SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
February 3, 2003
(Date of earliest event reported)
BLACK HILLS CORPORATION
(Exact name of Registrant as specified in its charter)
South Dakota 001-31303 46-0458824
(State of Incorporation) (Commission File No.) (IRS Employer
Identification Number)
625 Ninth Street
P. O. Box 1400
Rapid City, South Dakota 57709
(Address of principal executive offices)
(605) 721-1700
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address if changed since last report)
Item 5. Other Events.
On February 3, 2003 the Company issued a press release
announcing the declaration of quarterly dividends on the
common and preferred stock, resulting in the 33rd consecutive
annual common dividend increase.
On February 6, 2003 the Company issued a press release
announcing its fourth quarter and annual results for the
fiscal year ended December 31, 2002.
The press releases are attached as exhibits to this Form 8-K
and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
99.1 Press Release dated February 3, 2003 announcing the
declaration of quarterly dividends on the common and
preferred stock, resulting in the 33rd consecutive
annual common dividend increase.
99.2 Press Release dated February 6, 2003 announcing the
Company's fourth quarter and annual results for the
fiscal year ended December 31, 2002.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BLACK HILLS CORPORATION
By: /s/ Mark T. Thies
Mark T. Thies
Sr. Vice President
and Chief Financial Officer
Date: February 7, 2003
3
Exhibit Index
Exhibit
Number Description
99.1 Press Release dated February 3, 2003 announcing the
declaration of quarterly dividends on the common and
preferred stock, resulting in the 33rd consecutive annual
common dividend increase.
99.2 Press Release dated February 6, 2003 announcing the
Company's fourth quarter and annual results for the fiscal
year ended December 31, 2002.
4
Exhibit 99.1
Black Hills Corporation Declares 33rd Consecutive Dividend Increase
and Announces Quarterly Earnings Conference Call
RAPID CITY, SD-February 3, 2003-At a meeting held January 29, 2003, the
Board of Directors of Black Hills Corporation (NYSE: BKH) declared quarterly
dividends on the common and preferred stock, resulting in the 33rd consecutive
annual common dividend increase.
Common shareholders will receive 30 cents per share, equivalent to an
annual dividend rate of $1.20, which is a 3.4 percent increase over the dividend
rate for 2002. Preferred shareholders, whose holdings are related to a Company
acquisition, will receive $11.037 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, 2003, to all
shareholders of record at the close of business on February 14, 2003.
The Company will issue its fourth quarter and year-end 2002 financial
results on Thursday, February 6, 2003.
In conjunction with the earnings release, the Company will also conduct a
conference call on Friday, February 7, 2003 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) 450-0819. When
prompted, indicate that you wish to participate in the "Black Hills Quarterly
Earnings Conference Call."
A replay of the conference call is available through Friday, February 14,
2003 by dialing (800) 475-6701 (USA) or (320) 365-3844 (international). The
access code is 674105.
Black Hills Corporation (www.blackhillscorp.com) is a diverse energy and
communications company with three business groups: Black Hills Energy, the
integrated, nonregulated energy subsidiary which generates electricity, produces
natural gas, oil and coal and markets energy; Black Hills Power, an electric
utility serving western South Dakota, northeastern Wyoming and southeastern
Montana; and Black Hills FiberCom, a broadband communications company offering
bundled telephone, high speed Internet and cable entertainment services.
# # #
Exhibit 99.2
BLACK HILLS CORPORATION REPORTS 2002 EARNINGS
RAPID CITY, SD-February 6, 2003-Black Hills Corporation (NYSE: BKH) today
announced earnings per share of $2.26 in 2002, compared to $3.42 in 2001. For
the quarter ended December 31, 2002, the Company earned $0.59 per share,
compared to $0.18 per share for the same period in 2001.
As previously reported, results in 2001 were impacted positively by
approximately $1.40 per share due to high prevailing wholesale prices of natural
gas and power during the first half of the year. The fourth quarter 2001 results
included special charges totaling $0.28 per share, related to a financial
exposure to Enron Corporation, an employee stock bonus and the funding of a new
foundation.
YEAR IN REVIEW
Daniel P. Landguth, Chairman and CEO of Black Hills, said, "We are very
pleased with overall results of 2002, especially considering the economic
condition of the energy sector. Earnings met our expectations and cash flows
were strong. We also expanded our asset base in 2002."
Landguth continued, "Last year, we established several operational
performance records. During 2002, we added 365 MW of capacity to our corporate
generation fleet. We now have 950 MW of non-regulated wholesale capacity and 490
MW of utility capacity, including 55 MW of purchased power. Coal production
increased 15 percent to a record 4.1 million tons. Natural gas and oil
production attained the fifth consecutive record year with 7.4 BCFE of
production. Gas and oil reserves increased to a record 57.8 BCFE, primarily due
to our continued growth efforts and the effect of higher prices at year-end
2002. Energy marketing operations also performed well last year, with record
volumes marketed of both gas and oil. Our electric utility produced a record
amount of off-system wholesale power. Our broadband communications operation
added approximately 7,000 new subscribers, and was approaching 25,000 business
and residential customers at the end of the year."
