002. The increase was due primarily to the inclusion of
January results from Montana operations in 2003, which were excluded in 2002 and
the return of Montana choice customers to NorthWestern as the default supplier.
Natural gas volumes totaled approximately 36.4 million dekatherms in 2003, an
increase of 1.7 percent, compared with volumes of approximately 35.8 million
dekatherms in 2002. The increase was due primarily to January 2003 results from
Montana operations, which were excluded in 2002, and a 10.0 percent increase in
wholesale volumes in 2003 from new ethanol plant customers.
Asset Sales
On Nov. 25, 2003, Expanets closed on the sale of substantially all of the assets
and business of Expanets to Avaya, Inc. and retained certain specified
liabilities. Thereafter, Expanets was renamed Netexit, Inc., which will continue
as a nonoperating company until its affairs can be wound down. Among the terms
of the agreement, Avaya paid Netexit cash of approximately $50.8 million and
assumed debt of approximately $38.1 million, and approximately $14.5 million of
the purchase price was set aside to satisfy certain liabilities that were not
assumed by Avaya, and certain indemnification obligations of Netexit. Avaya also
reduced cash paid at closing by approximately $44.6 million as a working capital
adjustment, pending the determination of a final closing balance sheet. On Feb.
24, 2004, Avaya submitted its proposed final calculation of the working capital
adjustment asserting that there was a holdback amount plus an additional $4.2
million. Netexit disputes this calculation and believes that pursuant to the
terms of the asset purchase agreement, Netexit is owed additional cash ranging
from $10 to $20 million resulting in potential net cash proceeds to Netexit of
$60.8 million to $70.8 million. The dispute over the working capital adjustment
is subject to an arbitration process, which is expected to be decided in May
2004. If Netexit cannot wind down its affairs in an orderly manner pursuant to
applicable provisions of Delaware law, it may be forced to file bankruptcy.
NorthWestern has recognized an estimated loss on disposal of approximately $49.3
million based on the terms of the sale and the
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expected amount to be received from Avaya. An additional loss may arise based on
the results of the arbitration process.
Blue Dot has sold 48 businesses during 2003, repaid its credit facility from
sales proceeds and terminated the facility. As of Dec. 31, 2003, Blue Dot had 14
remaining businesses and has subsequently sold an additional six businesses as
of March 1, 2004. Blue Dot anticipates selling substantially all of the
remaining businesses by June 30, 2004. NorthWestern hopes to receive in excess
of $15 million in cash proceeds from Blue Dot during the liquidation of
operations, assuming the remaining businesses sold produce their projected
proceeds and there is successful resolution of insurance matters and remaining
obligations.
Additional financial information related to NorthWestern's 2003 results is
available in its Annual Report on Form 10-K which can be viewed on the Company's
Web site at www.northwestern.com.
About NorthWestern
NorthWestern Corporation is one of the largest providers of electricity and
natural gas in the Upper Midwest and Northwest, serving approximately 608,000
customers in Montana, South Dakota and Nebraska.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
On one or more occasions, we may make statements in this news release regarding
our assumptions, projections, expectations, targets, intentions or beliefs about
future events. All statements other than statements of historical facts,
included or incorporated by reference herein relating to management's current
expectations of future financial performance, continued growth, changes in
economic conditions or capital markets and changes in customer usage patterns
and preferences are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. On Sept. 14, 2003, NorthWestern Corporation filed a voluntary petition for
relief under the provisions of Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware. Our subsidiaries,
including Netexit, Inc. (f/k/a Expanets Inc.) and Blue Dot Services Inc., (Blue
Dot) are not party to the Chapter 11 case.
Words or phrases such as "anticipates," "may," "will," "should," "believes,"
"estimates," "expects," "intends," "plans," "predicts," "projects," "targets,"
"will likely result," "will continue" or similar expressions identify
forward-looking statements. Forward-looking statements involve risks and
uncertainties which could cause actual results or outcomes to differ materially
from those expressed. We caution that while we make such statements in good
faith and we believe such statements are based on reasonable assumptions,
including without limitation, management's examination of historical operating
trends, data contained in records and other data available from third parties,
we cannot assure you that our projections will be achieved. Factors that may
cause such differences include but are not limited to:
(i) our common stock will be cancelled and our trust preferred
securities will likely be restructured in a manner that will
eliminate or very substantially reduce any remaining value. We
have previously stated that the planned sale of noncore assets is
not expected to change our view that our common stock has no
value.
