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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 endedJune 30, 2021
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
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, 51,561,227 shares outstanding at July 23, 2021
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 management's 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, management’s 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, such as the COVID-19 pandemic, 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.

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.

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.

3


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 June 30,Six Months Ended June 30,
 2021202020212020
Revenues  
Electric$241,440 $217,938 $511,511 $462,563 
Gas56,777 51,422 187,509 142,052 
Total Revenues298,217 269,360 699,020 604,615 
Operating Expenses 
Cost of sales67,965 61,043 212,478 152,315 
Operating, general and administrative77,113 71,715 157,965 150,720 
Property and other taxes47,287 46,981 94,765 91,480 
Depreciation and depletion46,809 44,782 93,784 90,047 
Total Operating Expenses239,174 224,521 558,992 484,562 
Operating Income59,043 44,839 140,028 120,053 
Interest Expense, net(23,473)(24,287)(46,983)(48,621)
Other Income (Expense), net3,032 224 8,606 (1,758)
Income Before Income Taxes38,602 20,776 101,651 69,674 
Income Tax (Expense) Benefit(1,365)718 (1,343)2,524 
Net Income $37,237 $21,494 $100,308 $72,198 
Average Common Shares Outstanding50,989 50,570 50,811 50,538 
Basic Earnings per Average Common Share$0.72 $0.43 $1.97 $1.43 
Diluted Earnings per Average Common Share$0.72 $0.43 $1.96 $1.43 
Dividends Declared per Common Share$0.62 $0.60 $1.24 $1.20 
See Notes to Condensed Consolidated Financial Statements
 
4



NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
(Unaudited)
 
(in thousands)
 
Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net Income $37,237 $21,494 $100,308 $72,198 
Other comprehensive income, net of tax:
  Foreign currency translation adjustment21 (8)(55)93 
Postretirement medical liability adjustment(159) (317) 
Reclassification of net losses on derivative instruments113 113 226 226 
Total Other Comprehensive (Loss) Income(25)105 (146)319 
Comprehensive Income$37,212 $21,599 $100,162 $72,517 

See Notes to Condensed Consolidated Financial Statements
 
5



NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Unaudited)

(in thousands, except share data)
 June 30,
2021
December 31,
2020
ASSETS  
Current Assets:  
Cash and cash equivalents$5,942 $5,811 
Restricted cash13,656 11,285 
Accounts receivable, net143,497 168,229 
Inventories69,946 61,010 
Regulatory assets95,326 44,973 
Prepaid expenses and other19,365 17,372 
      Total current assets 347,732 308,680 
Property, plant, and equipment, net5,071,826 4,952,935 
Goodwill357,586 357,586 
Regulatory assets724,575 701,444 
Other noncurrent assets64,521 68,804 
      Total Assets $6,566,240 $6,389,449 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Current Liabilities:  
Current maturities of finance leases$2,768 $2,668 
Short term borrowings 100,000 
Accounts payable89,622 100,388 
Accrued expenses230,444 207,514 
Regulatory liabilities25,618 55,853 
      Total current liabilities 348,452 466,423 
Long-term finance leases13,388 14,771 
Long-term debt2,503,347 2,315,261 
Deferred income taxes494,477 471,777 
Noncurrent regulatory liabilities631,127 631,419 
Other noncurrent liabilities398,134 410,703 
      Total Liabilities 4,388,925 4,310,354 
Commitments and Contingencies (Note 10)
Shareholders' Equity:  
Common stock, par value $0.01; authorized 200,000,000 shares; issued and outstanding 55,117,575 and 51,560,013 shares, respectively; Preferred stock, par value 0.01; authorized 50,000,000 shares; none issued
551 541 
Treasury stock at cost(98,578)(98,075)
Paid-in capital1,575,159 1,513,787 
Retained earnings707,598 670,111 
Accumulated other comprehensive loss(7,415)(7,269)
Total Shareholders' Equity 2,177,315 2,079,095 
Total Liabilities and Shareholders' Equity$6,566,240 $6,389,449 

