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NorthWestern Reports 2012 Financial Results

February 14, 2013

SIOUX FALLS, S.D., Feb. 14, 2013 /PRNewswire/ — NorthWestern Corporation, d/b/a NorthWestern Energy (NYSE: NWE), reported financial results for the year ended December 31, 2012. Net income was $98.4 million, or $2.66 per diluted share, for the year ended December 31, 2012, compared with net income of $92.6 million, or $2.53 per diluted share, for the year ended December 31, 2011.

“Our net income and cash flows from operations improved in 2012, compared with 2011. Those results were driven by higher gross margin, primarily due to a favorable arbitration decision, partially offset by higher operating expenses, an impairment charge related to our decision to shelve the Mountain States Transmission Intertie (MSTI) project and higher income taxes,” said Bob Rowe, Chief Executive Officer. “Our continued focus is to remain committed to funding our distribution system infrastructure project and transmission infrastructure improvements while we seek additional regulated energy supply resources to provide our customers long-term price stability and resource adequacy.”

    Annual Summary Financial Results

                                        Three Months Ended December 31,           Twelve Months Ended December 31,
                                        2012                           2011               2012                 2011
    Total Revenues                              $280,773                     $283,209                               $1,070,342          $1,117,316
    Cost of Sales                     67,550                        124,036                     395,434                        494,559
    Gross Margin                     213,223                        159,173                     674,908                        622,757
                                     -------                        -------                     -------                        -------
    Operating Expenses
    Operating, general and
     administrative                   74,241                         63,906                     269,966                        267,160
    Mountain States
     Transmission Intertie
     impairment                            -                              -                      24,039                             -
    Property and other taxes          23,279                         20,571                      97,674                         89,122
    Depreciation                      26,680                         25,364                     106,044                        100,926
                                      ------                         ------                     -------                        -------
    Total Operating Expenses         124,200                        109,841                     497,723                        457,208
                                     -------                        -------                     -------                        -------
    Operating Income                  89,023                         49,332                     177,185                        165,549
                                      ------                         ------                     -------                        -------
    Interest Expense, net            (15,464)                      (16,122)                     (65,062)                       (66,859)
    Other Income                       1,238                          1,674                       4,372                          3,931
                                       -----                          -----                       -----                          -----
    Income Before Income Taxes        74,797                         34,884                     116,495                        102,621
    Income Tax Expense               (16,100)                          (768)                    (18,089)                       (10,065)
                                     -------                           ----                     -------                        -------
    Net Income                                   $58,697                      $34,116                                  $98,406             $92,556
    Average Common Shares
     Outstanding                      37,218                         36,271                      36,847                         36,258
                                      ------                         ------                      ------                         ------
    Basic Earnings per Average
     Common Share                                  $1.58                        $0.94                                    $2.67               $2.55
    Diluted Earnings per
     Average Common Share                          $1.57                        $0.93                                    $2.66               $2.53
    Dividends Declared per
     Average Common Share                          $0.37                        $0.36                                    $1.48               $1.44
                                                   -----                        -----                                    -----               -----

Significant items during 2012

  • Improvement in net income of approximately $5.9 million as compared with 2011, due primarily to:
    • Higher gross margin of $52.2 million, largely due to a $47.9 million pre-tax gain associated with a favorable arbitration decision;
    • Higher operating expenses of $40.5 million, primarily due to:
      • a charge of approximately $24.0 million in the third quarter of 2012 for the impairment of substantially all of the capitalized preliminary survey and investigative costs associated with the MSTI project; and
      • higher other operating expenses of $16.5 million, primarily related to property taxes and depreciation;
    • a reduction of interest expense of $1.8 million due to lower rates on debt outstanding and higher capitalization of accumulated funds used during construction on projects; and
    • higher income tax expense of $8.0 million.
  • Purchased and placed into service the 40 MW Spion Kop wind project in Montana for approximately $84 million.
  • Received approval from the MPSC to include our Battle Creek production assets in natural gas rate base.
  • Purchased natural gas production interests in northern Montana’s Bear Paw Basin for approximately $19 million.
  • Successfully accessed the capital markets to fund growth projects and extend debt maturities by:
    • Entering into an equity distribution agreement with UBS Securities LLC. Under this agreement we have received net proceeds of approximately $28.5 million from the sale of 815,416 common shares, after commissions and other fees; and
    • Issuing $90 million of first mortgage bonds at 4.15% and $60 million of first mortgage bonds at 4.30%, maturing in 2042 and 2052, respectively.
    Summary Financial Results
    The following table reconciles the primary changes from 2011 to 2012:

