10-Q 1 nwe-20220331.htm 10-Q nwe-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(mark one)  
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2022
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to          

Commission File Number: 1-10499
nwe-20220331_g1.jpg
NORTHWESTERN CORP
(Exact name of registrant as specified in its charter)
Delaware 46-0172280
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
3010 W. 69th StreetSioux FallsSouth Dakota 57108
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 605-978-2900

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockNWENasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, Par Value $0.01, 54,138,852 shares outstanding at April 22, 2022
1


NORTHWESTERN CORPORATION
 
FORM 10-Q
 
INDEX
 Page
 
 
 
 
2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

On one or more occasions, we may make statements in this Quarterly Report on Form 10-Q regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements other than statements of historical facts, included or incorporated by reference in this Quarterly Report, relating to our current expectations of future financial performance, continued growth, changes in economic conditions or capital markets and changes in customer usage patterns and preferences are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Words or phrases such as “anticipates," “may," “will," “should," “believes," “estimates," “expects," “intends," “plans," “predicts," “projects," “targets," “will likely result," “will continue" or similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. We caution that while we make such statements in good faith and believe such statements are based on reasonable assumptions, including without limitation, our examination of historical operating trends, data contained in records and other data available from third parties, we cannot assure you that we will achieve our projections. Factors that may cause such differences include, but are not limited to:

adverse determinations by regulators, as well as potential adverse federal, state, or local legislation or regulation, including costs of compliance with existing and future environmental requirements, could have a material effect on our liquidity, results of operations and financial condition;
the impact of extraordinary external events and natural disasters, such as the COVID-19 pandemic, geopolitical events, earthquake, flood, drought, lightning, weather, wind, and fire, on our liquidity, results of operations and financial condition;
acts of terrorism, cybersecurity attacks, data security breaches, or other malicious acts that cause damage to our generation, transmission, or distribution facilities, information technology systems, or result in the release of confidential customer, employee, or Company information;
supply chain constraints, recent high levels of inflation for product, services and labor costs, and their impact on capital expenditures, operating activities, and/or our ability to safely and reliably serve our customers;
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 operating costs 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.

We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectation regarding the relevant matter or subject area. In addition to the items specifically discussed above, our business and results of operations are subject to the uncertainties described under the caption “Risk Factors” which is part of the disclosure included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

From time to time, oral or written forward-looking statements are also included in our reports on Forms 10-K, 10-Q and 8-K, Proxy Statements on Schedule 14A, press releases, analyst and investor conference calls, and other communications released to the public. We believe that at the time made, the expectations reflected in all of these forward-looking statements are and will be reasonable. However, any or all of the forward-looking statements in this Quarterly Report on Form 10-Q, our reports on Forms 10-K and 8-K, our other reports on Form 10-Q, our Proxy Statements on Schedule 14A and any other public statements that are made by us may prove to be incorrect. This may occur as a result of assumptions, which turn out to be inaccurate, or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this Quarterly Report on Form 10-Q, certain of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of any of our forward-looking statements in this Quarterly Report on Form 10-Q or other public communications as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

3


We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent reports filed with the Securities and Exchange Commission (SEC) on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

Unless the context requires otherwise, references to “we,” “us,” “our,” “NorthWestern Corporation,” “NorthWestern Energy,” and “NorthWestern” refer specifically to NorthWestern Corporation and its subsidiaries.

