UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ For the quarterly period ended September 30, 2021 Commission file number 1-03480 OR MDU RESOURCES GROUP INC (Exact name of registrant as specified in its charter) (State or other jurisdi ...

Financial Performance - Second quarter earnings per share (EPS) were $0.50 [4] - Net earnings were $100.2 million [4] - Construction Services reported record second quarter earnings of $28.9 million [8] - Construction Materials reported earnings of $51.4 million [9] Segment Results - Electric & Natural Gas Utility reported earnings of $9.6 million [5], impacted by higher operating expenses and lower investment returns - Pipeline reported earnings of $9.2 million [7], driven by higher AFUDC, partially offset by higher operation and maintenance expense - Construction Services achieved record second quarter revenues of $525.6 million [8, 12], up from $497.2 million in 2020 [8] - Construction Materials reported second quarter revenues of $633.8 million [9, 13], up from $621.1 million in 2020 [9] Outlook and Guidance - The company expects to grow rate base of Electric & Natural Gas Utility by 5% compounded annually over the next five years [10] - Construction Services expects 2021 revenue in a range of $2.1 billion to $2.3 billion [12] - Construction Materials expects 2021 revenue in a range of $2.1 billion to $2.3 billion [13] - The company affirmed 2021 EPS guidance of $2.00 - $2.15 [14]

MDU Resources Group, Inc. (NYSE:MDU) Q2 2021 Earnings Conference Call August 5, 2021 2:00 PM ET Company Participants Jason Vollmer - Vice President and Chief Financial Officer Dave Goodin - President and Chief Executive Officer Dave Barney - President and Chief Executive Officer, Knife River Corporation Jeff Thiede - President and Chief Executive Officer, MDU Construction Services Group Nicole Kivisto - President and Chief Executive Officer, Utility Group Trevor Hastings - President and Chief Executive Offi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 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 1-03480 MDU RESOURCES GROUP INC (Exact name of registrant as specified in its charter) (State or other jurisdiction ...

MDU Resources Group, Inc. (NYSE:MDU) Q1 2021 Results Conference Call May 6, 2021 2:00 PM ET Company Participants Jason Vollmer - VP & CFO Dave Goodin - President and CEO Dave Barney - President and CEO, Knife River Corporation Jeff Thiede - President and CEO, MDU Construction Services Group Nicole Kivisto - President and CEO, Utility Group Trevor Hastings - President and CEO, WBI Energy Stephanie Barth - VP, Chief Accounting Officer and Controller Conference Call Participants Dariusz Lozny - Bank of America ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 For the quarterly period ended March 31, 2021 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 1-03480 MDU RESOURCES GROUP INC (Exact name of registrant as specified in its charter) (State or other jurisdictio ...

[Part I](index=7&type=section&id=Part%20I) [Forward-Looking Statements](index=7&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements in the Form 10-K, noting inherent risks and uncertainties that may cause actual results to differ, and disclaims any obligation to update them - Forward-looking statements are identified by words like 'anticipates,' 'estimates,' 'expects,' 'intends,' 'plans,' 'predicts' and similar expressions, covering future events, performance, and underlying assumptions[15](index=15&type=chunk) - Such statements involve risks and uncertainties, including the impact of COVID-19, which could cause actual outcomes to differ materially from those expressed[16](index=16&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances occurring after the statement's date[17](index=17&type=chunk) [Business and Properties](index=7&type=section&id=Items%201%20and%202%20Business%20and%20Properties) MDU Resources Group operates regulated energy delivery and construction materials/services across five segments, focusing on organic growth, acquisitions, safety, and compliance after a 2019 reorganization - The Company operates a two-platform business model: regulated energy delivery and construction materials and services, aiming to balance seasonality and industry risks[20](index=20&type=chunk)[21](index=21&type=chunk) - The five reportable business segments are electric, natural gas distribution, pipeline, construction materials and contracting, and construction services[22](index=22&type=chunk) - As of December 31, 2020, the Company had **12,994** employees across 40 states plus Washington D.C., with **7,204** employees represented by collective-bargaining agreements[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company is committed to safety, health, diversity, and inclusion, implementing policies and training, and establishing a Safety Leadership Council[28](index=28&type=chunk)[34](index=34&type=chunk) - Operations are subject to extensive environmental laws and regulations, including those related to air, water, solid waste, and GHG emissions, with ongoing monitoring of legislative and regulatory activity[35](index=35&type=chunk)[36](index=36&type=chunk) [General Business Overview](index=7&type=section&id=General) The Company completed a 2019 reorganization, establishing two business platforms, employing nearly 13,000 people, and prioritizing human capital, safety, diversity, and regulatory compliance - The Company completed a Holding Company Reorganization on January 2, 2019, making Montana-Dakota a subsidiary[19](index=19&type=chunk) - The Company's strategy involves delivering value through regulated energy delivery and construction materials/services, pursuing organic growth, and disciplined acquisitions[20](index=20&type=chunk) - As of December 31, 2020, the Company had **12,994** employees, with **7,204** covered by collective-bargaining agreements[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company established a Safety Leadership Council and implemented COVID-19 protection procedures, including daily self-assessments and social distancing[28](index=28&type=chunk)[30](index=30&type=chunk) - The Company created a Cyber Risk Oversight Committee (CyROC) to oversee cybersecurity and provides quarterly reports to the Audit Committee[38](index=38&type=chunk)[39](index=39&type=chunk) [Electric Segment](index=10&type=section&id=Electric) Montana-Dakota's electric segment serves 185 communities, with 2020 retail revenues of **$297.1 million**, 750,318 kW capacity (30% renewable), and plans to retire coal units while building an 88-MW natural gas unit - Montana-Dakota provides electric service to 185 communities in Montana, North Dakota, South Dakota, and Wyoming[41](index=41&type=chunk) Electric Retail Customers and Revenues (2018-2020) | Year | Customers Served | Revenues (Thousands of Dollars) | | :--- | :--------------- | :------------------------------ | | 2020 | 143,782 | $297,089 | | 2019 | 143,346 | $312,920 | | 2018 | 143,022 | $312,097 | - Montana-Dakota's interconnected system has an aggregate nameplate rating of **750,318 kW**, with **30%** of electricity from owned generation in 2020 derived from renewable resources[45](index=45&type=chunk)[48](index=48&type=chunk) - The Company plans to retire three aging coal-fired electric generating units (Lewis & Clark Unit 1 by March 2021, Heskett Units 1 and 2 by early 2022) and construct a new **88-MW** natural gas-fired combustion turbine peaking unit at Heskett Station by 2023[53](index=53&type=chunk)[268](index=268&type=chunk) Average Cost of Coal