BHC Form 11-K for 401-K 12-31-04
_____________________________________________________________________





SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K


ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


_________________________________________________


For the fiscal year ended December 31, 2004


Commission File Number 001-31303


BLACK HILLS CORPORATION
RETIREMENT SAVINGS PLAN


BLACK HILLS CORPORATION
625 NINTH STREET
PO BOX 1400
RAPID CITY, SOUTH DAKOTA 57709



______________________________________________________________________

 


 
Black Hills Corporation Retirement Savings Plan
 
Financial Statements for the Years Ended
December 31, 2004 and 2003, Supplemental
Schedule as of December 31, 2004, and Report of
Independent Registered Public Accounting Firm

 
 

 
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
 
TABLE OF CONTENTS
 
 
Page
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
1
 
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003:
 
  
Statements of Net Assets Available for Benefits
 
2
 
Statements of Changes in Net Assets Available for Benefits
 
3
 
Notes to Financial Statements
 
4-6
 
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2004—
 
  
Schedule H, Line 4i—Schedule of Assets (Held At End of Year)
 
8
 

 
 
  

 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Plan Administrator and Participants
 
Black Hills Corporation Retirement Savings Plan
 
Rapid City, South Dakota
 
We have audited the accompanying statements of net assets available for benefits of the Black Hills Corporation Retirement Savings Plan (the “Plan”) as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held as of December 31, 2004, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the 2004 basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the 2004 basic financial statements taken as a whole.
 

 
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
 
June 15, 2005
 



 
BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
          
           
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
      
DECEMBER 31, 2004 AND 2003
          
           
           
   
2004
  
2003
  
               
CASH
  
$
63,860
  
$
409
  
               
PARTICIPANT-DIRECTED INVESTMENTS—At market value
    
43,451,093
   
37,000,373
 
               
CONTRIBUTIONS RECEIVABLE:
              
Employee
    
-
   
94,501
 
Employer
    
-
   
41,308
 
               
INVESTMENT TRANSACTIONS PENDING
    
18,186
   
1,452
 
               
SETTLEMENTS PAYABLE
    
-
   
(148,351
)
               
NET ASSETS AVAILABLE FOR BENEFITS
  
$
43,533,139
  
$
36,989,692
  
               
               
See notes to financial statements.
              

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BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
          
           
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
  
YEARS ENDED DECEMBER 31, 2004 AND 2003
          
           
           
   
2004
  
2003
  
               
NET ASSETS AVAILABLE FOR BENEFITS—
              
Beginning of year
  
$
36,989,692
  
$
28,838,806
  
               
INCREASES (DECREASES) DURING THE YEAR:
              
Participant contributions
    
3,628,243
   
3,615,855
 
Employer matching contributions
    
1,376,414
   
1,382,581
 
Investment interest and dividends
    
1,083,743
   
1,052,910
 
Net realized and unrealized gain in fair value of investments
    
2,516,545
   
4,714,352
 
Administrative expenses
    
(10,160
)
  
(8,070
)
Distributions to participants
    
(2,112,087
)
  
(2,509,735
)
Other
    
60,749
   
(97,007
)
               
Net increase during the year
    
6,543,447
   
8,150,886
 
               
NET ASSETS AVAILABLE FOR BENEFITS—End of year
  
$
43,533,139
  
$
36,989,692
  
               
               
See notes to financial statements.
              

 

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BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
 
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
 
1.
DESCRIPTION OF THE PLAN
 
The following is not a comprehensive description of the Black Hills Corporation Retirement Savings Plan (the “Plan”) and, therefore, does not include all situations and limitations covered by the Plan. Participants should refer to the plan agreement for more complete information.
 
General—The Plan is a defined contribution plan for eligible employees of Black Hills Corporation and certain subsidiary companies (the “Company”). The eligible employees may have a percentage of their compensation withheld and contributed to the Plan, subject to limitations, as defined. The Plan is subject to the provisions of the Employment Retirement Income Security Act of 1974 (“ERISA”) and is designed to comply with the provisions of Section 401(k) of the Internal Revenue Code (the “Code”).
 
