Part I [Forward-Looking Statements](index=8&type=section&id=Forward-Looking%20Statements) This section highlights that the Form 10-K contains forward-looking statements, which are not historical facts and involve risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are identified by words like 'anticipates,' 'estimates,' 'expects,' 'intends,' 'plans,' 'predicts' and similar expressions, and cover future events, performance, and underlying assumptions[15](index=15&type=chunk) - These statements involve risks and uncertainties that could cause actual results to differ materially from expectations[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) [Items 1 and 2 Business and Properties](index=8&type=section&id=Items%201%20and%202%20Business%20and%20Properties) MDU Resources Group, Inc. operates as a regulated energy delivery and construction materials and services business, organized into five reportable segments - The Company is a regulated energy delivery and construction materials and services business, operating with a two-platform business model to balance seasonality and industry risks[18](index=18&type=chunk)[20](index=20&type=chunk) - On January 2, 2019, the Holding Company Reorganization was completed, making Montana-Dakota a subsidiary of the Company[19](index=19&type=chunk) - The Company is organized into five reportable business segments: electric, natural gas distribution, pipeline and midstream, construction materials and contracting, and construction services[21](index=21&type=chunk) [General Business Overview](index=8&type=section&id=General) - The Company's principal executive offices are located in Bismarck, North Dakota[18](index=18&type=chunk) - The regulated energy delivery platform provides electric and natural gas services, generation, transmission, distribution, and natural gas transportation, storage, and gathering, regulated by state public service commissions and/or FERC[20](index=20&type=chunk) - The construction materials and services platform provides construction services and materials (aggregates, ready-mixed concrete, asphalt) to commercial, industrial, and governmental sectors[20](index=20&type=chunk) Employee Count as of December 31, 2019 | Entity | Employees | | :--------------------------- | :-------- | | MDU Resources Group, Inc. | 244 | | MDU Energy Capital | 1,578 | | WBI Holdings | 335 | | Knife River | 4,255 | | MDU Construction Services | 6,947 | | **Total** | **13,359** | - The Company's operations are subject to federal, state, and local environmental laws and regulations, with ongoing monitoring of legislative and regulatory activity related to environmental and energy policy initiatives, including GHG emissions[29](index=29&type=chunk)[31](index=31&type=chunk) - The Company uses technology in all business aspects and has a Cyber Risk Oversight Committee (CyROC) to oversee cybersecurity, providing quarterly reports to the Audit Committee[32](index=32&type=chunk)[33](index=33&type=chunk) [Electric Segment](index=10&type=section&id=Electric) - The electric segment, operated through Montana-Dakota, serves **143,346** residential, commercial, industrial, and municipal customers in 185 communities across Montana, North Dakota, South Dakota, and Wyoming as of December 31, 2019[35](index=35&type=chunk) Electric Retail Customers and Revenues (2017-2019) | Class | 2019 Customers Served | 2019 Revenues ($ thousands) | 2018 Customers Served | 2018 Revenues ($ thousands) | 2017 Customers Served | 2017 Revenues ($ thousands) | | :------------- | :-------------------- | :-------------------------- | :-------------------- | :-------------------------- | :-------------------- | :-------------------------- | | Residential | 118,563 | 125,614 | 118,426 | 126,173 | 118,379 | 121,171 | | Commercial | 22,948 | 142,062 | 22,756 | 141,961 | 22,764 | 140,856 | | Industrial | 234 | 37,790 | 236 | 36,081 | 242 | 34,417 | | Other | 1,601 | 7,454 | 1,604 | 7,882 | 1,516 | 8,275 | | **Total** | **143,346** | **312,920** | **143,022** | **312,097** | **142,901** | **304,719** | - Montana-Dakota's electric operations are regulated by state public service commissions (MTPSC, NDPSC, SDPUC, WYPSC) and FERC for interstate transmission and wholesale power[37](index=37&type=chunk) - The interconnected system's generation capability includes coal, combustion turbine, wind, and reciprocating internal combustion engines, with **26%** of electricity from owned generation in 2019 from renewable resources[39](index=39&type=chunk)[41](index=41&type=chunk) Average Cost of Coal Purchased (2017-2019) | Metric | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Average cost of coal per MMBtu | $2.15 | $2.00 | $2.07 | | Average cost of coal per ton | $31.36| $29.08| $30.04| - Montana-Dakota plans to retire three aging coal-fired electric generating units (Lewis & Clark Station in early 2021, Heskett Station units 1 and 2 in early 2022) and construct a new simple-cycle natural gas-fired combustion turbine peaking unit (Heskett Unit 4) by 2023[50](index=50&type=chunk)[255](index=255&type=chunk) - The electric operations are subject to various environmental regulations (air, water, solid waste pollution control) and are in substantial compliance[57](index=57&type=chunk) Electric Environmental Capital Expenditures (2019-2022 Estimated) | Year | Amount (millions) | | :--- | :---------------- | | 2019 | $5.5 | | 2020 | $0.7 | | 2021 | $1.1 | | 2022 | $3.3 | [Natural Gas Distribution Segment](index=14&type=section&id=Natural%20Gas%20Distribution) - The natural gas distribution segment, through Montana-Dakota, Cascade, and Intermountain, serves **977,468** residential, commercial, and industrial customers in 337 communities across eight states as of December 31, 2019[63](index=63&type=chunk) Natural Gas Distribution Retail Customers and Revenues (2017-2019) | Class | 2019 Customers Served | 2019 Revenues ($ thousands) | 2018 Customers Served | 2018 Revenues ($ thousands) | 2017 Customers Served | 2017 Revenues ($ thousands) | | :------------- | :-------------------- | :-------------------------- | :-------------------- | :-------------------------- | :-------------------- | :-------------------------- | | Residential | 868,821 | 479,673 | 850,595 | 464,697 | 833,255 | 477,699 | | Commercial | 107,741 | 293,201 | 106,297 | 279,566 | 104,795 | 283,899 | | Industrial | 906 | 26,570 | 835 | 24,555 | 817 | 24,030 | | **Total** | **977,468** | **799,444** | **957,727** | **768,818** | **938,867** | **785,628** | - The segment's operations are regulated by state public utility commissions (IPUC, MNPUC, MTPSC, NDPSC, OPUC, SDPUC, WUTC, WYPSC) regarding retail rates, service, accounting, and security issuances[67](index=67&type=chunk) - Natural gas distribution operations are subject to federal, state, and local environmental laws and regulations, with the Company believing it is in substantial compliance[77](index=77&type=chunk) - Montana-Dakota and Cascade are involved in investigating and remediating historic manufactured gas plant sites, with costs potentially recoverable through natural gas rates[80](index=80&type=chunk) [Pipeline and Midstream Segment](index=16&type=section&id=Pipeline%20and%20Midstream) - WBI Energy operates regulated (natural gas transmission, gathering, storage) and nonregulated (gathering, energy-related services) businesses, primarily in the northern Great Plains and Rocky Mountain regions[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - The regulated business, WBI Energy Transmission, operates approximately **4,000 miles** of natural gas lines and is subject to FERC jurisdiction[82](index=82&type=chunk) - WBI Energy Transmission's underground natural gas storage facilities have a certificated capacity of approximately **353 Bcf**, including **194 Bcf** of working gas capacity[86](index=86&type=chunk) - The pipeline and midstream operations are subject to federal, state, and local environmental laws and regulations, with the Company believing it is in substantial compliance[90](index=90&type=chunk)[91](index=91&type=chunk) [Construction Materials and Contracting Segment](index=17&type=section&id=Construction%20Materials%20and%20Contracting) - Knife River operates construction materials and contracting businesses across 12 states, mining and selling aggregates, asphalt mix, and ready-mixed concrete, focusing on vertical integration[94](index=94&type=chunk) - Knife River's backlog was approximately **$693 million** at December 31, 2019, with a significant portion expected to be completed in the next 12 months[96](index=96&type=chunk) - The segment's products and services are marketed under highly competitive conditions, with price, service, quality, delivery time, and proximity to customers being key factors[99](index=99&type=chunk) - As of December 31, 2019, Knife River had estimated aggregate reserves of **1.1 billion tons**, with approximately **978 million tons** permitted[105](index=105&type=chunk)[108](index=108&type=chunk) Knife River Aggregate Reserves and Sales (2017-2019) | Metric | 2019 | 2018 | 2017 | | :---------------------- | :---------- | :---------- | :---------- | | Estimated Reserves (000's tons) | 1,054,186 | 1,014,431 | 965,036 | | Sales (000's tons) | 32,314 | 29,795 | 28,213 | - Knife River's operations are subject to federal, state, and local environmental compliance and reclamation regulations, including the Clean Air Act, Clean Water Act, RCRA, and ESA[111](index=111&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - Knife River - Northwest was named a PRP by the EPA for the Portland, Oregon, Harbor Superfund Site cleanup, but does not believe it will incur material environmental remediation costs[122](index=122&type=chunk)[124](index=124&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A%20Risk%20Factors) This section outlines significant economic, operational, environmental, and regulatory risks impacting the Company's business and financial condition - The Company is subject to extensive government regulations that can negatively impact its business, operating results, and cash flows, including allowed rates of return, cost recovery, and financing[136](index=136&type=chunk) - Economic volatility, including public and private expenditure levels, economic conditions in served industries, and population growth, affects demand for the Company's products and services, particularly in construction and utility businesses[139](index=139&type=chunk)[140](index=140&type=chunk) - Operational risks include catastrophic events (leaks, explosions, fires, terrorism) in natural gas and electric operations, which could lead to loss of life, property damage, environmental pollution, and substantial financial losses not fully covered by insurance[142](index=142&type=chunk) - Environmental and regulatory risks include adverse impacts from climate change (severe weather, increased costs, decreased demand), stringent environmental laws and regulations (increased capital and operating costs, compliance delays, remediation obligations), and initiatives to reduce GHG emissions (carbon taxes, renewable energy mandates, increased capital/operating costs)[162](index=162&type=chunk)[172](index=172&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Other risks include seasonality and weather conditions affecting revenues and operations, intense competition across all business segments, challenges in obtaining and retaining key personnel and skilled labor, potential warranty claims in construction businesses, reliance on subsidiary dividends as a holding company, and increasing costs related to multiemployer pension plans (MEPPs)[179](index=179&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Information technology disruptions or cyberattacks pose a significant risk, potentially leading to failures or unauthorized access, interrupting critical business functions, causing financial losses, and incurring legal or regulatory liabilities[189](index=189&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 1B. Unresolved Staff