Black Hills (BKH) - 2024 Q1 - Quarterly Report

markdown PART I. FINANCIAL INFORMATION [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q1 2024 indicate improved net income and earnings per share, with a slight increase in total assets Consolidated Statement of Income Highlights (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | **Revenue** | $726.4 | $921.2 | | **Operating Income** | $193.3 | $174.9 | | **Net Income Available for Common Stock** | $127.9 | $114.1 | | **Diluted Earnings Per Share** | $1.87 | $1.73 | Consolidated Balance Sheet Highlights (As of March 31, 2024) | Metric | March 31, 2024 (in millions) | Dec 31, 2023 (in millions) | | :--- | :--- | :--- | | **Total Current Assets** | $797.6 | $826.6 | | **Total Property, Plant and Equipment, net** | $7,223.1 | $7,119.3 | | **Total Assets** | $9,676.7 | $9,620.4 | | **Total Current Liabilities** | $1,088.4 | $1,185.1 | | **Long-term Debt** | $3,802.8 | $3,801.2 | | **Total Equity** | $3,422.5 | $3,305.8 | [Condensed Notes to Consolidated Financial Statements](index=13&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) The notes detail regulatory rate approvals, debt covenant compliance, equity financing, and segment operating income growth for Electric and Gas Utilities - Colorado Gas received final approval for a rate increase expected to generate **$20.2 million** in new annual revenue, effective May 1, 2024[85](index=85&type=chunk) - Wyoming Gas received approval for a rate increase expected to generate **$13.9 million** in new annual revenue, effective February 1, 2024[87](index=87&type=chunk) - The company was in compliance with its Revolving Credit Facility covenant, maintaining a Consolidated Indebtedness to Capitalization Ratio of **0.57 to 1.00**, below the maximum of **0.65 to 1.00**[93](index=93&type=chunk) - In Q1 2024, the company issued **0.6 million shares** under its ATM program, raising net proceeds of **$31.2 million**[95](index=95&type=chunk) Segment Operating Income (Q1 2024 vs Q1 2023) | Segment | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | **Electric Utilities** | $64.6 | $61.1 | | **Gas Utilities** | $130.8 | $114.6 | | **Corporate and Other** | $(2.1) | $(0.8) | [Management's Discussion and Analysis (MD&A)](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights increased operating income, strategic clean energy initiatives, and a solid financial position to fund capital expenditures [Recent Developments](index=26&type=section&id=Recent%20Developments) Recent developments include evaluating new EPA rules, proposing renewable energy resources, and acquiring a Renewable Natural Gas facility - In April 2024, the EPA published final rules regulating CO2 emissions from the power sector. The company is evaluating the impact but believes most costs will be recoverable through regulatory mechanisms[4](index=4&type=chunk) - Colorado Electric filed a report recommending **400 MW** of new renewable energy resources, including **200 MW solar**, **150 MW wind**, and **50 MW battery storage**, expected to be in service between 2026-2027[5](index=5&type=chunk) - In January 2024, the company acquired a Renewable Natural Gas (RNG) production facility in Iowa, entering the nonregulated RNG production business[8](index=8&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Consolidated operating income increased significantly in Q1 2024, driven by new rates and favorable adjustments across utility segments Consolidated Operating Results (Q1 2024 vs Q1 2023) | Metric (in millions) | Q1 2024 | Q1 2023 | Variance | | :--- | :--- | :--- | :--- | | **Electric Utilities Operating Income** | $64.6 | $61.1 | $3.5 | | **Gas Utilities Operating Income** | $130.8 | $114.6 | $16.2 | | **Total Operating Income** | $193.3 | $174.9 | $18.4 | | **Net Income Available for Common Stock** | $127.9 | $114.1 | $13.8 | | **Diluted EPS** | $1.87 | $1.73 | $0.14 | - Electric Utilities' operating income increased by **$3.5 million**, mainly due to new rates and rider recovery from the Wyoming Electric rate review and lower operating expenses[16](index=16&type=chunk) - Gas Utilities' operating income rose by **$16.2 million**, driven by new rates from Colorado and Wyoming rate reviews, favorable commodity contract adjustments, and lower operating expenses, despite unfavorable weather[16](index=16&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, planning to fund its capital expenditure program through operating cash flow and financing, despite a revised credit outlook - Net cash provided by operating activities was **$233.4 million** for Q1 2024, a decrease of **$95.3 million** from Q1 2023, primarily due to changes in regulatory assets and working capital driven by commodity price fluctuations[70](index=70&type=chunk)[166](index=166&type=chunk) - Net cash used in investing activities increased by **$75.4 million** year-over-year, driven by higher capital expenditures on projects like Ready Wyoming and the acquisition of an RNG facility[170](index=170&type=chunk) - The company plans to refinance its **$600 million**, 1.037% senior unsecured notes that are due on August 23, 2024[175](index=175&type=chunk) Capital Expenditure Forecast (2024-2028) | Year (in millions) | 2024 | 2025 | 2026 | 2027 | 2028 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Electric Utilities** | $409 | $287 | $466 | $199 | $264 | | **Gas Utilities** | $407 | $387 | $368 | $372 | $373 | | **Corporate & Other** | $24 | $29 | $29 | $27 | $29 | | **Incremental Projects** | - | $100 | $400 | $50 | $50 | | **Total** | **$840** | **$803** | **$1,263** | **$648** | **$716** | - On April 22, 2024, the board declared a quarterly dividend of **$0.65 per share**, equivalent to an annual dividend of **$2.60 per share**[185](index=185&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk disclosures from the 2023 Annual Report on Form 10-K - There have been no material changes to the company's disclosures about market risk from the 2023 Annual Report on Form 10-K[181](index=181&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[188](index=188&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2024[190](index=190&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to prior disclosures for legal proceedings, indicating no new material developments in the current quarter - For information on legal proceedings, the company refers to disclosures in its 2023 Form 10-K, implying no new material legal proceedings in Q1 2024[191](index=191&type=chunk) [Risk Factors](index=36&type=page&id=Item%201A.%20Risk%20Factors) There are no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There are no material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K[192](index=192&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired shares for tax withholding related to equity compensation plans, not as part of a formal repurchase program - A total of **14,599 shares** were acquired during Q1 2024 for tax withholding purposes related to equity compensation plans, not as part of a formal buyback program[193](index=193&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosure information, as required by the Dodd-Frank Act, is provided in Exhibit 95 of this report - Mine safety disclosure information is provided in Exhibit 95[197](index=197&type=chunk) [Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the first quarter of 2024 - No directors or officers entered into or modified any Rule 10b5-1 trading plans during Q1 2024[198](index=198&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications, mine safety data, and XBRL data files