See Notes to Condensed Consolidated Financial Statements
6



NORTHWESTERN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 Six Months Ended June 30,
 20212020
OPERATING ACTIVITIES:  
Net income$100,308 $72,198 
Items not affecting cash: 
Depreciation and depletion93,784 90,047 
Amortization of debt issuance costs, discount and deferred hedge gain2,637 2,371 
Stock-based compensation costs4,538 4,195 
Equity portion of allowance for funds used during construction(4,562)(2,318)
(Gain) loss on disposition of assets(55)3 
Deferred income taxes(641) 
Changes in current assets and liabilities:
Accounts receivable24,732 42,301 
Inventories(8,936)(7,299)
Other current assets(1,994)570 
Accounts payable(15,042)(7,319)
Accrued expenses22,828 9,382 
Regulatory assets(50,353)6,912 
Regulatory liabilities(30,235)12,365 
Other noncurrent assets(3,800)(346)
Other noncurrent liabilities(28,689)(3,843)
Cash Provided by Operating Activities104,520 219,219 
INVESTING ACTIVITIES:  
Property, plant, and equipment additions(182,194)(176,482)
Investment in equity securities(646)(37)
Cash Used in Investing Activities(182,840)(176,519)
FINANCING ACTIVITIES:  
Treasury stock activity32 (2,076)
Proceeds from issuance of common stock, net56,311  
Dividends on common stock(62,821)(60,172)
Issuance of long-term debt, net99,915 150,000 
   Line of credit borrowings (repayments), net88,000 (225,000)
(Repayments) issuance of short-term borrowings(100,000)100,000 
Financing costs(615)(1,109)
Cash Provided by (Used in) Financing Activities80,822 (38,357)
Increase in Cash, Cash Equivalents, and Restricted Cash2,502 4,343 
Cash, Cash Equivalents, and Restricted Cash, beginning of period17,096 12,070 
Cash, Cash Equivalents, and Restricted Cash, end of period $19,598 $16,413 
Supplemental Cash Flow Information:  
Cash paid during the period for:  
Income taxes$1,960 $55 
Interest43,474 42,115 
Significant non-cash transactions:  
Capital expenditures included in accounts payable25,955 13,835 
See Notes to Condensed Consolidated Financial Statements
7




NORTHWESTERN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except per share data)

Three Months Ended June 30,
Number of Common SharesNumber of Treasury SharesCommon StockTreasury StockPaid in CapitalRetained EarningsAccumulated Other Comprehensive Loss Total Shareholders' Equity
Balance at March 31, 202054,145 3,578 $541 $(98,644)$1,512,148 $655,865 $(9,434)$2,060,476 
Net income     21,494  21,494 
Foreign currency translation adjustment, net of tax      (8)(8)
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      113 113 
Stock-based compensation    1,139   1,139 
Issuance of shares (7) 206 223   429 
Dividends on common stock ($0.600 per share)
     (30,087) (30,087)
Balance at June 30, 202054,1453,571$541 $(98,438)$1,513,510 $647,272 $(9,329)$2,053,556 
Balance at March 31, 202154,2383,563$542 $(98,730)$1,517,355 $702,058 $(7,390)$2,113,835 
Net income     37,237  37,237 
Foreign currency translation adjustment, net of tax      21 21 
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      113 113 
Postretirement medical liability adjustment, net of tax      (159)(159)
Stock-based compensation    1,299   1,299 
Issuance of shares880 (5)9 152 56,505   56,666 
Dividends on common stock ($0.620 per share)
     (31,697) (31,697)
Balance at June 30, 202155,1183,558$551 $(98,578)$1,575,159 $707,598 $(7,415)$2,177,315 

8



Six Months Ended June 30,
Number  of Common SharesNumber of Treasury SharesCommon StockTreasury StockPaid in CapitalRetained EarningsAccumulated Other Comprehensive Loss Total Shareholders' Equity
Balance at December 31, 201953,999 3,547 $541 $(96,015)$1,508,970 $635,246 $(9,648)$2,039,094 
Net income     72,198  72,198 
Foreign currency translation adjustment, net of tax      93 93 
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      226 226 
Stock-based compensation146 35  (2,740)4,170   1,430 
Issuance of shares (11) 317 370   687 
Dividends on common stock ($1.200 per share)
     (60,172) (60,172)
Balance at June 30, 202054,1453,571$541 $(98,438)$1,513,510 $647,272 $(9,329)$2,053,556 
Balance at December 31, 202054,1453,558$541 $(98,075)$1,513,787 $670,111 $(7,269)$2,079,095 
Net income     100,308  100,308 
Foreign currency translation adjustment, net of tax      (55)(55)
Reclassification of net losses on derivative instruments from OCI to net income, net of tax      226 226 
Postretirement medical liability adjustment, net of tax      (317)(317)
Stock-based compensation93 17 1 (970)4,510   3,541 
Issuance of shares880 (17)9 467 56,862   57,338 
Dividends on common stock ($1.240 per share)
     (62,821) (62,821)
Balance at June 30, 202155,1183,558$551 $(98,578)$1,575,159 $707,598 $(7,415)$2,177,315 
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 743,000 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 management 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 the opinion of management, 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 June 30, 2021 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, management believes that the condensed disclosures provided are adequate to make the information presented not misleading. Management recommends 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, 2020.