Purchased (2018-2020) | Year | Average cost of coal per MMBtu | Average cost of coal per ton | | :--- | :----------------------------- | :--------------------------- | | 2020 | $2.10 | $30.52 | | 2019 | $2.15 | $31.36 | | 2018 | $2.00 | $29.08 | [Natural Gas Distribution Segment](index=13&type=section&id=Natural%20Gas%20Distribution) The natural gas distribution segment serves nearly one million customers across eight states, with 2020 retail revenues of **$787.9 million**, operating 20,600 miles of systems, and focusing on RNG access and energy efficiency - The natural gas distribution segment serves residential, commercial, and industrial customers in 340 communities across eight states through approximately **20,600 miles** of distribution systems[70](index=70&type=chunk) Natural Gas Distribution Retail Customers and Revenues (2018-2020) | Year | Customers Served | Revenues (Thousands of Dollars) | | :--- | :--------------- | :------------------------------ | | 2020 | 997,146 | $787,858 | | 2019 | 977,468 | $799,444 | | 2018 | 957,727 | $768,818 | - Markets are highly seasonal, with sales volumes dependent on weather, though mitigated by weather normalization mechanisms in certain jurisdictions[73](index=73&type=chunk) - Intermountain received approval in 2020 to facilitate access for Renewable Natural Gas (RNG) producers to its distribution system and to implement a commercial energy efficiency program[81](index=81&type=chunk)[82](index=82&type=chunk) - The segment is investigating and remediating contamination at historic manufactured gas plant sites, with costs potentially recoverable through natural gas rates[86](index=86&type=chunk) [Pipeline Segment](index=15&type=section&id=Pipeline) The pipeline segment operates 3,700 miles of natural gas transmission and storage (350 Bcf capacity), divested gathering assets in 2020, and focuses on system expansion and energy services - WBI Energy Transmission operates approximately **3,700 miles** of natural gas transmission and storage lines in Minnesota, Montana, North Dakota, South Dakota, and Wyoming[88](index=88&type=chunk) - The segment's underground natural gas storage facilities have a certificated storage capacity of approximately **350 Bcf**, including **193 Bcf** of working gas capacity[92](index=92&type=chunk) - In 2020, the Company divested its regulated and non-regulated natural gas gathering assets, exiting the natural gas gathering business[89](index=89&type=chunk)[294](index=294&type=chunk) - WBI Energy Transmission transports substantially all of Montana-Dakota's natural gas, representing **23%** of its subscribed firm transportation contract demand in 2020[95](index=95&type=chunk) [Construction Materials and Contracting Segment](index=16&type=section&id=Construction%20Materials%20and%20Contracting) Knife River operates construction materials and contracting across 12 states, managing **1.1 billion tons** of aggregate reserves, made two acquisitions in 2020, and faces competitive, cyclical market conditions - Knife River operates construction materials and contracting businesses in 12 states, producing and selling construction aggregates, asphalt mix, and ready-mixed concrete[100](index=100&type=chunk) - In 2020, Knife River acquired Oldcastle Infrastructure Spokane (prestressed-concrete) and McMurry Ready-Mix Co. (aggregates and concrete supplier)[101](index=101&type=chunk) - The segment's aggregate reserves are estimated at **1.1 billion tons** as of December 31, 2020, with approximately **1.0 billion tons** permitted[109](index=109&type=chunk)[113](index=113&type=chunk) Aggregate Reserves and Sales (2018-2020) | Year | Aggregate Reserves (Thousands of Tons) | Sales (Thousands of Tons) | | :--- | :------------------------------------- | :------------------------ | | 2020 | 1,104,887 | 30,949 | | 2019 | 1,054,186 | 32,314 | | 2018 | 1,014,431 | 29,795 | - Knife River - Northwest was named a PRP by the EPA in connection with the Portland, Oregon, Harbor Superfund Site cleanup, but believes it is not probable to incur material remediation costs[125](index=125&type=chunk)[673](index=673&type=chunk) [Construction Services Segment](index=19&type=section&id=Construction%20Services) MDU Construction Services provides specialty contracting across 44 states and D.C., acquired PerLectric in 2020, and operates in a highly competitive, bid-dependent market for utility and subcontract work - MDU Construction Services offers inside and outside specialty contracting services in 44 states plus Washington D.C.[127](index=127&type=chunk) - Inside services include electrical, communication, fire suppression, and mechanical piping; outside services include electrical distribution/transmission, substations, lighting, traffic signalization, and gas pipelines[127](index=127&type=chunk) - In 2020, MDU Construction Services acquired PerLectric, Inc., an electrical construction company in Fairfax, Virginia[128](index=128&type=chunk) - The segment operates in a highly competitive business environment, with competition based primarily on price and reputation for quality, safety, and reliability[131](index=131&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A%20Risk%20Factors) This section details significant economic, operational, environmental, and regulatory risks, including government regulations, economic volatility, catastrophic events, COVID-19 impacts, and aging infrastructure - The Company's regulated energy delivery businesses are subject to comprehensive federal, state, and local regulations, which can impact rates, cost recovery, and financing[137](index=137&type=chunk) - Economic volatility, including public/private spending levels and customer payment abilities, can negatively affect demand for products and services, especially in construction and utility sectors[140](index=140&type=chunk)[141](index=141&type=chunk) - Operations face risks from catastrophic events (e.g., explosions, natural disasters, pandemics) and disruptions to electric/natural gas grids, potentially leading to financial losses not fully covered by insurance[142](index=142&type=chunk)[143](index=143&type=chunk) - The COVID-19 pandemic poses risks to business operations, revenues, liquidity, and cash flows due to potential employee illness, project suspensions, and reduced demand, though impacts have not been material to date[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Aging infrastructure in utility and pipeline operations increases maintenance costs, outage risks, and potential regulatory scrutiny, which may not be fully recoverable in rates[162](index=162&type=chunk)[163](index=163&type=chunk) - Climate change and GHG emission reduction initiatives could adversely impact operations, increase costs, affect capital access, and lead to litigation or regulatory liabilities[168](index=168&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - The Company relies on cash from subsidiaries to pay dividends, which can be restricted by regulatory, contractual, and legal limitations[189](index=189&type=chunk) - Information technology disruptions or cyber-attacks could adversely impact operations, reputation, and financial results, leading to increased compliance costs and potential penalties[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Unresolved Staff Comments](index=27&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The Company has no unresolved comments with the SEC - The Company has no unresolved comments with the SEC[201](index=201&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203%20Legal%20Proceedings) This