4


PART 1. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS
 

NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
(Unaudited)
 
(in thousands, except per share amounts)
 
 Three Months Ended March 31,
 20222021
Revenues  
Electric$271,727 $270,071 
Gas122,755 130,732 
Total Revenues394,482 400,803 
Operating expenses 
Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below)135,073 144,513 
Operating and maintenance52,794 51,797 
Administrative and general31,644 29,055 
Property and other taxes46,850 47,478 
Depreciation and depletion48,905 46,975 
Total Operating Expenses315,266 319,818 
Operating income79,216 80,985 
Interest expense, net(23,716)(23,510)
Other income, net4,721 5,574 
Income before income taxes60,221 63,049 
Income tax (expense) benefit(1,111)22 
Net Income $59,110 $63,071 
Average Common Shares Outstanding54,097 50,631 
Basic Earnings per Average Common Share$1.09 $1.25 
Diluted Earnings per Average Common Share$1.08 $1.24 
Dividends Declared per Common Share$0.63 $0.62 
See Notes to Condensed Consolidated Financial Statements
 
5



NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
(Unaudited)
 
(in thousands)
 
Three Months Ended March 31,
 20222021
Net Income $59,110 $63,071 
Other comprehensive income, net of tax:
  Foreign currency translation adjustment(2)(76)
Postretirement medical liability adjustment(158)(158)
Reclassification of net losses on derivative instruments113 113 
Total Other Comprehensive (Loss) Income(47)(121)
Comprehensive Income$59,063 $62,950 

See Notes to Condensed Consolidated Financial Statements
 
6



NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Unaudited)

(in thousands, except share data)
 March 31,
2022
December 31,
2021
ASSETS  
Current Assets:  
Cash and cash equivalents$13,645 $2,820 
Restricted cash17,253 15,942 
Accounts receivable, net173,735 198,671 
Inventories70,609 80,614 
Regulatory assets100,580 115,541 
Prepaid expenses and other23,027 24,207 
      Total current assets 398,849 437,795 
Property, plant, and equipment, net5,317,518 5,247,232 
Goodwill357,586 357,586 
Regulatory assets698,438 690,686 
Other noncurrent assets49,644 47,144 
      Total Assets $6,822,035 $6,780,443 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Current Liabilities:  
Current maturities of finance leases$2,928 $2,875 
Accounts payable99,926 115,237 
Accrued expenses and other279,395 233,351 
Regulatory liabilities27,176 28,179 
      Total current liabilities 409,425 379,642 
Long-term finance leases11,151 11,897 
Long-term debt2,508,867 2,541,478 
Deferred income taxes509,039 499,634 
Noncurrent regulatory liabilities642,840 638,760 
Other noncurrent liabilities373,732 369,319 
      Total Liabilities 4,455,054 4,440,730 
Commitments and Contingencies (Note 10)
Shareholders' Equity:  
Common stock, par value $0.01; authorized 200,000,000 shares; issued and outstanding 57,692,048 and 54,136,509 shares, respectively; Preferred stock, par value 0.01; authorized 50,000,000 shares; none issued
577 576 
Treasury stock at cost(98,986)(98,248)
Paid-in capital1,719,070 1,716,227 
Retained earnings753,677 728,468 
Accumulated other comprehensive loss(7,357)(7,310)
Total Shareholders' Equity 2,366,981 2,339,713 
Total Liabilities and Shareholders' Equity$6,822,035 $6,780,443 