Landguth stated, "Our assets grew more than $300 million last year. This
achievement was attained with several key investments. We completed two
independent power projects in 2002, the 50 MW combined cycle expansion at
Arapahoe in Colorado and a 224 MW combined cycle expansion at our Las Vegas
cogeneration facility, which went into service in early January 2003. We also
acquired the remaining ownership interests at our Harbor, California power
plant, giving us sole ownership. In December, we secured a five-year, seasonal
100 MW tolling arrangement for Harbor. Over 90 percent of our non-regulated
power plants are under long-term contracts, many of which have received
regulatory approval or review. Our energy marketing operations expanded with the
acquisition of a 190-mile pipeline, which transports crude oil under long-term
contracts, and the acquisition of all remaining partnership interests in the
200-mile Millennium pipeline, which we now operate. With an eye on the future,
our coal mine invested in equipment to open a second pit and commenced
construction on a conveyor system to link the new pit to our existing
centralized facilities. At our electric utility, we added a 40 MW turbine and
are proceeding with construction of an AC-DC transmission tie that will link the
Eastern and Western power grids when completed in the latter part of 2003. That
tie will give us additional load support for our utility customers and will
increase our ability to buy or sell electric power. Our broadband communications
company also completed its initial infrastructure build-out, which covers Rapid
City and the northern Black Hills region."
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LIQUIDITY UPDATE
The Company recently completed financing arrangements for $32 million in
connection with certain gas turbine power plant assets. The seven-year credit
facilities are secured by a 40 MW turbine under long-term contract and a spare
engine with a "backstop" guarantee by the Company. At December 31, 2002, the
Company had approximately $64 million of credit availability under its revolving
credit facilities. The Company also had approximately $80 million of cash at
December 31, 2002, of which approximately $50 million was restricted by
subsidiary debt agreements.
OUTLOOK FOR 2003
"2003 is off to a great start. The 90 MW coal-fired Wygen power plant in
Wyoming is currently in testing and set to become operational very soon,"
Landguth continued. "80 MW of its capacity and associated energy is under a
10-year contract. It will use approximately 500,000 tons of our coal annually.
We also anticipate completing the acquisition of Mallon Resources, a natural gas
and oil company. This transaction is expected to double our reserves upon
closing, which is targeted for the first quarter of 2003. Production volumes are
expected to increase approximately 60 percent immediately after the acquisition,
with additional increases as development of the property proceeds."
Landguth concluded, "Despite its challenges, 2002 was also a year of
affirmation for Black Hills Corporation. We advanced our long-term agenda,
increased production and performance, and expanded our asset base. We expect our
approach to energy will provide additional opportunities in Western markets."
Black Hills Corporation expects to continue advancing its ongoing business
strategy. Long-term growth is expected through the expansion of integrated,
balanced and diverse competitive energy operations supplemented by the strength
and stability of our electric utility and improving results from our
communication business. The Company also recognizes that sustained growth
requires continued capital deployment, particularly in our integrated energy
operations. We strongly believe that we are strategically positioned to take
advantage of opportunities to acquire and develop energy assets consistent with
our prudent investment criteria and consistent with a prudent capitalization
structure.
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CONSOLIDATED FINANCIAL RESULTS
BLACK HILLS CORPORATION
(In thousands, except per share amounts)
-----------------------------------------------------------------------------------------------------------
Three months ended December 31, Year ended December 31,
2002 2001 2002 2001
--------------- ---------------- --------------- ----------------
Revenues:
Integrated Energy (a) $ 60,224 $ 50,036 $ 229,056 $ 229,325
Electric Utility 41,400 37,439 162,186 212,355
Communications 8,522 6,596 32,677 20,258
--------------- ---------------- --------------- ----------------
$ 110,146 $ 94,071 $ 423,919 $ 461,938
=============== ================ =============== ================
Net income (loss) available
for common stock:
Continuing operations -
Integrated Energy $ 11,962 $ 4,937 $ 42,338 $ 55,212
Electric Utility 7,297 3,178 30,203 45,055
Communications (1,532) (2,957) (7,261) (12,300)
Corporate (1,597) (543) (2,087) (383)
--------------- ---------------- --------------- ----------------
16,130 4,615 63,193 87,584
Change in accounting principle (b) - - 896 -
Discontinued operations (c) - 151 (2,637) 493
--------------- ---------------- --------------- ----------------
16,130 4,766 61,452 88,077
Less: preferred stock dividends (56) (54) (223) (527)
--------------- ---------------- --------------- ----------------
$ 16,074 $ 4,712 $ 61,229 $ 87,550
=============== ================ =============== ================
Earnings per share:
Basic -
From continuing operations $ 0.60 $ 0.17 $ 2.35 $ 3.43
Total $ 0.60 $ 0.18 $ 2.28 $ 3.45
Diluted -
From continuing operations $ 0.59 $ 0.17 $ 2.33 $ 3.40
Total $ 0.59 $ 0.18 $ 2.26 $ 3.42
-----------------------------------------------------------------------------------------------------------
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(a) All periods reflect a net presentation of all gains and losses,
including physical settlements, on energy trading contracts in our
energy marketing segment.