Merrill Lynch serves as the asset custodian and recordkeeper. The Plan is administered by the Black Hills Corporation Benefits Committee (the “Committee”). The Committee is the trustee of the Plan.
 
Plan Expenses—Administrative fees of approximately $47,675 and $58,604 were paid by the Company in 2004 and 2003, respectively. Administrative expenses for loan fees are paid by the individual plan participants.
 
Eligibility and Vesting—Employees are eligible to participate in the Plan on the first day of employment.
 
Participants are immediately vested in the value of their pretax salary reduction contributions. Participants vest 20% per year in employer matching contributions until reaching five years of service. At that time, participants are 100% vested in employer matching contributions. Participants also become fully vested in employer matching contributions if their employment with the Company is terminated due to retirement at or after attainment of age 65, total and permanent disability, or death.
 
Forfeitures from participants who have terminated from the Plan prior to attaining 100% vesting rights are used to reduce the Company’s annual matching contributions. During 2004 and 2003, forfeitures of $99,551and $61,878, respectively, were used to reduce the Company’s annual matching contribution.
 
Contributions—The maximum percentage of compensation an employee may contribute to the Plan is 20%, with an annual maximum contribution of $13,000 for 2004, as provided by the Code. There is no limit to how often participants may change their contribution percentages. Amounts contributed are invested at the discretion of plan participants in any of the 21 investment options or individual investments as directed by the participant.
 
Effective January 1, 2000 (May 1, 2000, for employees covered by a collective bargaining agreement), the Plan was amended to include a dollar-for-dollar company matching contribution, up to a maximum of 3% of an individual participant’s compensation. Effective April 1, 2001, there is an automatic enrollment provision in which eligible employees who are employed on or after April 1, 2001, shall be deemed to have made an automatic election to participate in the Plan at a rate of 3%.
 
 
 
- 4 -
 
Rollover Contributions—The Plan received $142,824 and $238,563 in rollover transfers from other qualified plans in 2004 and 2003, respectively, which are included in participant contributions on the statements of changes in net assets available for benefits.
 
Participant Loans—The Plan contains a loan provision that allows participants to borrow a minimum of $1,000 and a maximum equal to the lesser of $50,000 or 50% of their vested account balances at an interest rate of 1% over the prime interest rate and to repay the loan through payroll deductions, with a maximum repayment period of five years. During 2004 and 2003, interest rates on outstanding participant loans ranged from 5.0% to 10.5%. Loans are prohibited for terminated employees.
 
Distributions to Participants—Employee account balances are distributable upon retirement, disability, death, termination from the Company, or hardship. Upon the occurrence of one of these events, a participant (or the participant’s beneficiary in the case of death) may receive his or her account balance as a lump-sum payment or as installment payments over a period of no more than 10 years.
 
Amendments and Termination—The Company reserves the right to amend or terminate the Plan at any time. Upon termination of the Plan, participants become 100% vested, and all assets will be distributed among the participants in accordance with plan provisions.
 
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Accounting—The financial statements have been prepared using the accrual basis of accounting.
 
Investment Valuation and Income Recognition—Investments of the Plan are stated at market value. Shares of registered investment companies are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Realized gains and losses on sales of investments represent the difference between the net proceeds from the sale of investments and their beginning-of-year market value. Unrealized appreciation or depreciation of the investments represents changes in the market value of investments.
 
Purchases and sales of securities are reflected on a trade-date basis. Interest income is recognized when earned. Dividend income is recorded on the ex-dividend date.
 
Use of Estimates—The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Ultimate results could differ from those estimates.
 
3.
INVESTMENTS
 
The investment options of the Plan at December 31, 2004, include collective trusts of Merrill Lynch, mutual funds, common stock of the Company, and other investments as self-directed by participants. Units (shares) of the various investment funds are valued daily at net asset value (which equals market value). The investment options are participant-directed and participants may change their investment elections daily.
 
