Press Releases
BLACK HILLS CORPORATION REPORTS 2004 RESULTS
For Information Contact: Mark
T. Thies, Executive Vice President; Dale
T. Jahr, Director, Investor Relations
RAPID CITY, SD—February 7, 2005—Black
Hills Corporation (NYSE: BKH) today announced financial
results
for the fourth quarter and for the year 2004.
For the three months ended December 31, 2004, net income
was $19.4 million, or $0.59 per share, compared
to $7.9 million, or $0.24 per share for the same period
ended December 31, 2003. Income from continuing operations
for the three months ended December 31, 2004 was $20.4 million,
or $0.62 per share, compared to $9.6 million, or $0.29 per
share for the same period in 2003. Compared to the fourth
quarter of 2003, income from continuing operations in the
fourth quarter of 2004 increased primarily due to the following
factors:
-
a $3.8 million, or $0.12 per share, increase
in oil and gas production earnings;
-
a $2.4 million, or $0.07 per share, increase
in power generation earnings;
-
a $1.9 million, or $0.06 per share, decrease
in communications losses;
-
a $2.4 million, or $0.07 per share, decrease
in corporate losses.
For the full year 2004, net income was $57.7
million, or $1.76 per share, compared to $61.0 million,
or
$1.97 per share for the year 2003. Income from continuing
operations was $57.2 million in 2004, or $1.74 per share,
compared to $56.5 million, or $1.82 per share for the year
2003.
YEAR IN REVIEW
David R. Emery, President and Chief Executive Officer of
Black Hills Corporation, said, “In 2004, our earnings
performance improved as the year progressed, with the second
half returning to a more normalized earnings profile. Our
oil and gas operations ended the year on a stronger note.
This business had its seventh consecutive year of record
production – 12.6 billion cubic feet equivalent (BCFE),
a 16 percent increase over 2003. Earnings from oil and gas
operations in 2004 were up 45 percent, contributing a record
$12.2 million to the bottom line. Reserves were up 11 percent
at year-end 2004, to 173 BCFE. Regarding our power generation
business, two-thirds of its 2004 earnings were recorded
in the last half of 2004. For the year, its earnings were
down 31 percent compared to 2003, due primarily to the Las
Vegas Cogeneration II power plant. Energy marketing earnings
increased in 2004, with natural gas marketing and oil transportation
and marketing contributing to the increase. Gas marketing
delivered a record average daily volume in 2004 –
1.7 BCF, a 40 percent increase over 2003.”
Emery continued, “On the retail side, our communications
business improved its financial performance by
33 percent, compared to 2003. We are pleased with our marketing
and promotional efforts, as well as our cost-containment
initiative. Black Hills Power ended the year stronger, but
earnings for the year were down 20 percent, compared to
2003. Scheduled and unscheduled power outages, mild weather
in our utility territory and lower margins on increased
off-system sales were the primary reasons for the decline.
“Last year, our Company proceeded with goals important
to our long-term agenda. Among them was a strengthened capital
structure, achieved through more than $100 million of debt
reduction. We overcame construction delays and operational
challenges at our New Mexico natural gas operations, and
we expect to deploy drilling and development capital there
for several more years. Recently, we began to integrate
and streamline certain retail functions, and expect these
steps to improve our productivity and customer service.
We also reorganized our corporate structure to support holding
company and corporate compliance measures. Each of these
factors points to a stronger future.
“We also welcome the addition of Cheyenne Light, Fuel
& Power to our retail operations.” Emery said.
“ This recent acquisition is strategic for us, and
we look forward to providing energy services to 38,000 electric
and 31,000 natural gas customers for years to come.”
Emery concluded, “Our confidence in the future is
reflected in our recent increased dividend declaration.
This was the 35th consecutive annual dividend increase in
our Company’s history. Our asset base is solid and
well-positioned, and our capital structure is sound. We
remain on course toward diversified, balanced, and risk-managed
growth in the energy sector.”
2005 EARNINGS GUIDANCE
The Company reaffirmed its expectation that 2005 income
from continuing operations would be in a range between $1.85
and $2.00 per share. For the year, the Company anticipates
continued growth from oil and gas production; modest accretion
from Cheyenne Light, Fuel & Power; modest improvement
in communications results; an earnings increase from power generation, due to a full
year of contract revenues at the Las Vegas Cogeneration
II facility; and incremental cost savings from ongoing integration
efforts.