                                                                                  Year Ended
                                                                                  ----------
                                                               Pre-tax      Net       EPS
                                                               Income    Income(1)  Diluted
                                                               ------    --------   -------

             2011 reported                                                  $102.6                        $92.6 $2.53

    Gross Margin
             Gain on qualifying facility arbitration               47.9                29.5                0.79
             DSM lost revenues                                      5.9                 3.6                0.10
             Montana property tax tracker                           4.0                 2.5                0.07
             Gas production                                         3.3                 2.0                0.05
             Transmission capacity                                  2.3                 1.4                0.04
             South Dakota natural gas rate increase                 1.7                 1.0                0.03
             Natural gas retail volumes                            (5.5)               (3.4)             (0.09)
             Electric retail volumes                               (1.5)               (0.9)             (0.02)
             DGGS revenues                                         (3.8)               (2.3)             (0.06)
             Operating expenses recovered in trackers              (1.3)               (0.8)             (0.02)
             Other                                                 (0.8)               (0.5)             (0.01)
                                                                  -----
                            Subtotal - Gross Margin                52.2                32.1                0.88
    OG&A Expense
             Legal and professional fees                           (3.9)               (2.4)             (0.06)
             Employee benefits and labor                           (2.8)               (1.7)             (0.05)
             Plant operator costs                                   1.9                 1.2                0.03
              Nonemployee directors deferred
              compensation                                          1.7                 1.0                0.03
             Operating expenses recovered in trackers               1.3                 0.8                0.02
             Other                                                 (1.0)               (0.6)             (0.02)
                                                                  -----
                            Subtotal - OG&A Expense                (2.8)               (1.7)             (0.05)
    Other
             MSTI impairment                                      (24.0)              (14.8)             (0.40)
             Depreciation expense                                  (5.1)               (3.1)             (0.08)
             Property and other taxes                              (8.6)               (5.3)             (0.14)
             Interest expense                                       1.8                 1.1                0.03
             Other income                                           0.5                 0.3                0.01
    Items related to income tax and other items
              Prior year permanent return to accrual
              adjustments                                                     (2.0)               (0.05)
             Flow-through repairs deductions                                   3.0                 0.08
              Flow-through of state bonus depreciation
              deduction                                                       (4.8)               (0.13)
             State income tax and other, net                                   0.7                 0.02
             Impact of higher share count                                             (0.04)
             All other, net                                        (0.2)                0.3                   -
                                                                  -----

                            Total EPS impact of above items                            0.13

             2012 reported                                                  $116.5                        $98.4 $2.66
                                                                    ===
    (1) Income Tax Benefit (Expense) calculation on reconciling items assumes effective tax rate of 38.5%.

For more information see www.northwesternenergy.com/documents/investor/Q412.pdf

Significant Drivers

Gross Margin

Consolidated gross margin for the year ended December 31, 2012 was $674.9 million compared with $622.7 million for the same period of 2011. Consolidated gross margin increased $52.2 million primarily due to:

  • A $47.9 million pre-tax gain associated with a favorable arbitration decision related to a dispute over energy and capacity rates on a QF contract;
  • An increase in demand side management lost revenues recovered through our supply trackers related to efficiency measures implemented by customers;
  • An increase in Montana property taxes included in a tracker as compared to 2011;
  • An increase in gas production margin due to the inclusion of Battle Creek in rates, including approximately $1.1 million that we had deferred in prior periods based on the difference between our cost of service and current natural gas market prices. The acquisition of the Bear Paw Basin assets in the third quarter of 2012 also contributed to the higher gas production margin;
  • An increase in transmission capacity revenues due to higher demand to transmit energy for others across our transmission lines; and
  • An increase in South Dakota natural gas rates implemented in December 2011.

These increases were partly offset by the following:

  • A decrease in natural gas retail volumes, and to a lesser extent electric residential retail volumes, due primarily to warmer winter and spring weather;
  • Lower Dave Gates Generating Station (DGGS) related revenues primarily due to the deferral of an additional $13.7 million of DGGS FERC jurisdictional revenues, offset in part by higher DGGS Montana Public Service Commission (MPSC) jurisdictional revenues of approximately $7.2 million due to the regulatory flow-through treatment of the state bonus depreciation deduction during 2011 and approximately $2.7 million that we had deferred in 2011 pending outcome of allocation uncertainty in Montana; and
  • Lower revenues for operating expenses recovered in trackers, primarily due to lower environmental remediation costs, partly offset by increases in costs for customer efficiency programs.

