MDU Resources Reports Second Quarter Earnings; Reaffirms 2017 Earnings Guidance
BISMARCK, N.D., Aug. 1, 2017 /PRNewswire/ -- MDU Resources Group, Inc. (NYSE: MDU) today announced that a strong second quarter at its utility and construction services businesses partially offset a slow quarter at its construction materials business caused by weather-related delays and increased competition. Second quarter earnings from continuing operations were $43.8 million, or 22 cents per share, compared to second quarter 2016 earnings from continuing operations of $46.1 million, or 24 cents per share.
Including discontinued operations, MDU Resources reported second quarter earnings of $40.6 million, or 21 cents per share, compared to a loss of $109.3 million, or 56 cents per share, in second quarter 2016.
Highlights from the second quarter include:
-- Electric and natural gas utility earns $5.0 million, up from $200,000 in
second quarter 2016 based on stronger natural gas utility results.
Pipeline and midstream results consistent with second quarter 2016,
absent results from Pronghorn assets sold in early 2017.
-- Construction services earnings up $5.4 million, a 77 percent increase on
18 percent revenue growth. Construction materials earns $21.2 million.
Combined construction backlog approximately $1.4 billion, up 4 percent
from second quarter 2016.
-- Company reaffirms earnings guidance range of $1.10 to $1.25.
"Our second quarter results emphasize the benefits of our two-platform business model. Colder temperatures across our natural gas utility service territories and higher workloads and margins at the construction services business helped offset some of the impacts that above-average precipitation had on several markets where our construction materials business operates," said David L. Goodin, president and CEO of MDU Resources. "Our operations continue to perform well and we are optimistic about growth opportunities as we continue Building a Strong America.
"Construction services is off to a strong start with record year-to-date revenue of more than $635 million and significant earnings growth, so we are increasing our revenue guidance for this business to a range of $1.2 billion to $1.3 billion. Workload remains strong for our construction businesses, as evidenced by a combined backlog that's approximately 4 percent higher than this time last year. Both construction services and construction materials increased backlog since the first quarter, reflecting an active bidding environment. Our utility companies continue to experience customer growth and pursue regulatory recovery, including two recently filed natural gas rate cases. Our pipeline and midstream business is moving forward with the Valley Expansion project and recently announced its Line Section 27 growth project, which has firm customer commitments backing the expansion."
Business Unit Results
Regulated Energy Delivery
The electric and natural gas utility earned $5.0 million in second quarter 2017, compared to $200,000 in second quarter 2016. The utility's service territory experienced colder weather during the quarter, resulting in 19 percent higher natural gas retail sales volumes and higher retail sales margins, particularly in jurisdictions that do not have decoupling and weather normalization in place. Cost recovery through regulatory relief also contributed to the earnings growth. The electric utility saw an approximate 2 percent decline in retail sales volumes and recorded a true-up of interim rates to reflect the approved settlement of the North Dakota electric case. The utility continues to seek regulatory recovery for costs associated with upgrading and expanding facilities to meet customer demand. Customer growth is expected to average 1 to 2 percent per year.
Earnings at the pipeline and midstream business were $5.3 million for the second quarter, compared to $6.3 million in 2016. The decrease reflects the absence of earnings from the previously announced Jan. 1 sale of the company's interest in the Pronghorn assets, for which the company received proceeds of approximately $100 million in the first quarter. Transportation volumes were up 7 percent for the quarter compared to last year, primarily in off-system deliveries.
Construction Materials and Services
The construction services business earned $12.4 million in the second quarter, up 77 percent from $7.0 million in 2016. The increase reflects higher earnings in all service lines, particularly in inside work where the company saw higher workloads and margins. With record year-to-date revenues of more than $635 million through June 30, revenue guidance has been increased to a range of $1.2 billion to $1.3 billion. Construction services backlog at the end of second quarter was $596 million, 17 percent higher than $508 million in the second quarter of 2016 and up from $529 million in the first quarter of 2017.