The Company expects small decreases in earnings from Black
Hills Power, due to a planned maintenance outage of the
coal-fired Wyodak power plant; from lower coal production,
resulting from the same maintenance outage; and from energy
marketing operations, which anticipate reduced oil marketing
and transportation revenues and narrower margins from gas
marketing.
EARNINGS CONFERENCE CALL
The Company will conduct a conference call tomorrow, February
8, 2005 beginning at 11:00 a.m. Eastern Time to discuss
financial and operating performance. The conference call
will be open to the public. The call can be accessed by
dialing, toll-free, (800) 762-4717. When prompted, indicate
that you wish to participate in the “Black Hills Quarterly
Earnings Conference Call.” A replay of the conference
call will be available through February 15, 2005 by dialing
(800) 475-6701 (USA) or (320) 365-3844 (international).
The access code is 768614.
RECENT DIVIDEND DECLARATION
As previously disclosed, the Board of Directors declared
quarterly dividends on the common and preferred stock. Common
shareholders will receive 32 cents per share, equivalent
to an annual dividend rate of $1.28, an increase of 3.2
percent from the $1.24 paid in 2004. Preferred shareholders,
whose holdings are related to a Company acquisition, will
receive $11.609 per share, an amount which represents 1
percent per annum computed on the basis of $1,000 per share
plus a common stock dividend equivalence. Dividends will
be payable March 1, 2005, to all shareholders of record
at the close of business on February 15, 2005.
CONSOLIDATED FINANCIAL RESULTS
Black Hills Corporation
(in thousands, except per share amounts)
|
|
Three months
ended December 31, |
Twelve months
ended December 31, |
|
|
2004 |
2003 |
2004 |
2003 |
| Revenues: |
|
|
|
|
| Wholesale
Energy Group |
$
233,062 |
$
207,574 |
$
908,581 |
$
1,039,345(a) |
|
Retail Services
Group |
54,211 |
50,928 |
212,360 |
210,705 |
|
Corporate |
131 |
- |
760 |
- |
|
|
------- |
------- |
------- |
------- |
|
|
$
287,404 |
$
258,502 |
$ 1,121,701 |
$ 1,250,050 |
| Net
income (loss) available for common stock: |
|
|
|
|
|
Continuing
operations -- |
|
|
|
|
|
Wholesale
Energy Group |
$ 15,992 |
$ 10,161 |
$ 45,447 |
$ 45,843 |
|
Retail
Energy Group |
5,764 |
3,289 |
15,263 |
18,207 |
|
Corporate
|
(1,401) |
(3,847) |
(3,461) |
(7,569) |
|
|
------ |
------ |
------ |
------ |
|
|
20,355 |
9,603 |
57,249 |
56,481 |
|
Discontinued
operations(b) |
(863) |
852 |
724 |
9,936 |
|
Change
in accounting principles |
-- |
(2,515)(c) |
-- |
(5,195)(d) |
| |
------ |
------ |
------ |
------ |
| |
19,492 |
7,940 |
57,973 |
61,222 |
|
Less: preferred
stock dividends |
(77) |
(87) |
(321) |
(258) |
|
|
------ |
------ |
------ |
------ |
|
|
$ 19,415 |
$ 7,853 |
$ 57,652 |
$ 60,964 |
| Weighted
average common shares outstanding: |
|
|
|
|
| Basic
-- |
32,431 |
32,198 |
32,387 |
30,496 |
| Diluted
-- |
32,960 |
32,759 |
32,912 |
31,015 |
|
Earnings
per share: |
|
|
|
|
|
Basic -- |
|
|
|
|
|
From
continuing operations |
$ 0.63 |
$ 0.30 |
$ 1.76 |
$ 1.84 |
|
Total |
$ 0.60 |
$ 0.24 |
$ 1.78 |
$ 2.00 |
|
Diluted -- |
|
|
|
|
|
From
continuing operations |
$ 0.62 |
$ 0.29 |
$ 1.74 |
$ 1.82 |
|
Total |
$ 0.59 |
$ 0.24 |
$ 1.76 |
$ 1.97 |
(a) Includes $114.0 million related to a contract termination
payment received.
(b) Reflects the after-tax results of operations and
related gains and losses at the Company’s discontinued
New York hydroelectric power plants, Pepperell power
plant, coal enhancement plant, and coal marketing operations.