Operating, General and Administrative Expenses

Consolidated operating, general and administrative expenses were $270.0 million for the year ended December 31, 2012 as compared with $267.2 million during the same period of 2011. The increase in operating, general and administrative expenses of $2.8 million was primarily due to:

  • An increase in legal and professional fees due in part to the DGGS FERC proceeding, the QF arbitration matter and asset acquisitions discussed above; and
  • Higher employee benefits and labor expenses primarily due to increased medical costs in 2012.

These increases were partly offset by the following:

  • Lower plant operator costs at Colstrip Unit 4 and Big Stone offset in part by higher plant operator costs at Coyote due to the timing of scheduled maintenance;
  • Non-employee directors deferred compensation decreased as compared to the prior year, primarily due to changes in our stock price. Directors may defer their board fees into deferred shares held in a rabbi trust. If the market value of our stock goes up, deferred compensation expense increases; however, we account for the deferred shares as trading securities and their increase in value is reflected in other income with no impact on net income; and
  • Lower operating expenses recovered from customers primarily due to lower environmental remediation costs, partly offset by increases in costs for customer efficiency programs. These costs are included in our supply trackers and have no impact on operating income.

MSTI

We recorded a pre-tax charge of approximately $24.0 million in the third quarter of 2012 for the impairment of substantially all of the capitalized preliminary survey and investigative costs associated with MSTI.

Property and Other Taxes

Consolidated property and other taxes were $97.7 million for the year ended December 31, 2012 as compared with $89.1 million during the same period of 2011. This increase was due primarily to higher assessed property valuations in Montana and plant additions.

Depreciation Expense

Consolidated depreciation expense was $106.0 million for the year ended December 31, 2012 as compared with $100.9 million during the same period of 2011. This increase was due primarily to plant additions.

Interest Expense

Consolidated interest expense was $65.1 million for the year ended December 31, 2012 as compared with $66.9 million during the same period of 2011. The decrease was primarily due to lower interest rates on debt outstanding and higher capitalization of AFUDC.

Income Tax Expense

Consolidated income tax expense for the year ended December 31, 2012 was $18.1 million as compared with $10.1 million in same period of 2011. The effective tax rate for the year ended December 31, 2012 was 15.5% as compared with 9.8% for the same period of 2011. The increase in income tax expense for 2012 was primarily due to higher taxable income. The effective tax rate differs from the federal statutory tax rate of 35% primarily due to repairs and state tax bonus depreciation deductions.

The following table summarizes the significant differences from the Federal statutory rate, which result in reduced income tax expense:

                                     Year Ended December 31,
                                          (in millions)
                                       2012               2011
                                       ----               ----
    Income Before Income Taxes                $116.5                  $102.6
                                              ------                  ------

    Income tax calculated at 35%
     Federal statutory rate           (40.8)                   (35.9)

    Permanent or flow through
     adjustments:
    -------------------------
    Flow-through repairs deductions    16.4                     13.4
    Flow-through of state bonus
     depreciation deduction             2.8                      7.6
    Recognition of state NOL benefit    2.4                      2.4
    Prior year permanent return to
     accrual adjustments                1.9                      3.9
    State income tax & other, net      (0.8)                    (1.5)
                                       ----                     ----
                                       22.7                     25.8
                                       ----                     ----

    Income tax expense                        $(18.1)                 $(10.1)
                                              ======                  ======

Regulated Operations

In the regulated operations for the year ended December 31, 2012, electric gross margin improved by $57.4 million, due primarily to the $47.9 million pre-tax gain related to the favorable arbitration decision related to the QF dispute and an increase in demand side management lost revenues recovered in supply trackers.

Natural gas gross margin declined by $5.1 million, due primarily to reduced retail volumes driven by warmer winter and spring weather.

Fourth Quarter Financial Results

Consolidated net income for the fourth quarter ended December 31, 2012, was $58.7 million, or $1.57/diluted share, compared with $34.1 million, or $.93/diluted share for the fourth quarter in 2011.

The increase was primarily due to an increase in gross margin, driven by the pre-tax gain on the favorable arbitration decision related to the QF dispute, offset by increases in operating expenses and income tax expense, when compared with the prior fourth quarter.

Liquidity and Capital Resources

As of December 31, 2012, cash and cash equivalents were $9.8 million compared with $5.9 million at December 31, 2011. The Company had $173.6 million available from its revolving credit facility at December 31, 2012, compared with $130.1 million at December 31, 2011.

