Northwestern reports 11 percent rise in 2001 net income

SIOUX FALLS, S.D. – Feb. 7, 2002 – NorthWestern Corporation today reported full-year 2001 net income of $56.7 million or $2.03 per diluted share before restructuring charges, up 11 percent from the $49.6 million or $1.83 per diluted share reported in 2000.

These results are in line with previously announced expectations of between $2.00 and $2.03 earnings per share before charges.

“In addition to our reported recurring results of $2.03 per share, we have made substantial progress to further strengthen our energy and communications businesses for long-term growth and value creation,” said Merle D. Lewis, NorthWestern’s chairman and chief executive officer. “NorthWestern’s businesses are positioned to achieve improved performance, and we reaffirm our previously announced 2002 earnings per share guidance of between $2.30 to $2.55.”

Revenues for the fourth quarter of 2001 were $797 million, compared with $2.5 billion in the same quarter in 2000. Revenues for full-year 2001 were $4.2 billion, down from $7.1 billion in 2000. Revenues for both the fourth quarter and full-year 2001 were lower due primarily to the sale and exit of certain natural gas and crude oil businesses of CornerStone Propane along with lower commodity prices.

In addition, NorthWestern announced that it expects to close its pending acquisition of The Montana Power Company’s energy transmission and distribution business by mid-February.

“With the recent unanimous approval by the Montana Public Service Commission and clearance by the Federal Trade Commission, we have received all necessary regulatory approvals to complete this transaction,” Lewis said. “Combining Montana Power’s successful utility business with NorthWestern’s strong energy business will create a solid platform for substantially increased cash flow and a foundation for our value creation strategy of growth in earnings and dividends. This strategy is evidenced by the fourth quarter dividend increase of 6.7 percent, marking our 18th consecutive year for increasing dividends.”

CornerStone announced on Jan. 18, 2002, it had retained Credit Suisse First Boston Corporation to pursue strategic options, including the possible sale or merger of the Partnership. NorthWestern represents the largest unitholder of CornerStone and owns all of the stock of the managing general partner.

“We fully support CornerStone’s action as it is consistent with our strategic intent to continue to narrow the focus of NorthWestern’s energy and communications businesses,” Lewis said. “As we have noted, CornerStone has historically been a minor contributor to NorthWestern’s earnings and cash flow. By excluding CornerStone and adding Montana Power’s utility operations, approximately two-thirds of NorthWestern’s targeted 2002 earnings before interest, taxes, depreciation and amortization (EBITDA) is attributable to our utility businesses.”

As previously announced, NorthWestern recorded a pre-tax restructuring charge of $25 million in the fourth quarter of 2001 associated with its Operational Excellence initiative which is focused on reducing annualized selling, general and administrative (SG&A) expenses by $150 million. Including the charge, NorthWestern reported fourth quarter net income of $5.1 million or 12 cents per diluted share, compared to $15.7 million or 60 cents per diluted share in the fourth quarter of 2000. Net income for 2001 including the charge was $44.5 million or $1.53 per diluted share.

Dividend Actions
During the fourth quarter, NorthWestern announced a quarterly dividend increase to 313/4 cents per share on the Company’s common stock payable Dec. 1, 2001. The quarterly common stock dividend is equivalent to an annual rate of $1.27, an 8-cent or 6.7 percent increase over the previous annual dividend rate. Consistent with its strategy of growing both earnings and dividends, NorthWestern has increased dividends on its common stock for 18 consecutive years and has paid dividends for 55 consecutive years.

On Feb. 6, 2002, the Board of Directors announced another quarterly dividend of 313/4 cents per share on the Company’s common stock payable March 1, 2002, to shareholders of record on Feb. 15, 2002.

Business Segment Results
NorthWestern’s electric and natural gas business segment, NorthWestern Services Group, reported strong results for 2001 with operating income of $50.4 million, before restructuring charges, up 33 percent or $12.4 million, compared with 2000. Revenues for the year totaled $251.2 million, up from $181.3 million in 2000. In the fourth quarter 2001, operating income before restructuring charges totaled $8.6 million, down $1.6 million from the same period in 2000 due to milder weather conditions and reduced wholesale electricity sales.

NorthWestern’s President and Chief Operating Officer Richard R. Hylland said, “Overall, our core energy business showed healthy growth again in 2001, aided by favorable wholesale electricity sales in the first half of the year. Our underlying electricity and natural gas distribution business continues to perform well and will show substantial revenue growth and earnings accretion in 2002 following the completion of the Montana Power transaction.”

Fourth quarter results for Expanets, NorthWestern’s communications business, showed continued improvement, with EBITDA before restructuring charges reflecting a loss of $1.6 million, compared with a loss of $13.2 million for the same quarter in 2000. Further, the fourth quarter 2001 results include approximately $10 million in identified nonrecurring transition and integration costs as Expanets advanced the migration of its business toward a common information technology platform.

