Slide 1: Third Quarter 2014 Earnings Webcast
Third Quarter 2014 Earnings Webcast 10/23/2014
Slide 2: On the Call Today
On the Call Today 2 • Bob Rowe, President & CEO • Brian Bird, VP & CFO
Slide 3: Forward Looking Statements
3 Forward Looking Statements During the course of this presentation, there will be forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financia
Slide 4: Recent Significant Activities
• Received Montana Public Service Commission (MPSC) approval of our application associated with the hydro transaction. • Non-GAAP adjusted gross margin improvement of 2.1% for the third quarter as compared to 2013. Year-to-date Non-GAAP adjusted gross margin up 5.6%. • Improvement of Net Income of a
Slide 5: Summary Financial Results
Summary Financial Results 5 (in millions except EPS) 2014 2013 2014 2013 Operating Revenues 251.9$ 262.3$ 892.0$ 835.5$ Cost of Sales 94.6 104.3 374.5 343.4 Gross Margin 157.3 158.0 517.5 492.1 Operating Expenses Operating, general & administrative 68.1 72.5 214.6 208.7 Property and other taxes 27.8
Slide 6: Gross Margin
6 Gross Margin Decrease in gross margin due to the following factors: $ (4.9) DSM lost revenues ($2.3 million recorded in 2013 related to prior years) $ (1.7) Operating expenses recovered in trackers $ (0.8) Natural gas and electric retail volumes $ 3.5 Electric transmission capacity $ 2.8 Natural g
Slide 7: Operating Expenses
Operating Expenses 7 Decrease in operating expenses due mainly to the following factors: $4.4 million decrease in OG&A $ (3.6) Non-employee directors deferred compensation $ (2.2) Hydro transaction costs $ (1.7) Operating expenses recovered in trackers $ (0.6) Bad debt expenses $ 2.6 Natural gas pro
Slide 8: Operating Income to Net Income
Operating Income to Net Income 8 (dollars in millions) 2014 2013 Variance Primarily due to: Operating Income $31.0 $31.4 ($0.4) Items discussed previously Interest Expense (18.8) (17.1) (1.7) Interest expense increase includes $1.9 million of expense associated with bridge credit facility related to
Slide 9: Income Tax Reconciliation
Income Tax Reconciliation 9 The $12.6 million release of unrecognized tax benefits resulted from the lapse of statute of limitation in the third quarter of 2014. In addition, we submitted a tax accounting method change related to the deductibility of repair costs to bring our existing method into al
Slide 10: Updated Effective Tax Rate Guidance
Updated Effective Tax Rate Guidance 10 Even excluding the significant tax benefits recognized in the third quarter, we are lowering our full year 2014 tax rate guidance from 14% – 16% down to 12% – 14%. This reduction in our 2014 effective tax rate guidance is primarily due to the election and imple
Slide 11: Balance Sheet and Capitalization
(dollars in millions) As of September 30, As of December 31, 2014 2013 Cash 17.7$ 16.6$ Restricted cash 38.4 6.9 Accounts receivable, net 120.7 174.9 Inventories 63.0 55.6 Other current assets 80.7 67.0 Goodwill 355.1 355.1 PP&E and other non-current assets 3,198.7 3,039.2 Total Assets 3,874.3$ 3,71
Slide 12: Cash Flow
Cash Flow 12 $34 million year-to-date improvement in cash flow from operations as compared to 2013. (dollars in millions) 2014 2013 Operating Activities Net Income 83.5$ 67.9$ Non-Cash adjustments to net income 123.0 123.6 Changes in working capital 36.5 6.5 Other (38.1) (26.7) Cash provided by oper
Slide 13: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS We anticipate an improvement in the fourth quarter 2014 EPS over the same quarter in 2013 due primarily to customer and load growth, a full quarter of Bear Paw South earnings contribution (asset was placed into service in December 2013), cost controls and a lower effective tax
Slide 14: Three Months Ended September 30, 2014 Adjustments
(in millions) Three Months Ended September 30, 2014 Fa vo ra bl e we at he r Hy dr o tra ns ac tio n ex pe ns e No n- em p. d ef er re d co m pe ns at io n Re le as e of u nr ec og ni ze d ta x be ne fit s an d sa fe h ar bo r el ec tio n (p rio r y ea rs ) Three Months Ended September 30, 2014 Thre