The three months and twelve months ended December 31,
2004 include a $0.7 million after-tax additional impairment
charge on the Pepperell plant, which is currently held
for sale.
(c) Reflects the consolidation of Wygen Funding, LLC,
a variable interest entity, required by the adoption
of FIN 46-(R) on December 31, 2003.
(d) Reflects the adoption of FIN 46-(R), EITF Issue
No. 02-3 and SFAS No. 143.
BUSINESS UNIT PERFORMANCE SUMMARY
Wholesale Energy Group
Quarterly results. Income from continuing operations
from the Wholesale Energy business group for the three-month
period ended December 31, 2004 was $16.0 million, compared
to $10.2 million in 2003. Business segment results are
as follows:
- Power generation income from continuing operations was
$5.2 million, compared to $2.8 million in 2003. Earnings
for 2004 were higher primarily due to increased earnings
at our Las Vegas II plant, a $1.2 million benefit from certain
tax adjustments, and increased earnings from other revenue,
partially offset by increased fuel costs at our Las Vegas
I plant. Earnings for 2003 benefited from a non-recurring
$1.5 million legal settlement.
- Oil and gas income from continuing operations was $5.0
million compared to $1.2 million in 2003. Higher earnings
were primarily the result of a 10 percent increase in volumes
sold at average prices received that were 22 percent higher
for oil and 36 percent higher for natural gas.
- Energy marketing income from continuing operations was
$4.0 million in 2004 compared to $2.6 million in 2003. The
increase was primarily due to higher earnings at our gas
marketing company, as a result of a 45 percent increase
in volumes marketed at higher margins than received in 2003,
partially offset by higher operating expenses and taxes.
Oil transportation and marketing earnings were flat with
2003.
- Coal mining income from continuing operations was $1.8
million in 2004 compared to $3.6 million in 2003.
The decrease was primarily due to lower revenues from decreases
in average price received per ton and higher depreciation
expense. In addition, 2003 results benefited from lower
mine operating and tax costs.
Annual results. Income from continuing operations
from the Wholesale Energy business group for the year ended
December 31, 2004 was $45.4 million, compared to $45.8 million
in 2003. Business segment results are as follows:
- Power generation segment income from continuing operations
decreased to $15.6 million in 2004 from $22.4 million in
2003. Earnings decreased primarily as the result of lower
earnings at our Las Vegas Cogeneration II plant, due to
its operating as a merchant plant during the first quarter
of 2004 and its lower contract rates on the new long-term
contract, partially offset by lower depreciation expense
at that plant. The earnings decline was also due to higher
fuel costs at Las Vegas Cogeneration I; lower revenues at
our Harbor plant, due to the expiration of a summer reliability
agreement; and higher depreciation expense due to the consolidation
of our Wygen plant. These items were partially offset by
lower fuel costs at our Gillette combustion turbine, a benefit
from certain tax adjustments, lower interest expense, and
higher earnings from other revenues. In addition, the segment’s
2003 earnings were affected by certain items previously
disclosed, netting to a benefit of approximately $1.8 million
after-tax.
- Oil and gas income from continuing operations increased
to $12.2 million in 2004 compared to $8.4 million in 2003.
Results improved due to a 16 percent increase in volumes
sold at average prices received that were 5 percent higher
for oil and 15 percent higher for natural gas. These items
were partially offset by the negative impact of higher depletion
and operating costs.
- Income from continuing operations from our energy marketing
businesses increased to $10.2 million in 2004 compared to
$6.7 million in 2003. Earnings increased primarily due to
a 40 percent increase in natural gas volumes marketed and
an 11 percent increase in average margins received, partially
offset by a negative impact from a
$4.7 million change in mark-to-market adjustments between
2004 and 2003; increased earnings from oil transportation
and marketing due to increased revenues from contracted
oil transportation and higher marketing margins received.
In addition, 2003 earnings were negatively impacted by a
$3.0 million CFTC settlement.
- Coal mining income from continuing operations in 2004
decreased to $7.4 million compared to $8.3 million in 2003,
due to lower revenues associated with a decrease in average
price received per ton and higher depreciation expense,
partially offset by decreased general and administrative
and direct mining costs.
