Northwestern Corporation (NYSE:NWE) Q2 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 03:00 pm ET


Northwestern Corporation (NYSE:NWE) Q2 2020 Earnings Conference Call - Final Transcript


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Robert Rowe

a contract basis, we design our service to meet the customers' expectations in terms of affordability, environmental sensitivity and sustainability and reliability. And it's a location where we have the opportunity to try some of the exciting new distributed technologies that we're looking at.

So it's a small but important part of who we are in the area we serve. Second quarter highlights. Net income for the second quarter decreased $26.2 million compared to same period last year. This was driven primarily by an income tax benefit received in 2019, by lower gross margin due to impact of COVID-19, as we discussed last quarter, and then by higher depreciation expenses. These were offset in part by a decrease in operating, general and administrative and by some customer growth. Diluted EPS decreased $0.51 as compared to the same period last year. Diluted non-GAAP EPS decreased $0.08 per share after adjusting for income tax benefits noted and the normal weather.

The Board of Directors declared a quarterly dividend of $0.60 per share payable September 30 to shareholders of record as of September 15. I will get a chance to come back and talk about customer engagement and employee health and safety as part of our COVID response in the Q&A. But we continue to be doing very, very well on both those fronts.

And with that, I'll turn it over to Brian.

Brian Bird

Thanks, Bob. On page four of the presentation is the summary financial results for the second quarter. As Bob pointed out, our net income is down $26.2 million. As I look at this slide, there are really three themes jump out at main. Gross margin is down $6.7 million on a year-over-year basis. All of that negative variance could be reflected by two 2019 favorable impacts. The second thing I might point out is the reduction in OG&A expenses that we had during the quarter more than offset the increases in property tax, depreciation and interest expense. And the third theme is the $21.5 million negative variance in income taxes, is all attributed to a 2019 favorable impact, of course, on a year-over-year basis.

So taking those things into consideration, we feel we actually had a very good quarter, in line with our expectations from a COVID perspective. And with that, I'll turn you to the following page on gross margin. Gross margin was off $6.7 million or about 3%, as I pointed out, all of that really attributed to our electric business. You look at the primary drivers of the $8.2 million of change in gross margin actually impacts net income. The very first two items, Montana electric supply cost recovery, that item is after some favorable legislation we received. We were able to treat our PCCAM is slightly different, and we made a favorable adjustment in 2019 associated with that. That's $4.4 million. And then this year, our QF gain was $3.3 million less than the QF gain we had in 2019.

Those two items together are eight