section refers to Item 8 - Note 21 for detailed legal proceedings, especially environmental ones, with a **$1.0 million** disclosure threshold for monetary sanctions - The Company discloses information about proceedings under environmental provisions if monetary sanctions are expected to exceed **$1.0 million**[202](index=202&type=chunk) - Detailed information on legal proceedings is incorporated by reference from Item 8 - Note 21[203](index=203&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This section refers to Exhibit 95 for mine safety violations and regulatory matters as required by the Dodd-Frank Act and Regulation S-K - Information on mine safety violations and regulatory matters is provided in Exhibit 95 to this Form 10-K, as required by the Dodd-Frank Act[204](index=204&type=chunk) [Part II](index=29&type=section&id=Part%20II) [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205%20Market%20for%20the%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company's common stock (NYSE: MDU) had **10,400** stockholders as of December 31, 2020, paid uninterrupted dividends for 83 years, and purchased **45,273** shares in Q4 2020 - The Company's common stock is listed on the New York Stock Exchange under the symbol 'MDU'[206](index=206&type=chunk) - As of December 31, 2020, there were approximately **10,400** stockholders of record[206](index=206&type=chunk) - The Company has paid uninterrupted dividends for 83 consecutive years, with an increase in payout for the last 30 consecutive years[207](index=207&type=chunk) Issuer Purchases of Equity Securities (Q4 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------- | :----------------------------- | :--------------------------- | | November 1 through November 30, 2020 | 45,273 | $25.40 | | Total | 45,273 | | [Selected Financial Data](index=30&type=section&id=Item%206%20Selected%20Financial%20Data) This section provides a five-year summary of key financial and operating data, including revenues, income, EPS, and balance sheet metrics, highlighting performance across diverse business segments Selected Operating Revenues by Segment (2018-2020, in thousands) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Electric | $332,029 | $351,725 | $335,123 | | Natural gas distribution | $848,185 | $865,222 | $823,247 | | Pipeline | $143,877 | $140,444 | $128,923 | | Construction materials and contracting | $2,178,002 | $2,190,717 | $1,925,854 | | Construction services | $2,095,723 | $1,849,266 | $1,371,453 | | Total Operating Revenues | $5,532,750 | $5,336,776 | $4,531,552 | Selected Operating Income by Segment (2018-2020, in thousands) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Electric | $63,434 | $64,039 | $65,148 | | Natural gas distribution | $73,082 | $69,188 | $72,336 | | Pipeline | $49,436 | $42,796 | $36,128 | | Construction materials and contracting | $214,498 | $179,955 | $141,426 | | Construction services | $147,644 | $126,426 | $86,764 | | Total Operating Income | $544,925 | $481,220 | $401,723 | Earnings Per Common Share (Diluted, 2018-2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------- | :--- | :--- | :--- | | Earnings per common share before discontinued operations - diluted | $1.95 | $1.69 | $1.38 | | Discontinued operations attributable to the Company, net of tax | — | — | $0.01 | | Total Earnings per common share - diluted | $1.95 | $1.69 | $1.39 | Key Financial and Capitalization Ratios (2019-2020) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :------------------------------------- | :------------ | :------------ | | Total assets | $8,053,372 | $7,683,059 | | Total long-term debt | $2,213,130 | $2,243,107 | | Capitalization ratios: Total equity | 58 % | 56 % | | Capitalization ratios: Total debt | 42 % | 44 % | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A reviews financial performance, COVID-19 impact, consolidated earnings, and segment data, covering liquidity, capital, accounting standards, critical estimates, and non-GAAP measures - The Company's two-platform business model (regulated energy delivery and construction materials and services) helps balance seasonality and risks[215](index=215&type=chunk) - The COVID-19 pandemic has caused some inefficiency impacts but no material adverse impacts on results of operations for the year ended December 31, 2020[216](index=216&type=chunk)[219](index=219&type=chunk) - The Company deferred approximately **$56.7 million** in payroll taxes in 2020 under the CARES Act, with **50%** due by end of 2021 and the remainder by end of 2022[217](index=217&type=chunk) - Consolidated earnings increased by **$54.7 million (16%)** in 2020 compared to 2019, driven by increased earnings across all businesses[222](index=222&type=chunk)[223](index=223&type=chunk) [Consolidated Earnings Overview](index=33&type=section&id=Consolidated%20Earnings%20Overview) Consolidated net income increased by **$54.7 million (16%)** to **$390.2 million** in 2020, driven by higher margins in construction, increased pipeline revenues, and rate recovery in regulated segments Consolidated Net Income by Segment (2018-2020, in millions) | Segment | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | 2018 (Millions of Dollars) | | :----------------------------- | :---- | :---- | :---- | | Electric | $55.6 | $54.8 | $47.0 | | Natural gas distribution | $44.0 | $39.5 | $37.7 | | Pipeline | $37.0 | $29.6 | $28.5 | | Construction materials and contracting | $147.3 | $120.4 | $92.6 | | Construction services | $109.7 | $93.0 | $64.3 | | Other | $(3.1) | $(2.1) | $(0.7) | | Income from continuing operations | $390.5 | $335.2 | $269.4 | | Net income | $390.2 | $335.5 | $272.3 | - Consolidated earnings increased by **$54.7 million (16%)** in 2020 compared to 2019, driven by increased earnings across all businesses[222](index=222&type=chunk)[223](index=223&type=chunk) - Key drivers for 2020 growth included favorable weather and higher materials margins in construction materials, increased workloads in construction services, and higher transportation/storage revenues in pipeline[223](index=223&type=chunk) - In 2019, consolidated earnings increased by **$63.2 million (23%)** compared to 2018, primarily due to higher gross margins in construction services and materials, and approved rate relief in the electric business[224](index=224&type=chunk)[225](index=225&type=chunk) [Business Segment Financial and Operating Data](index=33&type=section&id=Business%20Segment%20Financial%20and%20Operating%20Data) This section details financial and operational data for each of the five business segments, covering revenues, margins, expenses, net income, and key statistics, along with strategies, challenges, and outlooks [Electric and Natural Gas Distribution](index=34&type=section&id=Electric%20and%20Natural%20Gas%20Distribution) Electric and Natural Gas Distribution segments aim for top utility performance, facing regulatory, supply chain, and environmental challenges, with Electric net income up **$0.8 million** and Natural Gas Distribution up **$4.5 million** in 2020 - Segments aim to be top-performing utilities, focusing on organic growth, cost management, and strategic acquisitions, while providing safe, reliable, and competitively priced energy[229](index=229&type=chunk) - Both segments are subject to extensive regulation, impacting allowed rates of return, cost recovery, and environmental compliance[230](index=230&type=chunk) - Increased lead times for raw materials (steel, electrical equipment) due to pipeline safety regulations and COVID-19 impacts are a