Second quarter 2017 earnings at the construction materials business were $21.2 million, compared to record second quarter earnings of $33.7 million in 2016. Although operations were impacted by above-average precipitation in a majority of markets and increased competition in some markets, the business was able to generate its second-best quarterly results for the second quarter since 2007. Due to the slow start to the construction season, revenue guidance has been lowered to a range of $1.8 billion to $1.9 billion. Construction materials backlog at the end of second quarter was $766 million, compared to $805 million for the same period in 2016 and up from $725 million in first quarter 2017.
Combined construction backlog of $1.4 billion at June 30 was up approximately 4 percent compared to the end of second quarter 2016.
Discontinued Operations and Other
The results of MDU Resources' former exploration and production and refining businesses have been reported as discontinued operations. The company has included in the "other" category any continuing results from these businesses, such as general and administrative costs and interest expense.
Earnings Per Share Guidance
The company reaffirmed its 2017 earnings per share guidance in the range of $1.10 to $1.25.
Conference Call
MDU Resources will host a webcast at 2 p.m. EDT Aug. 2 to discuss second quarter 2017 earnings results. The event can be accessed at www.mdu.com. Webcast and audio replays will be available. The dial-in number for audio replay, available through Aug. 16, is 855-859-2056, or 404-537-3406 for international callers, conference ID 40930145.
About MDU Resources
MDU Resources Group, Inc., a member of the S&P MidCap 400 index and the S&P High-Yield Dividend Aristocrats index, is Building a Strong America(®) by providing essential products and services through its regulated energy delivery and construction materials and services businesses. For more information about MDU Resources, see the company's website at www.mdu.com or contact the Investor Relations Department at investor@mduresources.com.
Contacts
Financial: Doran Schwartz, vice president and chief financial officer, 701-530-1750
Media: Laura Lueder, manager of communications and public relations, 701-530-1095
Performance Summary and Future Outlook
The following information highlights the key growth strategies, projections and certain assumptions for the company and its subsidiaries and other matters for each of the company's businesses. Many of these highlighted points are "forward-looking statements." There is no assurance that the company's projections, including estimates for growth and changes in earnings, will in fact be achieved. Please refer to assumptions contained in this section, as well as the various important factors listed at the end of this document under the heading "Risk Factors and Cautionary Statements that May Affect Future Results." Changes in such assumptions and factors could cause actual future results to differ materially from growth and earnings projections. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.
GAAP Earnings
Business Line Second Second YTD YTD
Quarter Quarter June 30, June 30,
2017 2016 2017 2016
Earnings Earnings Earnings Earnings
--- -------- -------- -------- --------
(In millions, except per share amounts)
Regulated energy delivery $10.3 $6.5 $56.5 $48.3
Construction materials and
services 33.6 40.7 21.0 32.2
Other and eliminations (.1) (1.1) 1.8 (2.6)
Earnings from continuing
operations 43.8 46.1 79.3 77.9
------------------------ ---- ---- ---- ----
Loss from discontinued
operations, net of tax (3.2) (276.1) (1.5) (294.2)
Loss from discontinued
operations attributable to
noncontrolling interest - (120.7) - (131.7)
Earnings (loss) on common
stock $40.6 $(109.3) $77.8 $(84.6)
------------------------- ----- ------- ----- ------
Earnings (loss) per share:
Earnings from continuing
operations $.22 $.24 $.40 $.40
Discontinued operations
attributable to the
company, net of tax (.01) (.80) - (.83)
---- ---- --- ----
Earnings (loss) per share $.21 $(.56) $.40 $(.43)
------------------------- ---- ----- ---- -----
On a consolidated basis, the following information highlights the key strategies, projections and certain assumptions for the company:
-- Earnings per share for 2017 are projected to be in the range of $1.10 to
$1.25.
-- The company's long-term compound annual growth goal on earnings per
share is 5 to 8 percent.
-- The company continually seeks opportunities to expand through organic
growth opportunities and strategic acquisitions.
-- The company focuses on creating value through vertical integration among
its business units.