Dividend Increase

NorthWestern’s Board of Directors declared a quarterly common stock dividend of $0.38 per share, an increase from $.37 per share, payable March 31, 2013, to common shareholders of record as of March 15, 2013.

Significant Items Not Contemplated in 2012 Guidance

A reconciliation of items not factored into our 2012 earnings guidance of $2.30 to $2.40 per diluted earnings per share is as follows (net of tax). The amount calculated below represents a non-GAAP measure that may provide users of this financial information with additional meaningful information regarding the impact of certain items on the Company’s expected earnings. The Company believes the following presentation is more representative of our ongoing earnings than the GAAP EPS, also represented below. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the reported operating results or cash flows from operations or any other measure of performance prepared in accordance with GAAP. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use.

                       Actual    Actual  Actual   Actual
                       Q1 2012   Q2 2012 Q3 2012  Q4 2012          2012
                       -------   ------- -------  -------          ----

    Reported Diluted
     EPS                           $0.88                     $0.31             $(0.10)        $1.57 $2.66

    Non-GAAP
     Adjustments:
    -------------

    Weather                0.09             0.05            (0.06)       0.06           0.14
    Release of DGGS
     deferral             (0.05)               -                 -          -          (0.05)
    Lost revenue
     recovery related
     to 2010/2011             -            (0.05)                -          -          (0.05)
    DGGS -FERC ALJ
     initial decision
     related to 2011          -                -              0.12          -           0.12
    MSTI impairment           -                -              0.40          -           0.40
    QF decision
     (favorable)                                     (0.79)             (0.79)
    Income tax benefit
     -MT NOL                                         (0.06)             (0.06)
                                                     -----              -----
    Adjusted Diluted
     EPS                           $0.92                     $0.31              $0.36         $0.78 $2.37
                                   =====                     =====              =====         ===== =====

2013 Earnings Outlook

NorthWestern expects its 2013 earnings to be $2.40 – 2.55 per diluted share.

                                                     Bridge
    2012 Reported GAAP (diluted EPS)                      $2.66

    2012 Non-GAAP adjustments:

    Weather                                               $0.14
    Release of MPSC DGGS deferral                        $(0.05)
    Lost revenue recovery related to 2010/2011           $(0.05)
    DGGS -FERC ALJ Decision -portion related
     to 2011 (unfavorable)                                $0.12
    MSTI Impairment (unfavorable)                         $0.40
    QF Decision (favorable)                              $(0.79)
    Income tax adjustment - benefit from MT NOL          $(0.06)

    2012 Non-GAAP Earnings                                $2.37

    2013 Expectations/Assumptions

    Gross Margin increase over 2012              $0.20            $0.25
    Spion Kop wind & Bear Paw gas fields
     addition                                    $0.10            $0.13
    Decrease in pension expense                  $0.31            $0.32
    Increase in DSIP expenses                   $(0.23)          $(0.22)
    Scheduled maintenance at jointly owned
     plants                                     $(0.08)          $(0.07)
    Increased operating expenses                $(0.09)          $(0.08)
    Increased property taxes (ex Spion Kop &
     Bear Paw)                                  $(0.07)          $(0.06)
    Increased depreciation expense              $(0.09)          $(0.09)
    Increased AFUDC (debt and equity)            $0.05            $0.05
    Dilution estimated on equity issuance       $(0.07)          $(0.05)

    2013 Expectations/Assumptions                $0.03            $0.18

    2013 diluted EPS Range                       $2.40            $2.55
                                                 -----            -----

Basic assumptions include the following expectations:

  • A consolidated income tax rate of approximately 12% – 16% of pre-tax income;
  • Colstrip Unit 4, Big Stone, and Coyote generation plants are scheduled for routine maintenance during second quarter of 2013
  • Diluted average shares outstanding of 38.1 million; and
  • Normal weather in the Company’s electric and natural gas service territories for 2013.

Company Hosting Investor Conference Call

NorthWestern will host an investor conference call today at 4:00 pm Eastern Time to review its financial results for the year ended December 31, 2012.

The conference call will be webcast live on the Internet at http://www.northwesternenergy.com under the “Investor Information” heading. To listen, please go to the site at least 10 minutes in advance of the call to register. An archived webcast will be available shortly after the call.

A telephonic replay of the call will be available beginning at 6:00 p.m. ET on February 14, 2013 through March 14, 2013, at (888) 203-1112 access code 7514599.