challenge[233](index=233&type=chunk) - Revenues are impacted by customer growth and usage, with weather normalization and decoupling mechanisms mitigating weather-related volume fluctuations in certain natural gas jurisdictions[235](index=235&type=chunk) Electric Segment Net Income (2018-2020, in millions) | Year | Net Income (Millions of Dollars) | | :--- | :------------------------------- | | 2020 | $55.6 | | 2019 | $54.8 | | 2018 | $47.0 | - Electric earnings increased by **$0.8 million** in 2020, primarily due to higher rates (**$2.8 million**) offsetting lower retail sales volumes (**3.3%**) from warmer weather and COVID-19 impacts[239](index=239&type=chunk) Natural Gas Distribution Segment Net Income (2018-2020, in millions) | Year | Net Income (Millions of Dollars) | | :--- | :------------------------------- | | 2020 | $44.0 | | 2019 | $39.5 | | 2018 | $37.7 | - Natural gas distribution earnings increased by **$4.5 million** in 2020, driven by **$6.8 million** in approved rate recovery, **2%** customer growth, and increased property tax tracker revenue, largely offsetting a **7.4%** decrease in retail sales volumes due to warmer weather and COVID-19[254](index=254&type=chunk) - The Company expects these segments to grow rate base by approximately **5%** annually over the next five years, with customer growth averaging **1% to 2%** per year[266](index=266&type=chunk) - Plans include retiring three coal-fired units by early 2022 and constructing an **88-MW** natural gas-fired unit (Heskett Unit 4) by 2023, approved by the NDPSC[268](index=268&type=chunk) [Pipeline](index=39&type=section&id=Pipeline) The Pipeline segment focuses on natural gas transportation and storage, divested gathering assets in 2020, and saw net income increase by **$7.4 million (25.0%)** to **$37.0 million**, driven by organic growth projects - The pipeline segment focuses on increasing market share and profitability through optimizing existing operations, organic growth, and investments in energy-related assets[272](index=272&type=chunk) - Organic growth projects completed in 2020 and 2019 include the Line Section 22 Expansion (**22.5 MMcf/day** capacity increase) and Demicks Lake Expansion (**175 MMcf/day** capacity increase)[272](index=272&type=chunk) - The segment divested its regulated natural gas gathering assets in April 2020 and non-regulated natural gas gathering assets in November 2020, exiting the gathering business[293](index=293&type=chunk)[294](index=294&type=chunk) Pipeline Segment Net Income (2018-2020, in millions) | Year | Net Income (Millions of Dollars) | | :--- | :------------------------------- | | 2020 | $37.0 | | 2019 | $29.6 | | 2018 | $28.5 | - Pipeline earnings increased by **$7.4 million** in 2020, driven by increased transportation volumes and demand revenue (**$6.2 million**) from organic growth projects and higher storage-related revenues (**$4.6 million**)[279](index=279&type=chunk) - The North Bakken Expansion project, with a design capacity of **250 MMcf/day**, is expected to begin construction in Q2 2021 and be in-service late 2021, supported by long-term take-or-pay contracts[292](index=292&type=chunk) [Construction Materials and Contracting](index=41&type=section&id=Construction%20Materials%20and%20Contracting) Construction Materials and Contracting focuses on high-growth markets, managing **1.1 billion tons** of aggregate reserves, made key acquisitions in 2020, and saw net income increase by **$26.9 million (22.3%)** to **$147.3 million** - The segment's long-term strategy is to expand market presence in higher-margin materials and strengthen aggregate reserve positions through purchases and leases[296](index=296&type=chunk) - In 2020, the Company acquired McMurry Ready-Mix Co. (aggregates and concrete supplier) and Oldcastle Infrastructure Spokane (prestressed-concrete business)[297](index=297&type=chunk)[312](index=312&type=chunk) - Challenges include competitive markets, volatility in raw material costs (diesel fuel, liquid asphalt, cement, steel), adverse weather, and the cyclical nature of the construction industry[298](index=298&type=chunk) Construction Materials and Contracting Net Income (2018-2020, in millions) | Year | Net Income (Millions of Dollars) | | :--- | :------------------------------- | | 2020 | $147.3 | | 2019 | $120.4 | | 2018 | $92.6 | - Earnings increased by **$26.9 million** in 2020, primarily due to higher material revenues and margins, higher contracting margins, and lower fuel costs, partially offset by lower gains on asset sales[302](index=302&type=chunk) - Backlog remained strong at **$673 million** as of December 31, 2020, comparable to **$693 million** in 2019, with a significant portion related to street and highway construction[313](index=313&type=chunk) [Construction Services](index=43&type=section&id=Construction%20Services) Construction Services focuses on project execution and growth, acquired PerLectric in 2020, and saw net income increase by **$16.7 million (18.0%)** to **$109.7 million**, despite competitive markets and supply chain challenges - The segment's strategy involves safely executing projects, building customer relationships, controlling costs, and growing through organic and acquisition opportunities[314](index=314&type=chunk) - In 2020, the Company acquired PerLectric, Inc., an electrical construction company in Fairfax, Virginia[330](index=330&type=chunk) - Challenges include competitive pricing, project delays, supply chain disruptions, raw material cost increases, and labor availability issues[315](index=315&type=chunk)[316](index=316&type=chunk) Construction Services Net Income (2018-2020, in millions) | Year | Net Income (Millions of Dollars) | | :--- | :------------------------------- | | 2020 | $109.7 | | 2019 | $93.0 | | 2018 | $64.3 | - Earnings increased by **$16.7 million** in 2020, primarily due to higher inside specialty contracting workloads (high-tech, hospitality, industrial projects) and outside workloads (utility projects, storm/wildfire restoration)[319](index=319&type=chunk) Construction Services Backlog (2019-2020, in millions) | Category | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | | :----------------------------- | :------ | :------ | | Inside specialty contracting | $1,059 | $908 | | Outside specialty contracting | $214 | $236 | | Total | $1,273 | $1,144 | [Other](index=45&type=section&id=Other) The 'Other' category, including Centennial Capital's captive insurer and corporate G&A, reported a net loss of **$3.1 million** in 2020, primarily due to higher insurance claims - The 'Other' category includes Centennial Capital's captive insurer activities and corporate general and administrative costs not meeting discontinued operations criteria[331](index=331&type=chunk) Other Segment Net Loss (2018-2020, in millions) | Year | Net Loss (Millions of Dollars) | | :--- | :----------------------------- | | 2020 | $(3.1) | | 2019 | $(2.1) | | 2018 | $(0.7) | - The net loss in 2020 was negatively impacted by higher insurance claims compared to 2019[332](index=332&type=chunk) [Intersegment Transactions](index=46&type=section&id=Intersegment%20Transactions) This section details the elimination of intersegment transactions, which totaled **$77.0 million** in operating revenues for 2020, to reconcile segment data with consolidated financial statements - Intersegment transactions are eliminated to reconcile segment data with consolidated financial statements[333](index=333&type=chunk) Intersegment Transactions (2018-2020, in millions) | Metric | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | 2018 (Millions of Dollars) | | :----------------------------- | :---- | :---- | :---- | | Operating revenues | $77.0 | $77.1 | $64.3 | | Operation and maintenance | $19.1 | $21.1 | $13.7 | | Purchased natural gas sold | $57.9 | $56.0 | $50.6 | [Liquidity and Capital Commitments](index=46&type=section&id=Liquidity%20and%20Capital%20Commitments) The Company maintains strong liquidity with **$59.6 million** cash and **$736.3 million** borrowing capacity, with operating cash flows increasing to **$768.4 million** in 2020 and estimated capital expenditures of **$826 million** for 2021 - As of December 31, 2020, the Company had **$59.6 million** in cash and cash equivalents and **$736.3 million** in available borrowing capacity under subsidiary credit facilities[334](index=334&type=chunk) - Cash flows provided by operating activities increased to **$768.4 million** in 2020 from **$542.3 million** in 2019, driven by stronger accounts receivable collections, decreased natural gas purchases, and payroll tax deferrals under the CARES Act[336](index=336&type=chunk) Capital Expenditures (2018-2023, in millions) | Segment | 2018 (Millions of Dollars) | 2019 (Millions of Dollars) | 2020 (Millions of Dollars) | 2021 (Millions of Dollars) | 2022 (Millions of Dollars) | 2023 (Millions of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | :--------------- | :--------------- | :--------------- | | Electric | $186 | $99 | $115 | $141 | $182 | $109 | | Natural gas distribution | $206 | $207 | $193 | $215 | $225 | $188 | | Pipeline | $70 | $71 | $62 | $230 | $74 | $110 | | Construction materials and contracting | $280 | $190 | $191 | $189 | $154 | $150 | | Construction services | $25 | $61 | $84 | $46 | $34 | $35 | | Other | $2 | $8 | $3 | $5 | $4 | $3 | | Total capital expenditures | $769 | $636 | $648 | $826 | $673 | $595 | - Estimated capital expenditures for 2021-2023 include the North Bakken Expansion project and construction of Heskett Unit 4[346](index=346&type=chunk) - Total equity as a percent of total capitalization was **58%** at December 31, 2020, up from **56%** in 2019, indicating financial strength[354](index=354&type=chunk) - The Company has an 'at-the-market' offering program with capacity to issue up to **6.4 million** additional shares of common stock[356](index=356&type=chunk)[357](index=357&type=chunk) [Cash flows](index=46&type=section&id=Cash%20flows) Operating cash flows increased to **$768.4 million** in 2020, investing activities used **$630.2 million**, and financing activities shifted to a net use of **$145.1 million**, reflecting changes in collections, acquisitions, and debt activity Consolidated Statements of Cash Flows (2018-2020, in thousands) | Activity | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Net cash provided by operating activities | $768,374 | $542,280 | $499,881 | | Net cash used in investing activities | $(630,243) | $(603,861) | $(710,907) | | Net cash provided by (used in) financing activities | $(145,043) | $74,092 | $230,376 | | Increase (decrease) in cash and cash equivalents | $(6,912) | $12,511 | $19,349 | - Operating cash flows increased in 2020 due to stronger accounts receivable collections in construction, decreased natural gas purchases, and payroll tax deferrals (CARES Act)[336](index=336&type=chunk) - Investing cash flows increased in 2020 primarily due to higher acquisition activity in construction businesses and increased capital expenditures in the electric segment[338](index=338&type=chunk) - Financing cash flows shifted from provided to used in 2020, mainly due to decreased net long-term and short-term debt borrowings and the absence of common stock issuance under the 'at-the-market' offering[340](index=340&type=chunk)[341](index=341&type=chunk) [Defined benefit pension plans](index=47&type=section&id=Defined%20benefit%20pension%20plans) Pension plans had a **$53.5 million** deficit at year-end 2020, with pretax pension income of **$684,000** in 2020, and no minimum funding contributions required for 2021 - At December 31, 2020, the pension plans' accumulated benefit obligations exceeded assets by approximately **$53.5 million**[343](index=343&type=chunk) - Pretax pension income was **$684,000** in 2020, compared to expenses of **$2.5 million** in 2019 and **$843,000** in 2018[343](index=343&type=chunk) - No minimum funding requirements for defined benefit pension plans in 2021 due to an additional **$20.0 million** contribution in 2019[343](index=343&type=chunk) [Capital expenditures](index=47&type=section&id=Capital%20expenditures) Total capital expenditures were **$648 million** in 2020, with estimated expenditures of **$826 million** for 2021, including major projects like North Bakken Expansion and Heskett Unit 4 Capital Expenditures (2018-2023, in millions) | Segment | 2018 (Millions of Dollars) | 2019 (Millions of Dollars) | 2020 (Millions of Dollars) | 2021 (Millions of Dollars) | 2022 (Millions of Dollars) | 2023 (Millions of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | :--------------- | :--------------- | :--------------- | | Electric | $186 | $99 | $115 | $141 | $182 | $109 | | Natural gas distribution | $206 | $207 | $193 | $215 | $225 | $188 | | Pipeline | $70 | $71 | $62 | $230 | $74 | $110 | | Construction materials and contracting | $280 | $190 | $191 | $189 | $154 | $150 | | Construction services | $25 | $61 | $84 | $46 | $34 | $35 | | Other | $2 | $8 | $3 | $5 | $4 | $3 | | Total capital expenditures | $769 | $636 | $648 | $826 | $673 | $595 | - 2020 capital expenditures included completed business combinations in construction materials and services[346](index=346&type=chunk) - Estimated capital expenditures for 2021-2023 include the North Bakken Expansion project and construction of Heskett Unit 4[346](index=346&type=chunk) - Funding for capital expenditures is anticipated from internal funds, credit facilities, commercial paper, and potential debt/equity issuances[348](index=348&type=chunk) [Capital resources](index=48&type=section&id=Capital%20resources) Subsidiaries maintain **$960 million** in credit facilities, with **$221.5 million** outstanding at year-end 2020, all debt entities have investment-grade ratings, and the Company is transitioning from LIBOR to SOFR Outstanding Revolving Credit Facilities (December 31, 2020, in millions) | Company | Facility Limit (Millions of Dollars) | Amount Outstanding (Millions of Dollars) | Letters of Credit (Millions of Dollars) | | :----------------------------- | :------------- | :----------------- | :---------------- | | Montana-Dakota Utilities Co. | $175.0 | $87.7 | $— | | Cascade Natural Gas Corporation | $100.0 | $54.0 | $2.2 | | Intermountain Gas Company | $85.0 | $41.9 | $— | | Centennial Energy Holdings, Inc. | $600.0 | $37.9 | $— | - Total equity as a percent of total capitalization was **58%** at December 31, 2020, and all entities issuing debt had investment-grade credit ratings[354](index=354&type=chunk) - The Company has a shelf registration statement for issuing common stock and debt securities, and an 'at-the-market' offering program with capacity for **6.4 million** additional shares[355](index=355&type=chunk)[357](index=357&type=chunk) - The Company is transitioning from LIBOR to SOFR in new and renewed debt instruments to address reference rate reform[358](index=358&type=chunk) - Cascade issued **$75.0 million** in senior notes in 2020 with maturity dates ranging from 2050 to 2060[364](index=364&type=chunk) [Dividend restrictions](index=49&type=section&id=Dividend%20restrictions) This