-- Estimated capital expenditures for 2017 through 2021 are noted in the
following table:
Capital Expenditures
Business Line 2017 2018 2019 2017 - 2021
Estimated Estimated Estimated Total
Estimated
--- --- ---------
(In millions)
Regulated energy delivery
Electric $121 $140 $110 $568
Natural gas
distribution 143 134 147 667
Pipeline and midstream 43 57 120 389
307 331 377 1,624
--- --- --- -----
Construction materials and services
Construction materials
and contracting 43 55 46 236
Construction services 12 9 10 52
55 64 56 288
--- --- --- ---
Other 3 2 2 11
Additional growth
capital 150 150 - 300
Total capital
expenditures $515 $547 $435 $2,223
------------- ---- ---- ---- ------
Note: Total capital expenditures is presented on a gross basis and excludes estimated net proceeds of $109 million in 2017, $6 million in 2018, $6
million in 2019, and $135 million overall for the years 2017-2021.
--------------------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures for 2017 through 2021 include line-of-sight opportunities at the company's business units as well as additional growth capital. This additional growth capital is not allocated to a specific business unit and will be invested based on the risk-adjusted return potential of opportunities that are identified by the company's business development team.
Based on the current level of capital expenditures and other key assumptions in the 2017 financial forecast, the company is not planning to issue equity this year. Estimated operating cash flows from operations are $425 million to $475 million in 2017.
Regulated Energy Delivery
-------------------------
Electric
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(Dollars in millions, where applicable)
Operating revenues $74.6 $73.8 $162.8 $156.8
------------------ ----- ----- ------ ------
Operating expenses:
Electric fuel and purchased
power 16.8 15.9 38.6 37.9
Operation and maintenance 28.9 28.8 57.0 55.8
Depreciation, depletion and
amortization 11.4 12.4 23.4 25.3
Taxes, other than income 3.9 3.3 7.4 6.6
61.0 60.4 126.4 125.6
Operating income 13.6 13.4 36.4 31.2
Earnings $7.8 $8.0 $22.2 $19.2
-------- ---- ---- ----- -----
Retail sales (million kWh):
Residential 225.7 235.5 581.5 559.1
Commercial 348.0 342.6 744.9 716.3
Industrial 120.4 132.2 262.3 275.9
Other 24.8 21.8 47.2 43.2
----- ---- ---- ---- ----
718.9 732.1 1,635.9 1,594.5
----- ----- -------
Average cost of electric fuel
and purchased power per kWh $.021 $.020 $.022 $.022
----------------------------- ----- ----- ----- -----
Natural Gas Distribution
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(Dollars in millions)
Operating revenues $131.6 $112.8 $474.1 $412.2
------------------ ------ ------ ------ ------
Operating expenses:
Purchased natural gas sold 64.1 54.0 278.5 236.1
Operation and maintenance 38.8 38.3 79.7 77.1
Depreciation, depletion and
amortization 17.2 16.6 34.2 32.9
Taxes, other than income 10.4 9.6 29.1 26.4
130.5 118.5 421.5 372.5
Operating income (loss) 1.1 (5.7) 52.6 39.7
Earnings (loss) $(2.8) $(7.8) $25.1 $17.5
-------------- ----- ----- ----- -----
Volumes (MMdk)
Sales:
Residential 8.3 6.9 36.5 30.3
Commercial 6.0 5.1 25.1 20.7
Industrial 1.0 .9 2.5 2.2
15.3 12.9 64.1 53.2
---- ---- ---- ----
Transportation:
Commercial .4 .4 1.1 .9
Industrial 28.2 30.1 66.2 70.9
28.6 30.5 67.3 71.8
---- ---- ---- ----
Total throughput 43.9 43.4 131.4 125.0
---------------- ---- ---- ----- -----
Degree days (% of normal)*
Montana-Dakota/Great Plains 96% 96% 97% 83%
Cascade 91% 56% 111% 80%
Intermountain 116% 81% 111% 92%
------------- --- --- --- ---
* Degree days are a measure of the daily temperature-related demand for energy for heating.