Slide 15: Nine Months Ended September 30, 2014 Adjustments
(in millions) Nine Months Ended September 30, 2014 Fa vo ra bl e we at he r Hy dr o tra ns ac tio n ex pe ns e No n- em p. d ef er re d co m pe ns at io n Re le as e of u nr ec og ni ze d ta x be ne fit s an d sa fe h ar bo r el ec tio n (p rio r y ea rs ) Nine Months Ended September 30, 2014 Nine M
Slide 16: Reaffirmed 2014 Earnings Guidance
Reaffirmed 2014 Earnings Guidance 16 We are reaffirming our 2014 guidance range of $2.60-$2.75 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories for the remainder of 2014; • Excludes any hydro relate
Slide 17: Montana Hydro Acquisition - Update
Montana Hydro Acquisition - Update 17 • Announced, in September 2013, the $900 million acquisition of eleven baseload hydroelectric generating facilities representing 633 megawatts of capacity and one storage reservoir from PPL Montana. • On September 26, 2014, after a yearlong process, the Montana
Slide 18: Hydro – Next Steps
Hydro – Next Steps 18 • On September 26th, following receipt of the MPSC Final Order, we requested the final necessary approval from the Federal Energy Regulatory Commission (FERC) to issue securities in connection with the hydro transaction. We anticipate FERC approval to take 30 to 60 days from th
Slide 19: Other Activity
Other Activity 19 • SD Electric Rate Case • Plan to file in the fourth quarter of 2014 • Filing based on trailing 12 month test year ending September 30, 2014 • Dave Gates Generating Station (DGGS) • In April 2014, FERC issued a decision to allocate only a fraction of the costs to FERC jurisdictiona
Slide 20: 2014 to 2015 Preliminary Earnings & Dividend Bridge
2014 to 2015 Preliminary Earnings & Dividend Bridge PRELIMINARY 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Assumes successful integration and a full year earnings contribution from the pending hydro transa
Slide 21: Net Investment in Existing Business
Net Investment in Existing Business 21 Maintenance capital expenditures have cumulatively outpaced depreciation by $190 million over the last five years (2009 to 2013), while maintaining a positive Free Cash Flow during the same period. Prior capital spending on South Dakota supply projects (Big Sto
Slide 22: Capital Spending Forecast
Capital Spending Forecast 22 Current estimated cumulative capital spending for 2014 through 2018 is $1.45 billion (upper chart), an increase of $330 million over last year’s estimate (bottom chart). *Similar to DSIP, Transmission System Infrastructure Project (TSIP) intends to move us beyond basic c
Slide 23: Appendix
23 Appendix
Slide 24: Third Quarter - Reconciliation
24 Third Quarter - Reconciliation NORTHWESTERN CORPORATION Three Months Ended September 30, 2014 ($millions, except EPS) Th re e M on th s E nd ed , Se pt em be r 3 0, 20 13 DS M lo st re ve nu e r ec ov er ies Op er ati ng ex pe ns es re co ve re d in tra ck er El ec tric re tai l v olu m es El ec
Slide 25: Year-to-Date - Reconciliation
25 Year-to-Date - Reconciliation ($millions, except EPS) Ni ne M on th s En de d, Se pt em be r 3 0, 2 01 3 Na tu ra l g as p ro du ct ion M on ta na n at ur al ga s ra te in cr ea se El ec tri c tra ns m iss ion c ap ac ity El ec tri c re ta il v olu m es Na tu ra l g as re ta il v olu m es DS M lo
Slide 26: Effective Tax Reconciliation
Effective Tax Reconciliation 26 (in millions) 2014 2013 Variance 2014 2013 Variance Income Before Income Taxes 11.8$ 17.5$ (5.7)$ 74.3$ 76.9$ (2.6)$ Income tax calculated at 35% federal statutory rate 4.1 6.1 (2.0) 26.0 26.9 (0.9) Permanent or flow through adjustments: State income, net of federal p
Slide 27: Third Quarter - Electric Segment
27 Third Quarter - Electric Segment (dollars in millions) 2014 2013 Change Retail revenues 197.9$ 201.5$ (3.6)$ (1.8) % Regulatory amortization (2.3) 11.8 (14.1) (119.5) Total retail revenue 195.6 213.3 (17.7) (8.3) Transmission 14.7 11.2 3.5 31.3 Ancillary services 0.3 0.4 (0.1) (25.0) Wholesale 0.