Comments](index=31&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[198](index=198&type=chunk) [Item 3. Legal Proceedings](index=31&type=section&id=Item%203%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 20 of the financial statements - Information regarding legal proceedings is provided in Item 8 - Note 20 of this Form 10-K[199](index=199&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Mine safety disclosures, as required by the Dodd-Frank Act and Regulation S-K, are provided in Exhibit 95 - Mine safety disclosures are included in Exhibit 95 to this Form 10-K, as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K[200](index=200&type=chunk) Part II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company's common stock is listed on the NYSE, with 10,700 stockholders and a 29-year history of increasing quarterly dividends - The Company's common stock is listed on the New York Stock Exchange (NYSE) under the symbol 'MDU'[202](index=202&type=chunk) - As of December 31, 2019, there were approximately **10,700** stockholders of record[202](index=202&type=chunk) - The Company has paid quarterly dividends for over **80 consecutive years**, with increases for the last **29 consecutive years**[203](index=203&type=chunk) Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------------------- | :------------------------------- | :--------------------------- | | October 1 through October 31, 2019 | — | — | | November 1 through November 30, 2019 | 41,644 | $29.16 | | December 1 through December 31, 2019 | — | — | | **Total** | **41,644** | | - These purchases were in connection with annual stock grants to non-employee directors; the Company has no publicly announced plans to purchase equity securities[205](index=205&type=chunk)[206](index=206&type=chunk) [Item 6. Selected Financial Data](index=33&type=section&id=Item%206%20Selected%20Financial%20Data) This section provides a summary of key financial and operating data for the Company and its segments over a six-year period (2014-2019) Selected Financial Data (2014-2019) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | | :---------------------------------------------- | :------------ | :------------ | :------------ | :------------ | :------------ | :------------ | | **Operating revenues ($ thousands):** | | | | | | | | Electric | $351,725 | $335,123 | $342,805 | $322,356 | $280,615 | $277,874 | | Natural gas distribution | $865,222 | $823,247 | $848,388 | $766,115 | $817,419 | $921,986 | | Pipeline and midstream | $140,444 | $128,923 | $122,213 | $141,602 | $154,904 | $157,292 | | Construction materials and contracting | $2,190,717 | $1,925,854 | $1,812,529 | $1,874,270 | $1,904,282 | $1,765,330 | | Construction services | $1,849,266 | $1,371,453 | $1,367,602 | $1,073,272 | $926,427 | $1,119,529 | | Other | $16,551 | $11,259 | $7,874 | $8,643 | $9,191 | $9,364 | | Intersegment eliminations | $(77,149) | $(64,307) | $(58,060) | $(57,430) | $(78,786) | $(136,302) | | **Total Operating Revenues** | **$5,336,776**| **$4,531,552**| **$4,443,351**| **$4,128,828**| **$4,014,052**| **$4,115,073**| | **Operating income (loss) ($ thousands):** | | | | | | | | Electric | $64,039 | $65,148 | $79,902 | $67,929 | $59,915 | $61,515 | | Natural gas distribution | $69,188 | $72,336 | $84,239 | $66,166 | $54,974 | $68,185 | | Pipeline and midstream | $42,796 | $36,128 | $36,004 | $42,864 | $30,218 | $46,500 | | Construction materials and contracting | $179,955 | $141,426 | $143,230 | $178,753 | $148,312 | $87,243 | | Construction services | $126,426 | $86,764 | $81,292 | $53,546 | $43,678 | $82,408 | | Other | $(1,184) | $(79) | $(619) | $(349) | $(8,414) | $(5,370) | | Intersegment eliminations | — | — | — | — | $(2,942) | $(9,900) | | **Total Operating Income** | **$481,220** | **$401,723** | **$424,048** | **$408,909** | **$325,741** | **$330,581** | | **Earnings (loss) on common stock ($ thousands):** | | | | | | | | Earnings per common share - diluted | $1.69 | $1.39 | $1.43 | $0.33 | $(3.20) | $1.55 | | Dividends declared per common share | $0.8150 | $0.7950 | $0.7750 | $0.7550 | $0.7350 | $0.7150 | | Book value per common share | $14.21 | $13.09 | $12.44 | $11.78 | $12.83 | $16.66 | | Market price per common share (year end) | $29.71 | $23.84 | $26.88 | $28.77 | $18.32 | $23.50 | | Total assets ($ thousands) | $7,683,059 | $6,988,110 | $6,334,666 | $6,284,467 | $6,565,154 | $7,805,405 | | Total long-term debt ($ thousands) | $2,243,107 | $2,108,695 | $1,714,853 | $1,790,159 | $1,796,163 | $2,016,198 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the Company's financial condition and results, covering consolidated earnings, segment data, liquidity, and critical accounting policies - The Company's strategy is to increase market share, profitability, and shareholder value through organic growth and strategic acquisitions in both regulated energy delivery and construction materials and services businesses[214](index=214&type=chunk) - The Company funds its growth and operations through internally generated funds, commercial paper, revolving credit facilities, and debt/equity issuances[215](index=215&type=chunk) [Consolidated Earnings Overview](index=36&type=section&id=Consolidated%20Earnings%20Overview) Consolidated Earnings by Segment (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Electric | $54.8 | $47.0 | $49.4 | | Natural gas distribution | $39.5 | $37.7 | $32.2 | | Pipeline and midstream | $29.6 | $28.5 | $20.5 | | Construction materials and contracting | $120.4| $92.6 | $123.4| | Construction services | $93.0 | $64.3 | $53.3 | | Other | $(2.1)| $(0.7)| $(1.5)| | Intersegment eliminations| — | — | $6.9 | | **Earnings before discontinued operations** | **$335.2**| **$269.4**| **$284.2**| | Income (loss) from discontinued operations, net of tax | $0.3 | $2.9 | $(3.8)| | **Earnings on common stock** | **$335.5**| **$272.3**| **$280.4**| | Earnings per common share - diluted | $1.69 | $1.39 | $1.43 | - Consolidated earnings increased by **$63.2 million** in 2019 compared to 2018, driven by higher gross