See Notes to Condensed Consolidated Financial Statements
7



NORTHWESTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 Three Months Ended March 31,
 20222021
OPERATING ACTIVITIES:  
Net income$59,110 $63,071 
Items not affecting cash: 
Depreciation and depletion48,905 46,975 
Amortization of debt issuance costs, discount and deferred hedge gain1,270 1,303 
Stock-based compensation costs2,757 3,223 
Equity portion of allowance for funds used during construction(3,116)(1,985)
Gain on disposition of assets(1)(57)
Deferred income taxes(6,558)(2,706)
Changes in current assets and liabilities:
Accounts receivable24,936 5,230 
Inventories10,005 4,183 
Other current assets1,181 (455)
Accounts payable(3,432)(16,591)
Accrued expenses and other46,119 63,169 
Regulatory assets14,961 (54,195)
Regulatory liabilities(1,003)(23,228)
Other noncurrent assets7,153 (1,682)
Other noncurrent liabilities(6,621)(20,656)
Cash Provided by Operating Activities195,666 65,599 
INVESTING ACTIVITIES:  
Property, plant, and equipment additions(115,502)(77,854)
Investment in equity securities(567) 
Cash Used in Investing Activities(116,069)(77,854)
FINANCING ACTIVITIES:  
Dividends on common stock(33,901)(31,124)
Issuance of long-term debt, net 99,915 
   Line of credit (repayments) borrowings, net(33,000)49,000 
Repayments of short-term borrowings (100,000)
Other financing activities, net(560)(742)
Cash (Used in) Provided by Financing Activities(67,461)17,049 
Increase in Cash, Cash Equivalents, and Restricted Cash12,136 4,794 
Cash, Cash Equivalents, and Restricted Cash, beginning of period18,762 17,096 
Cash, Cash Equivalents, and Restricted Cash, end of period $30,898 $21,890 
Supplemental Cash Flow Information:  
Cash paid during the period for:  
Interest14,152 13,765 
Significant non-cash transactions:  
Capital expenditures included in accounts payable17,156 18,089 

See Notes to Condensed Consolidated Financial Statements
8




NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except per share data)

Three Months Ended March 31,
Number of Common SharesNumber of Treasury SharesCommon StockTreasury StockPaid in CapitalRetained EarningsAccumulated Other Comprehensive Loss Total Shareholders' Equity
Balance at December 31, 202054,145 3,558 $541 $(98,075)$1,513,787 $670,111 $(7,269)$2,079,095 
Net income     63,071  63,071 
Foreign currency translation adjustment, net of tax      (76)(76)
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      113 113 
Postretirement medical liability adjustment, net of tax      (158)(158)
Stock-based compensation93 17 1 (970)3,211  2,242 
Issuance of shares (12) 315 357   672 
Dividends on common stock ($0.620 per share)
     (31,124) (31,124)
Balance at March 31, 202154,2383,563$542 $(98,730)$1,517,355 $702,058 $(7,390)$2,113,835 
Balance at December 31, 202157,6063,546$576 $(98,248)$1,716,227 $728,468 $(7,310)$2,339,713 
Net income     59,110  59,110 
Foreign currency translation adjustment, net of tax      (2)(2)
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      113 113 
Postretirement medical liability adjustment, net of tax      (158)(158)
Stock-based compensation87 16 1 (911)2,746  1,836 
Issuance of shares(6)173 97  270 
Dividends on common stock ($0.630 per share)
     (33,901) (33,901)
Balance at March 31, 202257,6933,556$577 $(98,986)$1,719,070 $753,677 $(7,357)$2,366,981 

See Notes to Condensed Consolidated Financial Statements

9



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements included in NorthWestern Corporation’s Annual Report)
(Unaudited)

(1) Nature of Operations and Basis of Consolidation
 
NorthWestern Corporation, doing business as NorthWestern Energy, provides electricity and/or natural gas to approximately 753,600 customers in Montana, South Dakota, Nebraska and Yellowstone National Park.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires us to make estimates and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates. The unaudited Condensed Consolidated Financial Statements (Financial Statements) reflect all adjustments (which unless otherwise noted are normal and recurring in nature) that are, in our opinion, necessary to fairly present our financial position, results of operations and cash flows. The actual results for the interim periods are not necessarily indicative of the operating results to be expected for a full year or for other interim periods. Events occurring subsequent to March 31, 2022 have been evaluated as to their potential impact to the Financial Statements through the date of issuance.

The Financial Statements included herein have been prepared by NorthWestern, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe that the condensed disclosures provided are adequate to make the information presented not misleading. We recommend that these Financial Statements be read in conjunction with the audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassification

In 2021, we renamed the line item "Cost of sales" as previously shown on the Consolidated Statements of Income, and used elsewhere within our filing, to "Fuel, purchased supply and direct transmission expense." Additionally, we disaggregated the line item "Operating, general and administrative" as previously shown on the Consolidated Statements of Income, and used elsewhere within our filing, to two line items, "Operating and maintenance" and "Administrative and general." These reclassifications were done in an effort to better convey the nature of these costs and did not impact reported operating income or net income.