Slide 28: Year-to-Date - Electric Segment
28 Year-to-Date - Electric Segment (dollars in millions) 2014 2013 Change Retail revenues 583.7$ 581.5$ 2.2$ 0.4 % Regulatory amortization 21.6 11.9 9.7 81.5 Total retail revenue 605.3 593.4 11.9 2.0 Transmission 40.8 37.3 3.5 9.4 Ancillary services 1.2 1.1 0.1 9.1 Wholesale 1.2 2.0 (0.8) (40.0) Oth
Slide 29: Third Quarter - Natural Gas Segment
29 Third Quarter - Natural Gas Segment (dollars in millions) 2014 2013 Change Retail revenues 25.4$ 22.8$ 2.6$ 11.4 % Regulatory amortization 4.0 3.2 0.8 25.0 Total retail revenue 29.4 26.0 3.4 13.1 Wholesale and other 10.1 8.8 1.3 14.8 Total Revenues 39.5 34.8 4.7 13.5 Total Cost of Sales 9.9 9.0 0
Slide 30: Year-to-Date - Natural Gas Segment
30 Year-to-Date - Natural Gas Segment (dollars in millions) 2014 2013 Change Retail revenues 202.7$ 173.5$ 29.2$ 16.8 % Regulatory amortization 3.7 (6.3) 10.0 (158.7) Total retail revenue 206.4 167.2 39.2 23.4 Wholesale and other 32.6 29.5 3.1 10.5 Total Revenues 239.0 196.7 42.3 21.5 Total Cost of
Slide 31: Heating and Cooling Degree Days
31 Heating and Cooling Degree Days 3 Months ending September 30 2014 Cooling Degree-Days 2014 2013 Historic Average 2013 Historic Average M ntana 324 393 265 18% colder 22% warmer South Dakota 467 702 63 33 l r 6% cold r Degree Days 4 as compared with: Heating Degree-Days 2014 2013 Historic Average
Slide 32: Third Quarter - Segment Results (Unaudited)
32 Third Quarter - Segment Results (Unaudited) (in thousands) Three Months Ending September 30, 2014 Electric Gas Other Total Operating revenues 212,430$ 39,482$ -$ 251,912$ Cost of sales 84,720 9,872 - 94,592 Gross margin 127,710 29,610 - 157,320 Operating, general and administrative 48,528 21,005
Slide 33: Year-to-Date - Segment Results (Unaudited)
33 Year-to-Date - Segment Results (Unaudited) (in thousands) Nine Months Ending September 30, 2014 Electric Gas Other Total Operating revenues 652,951$ 238,965$ -$ 891,916$ Cost of sales 273,754 100,740 - 374,494 Gross margin 379,197 138,225 - 517,422 Operating, general and administrative 144,933 66
Slide 34: Non-GAAP Financial Measures
These materials include financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and Adjusted Diluted EPS, that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company's financi
Slide 35: Delivering a bright future
Upelivering a bright future