margins in construction services and construction materials and contracting, approved rate relief in Montana for the electric business, and higher returns on benefit plan investments[218](index=218&type=chunk)[219](index=219&type=chunk) - Consolidated earnings decreased by **$8.1 million** in 2018 compared to 2017, primarily due to the lower federal statutory tax rate from TCJA (partially offset by the absence of a 2017 tax benefit), lower returns on investments, and increased outside specialty contracting gross margins[220](index=220&type=chunk) [Business Segment Financial and Operating Data](index=37&type=section&id=Business%20Segment%20Financial%20and%20Operating%20Data) [Electric and Natural Gas Distribution](index=37&type=section&id=Electric%20and%20Natural%20Gas%20Distribution) - The electric and natural gas distribution segments aim to be top-performing utilities, focusing on safety, reliability, competitive pricing, organic growth, managing operating costs, and strategic acquisitions[224](index=224&type=chunk) - These segments are subject to extensive regulation, with tracking mechanisms implemented in certain jurisdictions to mitigate regulatory lag from increased investments[225](index=225&type=chunk) - Tariff increases on steel and aluminum, along with extended lead times for raw materials, could negatively affect construction projects and maintenance work[226](index=226&type=chunk) Electric Segment Earnings Overview (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $351.7| $335.1| $342.8| | Electric fuel and purchased power | $86.6 | $80.7 | $78.7 | | Taxes, other than income | $0.6 | $0.7 | $0.8 | | **Adjusted gross margin**| **$264.5**| **$253.7**| **$263.3**| | Operating income | $64.0 | $65.2 | $79.9 | | Net income | $54.8 | $47.0 | $50.0 | | **Earnings** | **$54.8**| **$47.0**| **$49.4**| | Retail sales (million kWh)| 3,314.3| 3,354.4| 3,306.5| | Average cost of electric fuel and purchased power per kWh | $0.023| $0.022| $0.022| - Electric earnings increased by **$7.8 million (17%)** in 2019, primarily due to higher adjusted gross margin from regulatory mechanisms (Montana rates, BSSE project recovery) and increased income tax benefits, partially offset by lower retail sales volumes[231](index=231&type=chunk)[232](index=232&type=chunk)[236](index=236&type=chunk) - Electric earnings decreased by **$2.4 million (5%)** in 2018, mainly due to lower adjusted gross margin from reserves against revenues for anticipated customer refunds (TCJA impact) and a transmission formula rate adjustment, partially offset by increased retail sales volumes[237](index=237&type=chunk) Natural Gas Distribution Segment Earnings Overview (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $865.2| $823.2| $848.4| | Purchased natural gas sold | $477.6| $454.8| $479.9| | Taxes, other than income | $30.3 | $28.5 | $30.0 | | **Adjusted gross margin**| **$357.3**| **$339.9**| **$338.5**| | Operating income | $69.2 | $72.3 | $84.3 | | Net income | $39.5 | $37.7 | $32.3 | | **Earnings** | **$39.5**| **$37.7**| **$32.2**| | Retail sales (MMdk) | 123.7 | 112.6 | 112.5 | | Transportation sales (MMdk)| 166.1 | 149.5 | 144.5 | | Average cost of natural gas per dk | $3.86 | $4.04 | $4.26 | - Natural gas distribution earnings increased by **$1.8 million (5%)** in 2019, driven by a **$17.4 million** increase in adjusted gross margin from higher retail sales volumes due to colder weather and approved rate recovery, along with higher returns on benefit plan investments[244](index=244&type=chunk)[247](index=247&type=chunk) - Natural gas distribution earnings increased by **$5.5 million (17%)** in 2018, primarily due to increased retail sales margins from weather normalization and conservation revenue, and a significant decrease in income taxes due to the TCJA reduced corporate tax rate[250](index=250&type=chunk)[253](index=253&type=chunk) - The Company expects these segments to grow rate base by approximately **5% annually** over the next five years, with customer growth of **1% to 2% per year**[254](index=254&type=chunk) - The Company is pursuing regulatory approval for deferred accounting for costs related to the retirement of Lewis & Clark Station and Heskett Station units 1 and 2, and for the construction of Heskett Unit 4[255](index=255&type=chunk)[256](index=256&type=chunk) [Pipeline and Midstream](index=42&type=section&id=Pipeline%20and%20Midstream) - The pipeline and midstream segment focuses on optimizing existing operations, organic growth, and investments in energy infrastructure, with recent projects increasing natural gas capacity[258](index=258&type=chunk) - The segment is exposed to energy price volatility and faces challenges from increased pipeline safety regulations, methane emission reduction initiatives, and tariff increases on raw materials[259](index=259&type=chunk)[260](index=260&type=chunk) Pipeline and Midstream Segment Earnings Overview (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $140.4| $128.9| $122.2| | Operating income | $42.8 | $36.1 | $36.0 | | Net income | $29.6 | $28.5 | $20.5 | | Transportation volumes (MMdk)| 429.7 | 351.5 | 312.5 | | Natural gas gathering volumes (MMdk)| 13.9 | 14.9 | 16.1 | | Customer natural gas storage balance (MMdk) - End of period | 16.2 | 13.9 | 22.4 | - Pipeline and midstream earnings increased by **$1.1 million (4%)** in 2019, primarily due to increased natural gas transportation volumes from organic growth projects and higher rates from a finalized FERC rate case, partially offset by the absence of a 2018 income tax benefit[265](index=265&type=chunk)[267](index=267&type=chunk) - Pipeline and midstream earnings increased by **$8.0 million (39%)** in 2018, largely due to increased transportation volumes from organic growth projects and a **$4.2 million** income tax benefit from a regulatory liability reversal[268](index=268&type=chunk)[272](index=272&type=chunk) - The Company completed Phase I of the Line Section 22 Expansion project in November 2019 and the Demicks Lake project in February 