Annual Meeting

The Company’s Annual Meeting of Stockholders will be held on Thursday, April 25, 2013, in Huron, South Dakota. The record date for the annual meeting is February 25, 2013. The annual meeting notice, proxy statement, annual report to stockholders and voting instructions will be provided approximately 40 days prior to the meeting date to stockholders as of the record date.

About NorthWestern Energy

NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 673,200 customers in Montana, South Dakota and Nebraska. More information on NorthWestern Energy is available on the Company’s Web site at www.northwesternenergy.com.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, the information under “2013 Earnings Outlook”. Forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” These statements are based upon our current expectations and speak only as of the date hereof. Our actual future business and financial performance may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including, but not limited to:

  • potential adverse federal, state, or local legislation or regulation or adverse determinations by regulators could have a material effect on our liquidity, results of operations and financial condition;
  • changes in availability of trade credit, creditworthiness of counterparties, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments, may reduce revenues or may increase operating costs, each of which could adversely affect our liquidity and results of operations;
  • unscheduled generation outages or forced reductions in output, maintenance or repairs, which may reduce revenues and increase cost of sales or may require additional capital expenditures or other increased operating costs; and
  • adverse changes in general economic and competitive conditions in the U.S. financial markets and in our service territories.

Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors that may affect our business, results of operations and financial condition.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measure

This press release includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and adjusted EPS, that are considered a “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Gross Margin (Revenues less Cost of Sales) is a non-GAAP financial measure due to the exclusion of depreciation from the measure. The presentation of Gross Margin is intended to supplement investors’ understanding of our operating performance. Gross Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow recovery of operating costs. Our Gross Margin measure may not be comparable to other companies’ Gross Margin measure. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

                                                                     NORTHWESTERN CORPORATION
                                                            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                                            (Unaudited)
                                                             (in thousands, except per share amounts)

                                  Three Months Ended December 31,                        Twelve Months Ended December 31,
                                  2012                           2011                   2012                2011
                                  ----                           ----                   ----                ----
    Revenues
    Electric                              $199,838                                  $195,538                               $805,554  $797,562
    Gas                         80,582                         87,364                           263,394                     318,335
    Other                          353                            307                             1,394                       1,419
                                   ---                            ---                             -----                       -----
    Total Revenues             280,773                        283,209                         1,070,342                   1,117,316
                               -------                        -------                         ---------                   ---------
    Operating Expenses
    Cost of Sales               67,550                        124,036                           395,434                     494,559
    Operating, general and
     administrative             74,241                         63,906                           269,966                     267,160
    Mountain States
     Transmission Intertie
     impairment                      -                              -                            24,039                           -
    Property and other taxes    23,279                         20,571                            97,674                      89,122
    Depreciation                26,680                         25,364                           106,044                     100,926
                                ------                         ------                           -------                     -------
    Total Operating Expenses   191,750                        233,877                           893,157                     951,767
                               -------                        -------                           -------                     -------
    Operating Income            89,023                         49,332                           177,185                     165,549
    Interest Expense, net      (15,464)                      (16,122)                           (65,062)                    (66,859)
    Other Income                 1,238                          1,674                             4,372                       3,931
                                 -----                          -----                             -----                       -----
    Income Before Income Taxes  74,797                         34,884                           116,495                     102,621
    Income Tax Expense         (16,100)                          (768)                          (18,089)                    (10,065)
                               -------                           ----                           -------                     -------
    Net Income                             $58,697                                   $34,116                                $98,406   $92,556
    Average Common Shares
     Outstanding                37,218                         36,271                            36,847                      36,258
                                ------                         ------                            ------                      ------
    Basic Earnings per Average
     Common Share                            $1.58                                     $0.94                                  $2.67     $2.55
    Diluted Earnings per
     Average Common Share                    $1.57                                     $0.93                                  $2.66     $2.53
    Dividends Declared per
     Average Common Share                    $0.37                                     $0.36                                  $1.48     $1.44
                                             -----                                     -----                                  -----     -----

                                       NORTHWESTERN CORPORATION
                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                              (Unaudited)
                                            (in thousands)

                                        December 31, 2012              December 31, 2011
                                        -----------------              -----------------