section refers to Item 8 - Note 12 for information on the Company's dividends and associated restrictions - Information on the Company's dividends and dividend restrictions is detailed in Item 8 - Note 12[368](index=368&type=chunk) [Off balance sheet arrangements](index=49&type=section&id=Off%20balance%20sheet%20arrangements) As of December 31, 2020, the Company had no material off-balance sheet arrangements as defined by SEC rules - As of December 31, 2020, the Company had no material off-balance sheet arrangements[369](index=369&type=chunk) [Contractual obligations and Commercial Commitments](index=50&type=section&id=Contractual%20obligations%20and%20commercial%20commitments) Total contractual obligations and commercial commitments were **$5.34 billion** at year-end 2020, excluding **$446.9 million** in asset retirement obligations due to uncertain timing, with no pension funding required for 2021 Contractual Obligations and Commercial Commitments (December 31, 2020, in millions) | Obligation | Less than 1 year (Millions of Dollars) | 1-3 years (Millions of Dollars) | 3-5 years (Millions of Dollars) | More than 5 years (Millions of Dollars) | Total (Millions of Dollars) | | :----------------------------- | :--------------- | :-------- | :-------- | :---------------- | :------ | | Long-term debt maturities | $1.6 | $225.9 | $460.7 | $1,530.7 | $2,218.9 | | Estimated interest payments | $90.8 | $173.5 | $156.4 | $770.3 | $1,191.0 | | Operating leases | $36.6 | $41.8 | $20.0 | $48.8 | $147.2 | | Purchase commitments | $458.4 | $409.2 | $223.6 | $691.6 | $1,782.8 | | Total | $587.4 | $850.4 | $860.7 | $3,041.4 | $5,339.9 | - Total liabilities for asset retirement obligations were **$446.9 million** at December 31, 2020, excluded from the table due to uncertain payment timing[373](index=373&type=chunk) - The Company has no minimum funding requirements for its defined benefit pension plans for 2021[374](index=374&type=chunk) - MEPP contributions are based on union employee payroll and may increase due to underfunded status, potentially impacting results of operations and cash flows[375](index=375&type=chunk) [New Accounting Standards](index=50&type=section&id=New%20Accounting%20Standards) This section refers to Item 8 - Note 2 for information regarding new accounting standards, both recently adopted and issued but not yet adopted - Information regarding new accounting standards is provided in Item 8 - Note 2[376](index=376&type=chunk) [Critical Accounting Estimates](index=50&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates, including goodwill, business combinations, regulatory accounting, revenue recognition, pension costs, and income taxes, require significant judgment and could materially impact financial results - Critical accounting estimates involve significant judgment and assumptions, and changes could materially impact financial position or results of operations[378](index=378&type=chunk) [Goodwill](index=50&type=section&id=Goodwill) Annual goodwill impairment testing uses income and market approaches, with no impairment losses recorded in 2018-2020, and fair value substantially exceeded carrying value at October 31, 2020 - Goodwill impairment testing is performed annually in the fourth quarter, or more frequently if impairment is indicated[379](index=379&type=chunk) - Fair value of reporting units is determined using a weighted combination of income (discounted cash flow) and market approaches (comparative peer multiples)[382](index=382&type=chunk) - No goodwill impairment losses were recorded for the years ended December 31, 2020, 2019, and 2018[381](index=381&type=chunk) - At October 31, 2020, the fair value substantially exceeded the carrying value at all reporting units[381](index=381&type=chunk) [Business combinations](index=51&type=section&id=Business%20combinations) Acquisitions are accounted for using the acquisition method, recording assets and liabilities at fair value, involving significant judgment in estimating intangible assets and property, with a one-year measurement period for adjustments - Acquisitions are accounted for using the acquisition method, recording acquired assets and liabilities at their estimated fair values[383](index=383&type=chunk) - Estimation of fair values requires significant judgment and assumptions, often using market and cost approaches for tangible assets and discounted cash flow models for aggregate reserves and intangibles[383](index=383&type=chunk)[384](index=384&type=chunk) - A measurement period of up to one year allows for adjustments to provisional amounts recognized for business combinations[385](index=385&type=chunk) [Regulatory accounting](index=51&type=section&id=Regulatory%20accounting) Regulated businesses apply regulatory accounting, deferring income/expense as regulatory assets (**$447.9 million**) or liabilities (**$459.5 million**) at year-end 2020, based on expected future rate treatment - Regulated businesses defer certain income and expense items as regulatory assets or liabilities based on expected regulatory treatment in future rates[386](index=386&type=chunk) - Management continually assesses the likelihood of recovery in future rates for incurred costs and refunds to customers for regulatory assets and liabilities[387](index=387&type=chunk) Regulatory Assets and Liabilities (2019-2020, in millions) | Metric | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | | :----------------------------- | :---- | :---- | | Total regulatory assets | $447.9 | $417.4 | | Total regulatory liabilities | $459.5 | $490.3 | [Revenue recognition](index=52&type=section&id=Revenue%20recognition) Revenue is recognized upon transfer of control, with construction contract revenue recognized over time using the cost-to-cost method, which requires reliable estimates and accounts for variable consideration - Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer[388](index=388&type=chunk) - Construction contract revenue is recognized over time using an input method based on the cost-to-cost measure of progress, requiring reliable estimates of total costs and completion progress[390](index=390&type=chunk) - Variable consideration (e.g., liquidated damages, performance bonuses) is included in the estimated transaction price when it is probable that a significant reversal of cumulative revenue will not occur[393](index=393&type=chunk) - Total construction contract revenue was **$3.1 billion** in 2020 and **$2.8 billion** in 2019[390](index=390&type=chunk) [Pension and other postretirement benefits](index=52&type=section&id=Pension%20and%20other%20postretirement%20benefits) Pension and postretirement benefit plans rely on actuarial assumptions; a 50-basis point decrease in discount rate or expected return would increase 2020 after-tax expense by approximately **$2.0 million** each - Plan costs are dependent on actuarial assumptions, including discount rates, expected long-term return on plan assets, rate of compensation increases, and health care cost trend rates[396](index=396&type=chunk) - A **50-basis point** decrease in the discount rate or expected return on plan assets would each increase expense by approximately **$2.0 million** (after-tax) for the year ended December 31, 2020[397](index=397&type=chunk) - Estimates are based on historical returns, market conditions, investment mix, and expected future market trends[396](index=396&type=chunk) [Income taxes](index=53&type=section&id=Income%20taxes) The Company estimates tax obligations based on transaction effects, recognizing tax positions with a 