2020, both increasing natural gas capacity[274](index=274&type=chunk)[275](index=275&type=chunk) - The North Bakken Expansion project, with a design capacity of **350 MMcf per day**, is expected to begin construction in early 2021 and be completed late 2021, pending regulatory approval[276](index=276&type=chunk) - The Company entered an agreement to divest its regulated gathering assets in Montana and North Dakota, with the sale expected to close in the first half of 2020, pending FERC approval[277](index=277&type=chunk) [Construction Materials and Contracting](index=44&type=section&id=Construction%20Materials%20and%20Contracting) - The construction materials and contracting segment focuses on high-growth strategic markets, strengthening aggregate reserve positions, enhancing profitability through cost containment and vertical integration, and growing through organic and acquisition opportunities[278](index=278&type=chunk) - The segment strategically manages approximately **1.1 billion tons** of aggregate reserves and increased reserves by **40 million tons** in 2019 through strategic asset purchases[280](index=280&type=chunk) - Challenges include competitive markets, volatility in raw material costs (diesel fuel, liquid asphalt, cement, steel), adverse weather, project timing, and recruitment/retention of skilled labor[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) Construction Materials and Contracting Segment Earnings Overview (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $2,190.7| $1,925.9| $1,812.5| | Gross margin | $274.0| $225.5| $221.9| | Operating income | $180.0| $141.4| $143.2| | Net income | $120.4| $92.6 | $123.4| | Aggregates sales (000's tons)| 32,314| 29,795| 28,213| | Asphalt sales (000's tons)| 6,707 | 6,838 | 6,237 | | Ready-mixed concrete sales (000's cubic yards)| 4,123 | 3,518 | 3,548 | - Earnings increased by **$27.8 million (30%)** in 2019, driven by higher revenues from contracting services and material sales due to strong economic environments and increased gains on asset sales[286](index=286&type=chunk) - Earnings decreased by **$30.8 million (25%)** in 2018, primarily due to a significant increase in income taxes from the absence of a 2017 tax benefit related to TCJA, despite higher asphalt product and aggregate volumes[290](index=290&type=chunk)[293](index=293&type=chunk) - The segment's backlog at December 31, 2019, was **$693 million**, comparable to **$706 million** in 2018, with a significant amount expected to be completed in the next 12 months[297](index=297&type=chunk) - The Company acquired Viesko Redi-Mix, Inc. and Roadrunner Ready Mix, Inc. in 2019, and Oldcastle Infrastructure Spokane in Q1 2020, supporting its market expansion strategy[296](index=296&type=chunk)[700](index=700&type=chunk) [Construction Services](index=46&type=section&id=Construction%20Services) - The construction services segment provides inside and outside specialty contracting, focusing on project execution, customer relationships, quality service, cost control, employee development, and growth through organic and acquisition opportunities[299](index=299&type=chunk)[300](index=300&type=chunk) - The segment faces challenges from competitive pricing, project delays, variable consideration estimates, restrictive regulations, adverse weather, and labor market trends (aging workforce, availability issues)[301](index=301&type=chunk)[302](index=302&type=chunk) Construction Services Segment Earnings Overview (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $1,849.3| $1,371.5| $1,367.6| | Gross margin | $220.1| $164.8| $156.1| | Operating income | $126.4| $86.8 | $81.3 | | Net income | $93.0 | $64.3 | $53.3 | | Backlog (millions) | $1,144| $939 | $708 | - Earnings increased by **$28.7 million (45%)** in 2019, primarily due to higher operating revenues from increased inside and outside specialty contracting workloads and customer demand[304](index=304&type=chunk)[305](index=305&type=chunk) - Earnings increased by **$11.0 million (21%)** in 2018, mainly due to higher outside specialty contracting gross margins from increased equipment sales and rentals, and a lower corporate tax rate due to TCJA[307](index=307&type=chunk)[308](index=308&type=chunk) - The segment's backlog increased by **22% to $1.1 billion** at December 31, 2019, driven by new project opportunities in hospitality, high-tech, mission-critical, public, power, communications, and natural gas sectors[310](index=310&type=chunk) - The Company acquired Pride Electric, Inc. in Q3 2019 and PerLectric, Inc. in Q1 2020, supporting its acquisition growth strategy[311](index=311&type=chunk)[700](index=700&type=chunk) [Other](index=48&type=section&id=Other) Other Segment Net Loss (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $16.6 | $11.3 | $7.9 | | Operating loss | $(1.2)| $(0.1)| $(0.6)| | Net loss | $(2.1)| $(0.7)| $(1.5)| - The 'Other' category includes insurance activity from the Company's captive insurer, general and administrative costs, and interest expense previously allocated to discontinued operations, and costs associated with the Holding Company Reorganization in 2018[313](index=313&type=chunk)[314](index=314&type=chunk) [Discontinued Operations](index=49&type=section&id=Discontinued%20Operations) Income (Loss) from Discontinued Operations (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Income from discontinued operations before intercompany eliminations, net of tax | $0.3 | $2.9 | $3.1 | | Intercompany eliminations| — | — | $(6.9)| | **Income (loss) from discontinued operations, net of tax** | **$0.3**| **$2.9**| **$(3.8)**| - Discontinued operations include the results of Dakota Prairie Refining and Fidelity, excluding certain general and administrative costs and interest expense[315](index=315&type=chunk) - The loss in 2017 was largely due to eliminations for income tax adjustments between continuing and discontinued operations[315](index=315&type=chunk) [Intersegment Transactions](index=49&type=section&id=Intersegment%20Transactions) Intersegment