Black Hills (BKH) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents the unaudited consolidated financial statements for periods ended June 30, 2023, with key notes Consolidated Statements of Income Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $411,283 | $474,195 | $1,332,442 | $1,297,765 | | Operating Income | $63,516 | $72,389 | $238,399 | $245,742 | | Net Income | $26,544 | $35,846 | $143,924 | $156,870 | | Diluted EPS | $0.35 | $0.52 | $2.06 | $2.33 | Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $9,409,095 | $9,618,230 | | Total Liabilities | $6,206,328 | $6,528,335 | | Total Equity | $3,202,767 | $3,089,895 | Consolidated Statements of Cash Flows Consolidated Cash Flow Highlights - Six Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $605,071 | $442,030 | | Net cash (used in) investing activities | $(245,372) | $(291,385) | | Net cash (used in) financing activities | $(228,137) | $(149,093) | | Net change in cash | $131,562 | $1,552 | Note 2. Regulatory Matters - Total regulatory assets decreased to $523.7 million as of June 30, 2023, from $653.0 million at year-end 2022, primarily due to the amortization of costs related to Winter Storm Uri[71] - Several rate reviews were filed or concluded, including approved settlements for RMNG and Wyoming Electric expected to generate $8.2 million and $8.7 million in new annual revenue, respectively, and pending reviews for Colorado Gas and Wyoming Gas seeking $27 million and $19 million[74][75][76][77] Note 5. Financing - In March 2023, the company completed a public debt offering of $350 million in 5.95% five-year senior unsecured notes, using the proceeds to repay commercial paper borrowings[83] - The corporate Revolving Credit Facility was amended in May 2023 to replace LIBOR with SOFR as the benchmark interest rate[101] - A new Equity Distribution Sales Agreement was established in June 2023, allowing for the sale of up to $400 million in common stock through an At-the-Market (ATM) program[124] Note 12. Business Segment Information Segment Operating Income (in thousands) | Segment | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Electric Utilities | $46,619 | $45,226 | $107,679 | $95,972 | | Gas Utilities | $17,725 | $28,195 | $132,350 | $151,735 | | Corporate and Other | $(828) | $(1,032) | $(1,630) | $(1,965) | | Total Operating Income | $63,516 | $72,389 | $238,399 | $245,742 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial results, segment performance, liquidity, and capital resources for Q2 and H1 2023 Executive Summary - The company is a customer-focused energy solutions provider serving over 1.3 million customers across an eight-state service territory[6] - Business operations are conducted through two main segments: Electric Utilities and Gas Utilities, with unallocated corporate expenses presented as Corporate and Other[7] Results of Operations - For Q2 2023 vs Q2 2022, Gas Utilities' operating income decreased by $10.5 million, while Electric Utilities' operating income increased by $1.4 million[148][180] - For H1 2023 vs H1 2022, Gas Utilities' operating income decreased by $19.4 million, while Electric Utilities' operating income increased by $11.7 million[150][164] - The decrease in Gas Utilities' operating income was primarily due to higher operating expenses and a prior year one-time true-up of carrying costs related to Winter Storm Uri[176][177] - The increase in Electric Utilities' operating income was driven by new rates, rider recovery, and increased transmission services, partially offset by higher operating expenses[185][186] Liquidity and Capital Resources - Net cash from operating activities increased by $163.0 million in H1 2023 compared to H1 2022, mainly due to higher collections on pass-through revenues and lower natural gas in storage inventories[235] - The company plans to fund its capital plan through cash from operations and various financing alternatives, including its credit facility, commercial paper program, and ATM program[242] - The company maintains investment-grade credit ratings from S&P (BBB+), Moody's (Baa2), and Fitch (BBB+), all with a stable outlook[224] Forecasted Capital Expenditures (in millions) | Year | Electric Utilities | Gas Utilities | Corporate & Other | Incremental Projects | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | 2023 | $212 | $386 | $17 | - | $615 | | 2024 | $348 | $452 | $19 | - | $819 | | 2025 | $268 | $412 | $20 | - | $700 | | 2026 | $184 | $393 | $19 | $104 | $700 | | 2027 | $163 | $444 | $18 | $75 | $700 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Confirms no material changes to market risk disclosures from the 2022 Annual Report - There have been no material changes to the quantitative and qualitative disclosures about market risk previously disclosed in the 2022 Annual Report on Form 10-K[256] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of June 30, 2023 - The CEO and CFO evaluated disclosure controls and procedures and concluded they were effective as of June 30, 2023[230] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[231] PART II. OTHER INFORMATION Item 1. Legal Proceedings Reports no material changes to legal proceedings from the 2022 Annual Report - For information regarding legal proceedings, see Note 3 in Item 8 of our 2022 Annual Report on Form 10-K[232] Item 1A. Risk Factors Confirms no material changes to risk factors from the 2022 Annual Report - There are no material changes to the risk factors previously disclosed in Item 1A of Part I in our 2022 Annual Report on Form 10-K[251] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details equity securities acquired by the company in Q2 2023 for tax payments on vested compensation - Shares were acquired under the share withholding provisions of the Amended and Restated 2015 Omnibus Incentive Plan for payment of taxes associated with the vesting of various equity compensation plans[233] Item 4. Mine Safety Disclosures References Exhibit 95 for required mine safety violation and regulatory disclosures - Information concerning mine safety violations or other regulatory matters required by Sections 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95[234] Item 6. Exhibits Lists all exhibits filed with the report, including agreements, certifications, and XBRL data - Lists exhibits filed with the report, including amendments to credit agreements, certifications, and XBRL data[261]