Slide 1: 2016 First Quarter Earnings Webcast
2016 First Quarter Earnings Webcast April 20, 2016 Madison River – Three Forks
Slide 2: Presenting Today
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Vice President & 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: First Quarter Highlights
• Net income for the quarter was $38.1 million, or $0.79 per diluted share, as compared with net income of $51.4 million, or $1.09 per diluted share, for the same period in 2015. • This $13.4 million, or 26%, decrease in net income is primarily the result of lower revenue from recent regulatory deci
Slide 5: Summary Financial Results
Summary Financial Results (in millions except per share amounts) Three Months Ended March 31, 2016 2015 Ve e Operating Revenues $ 3325 $ 346.0 Cost of Sales 115.4 112.4 Gross Margin 2174 233.6 Operating Expenses Operating, genera & administrative 799 8141 (1.2) 15% Property and other taxes 35.4 32.
Slide 6: Gross Margin (First Quarter)
6 Gross Margin (First Quarter) (dollars in millions) Three Months Ended March 31, 2016 2015 Variance Electric $ 157.7 $ 172.1 $ (14.4) (8.4%) Natural Gas 59.4 61.5 (2.1) (3.4%) Gross Margin $ 217.1 $ 233.6 $ (16.5) (7.1%) Decrease in gross margin due to the following factors: $ 8.6 South Dakota elec
Slide 7: Weather (First Quarter)
Weather (First Quarter) 7 Minimum Temperature from Normal Maximum Temperature from Normal Over a 122 year history, the first three months of 2016 was the 2nd warmest period in Montana, the 3rd warmest in South Dakota and the 4th warmest in Nebraska. Source: NOAA National Centers for Environmental In
Slide 8: Operating Expenses (First Quarter)
Operating Expenses (First Quarter) 8 Increase in operating expenses due mainly to the following factors: $1.2 million decrease in OG&A $ (5.6) Hydro operations - Kerr conveyance $ 3.1 Non-employee directors deferred compensation $ 0.9 Insurance reserves $ 0.4 Other $2.6 million increase in property
Slide 9: Operating to Net Income (First Quarter)
Operating to Net Income (First Quarter) 9 $1.4 million increase in interest expenses was primarily due to increased debt outstanding associated with the Beethoven wind project acquisition and lower capitalization of allowance for funds used during construction (AFUDC). $2.5 million increase in other
Slide 10: Balance Sheet
(dollars in millions) Cash Restricted cash Accounts receivable, net Ss Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Short-term borrowings (Other current liabilities Long-term debt & capital leases Other non-current liabilities Shareholders’ equi Total Liabili
Slide 11: Cash Flow
Cash Flow 11 $15.3 million increase in cash provided by operating activities is primarily due to an $18.4 million settlement of interest rate swaps during the first quarter of 2015.
Slide 12: Income Tax Reconciliation
Income Tax Reconciliation 12 Income tax expense was $7.5 million lower primarily due to lower pretax income.
Slide 13: Non GAAP Adjusted Earnings (First Quarter '16 vs '15)
Non GAAP Adjusted Earnings (First Quarter ‘16 vs ’15) 13 The non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determin
Slide 14: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS 14 The non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or calculated in accordance w
Slide 15: 2016 Earnings Guidance
2016 Earnings Guidance 15 Our updated and narrowed 2016 guidance range of $3.20 - $3.35 (previously $3.20 - $3.40) per diluted share is based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • Excludes a
Slide 16: The Hydro Facilities
The Hydro Facilities 16 Overview of Hydro Facilities Black Eagle Hydro Asset Integration • Montana Asset Optimization Study: As part of reintegrating the hydro facilities into our generation portfolio, we initiated an asset optimization study to maximize the value of our diverse generation portfolio
Slide 17: South Dakota Electric Operations
17 South Dakota Electric Operations The owned and rate-based cost of energy from the Beethoven wind project over the next 20 years is expected to be $44 million ($25 million net present value) less than the PPA alternative, thus benefitting our customers’ bills over the long-term. Beethoven Wind Pro
Slide 18: Montana 2015 Electric Supply Resource Plan
Montana 2015 Electric Supply Resource Plan 18 The resource initiatives and actions developed in 2015 Electricity Supply Resource Procurement Plan identify the critical future needs of our portfolio. The plan identifies how to co- optimize hydro, wind and thermal resources to best meet the anticipate
Slide 19: Capital Spending Forecast
Capital Spending Forecast 19 Current estimated cumulative capital spending for 2016 through 2020 is $1.66 billion. This reflects a $187 million increase from the capital plan included in our 2015 10-K; approximately $122 million increase for internal combustion units in Montana and $65 million incre
Slide 20: Regulatory Update
20 Regulatory Update Regulatory Item Current / Anticipated Action FERC April 2014 order regarding cost allocation at DGGS between retail and wholesale customers. Awaiting a rehearing request that was filed in May 2014. If unsuccessful on rehearing, we may appeal to the United States Circuit Court of
Slide 21: Appendix
21 Appendix
Slide 22: Segment Results (First Quarter)
22 Segment Results (First Quarter) Net Income from our electric segment in the first quarter of 2016 is approximately $14M worse than 2015. This was primarily a result of the disallowance of previously incurred cost and increases in operating costs, which were partially offset by an increase in rate
Slide 23: Electric Segment (First Quarter)
23 Electric Segment (First Quarter) Appendix
Slide 24: Natural Gas Segment (First Quarter)
24 Natural Gas Segment (First Quarter) Appendix
Slide 25: 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 financ
Slide 26: Delivering a bright future
Upelivering a bright future