-------------------------------------------------------------------------------------------
The combined utility businesses reported earnings of $5.0 million in the second quarter of 2017, compared to $200,000 for the same period in 2016. This increase reflects higher natural gas distribution retail sales margins largely resulting from 19 percent higher retail sales volumes to all customer classes, primarily colder weather in all regions and customer growth, as well as approved rate recovery; offset in part by decoupling and weather normalization in certain jurisdictions. The increase also reflects higher natural gas transportation margins. Also included in the utility earnings were lower electric retail sales margins due to 2 percent lower retail sales volumes, largely offset by approved rate increases. The second quarter also reflects the effects of a true-up of interim rates related to the approved settlement of the North Dakota electric case.
The following information highlights the key growth strategies, projections and certain assumptions for the utility segments:
-- The company expects to grow its rate base by approximately 4 percent
annually over the next five years on a compound basis. This growth
projection is on a much larger base, having grown rate base at a record
pace of 12 percent compounded annually over the past five-year period.
The utility operations are spread across eight states where customer
growth is expected to be higher than the national average. This customer
growth, along with system upgrades and replacements needed to supply
safe and reliable service, will require investments in new electric
generation and transmission, and electric and natural gas distribution.
Rate base at Dec. 31, 2016, was $1.9 billion.
-- The company expects its customer base to grow by 1 to 2 percent per
year.
-- In June 2016, the company, along with a partner, began a 345-kilovolt
transmission line from Ellendale, North Dakota, to Big Stone City, South
Dakota, about 160 miles. The project has been approved as a Midcontinent
Independent System Operator multivalue project. All of the necessary
easements have been secured. The company's total capital investment in
this project is expected to be in the range of $150 million to $170
million. The company expects this project to be completed in 2019.
-- In December 2016, the company signed a 25-year agreement to purchase
power from the expansion of the Thunder Spirit Wind farm in southwest
North Dakota. The agreement includes an option to buy the project at the
close of construction. The expansion of the Thunder Spirit Wind farm
will boost the combined production at the wind farm to approximately 150
megawatts of renewable energy and, if purchased, will increase the
company's generation portfolio from approximately 22 percent renewables
to 27 percent. The original 107.5-MW Thunder Spirit Wind farm includes
43 turbines; it was purchased by the company in December 2015. The
expansion will include 13 to 16 turbines, depending on the turbine size
selected. It is expected to be on line in December 2018. Construction
costs for the project are estimated to be $85 million. In June 2017, the
company filed with the North Dakota Public Service Commission an advance
determination of prudence for the purchase of this expansion.
-- In June 2017, the company filed its 2017 North Dakota Electric
Integrated Resource Plan. The plan includes the proposed purchase of the
Thunder Spirit Wind farm expansion project and the development and
design of a large combined-cycle natural gas-fired facility.
-- The company is involved in a number of pipeline projects to enhance the
reliability and deliverability of its system.
-- The company is focused on organic growth, while monitoring potential
merger and acquisition opportunities.
-- Regulatory actionsCompleted Cases:Since Jan. 1, 2017, the company has
received approval on final rate increases totaling $33.0 million in
annual revenue. This includes electric rate proceedings in Montana,
North Dakota, South Dakota, Wyoming and before the Federal Energy
Regulatory Commission, and natural gas proceedings in Idaho, Minnesota,
Montana and Oregon. Recently approved final rates include:
-- On June 16, 2017, the NDPSC approved the settlement agreement filed
by the company on April 7, 2017, as it relates to the electric
general rate case application filed on Oct. 14, 2016. The approved
settlement agreement includes a net increase of approximately $7.5
million or 3.7 percent above previously approved final rates; a
true-up of the return on equity used in the interim renewable
resource cost adjustment, the electric generation resource recovery
and transmission cost adjustment riders of 9.45 percent; a return on
equity of 9.65 percent for base rates and the renewable resource
cost adjustment rider on a go-forward basis; and a return on equity
of 9.45 percent through Dec. 31, 2019, for the natural gas-fired
internal combustion engines and associated facilities included in
the electric generation resource recovery rider. Final rates are
less than the interim rates currently in effect; therefore, the
company will refund the difference to customers.
Pending Cases:
The company is requesting rate increases totaling $13.9 million in annual revenue. Cases recently filed include:
For a further discussion on the company's regulatory matters, refer to Item 1 - Notes to Consolidated Financial Statements in the company's most recent Form 10-Q.