    ASSETS
    Current Assets                                            $303,128                     $290,199
    Property, Plant, and
     Equipment, Net                             2,435,590                      2,213,267
    Goodwill                                      355,128                        355,128
    Regulatory Assets                             367,890                        308,804
    Other Noncurrent Assets                        23,797                         43,040
                                                   ------                         ------
    Total Assets                                            $3,485,533                   $3,210,438
                                                            ==========                   ==========
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current Maturities of Long-
     term Debt and Capital
     Leases                                                     $1,612                       $5,162
    Short-term Borrowings                         122,934                        166,934
    Other Current Liabilities                     324,719                        303,858
    Long-term Capital Leases                       31,562                         32,918
    Long-term Debt                              1,055,074                        905,049
    Noncurrent Regulatory
     Liabilities                                  276,618                        265,987
    Deferred Income Taxes                         363,928                        282,406
    Other Noncurrent Liabilities                  375,054                        389,012
                                                  -------                        -------
    Total Liabilities                           2,551,501                      2,351,326
                                                ---------                      ---------
    Total Shareholders' Equity                    934,032                        859,112
                                                  -------                        -------
    Total Liabilities and
     Shareholders' Equity                                   $3,485,533                   $3,210,438
                                                            ==========                   ==========

                                            NORTHWESTERN CORPORATION
                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (in thousands)

                                    Twelve Months Ended December 31,
                                    --------------------------------
                          2012                           2011                   2010
                          ----                           ----                   ----
    Operating
     Activities
    Net income                    $98,406                                    $92,556           $77,376
    Non-cash items     132,029                        167,090                          137,448
    Changes in
     operating assets
     and liabilities    20,758                        (25,889)                           4,096
                        ------                        -------                            -----
    Cash Provided by
     Operating
     Activities        251,193                        233,757                          218,920

    Cash Used in
     Investing
     Activities       (322,213)                     (188,521)                        (240,676)

    Cash Provided
     (Used in)
     Financing
     Activities         74,914                        (45,542)                          23,646

    Net Increase
     (Decrease) in
     Cash and Cash
     Equivalents         3,894                           (306)                           1,890
                         -----                           ----                            -----
    Cash and Cash
     Equivalents,
     beginning of
     period              5,928                          6,234                            4,344
                         -----                          -----                            -----
    Cash and Cash
     Equivalents, end
     of period                     $9,822                                     $5,928            $6,234
                                   ======                                     ======            ======

                                        NORTHWESTERN CORPORATION
                                       REGULATED ELECTRIC SEGMENT
                                    Twelve Months Ended December 31,
                                               (Unaudited)

                                       Results
                                       -------
                   2012         2011             Change              % Change
                   ----         ----             ------              --------
                                (dollars in millions)
     Retail
     revenue             $747.9                              $729.7              $18.2   2.5%
     Regulatory
     amortization  10.0                   8.6                             1.4     16.3%
                   ----                   ---                             ---     ----
       Total
        retail
        revenues  757.9                 738.3                            19.6      2.7%
    Transmission   46.4                  44.1                             2.3      5.2%
     Ancillary
     Services      (6.1)                  7.8                           (13.9) (178.2)%
    Wholesale       3.0                   1.9                             1.1     57.9%
    Other           4.4                   5.4                            (1.0)  (18.5)%
                    ---                   ---                            ----   ------
    Total
     Revenues            $805.6                              $797.5               $8.1   1.0%
    Total
     Cost
     of
     Sales        277.8                 327.1                           (49.3)  (15.1)%
                  -----                 -----                           -----   ------
    Gross
     Margin              $527.8                              $470.4              $57.4  12.2%
                         ------                              ------              -----  ----

                                  Revenues            Megawatt Hours (MWH)       Avg. Customer Counts
                                  --------            -------------------       --------------------
                             2012               2011          2012       2011         2012   2011
                             ----               ----          ----       ----         ----   ----
                                           (in thousands)
    Retail Electric
    Montana                       $255,623                $250,988             2,356        2,394          273,984             272,131
    South Dakota           47,696             46,869                 544               565          48,929          48,685
                           ------             ------                 ---               ---          ------          ------
        Residential       303,319            297,857               2,900             2,959         322,913         320,816
                          -------            -------               -----             -----         -------         -------
    Montana               308,077            302,591               3,199             3,197          62,102          61,571
    South Dakota           69,639             65,614                 938               919          12,113          11,946
                           ------             ------                 ---               ---          ------          ------
    Commercial            377,716            368,205               4,137             4,116          74,215          73,517
                          -------            -------               -----             -----          ------          ------
    Industrial             37,835             37,378               2,876             2,833              74              72
    Other                  29,074             26,298                 199               170           5,990           5,875
                           ------             ------                 ---               ---           -----           -----
    Total Retail Electric         $747,944                $729,738            10,112       10,078          403,192             400,280
                                  ========                ========            ======       ======          =======             =======
    Total Wholesale
     Electric                       $2,959                  $1,928               183          106              N/A         N/A
                              ===   ======                  ======               ===          ===              ===         ===

