Exhibit 99.1
[NORTHWESTERN CORPORATION LOGO] NEWS RELEASE
Contacts:
Investors/Media:
Roger Schrum
605-978-2848
roger.schrum@northwestern.com
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NORTHWESTERN REPORTS 2004 SECOND QUARTER FINANCIAL RESULTS
REPORTS LOSS OF $4.8 MILLION IN 2004 VERSUS LOSS OF $57.8 MILLION IN 2003
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SIOUX FALLS, S.D. - Aug. 6, 2004 - NorthWestern Corporation (OTC Pink Sheets:
NTHWQ) today reported financial results for the second quarter ended June 30,
2004, and filed the Company's second quarter 2004 Form 10-Q 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.
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. Included in the
consolidated financial statements are subsidiaries that are not party to the
Chapter 11 case and are not debtors. The assets and liabilities of such
nondebtor subsidiaries are not considered to be material to the consolidated
financial statements or are included in discontinued operations. In addition, in
order to wind-down its affairs in an orderly manner, NorthWestern's subsidiary,
Netexit, Inc. (f/k/a Expanets, Inc.), 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 on May 4, 2004.
Beginning in the third quarter of 2003, 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," and on a
going concern basis, which contemplates continuity of operations, realization of
assets, and liquidation of liabilities in the ordinary course of business. As a
result of the Company's Chapter 11 filing, the realization of assets and
liquidation of liabilities are subject to uncertainty. Under SOP 90-7, certain
liabilities existing prior to the Chapter 11 filing are classified as
Liabilities Subject to Compromise on the Consolidated Balance Sheets.
Additionally, professional fees and expenses directly related to the Chapter 11
proceeding and interest income on funds accumulated during the Chapter 11
proceeding are reported separately as reorganization items. Finally, the
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NorthWestern Reports Second Quarter 2004 Financial Results
Aug. 6, 2004
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extent to which reported interest expense differs from the contractual rate of
interest is disclosed in the Company's Consolidated Statements of Income (Loss).
Consolidated Financial Results
NorthWestern reported a consolidated loss on common stock in the second quarter
of 2004 of $4.8 million, compared with a consolidated loss on common stock of
$57.8 million in the same period in 2003. Due to NorthWestern's bankruptcy
filing, the Company has ceased recording interest expense on its unsecured debt
and trust preferred securities, which accounted for a $17.5 million decrease in
interest expense during the second quarter of 2004 and a $7.5 million decrease
in minority interests on preferred securities of subsidiary trusts. In addition,
results from discontinued operations improved by $22.6 million, primarily
related to a Netexit gain of $11.5 million attributable to a settlement with
Avaya, Inc. Consolidated earnings on common stock were $12.2 million for the six
months ended June 30, 2004, compared with a loss of $47.9 million for the first
six months of 2003.
Revenues from continuing operations in the second quarter of 2004 were $233.0
million, compared with $234.7 million in the second quarter of 2003. Revenues
for the six months ended June 30, 2004, were $572.6 million, compared with
$522.6 million in the same period in 2003. Revenues increased due to sales of
surplus gas of $19.7 million, increased market prices for gas of $15.9 million
and an increase in nonregulated gas revenues of $13.4 million.
Consolidated gross margin in the second quarter of 2004 was $103.3 million, as
compared to $105.4 million in the second quarter of 2003. For the six months
ended June 30, 2004, consolidated gross margin was $236.0, as compared to $238.2
million for the same period in 2003.
Results from Continuing Utility Operations
NorthWestern's electric and natural gas utility operations reported operating
income of $14.7 million for the second quarter of 2004, compared with operating
income of $25.8 million in same period in 2003. Operating income from electric
operations in the second quarter of 2004 was $15.9 million, a decrease of 36.3
percent, compared with $24.9 million in the same period of 2003. The decrease
was mainly due to higher transmission and wheeling costs, a $2.1 million loss
related to a dispute settlement with a wholesale power supply vendor and higher
operating, general and administrative expenses which includes increased
directors and officers liability insurance costs, higher property taxes and
higher contractor costs due to strike contingency planning and increased
allocation of corporate expenses. Operating loss for the
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NorthWestern Reports Second Quarter 2004 Financial Results
Aug. 6, 2004
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second quarter of 2004 from natural gas operations was $1.2 million, compared
with operating income of $0.9 million in the same period in 2003. The change
primarily resulted from higher operating, general and administrative expenses.