Reclassification

In the fourth quarter of 2020, we changed our classification of excess deferred income taxes in the Consolidated Balance Sheets from a regulatory asset to a regulatory liability, such that the excess deferred income tax regulatory liabilities are reflected on a gross basis, rather than net within our income tax regulatory asset based on our right to offset. The impact to our Consolidated Statements of Cash Flows for the six months ended June 30, 2020 is a gross up of non-cash activity within the Other noncurrent assets and Other noncurrent liabilities captions, both within the operating activities section, that offset one another with no impact to cash provided by operating activities. The impact to the total assets reported as of June 30, 2020 in the segment information table within Note 6 - Segment Information was an increase of $169.4 million. This reclassification had no effect on previously reported Net income in our Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, and Condensed Consolidated Statements of Shareholders' Equity.

Variable Interest Entities

A reporting company is required to consolidate a variable interest entity (VIE) as its primary beneficiary, which means it has a controlling financial interest, when it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. An entity is considered to be a VIE when its total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, or its equity investors, as a group, lack the characteristics of having a controlling financial interest. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.

Certain long-term purchase power and tolling contracts may be considered variable interests. We have various long-term purchase power contracts with other utilities and certain qualifying co-generation facilities and qualifying small power production facilities (QF). We identified one QF contract that may constitute a VIE. We entered into a 40-year power purchase contract in 1984 with this 35 megawatt (MW) coal-fired QF to purchase substantially all of the facility’s capacity and electrical output over a substantial portion of its estimated useful life. We absorb a portion of the facility’s variability through annual changes to the price we pay per megawatt hour (MWH). After making exhaustive efforts, we have been unable to obtain the information from the facility necessary to determine whether the facility is a VIE or whether we are the primary beneficiary of the facility. The contract with the facility contains no provision which legally obligates the facility to release this information. We have accounted for this QF contract as an executory contract. Based on the current contract terms with this QF, as of June 30, 2021 our estimated remaining gross contractual payments aggregate approximately $80.7 million through 2024.

10



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):
June 30,December 31,June 30,December 31,
2021202020202019
Cash and cash equivalents$5,942 $5,811 $7,464 $5,145 
Restricted cash13,656 11,285 8,949 6,925 
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows$19,598 $17,096 $16,413 $12,070 

Goodwill

We completed our annual goodwill impairment test as of April 1, 2021 and no impairment was identified. We calculate the fair value of our reporting units by considering various factors, including valuation studies based primarily on a discounted cash flow analysis, with published industry valuations and market data as supporting information. Key assumptions in the determination of fair value include the use of an appropriate discount rate and estimated future cash flows. In estimating cash flows, we incorporate expected long-term growth rates in our service territory, regulatory stability, and commodity prices (where appropriate), as well as other factors that affect our revenue, expense and capital expenditure projections.

(2) Regulatory Matters

FERC Filing - Montana Transmission Service Rates

In May 2019, we submitted a filing with the Federal Energy Regulatory Commission (FERC) for our Montana transmission assets. In June 2019, the FERC issued an order accepting our filing, and granting interim rates (subject to refund) effective July 1, 2019. In November 2020, we filed a settlement and implemented settlement rates on December 1, 2020. In January 2021, the FERC approved our settlement and during the first quarter of 2021 we refunded approximately $20.5 million to our FERC regulated wholesale customers.

Revenues from FERC regulated wholesale customers associated with our Montana FERC assets are reflected in our Montana Public Service Commission (MPSC) jurisdictional rates as a credit to retail customers. In March 2021, we submitted a compliance filing with the MPSC adjusting the revenue credit in our Montana retail rates to reflect the FERC approved settlement rates and a refund to retail customers of the difference between the FERC interim rates and the FERC approved settlement rates that were collected during the period from July 1, 2019 through March 31, 2021. On May 19, 2021, the MPSC approved the proposed tariffs and rates on a final basis. During the three month period ended June 30, 2021, we recognized a $4.7 million favorable adjustment related to excess deferred revenues based on the final MPSC approval. As of June 30, 2021, we had cumulative deferred revenue of approximately $6.1 million.