                   Degree Days                    2012 as compared with:
                   -----------                    ----------------------
     Heating
     Degree-
     Days     2012     2011          Historic Average                               2011 Historic Average
              ----     ----          ----------------                               ---- ----------------
    Montana  7,331             8,094                7,959                 9% warmer        8% warmer
    South
     Dakota  6,387             8,074                7,773                21% warmer       18% warmer

                                                       NORTHWESTERN CORPORATION
                                                    REGULATED NATURAL GAS SEGMENT
                                                   Twelve Months Ended December 31,
                                                             (Unaudited)

                                                   Results
                                                   -------
                                2012        2011             Change             % Change
                                ----        ----             ------             --------
                                            (dollars in millions)
    Retail revenues                  $220.8                             $274.8            $(54.0) (19.7)%
    Regulatory amortization      7.9                  2.5                            5.4   216.0
                                 ---                  ---                            ---   -----
         Total retail revenues 228.7                277.3                          (48.6)  (17.5)
    Wholesale and other         34.7                 41.0                           (6.3)  (15.4)
                                ----                 ----                           ----   -----
    Total Revenues             263.4                318.3                          (54.9)  (17.2)
    Total Cost of Sales        117.6                167.4                          (49.8)  (29.7)
                               -----                -----                          -----   -----
    Gross Margin                     $145.8                             $150.9             $(5.1)  (3.4)%
                                     ------                             ------             -----   -----

                              Revenue               Dekatherms (Dkt)        Avg. Customer Counts
                              -------                ---------------        --------------------
                        2012               2011          2012        2011          2012   2011
                        ----               ----          ----        ----          ----   ----
                                      (in thousands)
    Retail Gas
    Montana                  $102,884                $124,001             11,826        13,170          159,431         158,514
    South Dakota      21,085             25,633                2,351              2,918          37,915          37,515
    Nebraska          19,223             23,855                2,129              2,605          36,595          36,586
                      ------             ------                -----              -----          ------          ------
    Residential      143,192            173,489               16,306             18,693         233,941         232,615
                     -------            -------               ------             ------         -------         -------
    Montana           51,978             63,346                6,082              6,787          22,326          22,176
    South Dakota      13,446             18,591                2,116              2,665           5,980           5,915
    Nebraska          10,250             16,915                1,674              2,668           4,580           4,586
                      ------             ------                -----              -----           -----           -----
    Commercial        75,674             98,852                9,872             12,120          32,886          32,677
                      ------             ------                -----             ------          ------          ------
    Industrial         1,021              1,464                  121                162             272             278
    Other                905              1,044                  118                126             150             147
                         ---              -----                  ---                ---             ---             ---
    Total Retail Gas         $220,792                $274,849             26,417        31,101          267,249         265,717
                             ========                ========             ======        ======          =======         =======

                   Degree Days                  2012 as compared with:
                   -----------                  ----------------------
    Heating
     Degree-
     Days     2012    2011          Historic Average                              2011 Historic Average
              ----    ----          ----------------                              ---- ----------------
    Montana  7,331            8,094               7,959                9% warmer         8% warmer
    South
     Dakota  6,387            8,074               7,773                21% warmer       18% warmer
    Nebraska 5,175            6,493               6,432                20% warmer       20% warmer

                                                                 NORTHWESTERN CORPORATION
                                                              FOURTH QUARTER SEGMENT RESULTS
                                                                       (Unaudited)
                                                                      (in thousands)

    Three Months Ended
    December 31, 2012    Electric            Gas         Other             Eliminations              Total
                         --------            ---         -----             ------------              -----
    Operating revenues              $199,838           $80,582                                  $353             $    - $280,773
    Cost of sales           32,923             34,626                 -                            -        67,549
                            ------             ------               ---                          ---        ------
    Gross margin           166,915             45,956               353                            -       213,224
                           -------             ------               ---                          ---       -------
    Operating, general
     and administrative     49,847             20,573             3,821                            -        74,241
    Property and other
     taxes                  17,129              6,147                 3                            -        23,279
    Depreciation            21,789              4,883                 8                            -        26,680
                            ------              -----               ---                          ---        ------
    Operating income
     (loss)                 78,150             14,353           (3,479)                            -        89,024
                            ------             ------            ------                          ---        ------
    Interest expense       (12,861)           (2,404)              (199)                           -       (15,464)
    Other income               812                399                27                            -         1,238
    Income tax (expense)
     benefit               (17,368)              (443)              420                            -       (17,391)
                           -------               ----               ---                          ---       -------
    Net income (loss)                $48,733           $11,905                               $(3,231)            $    -  $57,407
                                     -------           -------                               -------           ---  ---  -------