(b) Reflects the write-off of negative goodwill upon adoption of SFAS No.
142.
(c) Reflects the results of operations at the Company's discontinued coal
marketing operations.
BUSINESS GROUP PERFORMANCE SUMMARY
Integrated Energy
Quarterly results. Earnings from the Integrated Energy business group for
the three-month period ended December 31, 2002 were $12.0 million, compared to
$4.9 million in 2001. Earnings for the quarter increased due to strong earnings
in our power generation and energy marketing segments. In addition, a $4.4
million after-tax charge for Enron exposure was reflected in the 2001 earnings,
partially offset by a $1.7 million after-tax gain included in 2001 that resulted
from the sale of coal mining equipment. Earnings from the power generation
segment were $3.4 million in 2002, compared to $(2.3) million in 2001. The
increase was primarily attributable to earnings from additional generating
capacity that came online during 2002 and the effects of the charge for Enron
related exposure included in 2001. Earnings from the energy marketing segment
increased 56 percent to $5.7 million due to higher margins received from gas
marketing and higher earnings related to oil pipelines acquired during 2002,
partially offset by lower gas volumes marketed. Earnings from oil and gas
operations increased slightly over 2001 to $1.6 million as higher average prices
received were partially offset by a decrease in volumes sold. Coal mining
earnings decreased 47 percent to $1.6 million in 2002 due to the effect of a
gain on the sale of coal mining equipment included in 2001 earnings.
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Annual results. Earnings from the Integrated Energy group for the
twelve-month period ended December 31, 2002 were $42.3 million, compared to
$55.2 million in 2001. Earnings for the year decreased primarily due to higher
commodity prices and margins in the first half of 2001. The power generation
segment increased earnings to $18.0 million in 2002 from $1.6 million in 2001,
primarily due to results from increased capacity that went into service during
2002 and the second half of 2001. Earnings for 2002 also reflected a $1.9
million after-tax benefit relating to the collection of receivables reserved for
in prior periods. In addition, 2001 was impacted by a $4.4 million after-tax
charge for exposure to Enron Corporation. Earnings from energy marketing
decreased 63 percent to $12.7 million, due primarily to a substantial decline in
commodity prices and margins received as a result of the unusual energy markets
in the West during the first half of 2001. Coal mining earnings in 2002
decreased 26 percent to $8.6 million due to earnings benefits in 2001 from a
$1.7 million after-tax gain on the sale of coal mining equipment, and a
settlement with PacifiCorp in 2001 which resulted in an after-tax gain of $3.4
million. As a result of significantly lower average oil and natural gas prices
during 2002, oil and gas earnings decreased 53 percent to $4.8 million in 2002.
The following tables contain certain Integrated Energy operating
statistics:
--------------------------------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
-------------- -------------- -------------- ------------
Fuel production:
Tons of coal sold 1,096,900 1,053,000 4,052,400 3,518,000
Mcf equivalent sales 1,790,500 1,968,600 7,397,800 7,292,500
Energy marketing
average daily volumes:
Natural gas-MMBtus 1,233,594 1,343,991 1,088,229 1,047,736
Crude oil-barrels 67,556 35,256 57,193 36,544
--------------------------------------------------------------------------------------------------
December 31,
------------------------------
Oil and gas reserves: 2002 2001
-------------- -------------
Bcf equivalent reserves (a) 57.8 48.4
IPP Nameplate Net Capacity:
In service-MW 950 (b) 625
Under construction-MW (c) 90 360
(a) Reserves at December 31 reflect an oil price of $31.20 per barrel
and a natural gas price of $4.60 per Mcf in 2002 and $19.84 per
barrel and $2.57 per Mcf in 2001.
(b) Includes the 224 MW expansion at the Las Vegas cogeneration power
plant which went into service on January 3, 2003.
(c) Includes plant under a lease arrangement.