Pipeline and Midstream
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(Dollars in millions)
Operating revenues $30.2 $36.3 $58.3 $69.7
------------------ ----- ----- ----- -----
Operating expenses:
Operation and maintenance 13.7 15.1 27.2 29.0
Depreciation, depletion and
amortization 4.1 6.1 8.2 12.4
Taxes, other than income 3.1 3.1 6.1 5.8
20.9 24.3 41.5 47.2
Operating income 9.3 12.0 16.8 22.5
Earnings $5.3 $6.3 $9.2 $11.6
-------- ---- ---- ---- -----
Transportation volumes (MMdk) 79.4 74.1 146.5 149.4
Natural gas gathering volumes
(MMdk) 4.1 5.0 8.0 9.9
Customer natural gas storage balance (MMdk):
Beginning of period 15.0 14.5 26.4 16.6
Net injection (withdrawal) 10.1 13.6 (1.3) 11.5
End of period 25.1 28.1 25.1 28.1
------------- ---- ---- ---- ----
The pipeline and midstream segment reported earnings of $5.3 million in the second quarter of 2017, compared to $6.3 million for the same period in 2016. The earnings decrease reflects lower gathering and processing earnings due to the sale of Pronghorn in January 2017, partially offset by lower interest expense due to lower debt balances.
The following information highlights the key growth strategies, projections and certain assumptions for this segment:
-- In September 2016, the company secured sufficient capacity commitments
and started survey work on a 38-mile pipeline that will deliver natural
gas supply to eastern North Dakota and far western Minnesota. The Valley
Expansion project will connect the Viking Gas Transmission Company
pipeline near Felton, Minnesota, to the company's existing pipeline near
Mapleton, North Dakota. Cost of the expansion is estimated at $55
million to $60 million. The project, which is designed to transport 40
million cubic feet of natural gas per day, is under the jurisdiction of
the FERC. In October 2016, the company received FERC approval on its
pre-filing for the Valley Expansion project. With minor enhancements,
the pipeline will be able to transport significantly more volume if
required, based on capacity requested or as needed in the future as the
region's demand grows. Following receipt of necessary permits and
regulatory approvals, construction is expected to begin in 2018 with
completion expected late that same year.
-- The Charbonneau and Line Section 25 expansion projects, which include a
new compression station as well as other compression additions and
enhancements at existing stations, were placed into service in the
second quarter of 2017. The company has signed long-term agreements
supporting the expansion projects.
-- In June 2017, the company announced plans to complete a Line Section 27
expansion project. The project will include approximately 13 miles of
new pipeline and associated facilities. The project, as designed, will
increase capacity by over 200,000 dekatherms per day and bring total
capacity to over 600,000 dk per day. The project is expected to be
placed in-service in the fall of 2018. The company has signed long-term
contracts supporting this expansion and expects construction costs to
range from $27 million to $30 million.
-- The company continues to focus on growing and improving existing
operations through organic projects to become the leading pipeline
company and midstream provider in all areas in which it operates.
Construction Materials and Services
-----------------------------------
Construction Materials and
Contracting
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(Dollars in millions)
Operating revenues $501.6 $541.4 $702.5 $751.3
------------------ ------ ------ ------ ------
Operating expenses:
Operation and maintenance 437.2 456.6 643.1 661.2
Depreciation, depletion and
amortization 14.4 14.8 28.1 29.9
Taxes, other than income 12.0 11.9 20.9 21.4
463.6 483.3 692.1 712.5
Operating income 38.0 58.1 10.4 38.8
Earnings $21.2 $33.7 $1.3 $19.2
-------- ----- ----- ---- -----
Sales (000's):
Aggregates (tons) 7,374 7,659 10,879 11,285
Asphalt (tons) 1,830 2,213 2,045 2,452
Ready-mixed concrete
(cubic yards) 1,037 1,050 1,599 1,694
-------------------- ----- ----- ----- -----
Construction Services
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In millions)
Operating revenues $336.3 $286.0 $635.9 $542.0
------------------ ------ ------ ------ ------
Operating expenses:
Operation and maintenance 300.1 260.7 569.7 494.3
Depreciation, depletion and
amortization 4.0 3.8 8.0 7.6
Taxes, other than income 11.5 9.7 24.8 20.4
315.6 274.2 602.5 522.3
Operating income 20.7 11.8 33.4 19.7
Earnings $12.4 $7.0 $19.7 $13.0
-------- ----- ---- ----- -----
The combined construction materials and services businesses reported earnings of $33.6 million in the second quarter of 2017, compared to $40.7 million in 2016.