For the six months ended June 30, 2004, operating income from electric and
natural gas operations was $57.4 million, compared with $78.7 million, a
decrease of 27.1 percent, for the same period in 2003. Operating income from
electric operations during the first six months of 2004 was $39.0 million,
compared with $56.4 million for the same period in 2003. Operating income from
natural gas operations during the first six months of 2004 was $18.3 million,
compared with $22.2 million for the same period in 2003.
Electric revenues for the second quarter of 2004 were $152.6 million, a decrease
of 5.7 percent, compared with revenues of $161.9 million in the same period of
2003. The decrease in revenues during the second quarter of 2004 as compared
with 2003 was primarily due to a $16.9 million decrease in sales of excess
purchased power to the secondary market. This was offset by an $8.4 million
increase in sales volumes to core customers. Electric revenues for the first six
months of 2004 were $329.6 million, compared with $329.5 million for the same
period in 2003.
Natural gas revenues during the second quarter of 2004 were $78.2 million, an
increase of 10.6 percent, compared with $70.7 million in same period in 2003.
Gas supply costs increased $5.2 million as a result of higher average market
prices. These costs are also reflected in cost of sales thereby having no impact
on gross margins. Additionally, nonregulated gas revenues increased
approximately $4.3 million, primarily from the addition of ethanol plant
customers in South Dakota. This was partially offset by a $2.7 million decrease
in retail revenues resulting from a 3.7 percent volume decline. Natural gas
revenues for the six months ended June 30, 2004, were $238.3 million, compared
with $188.4 million in the same period in 2003.
Gross margin for electric operations in the second quarter of 2004 was $82.3
million, a decrease of $3.4 million, or 3.9 percent from gross margin in the
second quarter of 2003. This decrease was primarily attributable to the loss on
a wholesale power supply contract and increased transmission and wheeling costs.
For the six months ended June 30, 2004, margins of $171.6 million were $4.6
million lower, or 2.6 percent, from results in the first six months of 2003.
This decrease was primarily attributable to higher transmission and wheeling
costs and the loss related to the dispute settlement discussed above.
Gross margin for natural gas operations in the second quarter of 2004 was $19.4
million, an increase of $1.1 million, or 6.1 percent, over the same period in
2003. Lower retail margins were more than offset by the decrease in the
write-off of the gas supply costs. For the six months
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NorthWestern Reports Second Quarter 2004 Financial Results
Aug. 6, 2004
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ended June 30, 2004, margins of $61.0 million were $2.3 million higher, or 3.9
percent, over the same period in 2003. This increase was mainly due to the
decrease in the write-off of gas supply costs.
Total electric volumes in the second quarter of 2004 totaled approximately 2.6
million megawatts hours, compared with volumes of approximately 2.5 million
megawatt hours in the same period in 2003. This change during the 2004 second
quarter was due primarily to a 7.6 percent increase in retail volumes stemming
from a return of Montana choice customers to NorthWestern and higher wholesale
volumes in South Dakota.
Retail natural gas volumes totaled approximately 4.5 million dekatherms in the
second quarter of 2004, compared with volumes of approximately 4.7 million
dekatherms in the same period in 2003. The decrease during the second quarter of
2004 was due to milder than normal temperatures. Unregulated wholesale natural
gas volumes totaled approximately 3.4 million dekatherms in the second quarter
of 2004, compared with volumes of approximately 2.2 million dekatherms in the
same period in 2004. The increase during the second quarter of 2004 was due to a
51.3 percent increase in gas wholesale volumes in South Dakota due to the
addition of ethanol plant customers in comparison to the same period in 2003.