The following tables contain certain Wholesale Energy operating
statistics:
| |
Three months ended
December 31, |
Twelve months ended
December 31, |
| |
2004 |
2003 |
2004 |
2003 |
| Coal
mining: |
|
|
|
|
| Tons
of coal sold |
1,270,000 |
1,250,000 |
4,780,100 |
4,812,300 |
| Oil
and gas production: |
|
|
|
|
| Mcf
equivalent sales |
3,462,500 |
3,138,400 |
12,594,600 |
10,843,400 |
| Energy
marketing average daily volumes: |
|
|
|
|
| Natural
gas - MMBtus |
2,055,500 |
1,420,300 |
1,741,100 |
1,241,900 |
| Crude
oil - barrels |
37,400 |
55,000 |
44,900 |
58,700 |
|
December
31 , |
|
2004 |
2003 |
| Oil
and gas reserves: |
|
|
| Bcf
equivalent reserves(a) |
173.4 |
156.4 |
| IPP
Nameplate Net Capacity: |
|
|
| In
service - MW(b) |
964 |
962 |
(a) Reserves reflect an oil price of $41.19 per barrel and
a natural gas price of $5.55 per Mcf as of December
31, 2004 and $32.52 per barrel and $6.15 per Mcf as
of December 31, 2003.
(b) Capacity in service does not include the 40 MW Pepperell
facility, which is currently reported in “Discontinued
operations.”
Retail Services Group
Quarterly results. Income from continuing
operations from the Retail Services business group for
the three-month period ended December 31, 2004 was $5.8
million, compared to $3.3 million in 2003. Business
segment results are as follows:
- Net income from the Electric Utility business segment
for the three months ended December 31, 2004 was
$6.5 million, compared to $5.9 million in 2003. Increased
earnings in 2004 were the product of increased electric
sales, partially offset by increased fuel and purchased
power costs. Revenues from off-system sales increased
31 percent as volumes sold were 19 percent higher
and average sales prices increased 10 percent. Retail
electric sales were flat with 2003. Degree days in
the fourth quarter of 2004 were 9 percent lower than
the fourth quarter of 2003. In addition, interest
expense was lower in 2004, primarily due to debt reduction.
- The Communications business segment reported a net
loss of $0.7 million for the three month period ended
December 31, 2004, compared to a net loss of $2.6
million in 2003. Improved results reflect additional
revenues from increased business customers and residential
revenue generating units, a benefit from a reduction
in property tax accruals, partially offset by an increase
in allocated corporate costs. Additionally, 2003 results
were impacted by marketing campaign costs in response
to competitive pressures, a $0.7 million pre-tax increase
in depreciation expense, and a $0.5 million pre-tax
charge related to business development costs and obsolete
inventory.
Annual results. Income from continuing operations
from the Retail Services business group for the twelve-month
period ended December 31, 2004 was $15.3 million, compared
to $18.2 million in 2003. Business segment results are
as follows:
- Net income from the Electric Utility business segment
was $19.2 million in 2004, compared to $24.1 million
in 2003. The decrease in 2004 was primarily due to
lower firm system sales, increased fuel and purchased
power costs, higher costs related to scheduled and
unscheduled maintenance, increased health insurance
and allocated corporate costs, and decreased transmission
revenues. These negative impacts were partially offset
by increased
off-system electric sales and reduced interest expense.
Firm residential and commercial sales decreased 3
percent and 2 percent, respectively. Degree days in
2004 were 11 percent lower than 2003. Off-system sales
revenue increased
16 percent and firm industrial sales increased 1 percent.
- The Communications business segment reported a net
loss of $3.9 million in 2004 compared to a $5.9 million
net loss in 2003. Improved results reflect additional
revenues from increased business customers and residential
revenue generating units, partially offset by an increase
in allocated corporate costs and higher marketing
campaign costs in 2004 compared to 2003.
The following tables provide certain Retail Services
operating statistics:
|
Electric Utility |
Three months ended
December 31, |
Twelve months
ended December 31, |
| |
2004 |
2003 |
2004 |
2003 |
| Firm
(system) sales - MWh |
483,900 |
496,700 |
1,960,000 |
1,994,800 |
| Off-system
sales - MWh |
293,400 |
246,200 |
1,090,800 |
930,700 |
|
Communications |
December
31, |
September
30, |
December
31, |
| |
2004 |
2004 |
2003(a) |
| Residential
customers |
23,663 |
23,557 |
23,878 |
| Revenue
Generating Units(b) |
56,835 |
56,393 |
53,568 |
| Business
customers |
3,317 |
3,311 |
3,012 |
| Business
access lines |
12,978 |
12,949 |
12,023 |
Corporate
Quarterly results. Corporate costs for the
three-month period ended December 31, 2004 decreased
$2.4 million to $1.4 million after tax, compared to
the same period in 2003. This decrease is primarily
due to decreased net interest costs and increased cost
allocations to subsidiaries. These positive impacts
were partially offset by increased professional fees
related to Sarbanes Oxley compliance and holding company
structuring.