The construction services business reported an increase in earnings of $5.4 million as compared to second quarter 2016 due to higher inside workloads and margins, largely due to an increase in the number and size of projects that moved into full construction during the quarter, as well as higher outside margins. Partially offsetting these increases was higher selling, general and administrative expense, primarily payroll-related costs.
The construction materials business reported a decrease in earnings of $12.5 million as compared to second quarter 2016, which reflects lower asphalt product volumes and margins, primarily due to weather-related delays, increased competition and increasing material costs. Also contributing to the decrease was lower construction margins primarily due to lower revenues resulting from poor weather conditions that caused a delay in the start of projects.
The following information highlights the key growth strategies, projections and certain assumptions for the construction segments:
-- The construction services work backlog at June 30 was $596 million,
compared to $508 million a year ago.
-- The construction materials backlog at June 30 was $766 million, compared
to $805 million a year ago.
-- Projected revenues included in the company's 2017 earnings guidance are
in the range of $1.8 billion to $1.9 billion for construction materials
and $1.2 billion to $1.3 billion for construction services.
-- The company anticipates margins in 2017 to be slightly lower at
construction materials as compared to 2016 and construction services'
2017 margins are expected to be comparable to 2016.
-- Construction materials expects public sector workload growth as
anticipated new state and local infrastructure spending initiatives are
introduced. California's $52.4 billion Road Repair and Accountability
Act of 2017, and the $5.3 billion transportation package in Oregon, are
expected to drive demand in both the near and far term.
-- The construction services business continues to pursue opportunities for
expansion in energy projects such as petrochemical, transmission,
substations, utility services and renewables. Initiatives are aimed at
capturing additional market share and expanding into new markets.
-- As one of the country's largest sand and gravel producers, construction
materials will continue to strategically manage its 1.0 billion tons of
aggregate reserves in all its markets, as well as take further advantage
of being vertically integrated.
-- As the 13th-largest specialty contractor, as ranked on Engineering
News-Record's 2016 Top 600 Specialty Contractors list, construction
services continues to pursue opportunities for expansion and execute
initiatives in current and new markets that align with the company's
expertise, resources and strategic growth plan.
Other
-----
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In millions)
Operating revenues $1.9 $2.1 $4.0 $4.1
------------------ ---- ---- ---- ----
Operating expenses:
Operation and maintenance 4.4 2.2 5.6 3.9
Depreciation, depletion and
amortization .5 .5 1.1 1.0
Taxes, other than income - - .1 .1
4.9 2.7 6.8 5.0
Operating loss (3.0) (.6) (2.8) (.9)
Loss $(2.2) $(1.1) $(2.5) $(2.6)
---- ----- ----- ----- -----
Included in Other are general and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that do not meet the criteria for income (loss) from discontinued operations. Other loss increased $1.1 million primarily due to a loss on the disposition of certain assets offset in part by lower interest expense due to the repayment of long-term debt with the sale of the remaining exploration and production assets.
Discontinued Operations
-----------------------
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In millions)
Income (loss) from
discontinued operations
before intercompany
eliminations, net of tax $(1.1) $(285.1) $2.8 $(303.3)
Intercompany eliminations (2.1) * 9.0 (4.3) * 9.1
------------------------- ---- --- --- ---- --- ---
Loss from discontinued
operations, net of tax (3.2) (276.1) (1.5) (294.2)
Loss from discontinued
operations attributable to
noncontrolling interest - (120.7) - (131.7)
--- ------ --- ------
Loss from discontinued
operations attributable to
the company, net of tax $(3.2) $(155.4) $(1.5) $(162.5)
--------------------------- ----- ------- ----- -------
* Includes eliminations for the presentation of income tax adjustments between continuing and discontinued operations.