    Three Months Ended
    December 31, 2011    Electric            Gas        Other          Eliminations         Total
                         --------            ---        -----          ------------         -----
    Operating revenues              $195,538          $87,364                          $307             $    - $283,209
    Cost of sales           80,534             43,502               -                     -       124,036
                            ------             ------             ---                   ---       -------
    Gross margin           115,004             43,862             307                     -       159,173
                           -------             ------             ---                   ---       -------
    Operating, general
     and administrative     43,235             19,781             890                     -        63,906
    Property and other
     taxes                  15,488              5,080               3                     -        20,571
    Depreciation            20,656              4,701               7                     -        25,364
                            ------              -----             ---                   ---        ------
    Operating income
     (loss)                 35,625             14,300            (593)                    -        49,332
                            ------             ------            ----                   ---        ------
    Interest expense       (13,518)           (2,327)            (277)                    -       (16,122)
    Other income             1,140                507              27                     -         1,674
    Income tax (expense)
     benefit                 5,496            (3,191)         (3,073)                     -          (768)
                             -----             ------          ------                   ---          ----
    Net income (loss)                $28,743           $9,289                       $(3,916)            $    -  $34,116
                                     -------           ------                       -------           ---  ---  -------

    Twelve Months Ended
    December 31, 2012    Electric            Gas          Other          Eliminations         Total
                         --------            ---          -----          ------------         -----
    Operating revenues              $805,554           $263,394                       $1,394              $    - $1,070,342
    Cost of sales          277,826            117,608                 -                    -        395,434
                           -------            -------               ---                  ---        -------
    Gross margin           527,728            145,786             1,394                    -        674,908
                           -------            -------             -----                  ---        -------
    Operating, general
     and administrative    187,599             75,971             6,396                    -        269,966
    MSTI impairment         24,039                  -                 -                    -         24,039
    Property and other
     taxes                  72,755             24,907                12                    -         97,674
    Depreciation            86,559             19,452                33                    -        106,044
                            ------             ------               ---                  ---        -------
    Operating income
     (loss)                156,776             25,456           (5,047)                    -        177,185
                           -------             ------            ------                  ---        -------
    Interest expense       (55,118)           (9,063)              (881)                   -        (65,062)
    Other income             2,630              1,633               109                    -          4,372
    Income tax (expense)
     benefit               (22,298)              (692)            4,901                    -        (18,089)
                           -------               ----             -----                  ---        -------
    Net income (loss)                $81,990            $17,334                        $(918)             $    -    $98,406
                                     -------            -------                        -----            ---  ---    -------

    Twelve Months Ended
    December 31, 2011      Electric            Gas          Other          Eliminations        Total
                           --------            ---          -----          ------------        -----
    Operating revenues                $797,562            $318,335                      $1,419             $    - $1,117,316
    Cost of sales            327,126             167,433                 -                   -       494,559
                             -------             -------               ---                 ---       -------
    Gross margin             470,436             150,902             1,419                   -       622,757
                             -------             -------             -----                 ---       -------
    Operating, general and
     administrative          183,503              80,431             3,226                   -       267,160
    Property and other
     taxes                    66,425              22,686                11                   -        89,122
    Depreciation              81,859              19,034                33                   -       100,926
                              ------              ------               ---                 ---       -------
    Operating income
     (loss)                  138,649              28,751           (1,851)                   -       165,549
                             -------              ------            ------                 ---       -------
    Interest expense         (54,394)           (10,432)           (2,033)                   -       (66,859)
    Other income               2,563               1,258               110                   -         3,931
    Income tax (expense)
     benefit                 (14,049)             (3,472)            7,456                   -       (10,065)
                             -------              ------             -----                 ---       -------
    Net income (loss)                  $72,769             $16,105                      $3,682             $    -    $92,556
                                       -------             -------                      ------           ---  ---    -------

SOURCE NorthWestern Corporation


Source: PR Newswire