 
- 5 -
 
The following presents investments that represent 5% or more of the Plan’s net assets as of December 31:
 
   
2004
  
2003
  
               
Black Hills Corporation common stock
  
$
8,541,399
  
$
8,878,939
  
Merrill Lynch Retirement Preservation Trust
    
8,505,513
   
7,186,669
 
Merrill Lynch Equity Index Trust 1
    
6,300,542
   
3,652,670
 
Davis New York Venture Fund
    
3,735,918
   
2,198,338
 
PIMCO Total Return Fund
    
2,720,990
   
2,304,993
 
Templeton Foreign Fund
    
2,658,281
   
2,086,183
 

 
During 2004 and 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:
 
   
2004
  
2003
  
               
Common stock
  
$
244,596
  
$
1,003,093
  
Mutual funds
    
1,665,801
   
2,845,722
 
Common collective trusts
    
606,148
   
865,537
 
               
   
$
2,516,545
  
$
4,714,352
  

 
4.
TAX STATUS
 
The Plan obtained its latest determination letter on October 9, 2001, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan has been amended since receiving the determination letter; however, the plan administrator and the Plan’s legal counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code and, as a result, no provision for income tax is believed necessary.
 
5.
PARTY-IN-INTEREST TRANSACTIONS
 
The Plan invests in Merrill Lynch funds and Black Hills Corporation stock. These transactions qualify as exempt party-in-interest transactions.
 
6.
RISKS AND UNCERTAINTIES
 
The Plan provides for investment in a variety of investment funds. Investments in general are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
 
* * * * * *


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SUPPLEMENTAL SCHEDULE
 


- 7 -


BLACK HILLS CORPORATION RETIREMENT SAVINGS PLAN
          
(Employer Identification Number: 46-0458824) (Plan Number: 003)
      
           
SCHEDULE H, LINE 4i—SCHEDULE OF ASSETS (Held At End of Year)
          
DECEMBER 31, 2004
          
       
Current
  
Description
  
Cost**
  
Value
  
               
Collective trusts:
              
Merrill Lynch Equity Index Trust 1*
        
$
5,503,680
  
Merrill Lynch Equity Index Trust 1-GM*
          
796,862
 
Merrill Lynch Retirement Preservation Trust*
          
8,070,344
 
Merrill Lynch Retirement Preservation Trust-GM*
          
435,169
 
               
Total collective trusts
          
14,806,055
 
               
Mutual funds:
              
AIM Small Cap Growth Fund Class A
          
535,636
 
PIMCO Total Return Fund—Class A
          
1,671,442
 
PIMCO Total Return Fund—Class A-GM
          
1,049,548
 
PIMCO Mid-Cap Growth Fund—Class A
          
402,003
 
Munder Framlington Health Care Fund
          
695,914
 
Oppenheimer Gold & Special Minerals Fund
          
265,891
 
Seligman Communications Fund
          
1,595,618
 
Oppenheimer Global Fund
          
1,782,287
 
Templeton Foreign Fund
          
2,026,657
 
Oppenheimer US Government Fund
          
210,376
 
Templeton Foreign Fund-GM
          
631,624
 
Franklin Balance Sheet Fund
          
1,755,011
 
Massachusetts Investors Stock Fund—Class A-GM
          
404
 
Davis New York Venture Fund
          
3,041,486
 
Davis New York Venture Fund-GM
          
694,432
 
Van Kampen Real Estate Securities Fund
          
871,445
 
Merrill Lynch Capital Fund—Class D*
          
1,043,123
 
               
Total mutual funds
          
18,272,897
 
               
Common stock—
              
Black Hills Corporation*
          
8,541,399
 
               
Self-directed accounts
          
542,983
 
Pending Stlmt
          
18,186
 
               
Participant loans, with interest rates ranging from 5.0% to 10.5%—
            
Maturity dates extending through December 31, 2009*
          
1,287,759
 
         
$
43,469,279
  
               
*Denotes party-in-interest
              
**Cost is not required for participant-directed accounts
              

 

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EXHIBIT INDEX


Exhibit Number       Description

23          Consent of Deloitte & Touche LLP








SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized.

Black Hills Corporation
Retirement Savings Plan

By /s/ Mark T. Thies 
Mark T. Thies
Executive Vice President and Chief Financial Officer

Date: June 28, 2005



- 9 -

EXHIBIT INDEX


Exhibit Number         Description

23   Consent of Deloitte & Touche LLP