Liquidity and Capital Resources
As of June 30, 2004, cash and cash equivalents were $101.6 million, compared
with $15.2 million as of Dec. 31, 2003. Cash provided by continuing operations
during the six months ended June 30, 2004, totaled $123.1 million, compared with
cash used in continuing operations of $86.3 million during the six months ended
June 30, 2003. This increase was substantially due to improved vendor credit
terms and the suspension of interest payments on our unsecured debt and
preferred securities during the Company's reorganization. In July 2004,
NorthWestern reduced the availability under its debtor-in-possession (DIP)
facility from $75 million to $50 million. As of Aug. 6, 2004, the only
outstanding amounts under the DIP facility were letters of credit of $15.4
million. NorthWestern anticipates that its total cash and cash equivalents,
together with access to the DIP facility, will be sufficient to fund operations
during its bankruptcy proceedings.
In July 2004, NorthWestern filed applications with the Montana Public Service
Commission (MPSC) and the Federal Energy Regulatory Commission (FERC) seeking
approval to enter proposed exit financing facilities including:
o $100 million revolving credit facility with a five-year maturity
and a variable interest rate based on LIBOR plus a credit spread;
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NorthWestern Reports Second Quarter 2004 Financial Results
Aug. 6, 2004
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o $150 million Term B loan credit facility with a seven-year
maturity and variable interest rate based on LIBOR plus a credit
spread; and
o Up to $350 million of senior secured notes with a maturity of
seven to 10 years and fixed interest rate expected to range
between 6.75% and 7.25%.
The only component of the exit financing needed for the Company to emerge from
bankruptcy is the $100 million revolving credit facility. The exit financing
will be secured by mortgage bonds and will be used to repay and refinance the
Company's existing DIP facility, existing Senior Secured Term Loan ($384.2
million outstanding as of June 30, 2004) and potentially $150 million of Montana
First Mortgage Bonds. NorthWestern believes that refinancing these obligations
at this time with longer term maturities and at lower interest rates will lower
the Company's borrowing cost and improve cash flow. The additional components of
the exit financing are being contemplated to lower the Company's borrowing costs
and extend existing maturities.
NorthWestern has also requested the MPSC and FERC approval to issue up to 35.5
million shares of new common stock. Under the terms of NorthWestern's First
Amended Plan of Reorganization, the Company's existing common stock will be
cancelled, and the debt owed to the Company's unsecured creditors and holders of
Mandatorily Redeemable Preferred Securities of Subsidiary Trusts will be
exchanged for the new common stock. On Aug. 3, 2004, the MPSC conditionally
approved the proposed exit financing and issuance of new common stock, subject
to confirmation of our Plan.
Additional financial information related to NorthWestern's second quarter 2004
results is available in its Form 10-Q 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
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Aug. 6, 2004
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provisions of Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. On May 4, 2004, our subsidiary,
Netexit, Inc. (f/k/a Expanets, Inc.) 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.
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 be restructured in a manner that will eliminate or
very substantially reduce any remaining value. The sale of noncore
assets does not change the fact that our common stock has no
value. 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 Federal 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
debtor-in-possession financing facility arranged by us with Bank
One, N.A. (the DIP Facility) and any replacement facility 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 certain subordinated and
equity stakeholders of the company for a plan of reorganization,
which may be difficult in light of our inability to preserve any
material value in our common equity and our trust preferred
securities 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;
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(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 an adverse judgment against us in
(1) that certain lawsuit seeking to recover assets on behalf of
Clark Fork and Blackfoot LLC filed by Magten Asset Management
Corporation and Law Debenture Trust of New York and (2) that
pending litigation styled as the McGreevey et al v. The Montana
Power Company;
(xiii) 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 Employee Stock Ownership Plan 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;
General Factors
(xiv) our ability to maintain an effective internal controls structure;
(xv) our ability to attract, motivate and/or retain key employees;
(xvi) 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 2003 tracker year, and an interim order
disallowing the recovery of approximately $4.6 million of natural
gas costs during the 2004 tracker year, which has had and could
continue to have a material adverse affect on our liquidity,
results of operations and financial condition;
(xvii) 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;
(xviii) 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;
(xix) increases in interest rates, which will increase our cost of
borrowing;
(xx) adverse changes in general economic and competitive conditions in
our service territories; and
(xxi) certain other business uncertainties related to the occurrence of
natural disasters, war, hostilities and the threat of terrorist
actions.
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Aug. 6, 2004
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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 2 of our Quarterly
Report on Form 10-Q 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 Quarterly Reports on Forms
10-Q, reports on Forms 10-K 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 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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