SG&A expenses for the fourth quarter reflect a reduction of $25.4 million, or 23 percent, from the same quarter in 2000 and a reduction of $19.9 million, or 19 percent, from the third quarter of 2001, representing actions taken by the company to resize its business and reduce its cost structure. For the full year, Expanets reported an EBITDA loss before nonrecurring charges of $47.5 million, of which $37.7 million occurred during the first quarter prior to the restructuring of Expanets’ agreement with Avaya, Inc., compared with positive EBITDA of $12.6 million in 2000. Identified nonrecurring transition and integration costs totaled $36 million during 2001 and $24 million in 2000. Revenues for fourth quarter 2001 were $217.5 million, compared with $293.5 million in fourth quarter 2000. For the full year, revenues were $1.0 billion, compared with $1.1 billion in 2000.

“Expanets took several important steps during the fourth quarter and throughout the year that should provide major building blocks for achieving its targets in 2002. First, the company further resized its cost structure and substantially reduced expenses to reflect changing market conditions in the communications industry.

In late November, Expanets also introduced a new information technology system infrastructure that when fully implemented should enable the company to more efficiently develop and deploy communications solutions for clients while reducing operating expenses. This project is part of Expanets’ previously announced plan to exit from the costly transition services agreements entered into in connection with the purchase of the Growing and Emerging Markets (GEM) division of Lucent Technologies.

This is an extensive project involving substantial data migration from third-party legacy systems to the new Expanets system and the launching of a new integrated customer care, billing, order processing and information technology system. Expanets’ process teams addressed initial delays in the integration of the new system and continue to make progress toward full implementation of the system,” Hylland said.

“Expanets’ focus on value-added services and solutions at the customer premises, as opposed to commodity-based services such as a broadband networks, has enabled it to maintain a core level of recurring customer revenues, even in the face of challenging economic conditions. We believe Expanets is well positioned with a cost structure to meet our performance expectations in 2002,” Hylland added.

“As we highlighted in our Nov. 30, 2001, webcast presentation, we are targeting an improvement in Expanets’ EBITDA in 2002 of approximately $130 million resulting from cost reductions and efficiencies across the business. Specifically, the improvement is targeted to come from the completion of activities generating the nonrecurring transition and integration costs incurred during 2001 ($36 million), nonrecurring expenses attributable to the new information technology system when fully implemented ($14 million), and SG&A reductions resulting principally from cost improvement and resizing initiatives during 2001 ($80 million).”

Blue Dot, NorthWestern’s heating, ventilation, air conditioning (HVAC) and plumbing services provider, reported full-year 2001 EBITDA before restructuring charges of $9.9 million, compared with $18.4 million in 2000. Revenues improved to $423.8 million for full-year 2001, compared with $408.8 million in 2000 due to the acquisition of certain locations during 2000 and 2001.

Reported EBITDA before restructuring charges for the fourth quarter 2001 reflects a loss of $2.4 million, compared with positive EBITDA of $1.7 million in the same period in 2000. Revenues during the fourth quarter 2001 were $101.2 million, compared with $109.9 million in the same quarter in 2000. Included in the fourth quarter 2001 results are approximately $6 million in negative adjustments relating principally to the carrying value of inventory and receivables at certain locations.

“Blue Dot’s results during the fourth quarter were impacted by continued soft economic conditions, nonrecurring charges taken at business locations that are undergoing restructuring and the relocation of its corporate headquarters to Sioux Falls,” said Hylland. “Blue Dot’s new management team is implementing a plan to improve performance by maximizing higher margin services, implementing new systems and processes, enhancing efficiency and improving underperforming business locations.”

Fourth quarter EBITDA from CornerStone Propane (NYSE:CNO) was $21.6 million, before nonrecurring losses totaling approximately $5.9 million primarily related to the sale of CornerStone’s remaining crude and natural gas businesses, compared with $35.2 million in the fourth quarter of 2000.

The propane distribution company results were significantly impacted by near record warm weather in the fourth quarter, which reduced retail gallons sold by 28 percent compared with the fourth quarter of 2000. Revenues for the quarter were $427 million, compared with $2.1 billion in same quarter in 2000. Full-year 2001 revenues were $2.5 billion, compared with $5.4 billion in 2000. Revenues for both the fourth quarter and full-year 2001 were lower due primarily to the sale and exit of certain natural gas and crude oil businesses along with lower commodity prices.

The action taken by CornerStone in January to pursue strategic options will be considered in conjunction with NorthWestern’s required adoption of Financial Accounting Standard 142, “Goodwill and Other Intangible Assets” and Financial Accounting Standard 144, “Impairment or Disposal of Long-Lived Assets” effective Jan. 1, 2002. It is likely that substantially all of NorthWestern’s nearly $40 million net carrying value in CornerStone will be taken as a non-cash adoption during the first quarter 2002.

About NorthWestern
NorthWestern Corporation, a FORTUNE 500 company, is a provider of services and solutions to more than 2 million customers across America in the energy and communications sectors.

NorthWestern’s partner entities include NorthWestern Services Group, a provider of electric, natural gas and communications services to Upper Plains customers; Expanets, one of the largest mid-market providers of networked communications solutions and services in the United States; Blue Dot, a provider of air conditioning, heating, plumbing and related services; and CornerStone Propane Partners L.P.
For more information, visit the company’s web site at


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