'more-likely-than-not' threshold, and assesses deferred tax asset recoverability based on earnings and tax planning - Judgments are required for potential tax effects of financial transactions and operations to estimate tax obligations[399](index=399&type=chunk) - Tax positions are recognized if it is 'more-likely-than-not' that they will be sustained on audit[399](index=399&type=chunk) - Deferred tax assets are assessed for recoverability based on historical/anticipated earnings, temporary differences, and tax planning strategies, with valuation allowances adjusted as needed[401](index=401&type=chunk) [Non-GAAP Financial Measures](index=53&type=section&id=Non-GAAP%20Financial%20Measures) The Company uses 'adjusted gross margin' as a non-GAAP measure for electric and natural gas distribution segments, calculated by adding back O&M, depreciation, and certain non-income taxes to operating income, to provide clearer operational insight - Adjusted gross margin is a non-GAAP financial measure used for electric and natural gas distribution segments to understand operating performance[402](index=402&type=chunk) - Adjusted gross margin is calculated by adding back operation and maintenance, depreciation, depletion and amortization, and certain non-income taxes to operating income[403](index=403&type=chunk) - This measure is useful because regulated segments pass through commodity and revenue taxes to customers, which can distort GAAP operating income[404](index=404&type=chunk) Electric Segment Adjusted Gross Margin Reconciliation (2018-2020, in millions) | Metric | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | 2018 (Millions of Dollars) | | :----------------------------- | :---- | :---- | :---- | | Operating income | $63.4 | $64.0 | $65.2 | | Total adjustments | $201.1 | $200.5 | $188.5 | | Adjusted gross margin | $264.5 | $264.5 | $253.7 | Natural Gas Distribution Segment Adjusted Gross Margin Reconciliation (2018-2020, in millions) | Metric | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | 2018 (Millions of Dollars) | | :----------------------------- | :---- | :---- | :---- | | Operating income | $73.1 | $69.2 | $72.3 | | Total adjustments | $294.6 | $288.1 | $267.6 | | Adjusted gross margin | $367.7 | $357.3 | $339.9 | [Effects of Inflation](index=54&type=section&id=Effects%20of%20Inflation) Inflation did not significantly affect the Company's operations in 2020, 2019, or 2018 - Inflation did not have a significant effect on the Company's operations in 2020, 2019, or 2018[408](index=408&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company manages market risks from commodity prices and interest rates through policies and derivatives, minimizing natural gas price risk and timing long-term financing for interest rate exposure - The Company is exposed to market fluctuations in commodity prices and interest rates, managed through policies, procedures, and derivatives[409](index=409&type=chunk) - Interest rate risk on long-term debt is managed by timing long-term financing, with no outstanding interest rate hedges at December 31, 2020 and 2019[410](index=410&type=chunk) Long-Term Debt by Expected Maturity (December 31, 2020, in millions) | Type | 2021 (Millions of Dollars) | 2022 (Millions of Dollars) | 2023 (Millions of Dollars) | 2024 (Millions of Dollars) | 2025 (Millions of Dollars) | Thereafter (Millions of Dollars) | Total (Millions of Dollars) | Fair Value (Millions of Dollars) | | :----------------------------- | :--- | :--- | :--- | :--- | :--- | :--------- | :---- | :--------- | | Fixed rate | $1.6 | $148.0 | $77.9 | $61.4 | $177.8 | $1,530.7 | $1,997.4 | $2,321.6 | | Weighted average interest rate | 1.1% | 4.5% | 3.7% | 4.2% | 4.0% | 4.5% | 4.4% | | | Variable rate | $— | $— | $— | $221.5 | $— | $— | $221.5 | $221.5 | | Weighted average interest rate | —% | —% | —% | 1.0% | —% | —% | 1.0% | | - Commodity price risk for natural gas costs is minimized using derivative contracts, which were not material in 2020 or 2019[413](index=413&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, management's report on internal control, independent auditor's reports, and detailed notes on accounting policies, segments, and financial instruments - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2020[417](index=417&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the Company's consolidated financial statements and internal control over financial reporting[419](index=419&type=chunk)[420](index=420&type=chunk) - Critical audit matters included revenue recognition from construction contracts and the impact of rate regulation on financial statements, both requiring significant judgment and audit effort[423](index=423&type=chunk)[424](index=424&type=chunk)[427](index=427&type=chunk)[429](index=429&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=55&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2020, based on its assessment using the COSO framework - Management is responsible for establishing and maintaining adequate internal control over financial reporting[414](index=414&type=chunk) - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2020, using the COSO framework[416](index=416&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2020[417](index=417&type=chunk) [Report of Independent Registered Public Accounting Firm](index=56&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting, highlighting critical audit matters in construction revenue and rate regulation - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2020[419](index=419&type=chunk) - An unqualified opinion was also expressed on the effectiveness of the Company's internal control over financial reporting as of December 31, 2020[420](index=420&type=chunk) - Critical audit matters included revenue from construction contracts, due to judgments in estimating total costs and profit, and regulatory matters, due to management's judgments on cost recovery and refunds[423](index=423&type=chunk)[424](index=424&type=chunk)[427](index=427&type=chunk)[429](index=429&type=chunk) [Consolidated Statements of Income](index=60&type=section&id=Consolidated%20Statements%20of%20Income) Total operating revenues were **$5.53 billion** in 2020, with operating income of **$544.9 million** and net income of **$390.2 million**, resulting in diluted EPS of **$1.95** Consolidated Statements of Income (2018-2020, in thousands) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Total operating revenues | $5,532,750 | $5,336,776 | $4,531,552 | | Total operating expenses | $4,987,825 | $4,855,556 | $4,129,829 | | Operating income | $544,925 | $481,220 | $401,723 | | Income from continuing operations | $390,527 | $335,166 | $269,386 | | Net income | $390,205 | $335,453 | $272,318 | | Earnings per share - diluted | $1.95 | $1.69 | $1.39 | [Consolidated Statements of Comprehensive Income](index=61&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Net income was **$390.2 million** in 2020, with an other comprehensive loss of **$6.0 million** primarily from postretirement liability adjustments, leading to total comprehensive income of **$384.2 million** Consolidated Statements of Comprehensive Income (2018-2020, in thousands) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Net income | $390,205 | $335,453 | $272,318 | | Other comprehensive income (loss) | $(5,976) | $(3,760) | $6,951 | | Comprehensive income attributable to common stockholders | $384,229 | $331,693 | $279,269 | - Other comprehensive loss in 2020 was primarily due to postretirement liability adjustments[444](index=444&type=chunk) [Consolidated