Supplemental Cash Flow Information

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
March 31,December 31,March 31,December 31,
2022202120212020
Cash and cash equivalents$13,645 $2,820 $8,925 $5,811 
Restricted cash17,253 15,942 12,965 11,285 
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows$30,898 $18,762 $21,890 $17,096 

(2) Regulatory Matters

Federal Energy Regulatory Commission (FERC) Financial Audit

We are subject to FERC’s jurisdiction and regulations with respect to rates for electric transmission service in interstate commerce and electricity sold at wholesale rates, the issuance of certain securities, and incurrence of certain long-term debt, among other things. The Division of Audits and Accounting in the Office of Enforcement of FERC initiated a routine audit of NorthWestern Corporation for the period of January 1, 2018 to the present to evaluate our compliance with FERC accounting and financial reporting requirements. We responded to several sets of data requests as part of the audit process and in April
10



2022 received a draft audit report from FERC. Based on review of the draft report, we believe final resolution of the identified audit findings and recommendations will not have a material financial impact on us.

(3) Income Taxes
 
We compute income tax expense for each quarter based on the estimated annual effective tax rate for the year, adjusted for certain discrete items. Our effective tax rate typically differs from the federal statutory tax rate due to the regulatory impact of flowing through the federal and state tax benefit of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable) and production tax credits. The regulatory accounting treatment of these deductions requires immediate income recognition for temporary tax differences of this type, which is referred to as the flow-through method. When the flow-through method of accounting for temporary differences is reflected in regulated revenues, we record deferred income taxes and establish related regulatory assets and liabilities.

The following table summarizes the differences between our effective tax rate and the federal statutory rate (in thousands):
 Three Months Ended March 31,
20222021
Income before income taxes$60,221 $63,049 
Income tax calculated at federal statutory rate12,646 21.0 %13,240 21.0 %
Permanent or flow-through adjustments:
State income tax, net of federal provisions 400 0.7 55 0.1 
Flow-through repairs deductions(6,801)(11.3)(7,853)(12.5)
Production tax credits(3,824)(6.4)(4,307)(6.8)
Amortization of excess deferred income tax(411)(0.7)(265)(0.4)
Plant and depreciation of flow-through items(255)(0.4)(340)(0.5)
Share-based compensation(253)(0.4)(261)(0.4)
Other, net(391)(0.7)(291)(0.5)
(11,535)(19.2)(13,262)(21.0)
Income tax expense (benefit) $1,111 1.8 %$(22)0.0 %
Uncertain Tax Positions

We recognize tax positions that meet the more-likely-than-not threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We had unrecognized tax benefits of approximately $31.6 million as of March 31, 2022, including approximately $28.1 million that, if recognized, would impact our effective tax rate. We do not anticipate that total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within the next twelve months.

Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2022, we have accrued $0.7 million for the payment of interest and penalties on the Condensed Consolidated Balance Sheets. As of December 31, 2021, we had accrued $0.5 million for the payment of interest and penalties on the Condensed Consolidated Balance Sheets.

Tax years 2018 and forward remain subject to examination by the Internal Revenue Service and state taxing authorities.