----------------------------------------------------------------------------------------------------------------------
The results of operations for the exploration and production and refining businesses, except certain general and administrative costs and interest expense that do not meet the criteria for income (loss) from discontinued operations, are included in income (loss) from discontinued operations.
The company's discontinued operations reported a loss of $3.2 million in the second quarter of 2017, compared to a loss of $155.4 million in 2016. The decreased loss was largely due to the absence in 2017 of a loss associated with the sale of the refining business, which was sold in June 2016.
Risk Factors and Cautionary Statements That May Affect Future Results
The information in this release includes certain forward-looking statements, including earnings per share guidance, other financial and business projections, and statements by the president and CEO of MDU Resources, within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations are based on reasonable assumptions, actual results may differ materially. Following are important factors that could cause actual results or outcomes for the company to differ materially from those discussed in forward-looking statements.
-- The company's pipeline and midstream business is dependent on factors,
including commodity prices and commodity price basis differentials, that
are subject to various external influences that cannot be controlled.
-- The regulatory approval, permitting, construction, startup and/or
operation of pipelines and power generation and transmission facilities
may involve unanticipated events or delays that could negatively impact
the company's business and its results of operations and cash flows.
-- Economic volatility, including volatility in North Dakota's Bakken
region, affects the company's operations, as well as the demand for its
products and services and the value of its investments and investment
returns including its pension and other postretirement benefit plans,
and may have a negative impact on the company's future revenues and cash
flows.
-- The company relies on financing sources and capital markets. Access to
these markets may be adversely affected by factors beyond the company's
control. If the company is unable to obtain cost effective financing in
the future, the company's ability to execute its business plans, make
capital expenditures or pursue acquisitions that the company may
otherwise rely on for future growth could be impaired. As a result, the
market value of the company's common stock may be adversely affected. If
the company issues a substantial amount of common stock it could have a
dilutive effect on its existing shareholders.
-- The company is exposed to credit risk and the risk of loss resulting
from the nonpayment and/or nonperformance by the company's customers and
counterparties.
-- The backlogs at the company's construction materials and contracting and
construction services businesses are subject to delay or cancellation
and may not be realized.
-- The company's operations are subject to environmental laws and
regulations that may increase costs of operations, impact or limit
business plans, or expose the company to environmental liabilities.
-- Initiatives to reduce greenhouse gas emissions could adversely impact
the company's operations.
-- The company is subject to government regulations that may delay and/or
have a negative impact on its business and its results of operations and
cash flows. Statutory and regulatory requirements also may limit another
party's ability to acquire the company or impose conditions on an
acquisition of or by the company.
-- The company's electric and natural gas transmission and distribution
operations involve risks that may result in accidents. These events and
pipeline safety regulation costs could adversely affect the company's
business and its results of operations and cash flows.
-- Weather conditions can adversely affect the company's operations,
revenues and cash flows.
-- Competition exists in all of the company's businesses.
-- The company could be subject to limitations on its ability to pay
dividends.
-- Costs related to obligations under multiemployer pension plans could
have a material negative effect on the company's results of operations
and cash flows.
-- The company's operations may be negatively impacted by cyber attacks or
acts of terrorism.
-- The company may be subject to potential material liabilities relating to
the past sale of assets or businesses, primarily arising from events
prior to sale.
Other factors that could cause actual results or outcomes for the company to differ materially from those discussed in forward-looking statements include:
-- Acquisition, disposal and impairments of assets or facilities.
-- Changes in operation, performance and construction of plant facilities
or other assets.
-- Changes in present or prospective generation.
-- The ability to obtain adequate and timely cost recovery for the
company's regulated operations through regulatory proceedings.
-- The availability of economic expansion or development opportunities.
-- Population growth rates and demographic patterns.
-- Market demand for, available supplies of, and/or costs of, energy- and
construction-related products and services.
-- The cyclical nature of large construction projects at certain
operations.