Montana Community Renewable Energy Projects (CREPs)

We were required to acquire, as of December 31, 2020, approximately 65 MW of CREPs. While we have made progress towards meeting this obligation by acquiring approximately 50 MW of CREPs, we have been unable to acquire the remaining MWs required for various reasons, including the fact that proposed projects fail to qualify as CREPs or do not meet the statutory cost cap. The MPSC granted us waivers for 2012 through 2016. The validity of the MPSC’s action as it related to waivers granted for 2015 and 2016 has been challenged legally and we are waiting on a final decision from the Montana Supreme Court.

On May 14, 2021, the Montana Governor signed a bill that repealed the CREP requirement. We notified the Montana Supreme Court of the repeal as it considers the legal challenge concerning the MPSC's decision granting our waiver requests from full compliance for years 2015 and 2016. We also dismissed our pending application filed with the MPSC for a waiver from full compliance for years 2017 through 2020. If the Montana Supreme Court and/or MPSC determine that the repeal should not be applied retroactively and find that waivers should not be granted, we could be liable for penalties. However, we do not believe any such penalties would be material.


11



(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 June 30,
20212020
Income Before Income Taxes$38,602 $20,776 
Income tax calculated at federal statutory rate8,107 21.0 %4,363 21.0 %
Permanent or flow-through adjustments:
State income tax, net of federal provisions 222 0.6 5 0.0 
Flow-through repairs deductions(4,227)(11.0)(3,208)(15.4)
Production tax credits(2,262)(5.9)(1,737)(8.5)
Plant and depreciation of flow-through items(184)(0.5)59 0.3 
Amortization of excess deferred income tax(143)(0.4)(153)(0.7)
Other, net(148)(0.4)(47)(0.2)
(6,742)(17.6)(5,081)(24.5)
Income tax expense (benefit) $1,365 3.4 %$(718)(3.5)%

 Six Months Ended June 30,
20212020
Income Before Income Taxes$101,651 $69,674 
Income tax calculated at federal statutory rate21,347 21.0 %14,631 21.0 %
Permanent or flow through adjustments:
State income, net of federal provisions 277 0.3 27 0.1 
Flow-through repairs deductions(12,080)(11.9)(10,646)(15.3)
Production tax credits(6,569)(6.5)(5,348)(7.7)
Plant and depreciation of flow through items(524)(0.5)196 0.3 
Amortization of excess deferred income tax(408)(0.4)(509)(0.7)
Share-based compensation(261)(0.3)(609)(0.9)
Other, net(439)(0.4)(266)(0.4)
(20,004)(19.7)(17,155)(24.6)
Income tax expense (benefit)$1,343 1.3 %$(2,524)(3.6)%

12



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 $32.6 million as of June 30, 2021, including approximately $27.9 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 June 30, 2021, we did not have any amounts accrued for the payment of interest and penalties.

Tax years 2017 and forward remain subject to examination by the Internal Revenue Service (IRS) and state taxing authorities. In addition, the available federal net operating loss carryforward may be reduced by the IRS for losses originating in certain tax years from 2003 forward.

(4) Comprehensive (Loss) Income

The following tables display the components of Other Comprehensive (Loss) Income, after-tax, and the related tax effects (in thousands):
Three Months Ended
June 30, 2021June 30, 2020
 Before-Tax AmountTax ExpenseNet-of-Tax AmountBefore-Tax AmountTax ExpenseNet-of-Tax Amount
Foreign currency translation adjustment$21 $ $21 $(8)$ $(8)
Reclassification of net income on derivative instruments153 (40)113 153 (40)113 
Postretirement medical liability adjustment(212)53 (159)   
Other comprehensive (loss) income$(38)$13 $(25)$145 $(40)$105 
Six Months Ended
June 30, 2021June 30, 2020
 Before-Tax AmountTax ExpenseNet-of-Tax AmountBefore-Tax AmountTax ExpenseNet-of-Tax Amount
Foreign currency translation adjustment$(55)$ $(55)$93 $ $93 
Reclassification of net income on derivative instruments306 (80)226 306 (80)