Transactions (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $77.1 | $64.3 | $58.0 | | Operation and maintenance| $21.1 | $13.7 | $9.1 | | Purchased natural gas sold | $56.0 | $50.6 | $48.9 | | Income from continuing operations* | — | — | $(6.9)| - Intersegment transactions are eliminated in the consolidated financial statements to avoid double-counting revenues and expenses between the Company's business segments[316](index=316&type=chunk)[317](index=317&type=chunk) [Liquidity and Capital Commitments](index=49&type=section&id=Liquidity%20and%20Capital%20Commitments) - As of December 31, 2019, the Company had **$66.5 million** in cash and cash equivalents and **$644.4 million** in available borrowing capacity under credit facilities[318](index=318&type=chunk) - The Company expects to meet its obligations through internally generated funds, credit facilities, and the issuance of long-term debt and equity securities[318](index=318&type=chunk) [Cash Flows](index=49&type=section&id=Cash%20flows) - Cash flows from operating activities increased by **$42.4 million** in 2019, driven by increased earnings from construction businesses and lower inventory balances, partially offset by higher natural gas purchases and pension contributions[320](index=320&type=chunk) - Cash flows used in investing activities decreased by **$107.0 million** in 2019, primarily due to lower cash used in acquisition activity and higher proceeds from asset sales at construction businesses[323](index=323&type=chunk) - Cash flows provided by financing activities decreased by **$156.3 million** in 2019, mainly due to higher repayment of long-term debt, partially offset by proceeds from common stock issuance (**$106.8 million**)[325](index=325&type=chunk) [Defined Benefit Pension Plans](index=50&type=section&id=Defined%20benefit%20pension%20plans) - As of December 31, 2019, the pension plans' accumulated benefit obligations exceeded assets by approximately **$55.9 million**[327](index=327&type=chunk) Pretax Pension Expense (2017-2019) | Year | Pretax Pension Expense (millions) | | :--- | :-------------------------------- | | 2019 | $2.5 | | 2018 | $0.843 | | 2017 | $1.7 | - Projected pension expense for 2020 is approximately **$300,000**[327](index=327&type=chunk) [Capital Expenditures](index=50&type=section&id=Capital%20expenditures) Capital Expenditures from Continuing Operations (Actual 2017-2019, Estimated 2020-2022, in millions) | Segment | 2017 Actual | 2018 Actual | 2019 Actual | 2020 Estimated | 2021 Estimated | 2022 Estimated | | :------------------------------- | :---------- | :---------- | :---------- | :------------- | :------------- | :------------- | | Electric | $109 | $186 | $99 | $111 | $128 | $139 | | Natural gas distribution | $147 | $206 | $207 | $221 | $191 | $180 | | Pipeline and midstream | $31 | $70 | $71 | $85 | $304 | $53 | | Construction materials and contracting | $44 | $280 | $190 | $167 | $154 | $157 | | Construction services | $19 | $25 | $61 | $61 | $20 | $20 | | Other | $2 | $2 | $8 | $5 | $3 | $3 | | **Total capital expenditures** | **$352** | **$769** | **$636** | **$650** | **$800** | **$552** | - 2019 capital expenditures included two business combinations in construction materials and contracting and one in construction services, funded by internal sources, long-term debt, and equity securities[330](index=330&type=chunk) - Estimated capital expenditures for 2020-2022 include the Demicks Lake Expansion, North Bakken Expansion, and Heskett Unit 4 projects[330](index=330&type=chunk) [Capital Resources](index=51&type=section&id=Capital%20resources) - The Company's subsidiaries must comply with restrictive and financial covenants in their debt instruments to borrow, which they were in compliance with at December 31, 2019[332](index=332&type=chunk) Outstanding Revolving Credit Facilities (December 31, 2019, in millions) | Company | Facility Limit | Amount Outstanding | Letters of Credit | | :--------------------------- | :------------- | :----------------- | :---------------- | | Montana-Dakota Utilities Co. | $175.0 | $118.6 | — | | Cascade Natural Gas Corporation | $100.0 | $64.6 | $2.2 | | Intermountain Gas Company | $85.0 | $24.5 | $1.4 | | Centennial Energy Holdings, Inc. | $600.0 | $104.3 | — | - Total equity as a percent of total capitalization was **56%** at December 31, 2019, indicating financial strength[337](index=337&type=chunk) - The Company has a shelf registration statement for up to **$1.0 billion** in common stock and debt securities, and issued **3.6 million shares** of common stock for **$94.0 million** net proceeds in 2019 under an 'at-the-market' offering[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk) - The Company is proactively replacing LIBOR with Secured Overnight Financing Rate in new/renewed debt instruments and does not anticipate a significant impact from LIBOR reform[341](index=341&type=chunk) [Dividend Restrictions](index=53&type=section&id=Dividend%20restrictions) - The Company's ability to pay dividends depends on earnings and dividends from its subsidiaries, which are subject to regulatory, contractual, and legal limitations[354](index=354&type=chunk) - Approximately **$1.4 billion** of the net assets of the Company's subsidiaries were restricted from use for dividend payments at December 31, 2019, based on the most restrictive limitation (funded debt to capitalization ratio not exceeding **65%**)[583](index=583&type=chunk) [Off Balance Sheet Arrangements](index=53&type=section&id=Off%20balance%20sheet%20arrangements) - As of December 31, 2019, the Company had no material off-balance sheet arrangements as defined by SEC rules[355](index=355&type=chunk) [Contractual Obligations and Commercial Commitments](index=53&type=section&id=Contractual%20obligations%20and%20commercial%20commitments) Contractual Obligations and Commercial Commitments (December 31, 2019, in millions) | Obligation Type | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | | :------------------------ | :--------------- | :-------- | :-------- | :---------------- | :-------- | | Long-term debt maturities*| $16.6 | $149.5 | $451.3 | $1,632.8 | $2,250.2 | | Estimated interest payments**| $0.8 | $6.6 | $13.9 | $74.4 | $95.7 | | Operating leases | $35.2 | $41.8 | $17.6 | $47.9 | $142.5 | | Purchase commitments | $405.5 | $434.5 | $210.5 | $678.4 | $1,728.9 | | **Total** | **$458.1** | **$632.4**| **$693.3**| **$2,433.5** | **$4,217.3**| - The Company had total asset retirement obligations of **$417.6 million** at December 31, 2019, with **$4.3 million** as the current portion, but the timing of payments cannot be precisely determined[358](index=358&type=chunk)[99](index=99&type=chunk) - The Company has no minimum funding requirements for its defined benefit pension plans for 2020 due to a **$20.0 million** contribution in 2019[360](index=360&type=chunk) [New Accounting Standards](index=54&type=section&id=New%20Accounting%20Standards) - Information regarding new accounting standards is incorporated by reference from Note 1 of the financial statements[362](index=362&type=chunk) [Critical Accounting Policies Involving Significant Estimates](index=54&type=section&id=Critical%20Accounting%20Policies%20Involving%20Significant%20Estimates) - The preparation of financial statements requires management to make significant estimates and assumptions, which can affect reported amounts of assets, liabilities, revenues, and expenses[363](index=363&type=chunk)[364](index=364&type=chunk) - Key areas involving significant estimates include impairment testing of long-lived assets and goodwill, fair values in business combinations, aggregate reserves, property depreciable lives, tax provisions, revenue recognition on construction contracts, and actuarially determined benefit costs[364](index=364&type=chunk) - Goodwill impairment testing is performed annually in the fourth quarter, or more frequently if impairment indicators exist, by comparing the fair value of each reporting unit to its carrying value[367](index=367&type=chunk)[368](index=368&type=chunk) - Fair value determination for reporting units involves significant judgment and estimates, using a weighted combination of income (discounted cash flow) and market approaches[369](index=369&type=chunk)[370](index=370&type=chunk) - Business combinations are accounted for by recording acquired assets and assumed liabilities at fair value, with the excess purchase price recorded as goodwill, requiring significant judgment in fair value estimation[374](index=374&type=chunk)[375](index=375&type=chunk) - Revenue recognition for construction contracts uses the cost-to-cost measure of progress, which relies heavily on dependable estimates of total costs to complete projects, contract revenues, and contract costs[378](index=378&type=chunk)[380](index=380&type=chunk) [Non-GAAP Financial Measures](index=54&type=section&id=Non-GAAP%20Financial%20Measures) - The Company uses 'adjusted gross margin' as a non-GAAP financial measure for its electric and natural gas distribution segments to evaluate operating performance[392](index=392&type=chunk)[393](index=393&type=chunk) - Adjusted gross margin is calculated by adding back operation and maintenance expense, depreciation, depletion and amortization expense, and certain taxes (other than income) to operating income[393](index=393&type=chunk) Electric Segment Operating Income to Adjusted Gross Margin Reconciliation (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating income | $64.0 | $65.2 | $79.9 | | Total adjustments | $200.5| $188.5| $183.4| | **Adjusted gross margin**| **$264.5**| **$253.7**| **$263.3**| Natural Gas Distribution Segment Operating Income to Adjusted Gross Margin Reconciliation (2017-2019, in millions) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating income | $69.2 | $72.3 | $84.3 | | Total adjustments | $288.1| $267.6| $254.2| | **Adjusted gross margin**| **$357.3**| **$339.9**| **$338.5**| [Effects of Inflation](index=58&type=section&id=Effects%20of%20Inflation) - Inflation did not have a significant effect on the Company's operations in 2019, 2018, or 2017[398](index=398&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company manages interest rate risk from fixed and variable long-term debt through policies and procedures, with no outstanding interest rate hedges - The Company is exposed to interest rate risk from its fixed and variable rate long-term debt, which is used to finance capital expenditures and debt retirements[399](index=399&type=chunk)[400](index=400&type=chunk) - The Company manages interest rate risk by timing long-term financing and has utilized interest rate swap agreements in the past[400](index=400&type=chunk) - As of December 31, 2019 and 2018, the Company had no outstanding interest rate hedges[402](index=402&type=chunk) Long-Term Debt by Expected Maturity and Interest Rates (December 31, 2019, in millions) | Type | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | Fair Value | | :------------ | :---- | :---- | :---- | :---- | :---- | :--------- | :-------- | :--------- | | Fixed rate | $16.6 | $1.5 | $148.0| $77.9 | $61.4 | $1,632.8 | $1,938.2 | $2,113.7 | | Avg. Int. Rate| 4.8% | 1.1% | 4.5% | 3.7% | 4.2% | 4.6% | 4.5% | | | Variable rate | — | — | — | — | $312.0| — | $312.0 | $312.0 | | Avg. Int. Rate| —% | —% | —% | —% | 2.7% | —% | 2.7% | | [Item 8. Financial Statements and Supplementary Data](index=60&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the Company's audited consolidated financial statements, management's internal control report, and independent auditor's reports [Management's Report on Internal Control Over Financial Reporting](index=60&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) - Management is responsible for establishing and maintaining adequate internal control over financial reporting[404](index=404&type=chunk) - Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2019, using the COSO framework[406](index=406&type=chunk) - Based on the evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2019[407](index=407&type=chunk) [Report