(4) Comprehensive (Loss) Income

The following tables display the components of Other Comprehensive (Loss) Income, after-tax, and the related tax effects (in thousands):
11



Three Months Ended
March 31, 2022March 31, 2021
 Before-Tax AmountTax ExpenseNet-of-Tax AmountBefore-Tax AmountTax ExpenseNet-of-Tax Amount
Foreign currency translation adjustment$(2)$ $(2)$(76)$ $(76)
Reclassification of net income on derivative instruments153 (40)113 153 (40)113 
Postretirement medical liability adjustment(212)54 (158)(212)54 (158)
Other comprehensive (loss) income$(61)$14 $(47)$(135)$14 $(121)

Balances by classification included within accumulated other comprehensive loss (AOCL) on the Condensed Consolidated Balance Sheets are as follows, net of tax (in thousands):
 March 31, 2022December 31, 2021
Foreign currency translation$1,441 $1,443 
Derivative instruments designated as cash flow hedges(10,164)(10,277)
Postretirement medical plans1,366 1,524 
Accumulated other comprehensive loss$(7,357)$(7,310)

The following tables display the changes in AOCL by component, net of tax (in thousands):
Three Months Ended
March 31, 2022
Affected Line Item in the Condensed Consolidated Statements of IncomeInterest Rate Derivative Instruments Designated as Cash Flow HedgesPostretirement Medical PlansForeign Currency TranslationTotal
Beginning balance$(10,277)$1,524 $1,443 $(7,310)
Other comprehensive income before reclassifications  (2)(2)
Amounts reclassified from AOCLInterest Expense113   113 
Amounts reclassified from AOCL (158) (158)
Net current-period other comprehensive income (loss)113 (158)(2)(47)
Ending balance$(10,164)$1,366 $1,441 $(7,357)
12




Three Months Ended
March 31, 2021
Affected Line Item in the Condensed Consolidated Statements of IncomeInterest Rate Derivative Instruments Designated as Cash Flow HedgesPostretirement Medical PlansForeign Currency TranslationTotal
Beginning balance$(10,729)$1,960 $1,500 $(7,269)
Other comprehensive loss before reclassifications  (76)(76)
Amounts reclassified from AOCLInterest Expense113   113 
Amounts reclassified from AOCL (158) (158)
Net current-period other comprehensive income (loss)113 (158)(76)(121)
Ending balance$(10,616)$1,802 $1,424 $(7,390)
(5) Financing Activities

On November 17, 2021, we announced a registered public offering of 6,074,767 shares of our common stock at a public offering price of $53.50 per share, for an issuance amount of $325.0 million. In conjunction with this offering, we granted the underwriters an option to purchase up to 911,215 additional shares, which was subsequently exercised in full, for an additional issuance amount of $48.8 million. Of the total 6,985,982 shares of common stock offered, we initially sold 1,401,869 shares, for $75.0 million in gross proceeds, directly to the underwriters in the offering, with cash proceeds received at closing. The remaining 5,584,113 shares were sold under forward sales agreements which provide for settlement on a settlement date or dates to be specified at our discretion, but which is expected to occur on or prior to February 28, 2023. The cumulative shares issued under the forward sales agreement is limited to one and one-half times the base number of shares within the agreement, or 8,376,170 shares.

The forward sales agreements will be physically settled with common shares issued by us, unless we elect to settle the agreements in cash or to net share settle the agreements, subject to certain conditions. On a settlement date or dates, if we decide to physically settle the forward sales agreement, we will issue shares of common stock to the forward purchaser at the then-applicable forward sale price and receive issuance proceeds at that time. The forward sale price will initially be $51.8950 per share, which is subject to adjustment based on a floating interest rate factor equal to the overnight bank funding rate less a spread of 75.00 basis points, and will be subject to decrease on certain dates specified in the forward sale agreement by amounts related to expected dividends on shares of common stock during the term of the forward sale agreement.

At March 31, 2022, the forward agreements could have been settled with physical delivery of 5,584,113 common shares to the banking counterparty in exchange for cash of $282.1 million. The forward instruments could have also been settled at March 31, 2022, with delivery of $41.2 million of cash or 705,342 shares of common stock to the counterparty, if we elected net cash or net share settlement, respectively.

13



(6) Segment Information
 
Our reportable business segments are primarily engaged in the electric and natural gas business. The remainder of our operations are presented as other, which primarily consists of unallocated corporate costs and unregulated activity.