-- Changes in tax rates, policies or tax reform.
-- Unanticipated project delays or changes in project costs, including
related energy costs.
-- Unanticipated changes in operating expenses or capital expenditures.
-- Labor negotiations or disputes.
-- Inability of the contract counterparties to meet their contractual
obligations.
-- Changes in accounting principles and/or the application of such
principles to the company.
-- Changes in technology.
-- Changes in legal or regulatory proceedings.
-- The ability to effectively integrate the operations and the internal
controls of acquired companies.
-- The ability to attract and retain skilled labor and key personnel.
-- Increases in employee and retiree benefit costs and funding
requirements.
For a further discussion of these risk factors and cautionary statements, refer to Item 1A - Risk Factors in the company's most recent Form 10-K.
MDU Resources Group, Inc.
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(In millions, except per share amounts)
(Unaudited)
Operating revenues $1,067.6 $1,043.9 $2,005.6 $1,904.2
------------------ -------- -------- -------- --------
Operating expenses:
Electric fuel and
purchased power 16.8 15.9 38.6 37.9
Purchased natural gas
sold 57.7 47.4 250.6 208.5
Operation and maintenance 820.9 799.8 1,378.2 1,317.0
Depreciation, depletion
and amortization 51.6 54.2 103.0 109.1
Taxes, other than income 40.9 37.6 88.4 80.7
987.9 954.9 1,858.8 1,753.2
----- ----- ------- -------
Operating income 79.7 89.0 146.8 151.0
Other income .8 .9 1.8 1.9
Interest expense 20.8 22.3 41.1 45.1
---------------- ---- ---- ---- ----
Income before income
taxes 59.7 67.6 107.5 107.8
Income taxes 15.3 21.3 27.5 29.6
------------ ---- ---- ---- ----
Income from continuing
operations 44.4 46.3 80.0 78.2
Loss from discontinued
operations, net of tax (3.2) (276.1) (1.5) (294.2)
----------------------- ---- ------ ---- ------
Net income (loss) 41.2 (229.8) 78.5 (216.0)
Loss from discontinued
operations attributable
to noncontrolling
interest - (120.7) - (131.7)
Loss on redemption of
preferred stocks .6 - .6 -
Dividends declared on
preferred stocks - .2 .1 .3
--- --- --- ---
Earnings (loss) on common
stock $40.6 $(109.3) $77.8 $(84.6)
------------------------- ----- ------- ----- ------
Earnings (loss) per
common share - basic:
Earnings before
discontinued operations $.22 $.24 $.41 $.40
Discontinued operations
attributable to the
company, net of tax (.01) (.80) (.01) (.83)
Earnings (loss) per
common share - basic $.21 $(.56) $.40 $(.43)
--------------------- ---- ----- ---- -----
Earnings (loss) per
common share - diluted:
Earnings before
discontinued operations $.22 $.24 $.40 $.40
Discontinued operations
attributable to the
company, net of tax (.01) (.80) - (.83)
Earnings (loss) per
common share - diluted $.21 $(.56) $.40 $(.43)
Dividends declared per
common share $.1925 $.1875 $.3850 $.3750
Weighted average common
shares outstanding -
basic 195.3 195.3 195.3 195.3
Weighted average common
shares outstanding -
diluted 196.0 195.7 196.0 195.7
----------------------- ----- ----- ----- -----
June 30,
2017 2016
---- ----
(Unaudited)
Other Financial Data
Book value per common share $11.79 $11.38
Market price per common share $26.20 $24.00
Dividend yield (indicated annual
rate) 2.9% 3.1%
Price/earnings from continuing
operations ratio (12 months ended) 22.0x 23.5x
Market value as a percent of book
value 222.2% 210.9%
Net operating cash flow (year to
date)* $139 $103
Total assets* $6,230 $6,352
Total equity* $2,303 $2,238
Total debt* $1,761 $1,987
Capitalization ratios:
Total equity 56.7% 53.0%
Total debt 43.3 47.0
100.0% 100.0%
----- -----
* In millions
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SOURCE MDU Resources Group, Inc.