Annual results. Corporate costs for the year
ended December 31, 2004 decreased $4.1 million to $3.5
million after tax, compared to 2003. The decrease is
primarily due to increased cost allocations to subsidiaries,
a $1.0 million pre-tax gain on the sale of assets, and
a benefit from certain tax adjustments. These positive
impacts were partially offset by increased professional
fees related to Sarbanes Oxley compliance and holding
company structuring, higher pension expense, higher
insurance costs and increased net interest expense.
The Company’s subsidiary, Daksoft, Inc., recorded
a gain on the sale of its campground reservation system.
As Daksoft now primarily provides information technology
support to the Company, its results of operations are
included in Corporate. Prior to 2004, Daksoft’s
results were included in the Communications segment.
ABOUT BLACK HILLS CORPORATION
Black Hills Corporation is a diverse energy and communications
company. Black Hills Energy, the wholesale energy unit,
generates electricity, produces natural gas, oil and
coal, and markets energy. Our retail businesses are
Black Hills Power, an electric utility serving western
South Dakota, northeastern Wyoming and southeastern
Montana; Cheyenne Light, Fuel & Power, an electric
and gas distribution company serving the Cheyenne, Wyoming
vicinity, which was acquired in January 2005; and Black
Hills FiberCom, a broadband communications company,
which offers bundled telephone, high speed Internet,
and cable entertainment services. More information is
available at our Internet web site: www.blackhillscorp.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this release include “forward-looking
statements” as defined by the Securities and Exchange
Commission, or SEC. Black Hills Corporation makes these
forward-looking statements in reliance on the safe harbor
protections provided under the Private Securities Litigation
Reform Act of 1995. All statements, other than statements
of historical facts, included in this release that address
activities, events or developments that Black Hills
expects, believes or anticipates will or may occur in
the future are forward-looking statements. These forward-looking
statements are based on assumptions, which Black Hills
believes are reasonable based on current expectations
and projections about future events and industry conditions
and trends affecting Black Hills’ business. However,
whether actual results and developments will conform
to Black Hills’ expectations and predictions is
subject to a number of risks and uncertainties that
could cause actual results to differ materially from
those contained in the forward-looking statements, including,
among other things:
- The amount and timing of capital deployment in new investment
opportunities or for the repurchase of debt;
- The timing of production from oil and gas development
facilities, which may be dependent upon issuance by federal,
state, and tribal governments, or agencies thereof, of building,
environmental and other permits, and the availability of
specialized contractors, work force, equipment, and prices
of and demand for our products;
- General economic and political conditions, including
tax rates or policies and inflation rates;
- Our use of derivative financial instruments to hedge commodity
and interest rate risks;
- The creditworthiness of counterparties to trading and
other transactions, and defaults on amounts due from counterparties;
- The amount of collateral required to be posted from time
to time in our transactions;
- Changes in or compliance with laws and regulations, particularly
those relating to taxation, safety and protection of the
environment;
- The timing and extent of changes in energy-related and
commodity prices, interest rates, energy and commodity supply
or volume, the cost of transportation of commodities, and
demand for our services, all of which can affect our earnings,
liquidity position and the underlying value of our assets;
- Weather and other natural phenomena;
- The extent of success in connecting natural gas supplies
to gathering and processing systems;
- Industry and market changes, including the impact of
consolidations and changes in competition;
- The effect of accounting policies issued periodically
by accounting standard-setting bodies;
- The cost and effects on our business, including insurance,
resulting from terrorist actions or responses to such actions;
- Capital market conditions, including price risk due to
marketable securities held as investments
in benefit plans; and
- Other factors discussed from time to time in our filings
with the SEC.
New factors that could cause actual results to differ
materially from those described in forward-looking statements
emerge from time to time, and it is not possible for
us to predict all such factors, or the extent to which
any such factor or combination of factors may cause
actual results to differ from those contained in any
forward-looking statement. We assume no obligation to
update publicly any such forward-looking statements,
whether as a result of new information, future events,
or otherwise.
|