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Accordingly, we urge that appropriate caution be exercised with
respect to existing and future investments in any of our
liabilities and/or securities;
(ii) our ability to successfully develop, prosecute, confirm and
consummate a plan of reorganization, emerge from bankruptcy as a
going concern and avoid liquidation under the U.S. Bankruptcy
Code;
(iii) risks associated with third parties seeking and obtaining
Bankruptcy Court approval for the appointment of a Chapter 11
trustee or to convert the case to a Chapter 7 proceeding;
(iv) our ability to operate pursuant to the terms of our $85 million
debtor-in-possession financing facility arranged by us with Bank
One, N.A., and other financing and contractual arrangements;
(v) our ability to obtain Bankruptcy Court approval with respect to
material motions in the Chapter 11 proceeding from time to time;
(vi) our ability to obtain the support of the official committee of
unsecured creditors and other stakeholders of the company for a
plan of reorganization, which may be difficult in light of our
likely inability to preserve any material value in our common
equity and our trust preferred securities, or satisfy a material
amount of our current unsecured debt, in a plan of
reorganization;
(vii) our ability to offset the negative effects that the filing for
reorganization under Chapter 11 has had, or may have, on our
business, management and employees including constraints placed
on available capital;
(viii) our ability to obtain and maintain normal terms with vendors and
service providers;
(ix) our ability to maintain contracts, including leases, that are
critical to our operations;
(x) the potential adverse impact of the Chapter 11 case on our
liquidity or results of operations;
(xi) our ability to develop a long-term strategy and our ability to
fund and execute our business plan;
(xii) our ability to avoid or mitigate material uninsured monetary
judgments, or other adverse judgments, against us in (1) the
shareholder class action lawsuit relating to the disposition of
the generating and energy-related assets by The Montana Power
Company, excluding our acquisition of the electric and natural
gas transmission and distribution business formerly held by The
Montana Power Company, together with ERISA litigation regarding
The Montana Power Company ESOP and 401(k) plan and (2) existing
shareholder and derivative litigation or any additional
litigation and regulatory action, including the initiation by the
Securities and Exchange Commission (SEC) of a formal
investigation, in connection with the restatement of our 2002
quarterly financial statements, any of which could have a
material adverse affect on our liquidity, results of operations
and financial condition;
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General Factors
(xiii) our ability to fully address and correct weaknesses in our
internal controls and to thereafter maintain an effective
internal controls structure;
(xiv) our ability to attract, motivate and/or retain key employees;
(xv) potential additional adverse federal, state, or local legislation
or regulation or adverse determinations by regulators, including
the final order of the Montana Public Service Commission (MPSC)
disallowing the recovery of $6.2 million of natural gas costs we
incurred during the past tracker year, and an interim order
fixing the recovery price during the next tracker year, which has
had and could continue to have a material adverse effect on our
liquidity, results of operations and financial condition;
(xvi) unscheduled generation outages, maintenance or repairs which may
reduce revenues and increase cost of sales or may require
additional capital expenditures or other increased operating
costs;
(xvii) unanticipated changes in commodity prices or in fuel supply costs
or availability due to higher demand, shortages, weather
conditions, transportation problems or other developments, in
combination with reduced availability of trade credit, may reduce
revenues or may increase operating costs, each of which would
adversely affect our liquidity;
(xviii)increases in interest rates will increase our cost of borrowing;
(xix) adverse changes in general economic and competitive conditions in
our service territories; and
(xx) certain other business uncertainties related to the occurrence of
natural disasters, war, hostilities and the threat of terrorist
actions.
We have attempted to identify, in context, certain of the factors that we
believe may cause actual future experience and results to differ materially from
our current expectation regarding the relevant matter or subject area. In
addition to the items specifically discussed above, our business and results of
operations are subject to the uncertainties described under the caption "Risk
Factors" which is a part of the disclosure included in Item 7 in our report on
Form 10-K entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
From time to time, oral or written forward-looking statements are also included
in our reports on Forms 10-K, 10-Q and 8-K, Proxy Statements on Schedule 14A,
press releases and other materials released to the public. Although we believe
that at the time made, the expectations reflected in all of these
forward-looking statements are and will be reasonable, any or all of the
forward-looking statements in this news release, our reports on Forms 10-K, 10-Q
and 8-K, our Proxy Statements on Schedule 14A and any other public statements
that are made by us may prove to be incorrect. This may occur as a result of
inaccurate assumptions or as a consequence of known or unknown risks and
uncertainties. Many factors discussed in this news release, certain of which are
beyond our control, will be important in determining our future performance.
Consequently, actual results may differ materially from those that might be
anticipated from forward-looking statements. In light of these and other
uncertainties, you should not regard the inclusion of a forward-looking
statement in this news release or other public communications that
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we might make as a representation by us that our plans and objectives will be
achieved, and you should not place undue reliance on such forward-looking
statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
However, your attention is directed to any further disclosures made on related
subjects in our subsequent annual and periodic reports filed with the SEC on
Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.
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