Electric Utility
Quarterly results. Earnings from the Electric Utility business group for
the three months ended December 31, 2002 were $7.3 million, compared to $3.2
million in 2001. The 2001 results include a $2.0 million after-tax non-cash
charge related to the Utility's contribution of Company stock to the Black Hills
Corporation Foundation. In addition, earnings increased primarily due to a 51
percent increase in off-system sales, partially offset by a 15 percent decline
in firm industrial sales, related to the closing of the Homestake Gold Mine at
the end of 2001. Off-system megawatthours sold increased 43 percent over 2001
while the average price per megawatthour increased 6 percent. Firm residential
and commercial electricity sales increased 7 percent and 3 percent,
respectively.
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Annual results. Earnings were $30.2 million in 2002 compared to $45.1
million in 2001. The decrease was primarily due to a 63 percent decrease in
off-system average sales prices received compared to 2001.
The following table provides certain electric utility operating statistics:
--------------------------------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
------------------------------ -----------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Firm (system) sales-MWh 479,000 486,000 1,966,000 2,013,000
Off-system sales-MWh 291,000 203,000 979,700 964,000
---------------------------------------------------------------------------------------------------
Communications
Quarterly results. The Communications business group reported a net loss of
$(1.5) million for the three month period ending December 31, 2002, compared to
$(3.0) million in 2001. The reduction of the loss is due to a 29 percent
increase in revenues resulting from a larger customer base compared to 2001 and
lower operating expenses, partially offset by increased cost of sales and
interest costs. In addition, 2001 results reflect additional charges related to
increases in reserves for inventory and carrier billings.
Annual results. The communications business group reported a net loss of
$(7.3) million in 2002. This represents a 41 percent improvement from the
$(12.3) million net loss in 2001. The improved performance is due to increased
revenues from customers and lower interest costs, partially offset by increased
cost of sales and higher depreciation costs.
The Company expects a continuation of better financial performance in 2003.
The net loss for 2003 currently is anticipated to be approximately one-half of
2002 and profitability is expected in 2004.
The following table provides certain communications operating statistics:
--------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2002 2002 2002 2002 2001
-------------- -------------- -------------- -------------- ----------------
Residential customers 21,700 20,760 19,450 17,550 15,660
Business customers 3,061 2,960 2,970 2,600 2,250
Business access lines 9,094 8,772 8,380 7,667 6,836
--------------------------------------------------------------------------------------------------------
EARNINGS CONFERENCE CALL
The Company will conduct a conference call on Friday, February 7, 2003
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) 450-0819. When prompted, indicate that you
wish to participate in the "Black Hills Quarterly Earnings Conference Call." A
replay of the conference call is available through Friday, February 14, 2003 by
dialing (800) 475-6701 (USA) or (320) 365-3844 (international). The access code
is 674105.
ABOUT BLACK HILLS CORPORATION
Black Hills Corporation (www.blackhillscorp.com) is a diverse energy and
communications company with three business groups: Black Hills Energy, the
integrated energy unit which generates electricity, produces natural gas, oil
and coal and markets energy; Black Hills Power, an electric utility serving
western South Dakota, northeastern Wyoming and southeastern Montana; and Black
Hills FiberCom, a broadband communications company offering bundled telephone,
high speed Internet and cable entertainment services.
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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: (1) unanticipated developments in the western
power markets, including unanticipated governmental intervention, deterioration
in the financial condition of counterparties, default on amounts due from
counterparties, adverse changes in current or future litigation, adverse changes
in the tariffs of the California Independent System Operator, market disruption
and adverse changes in energy and commodity supply, volume and pricing and
interest rates; (2) prevailing governmental policies and regulatory actions with
respect to allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of purchased power and other capital investments, and
present or prospective wholesale and retail competition; (3) the State of
California's efforts to reform its long-term power purchase contracts; (4)
impact of environmental and safety laws; (5) weather conditions; (6)
competition; (7) pricing and transportation of commodities; (8) market demand,
including structural market changes; (9) unanticipated changes in operating
expenses or capital expenditures; (10) capital market conditions; (11) legal and
administrative proceedings that influence Black Hills' business and
profitability; (12) the effects on Black Hills' business of terrorist actions or
responses to such actions; (13) the effects on Black Hills' business resulting
from the financial difficulties of Enron and other energy companies, including
their effects on liquidity in the trading and power industry, and Black Hills'
ability to access the capital markets on the same favorable terms as in the
past; (14) the effects on Black Hills' business in connection with a lowering of
Black Hills' credit rating (or actions Black Hills may take in response to
changing credit ratings criteria), including, increased collateral requirements
to execute Black Hills' business plan, demands for increased collateral by Black
Hills' current counter-parties, refusal by Black Hills' current or potential
counterparties or customers to enter into transactions with Black Hills and
Black Hills' inability to obtain credit or capital in amounts or on terms
favorable to Black Hills; and (15) other factors discussed from time to time in
Black Hills' filings with the SEC.
# # #
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