We evaluate the performance of these segments based on utility margin. The accounting policies of the operating segments are the same as the parent except that the parent allocates some of its operating expenses to the operating segments according to a methodology designed by us for internal reporting purposes and involves estimates and assumptions.

Financial data for the business segments are as follows (in thousands):
Three Months Ended    
March 31, 2022ElectricGasOtherEliminationsTotal
Operating revenues$271,727 $122,755 $ $ $394,482 
Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below)77,623 57,450   135,073 
Utility margin194,104 65,305   259,409 
Operating and maintenance39,501 13,293   52,794 
Administrative and general22,737 8,652 255  31,644 
Property and other taxes36,425 10,423 2  46,850 
Depreciation and depletion40,424 8,481   48,905 
Operating income (loss)55,017 24,456 (257) 79,216 
Interest expense, net(18,969)(3,390)(1,357) (23,716)
Other income, net2,982 1,530 209  4,721 
Income tax (expense) benefit(994)(1,382)1,265  (1,111)
Net income (loss)$38,036 $21,214 $(140)$ $59,110 
Total assets$5,523,726 $1,291,946 $6,363 $ $6,822,035 
Capital expenditures$98,609 $16,893 $ $ $115,502 

Three Months Ended
March 31, 2021ElectricGasOtherEliminationsTotal
Operating revenues$270,071 $130,732 $ $ $400,803 
Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below)80,188 64,325   144,513 
Utility margin189,883 66,407   256,290 
Operating and maintenance38,206 13,591   51,797 
Administrative and general19,549 7,588 1,918  29,055 
Property and other taxes37,027 10,449 2  47,478 
Depreciation and depletion38,684 8,291   46,975 
Operating income (loss)56,417 26,488 (1,920) 80,985 
Interest expense, net(20,729)(1,488)(1,293) (23,510)
Other income, net2,829 983 1,762  5,574 
Income tax benefit (expense)115 (2,022)1,929  22 
Net income$38,632 $23,961 $478 $ $63,071 
Total assets(1)
$5,220,632 $1,270,686 $11,495 $ $6,502,813 
Capital expenditures$68,940 $8,914 $ $ $77,854 

14



(1) Subsequent to the issuance of our Annual Report on Form 10-K for the year ended December 31, 2020, we determined that Total Assets - Electric and Total Assets - Gas had been incorrectly reported due to an error in the allocation methodology utilized to calculate assets by segment. As a result, the March 31, 2021 Total Assets - Electric and Total Assets - Gas amounts have been corrected from the amounts previously reported to reflect an increase of Total Assets - Electric and a decrease of Total Assets - Gas of $484.8 million. The correction had no impact on net income or the presentation of total assets on the condensed consolidated balance sheets and was determined not to be material.
(7)  Revenue from Contracts with Customers

Nature of Goods and Services

We provide retail electric and natural gas services to three primary customer classes. Our residential customers include single private dwellings and individual apartments. Our commercial customers consist primarily of main street businesses, and our industrial customers consist primarily of manufacturing and processing businesses that turn raw materials into products.

Electric Segment - Our regulated electric utility business primarily provides generation, transmission, and distribution services to customers in our Montana and South Dakota jurisdictions. We recognize revenue when electricity is delivered to the customer. Payments on our tariff-based sales are generally due 20-30 days after the billing date.

Natural Gas Segment - Our regulated natural gas utility business primarily provides production, storage, transmission, and distribution services to customers in our Montana, South Dakota, and Nebraska jurisdictions. We recognize revenue when natural gas is delivered to the customer. Payments on our tariff-based sales are generally due 20-30 days after the billing date.

Disaggregation of Revenue

The following tables disaggregate our revenue by major source and customer class (in millions):
Three Months Ended
March 31, 2022March 31, 2021
ElectricNatural GasTotalElectricNatural GasTotal
Montana$97.0 $52.3 $149.3 $96.0 $47.0 $