Balance Sheets](index=62&type=section&id=Consolidated%20Balance%20Sheets) Total assets were **$8.05 billion** at year-end 2020, with net property, plant and equipment at **$5.17 billion**, goodwill at **$715.0 million**, and total stockholders' equity at **$3.08 billion** Consolidated Balance Sheets (December 31, 2019-2020, in thousands) | Asset/Liability/Equity | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | | Total current assets | $1,337,347 | $1,297,701 | | Net property, plant and equipment | $5,166,939 | $4,917,142 | | Goodwill | $714,963 | $681,358 | | Total assets | $8,053,372 | $7,683,059 | | Total current liabilities | $963,522 | $866,427 | | Total noncurrent liabilities | $4,010,745 | $3,969,386 | | Total liabilities and stockholders' equity | $8,053,372 | $7,683,059 | | Total stockholders' equity | $3,079,105 | $2,847,246 | [Consolidated Statements of Equity](index=63&type=section&id=Consolidated%20Statements%20of%20Equity) Total stockholders' equity increased to **$3.08 billion** at year-end 2020, driven by **$390.2 million** net income, partially offset by **$168.5 million** in dividends and other comprehensive losses Consolidated Statements of Equity (2018-2020, in thousands) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Total Stockholders' Equity (End of Year) | $3,079,105 | $2,847,246 | $2,566,775 | | Net income | $390,205 | $335,453 | $272,318 | | Dividends declared on common stock | $(168,489) | $(162,408) | $(156,453) | - Total stockholders' equity increased by **$231.8 million** in 2020, primarily due to net income and stock-based compensation, partially offset by dividends and other comprehensive loss[448](index=448&type=chunk) [Consolidated Statements of Cash Flows](index=64&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flows increased to **$768.4 million** in 2020, investing activities used **$630.2 million**, and financing activities shifted to a net use of **$145.0 million** Consolidated Statements of Cash Flows (2018-2020, in thousands) | Activity | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Net cash provided by operating activities | $768,374 | $542,280 | $499,881 | | Net cash used in investing activities | $(630,243) | $(603,861) | $(710,907) | | Net cash provided by (used in) financing activities | $(145,043) | $74,092 | $230,376 | | Increase (decrease) in cash and cash equivalents | $(6,912) | $12,511 | $19,349 | - The increase in operating cash flows in 2020 was largely driven by increased earnings, stronger collection of accounts receivable, and decreased natural gas purchases[336](index=336&type=chunk) - The increase in cash used in investing activities in 2020 was primarily due to additional cash needs for acquisition activity and increased capital expenditures in the electric business[338](index=338&type=chunk) - The shift to cash used in financing activities in 2020 was largely due to a decrease in net long-term and short-term debt borrowings and the absence of common stock issuance[340](index=340&type=chunk)[341](index=341&type=chunk) [Notes to Consolidated Financial Statements](index=65&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures supporting consolidated financial statements, covering basis of presentation, accounting policies, revenue recognition, business segments, and financial instruments [Note 1 - Basis of Presentation](index=65&type=section&id=Note%201%20-%20Basis%20of%20Presentation) Consolidated financial statements, prepared under GAAP, reflect a 2019 reorganization; COVID-19 had no material impact in 2020, and out-of-period adjustments and ASU 2016-13 adoption were immaterial - The consolidated financial statements include the Company and its wholly-owned subsidiaries, prepared in accordance with GAAP[460](index=460&type=chunk) - The Holding Company Reorganization was completed on January 2, 2019, making Montana-Dakota a subsidiary[453](index=453&type=chunk) - The COVID-19 pandemic had no material adverse impacts on the Company's results of operations for the twelve months ended December 31, 2020[454](index=454&type=chunk) - Out-of-period adjustments were recorded in 2020 for revenue recognition (**$6.7 million** after-tax reduction) and benefit plan expenses (**$4.4 million** after-tax increase), both deemed immaterial to prior periods[455](index=455&type=chunk)[456](index=456&type=chunk) - The Company adopted ASU 2016-13 (Measurement of Credit Losses on Financial Instruments) on January 1, 2020, with no material impact[457](index=457&type=chunk) [Note 2 - Significant Accounting Policies](index=66&type=section&id=Note%202%20-%20Significant%20Accounting%20Policies) This note details significant accounting policies, including the immaterial adoption of ASU 2016-13 and 2018-13, and discusses other standards not expected to have a material impact, covering revenue, business combinations, and regulatory accounting - Adopted ASU 2016-13 (Credit Losses) and ASU 2018-13 (Fair Value Measurement) on January 1, 2020, with no material impact on financial reporting[463](index=463&type=chunk)[465](index=465&type=chunk) - Recently issued standards (ASU 2018-14, ASU 2019-12, ASU 2020-04) are not expected to have a material impact[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) - Revenue is recognized when control of a product or service is transferred to a customer, measured based on contract consideration[470](index=470&type=chunk) - Construction contract revenue is recognized over time using the cost-to-cost method, while material sales are recognized at a point in time upon delivery[473](index=473&type=chunk)[474](index=474&type=chunk) - Receivables are recorded net of expected credit losses, determined quarterly using historical experience, current conditions, and future forecasts[478](index=478&type=chunk)[479](index=479&type=chunk) - Regulated businesses apply regulatory accounting, deferring certain income/expense items as regulatory assets/liabilities based on expected regulatory treatment[491](index=491&type=chunk) - Goodwill is tested for impairment annually, comparing the fair value of reporting units to their carrying value; no impairment losses were recorded in 2018-2020[493](index=493&type=chunk)[494](index=494&type=chunk) - The Company uses commodity price derivative contracts to minimize natural gas cost volatility, not designated as hedging instruments[496](index=496&type=chunk) [Note 3 - Revenue from Contracts with Customers](index=72&type=section&id=Note%203%20-%20Revenue%20from%20Contracts%20with%20Customers) Total external operating revenues were **$5.53 billion** in 2020, with construction segments recognizing revenue over time using the cost-to-cost method; backlog totaled **$2.1 billion** at year-end 2020 - Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer[510](index=510&type=chunk) External Operating Revenues by Segment (2018-2020, in thousands) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | 2018 (Thousands of Dollars) | | :----------------------------- | :------------ | :------------ | :------------ | | Electric | $331,538 | $351,725 | $335,123 | | Natural gas distribution | $847,651 | $865,222 | $823,247 | | Pipeline | $85,346 | $84,192 | $78,018 | | Construction materials and contracting | $2,177,585 | $2,189,651 | $1,925,185 | | Construction services | $2,090,685 | $1,845,896 | $1,369,772 | | Total external operating revenues | $5,532,750 | $5,336,776 | $4,531,552 | - Construction contracts generally involve a single performance obligation, with revenue reco

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