of Independent Registered Public Accounting Firm](index=61&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Deloitte & Touche LLP audited the consolidated financial statements and expressed an unqualified opinion that they present fairly, in all material respects, the financial position, results of operations, and cash flows for the periods ended December 31, 2019, 2018, and 2017[409](index=409&type=chunk) - The auditors also expressed an unqualified opinion on the Company's internal control over financial reporting as of December 31, 2019[410](index=410&type=chunk) - Critical audit matters included revenue from construction contracts due to judgments in estimating total costs and profit, and the impact of rate regulation on financial statements due to management's judgments on cost recovery and refunds[413](index=413&type=chunk)[414](index=414&type=chunk)[417](index=417&type=chunk)[419](index=419&type=chunk) [Opinion on Internal Control over Financial Reporting](index=64&type=section&id=Opinion%20on%20Internal%20Control%20over%20Financial%20Reporting) - Deloitte & Touche LLP audited the internal control over financial reporting and expressed an unqualified opinion that the Company maintained effective internal control over financial reporting as of December 31, 2019, based on COSO criteria[422](index=422&type=chunk) - Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements[426](index=426&type=chunk) [Consolidated Statements of Income](index=65&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (2017-2019, in thousands) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :------------ | :------------ | :------------ | | Total operating revenues | $5,336,776 | $4,531,552 | $4,443,351 | | Total operating expenses | $4,855,556 | $4,129,829 | $4,019,303 | | Operating income | $481,220 | $401,723 | $424,048 | | Income before income taxes | $398,445 | $316,871 | $350,027 | | Income taxes | $63,279 | $47,485 | $65,041 | | Income from continuing operations | $335,166 | $269,386 | $284,986 | | Income (loss) from discontinued operations, net of tax | $287 | $2,932 | $(3,783) | | Net income | $335,453 | $272,318 | $281,203 | | Earnings on common stock | $335,453 | $272,318 | $280,432 | | Earnings per common share - diluted | $1.69 | $1.39 | $1.43 | [Consolidated Statements of Comprehensive Income](index=66&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income (2017-2019, in thousands) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :------------ | :------------ | :------------ | | Net income | $335,453 | $272,318 | $281,203 | | Other comprehensive income (loss) | $(3,760) | $6,951 | $(1,601) | | **Comprehensive income attributable to common stockholders** | **$331,693**| **$279,269**| **$279,602**| [Consolidated Balance Sheets](index=67&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (December 31, 2018 & 2019, in thousands) | December 31, | 2019 | 2018 | | :----------------------- | :------------ | :------------ | | **Assets:** | | | | Total current assets | $1,297,701 | $1,184,132 | | Net property, plant and equipment | $4,917,142 | $4,578,677 | | Total deferred charges and other assets | $1,319,560 | $1,086,681 | | **Total assets** | **$7,683,059**| **$6,988,110**| | **Liabilities and Stockholders' Equity:** | | | | Total current liabilities| $866,427 | $986,050 | | Long-term debt | $2,226,567 | $1,856,841 | | Total deferred credits and other liabilities | $1,742,819 | $1,578,444 | | Total stockholders' equity | $2,847,246 | $2,566,775 | | **Total liabilities and stockholders' equity** | **$7,683,059**| **$6,988,110**| [Consolidated Statements of Equity](index=68&type=section&id=Consolidated%20Statements%20of%20Equity) Consolidated Statements of Equity (2017-2019, in thousands) | Metric | December 31, 2017 | December 31, 2018 | December 31, 2019 | | :----------------------- | :---------------- | :---------------- | :---------------- | | Total Equity | $2,429,043 | $2,566,775 | $2,847,246 | | Net income | $281,203 | $272,318 | $335,453 | | Other comprehensive income (loss) | $(1,601) | $6,951 | $(3,760) | | Dividends declared on common stock | $(151,966) | $(156,453) | $(162,408) | | Issuance of common stock | — | $18,176 | $106,848 | [Consolidated Statements of Cash Flows](index=70&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (2017-2019, in thousands) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :------------ | :------------ | :------------ | | Net cash provided by operating activities | $542,280 | $499,881 | $448,011 | | Net cash used in investing activities | $(603,861) | $(710,907) | $(214,168) | | Net cash provided by (used in) financing activities | $74,092 | $230,376 | $(245,350) | | Increase (decrease) in cash and cash equivalents | $12,511 | $19,349 | $(11,508) | | Cash and cash equivalents - end of year | $66,459 | $53,948 | $34,599 | [Notes to Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1 - Summary of Significant Accounting Policies](index=71&type=section&id=Note%201%20-%20Summary%20of%20Significant%20Accounting%20Policies) - The consolidated financial statements include electric, natural gas distribution, pipeline and midstream, construction materials and contracting, construction services, and other businesses, with intercompany balances and transactions eliminated[438](index=438&type=chunk) - Regulated businesses follow FERC's Uniform System of Accounts and regulatory accounting provisions, deferring certain income and expense items as regulatory assets or liabilities[439](index=439&type=chunk)[440](index=440&type=chunk) - The Holding Company Reorganization was completed on January 2, 2019, making Montana-Dakota a subsidiary[441](index=441&type=chunk) - The Company adopted ASU 2016-02 (Leases) effective January 1, 2019, recognizing operating lease liabilities and right-of-use assets on the balance sheet, with an initial impact of approximately **$112 million**[443](index=443&type=chunk)[489](index=489&type=chunk) - Discontinued operations (Dakota Prairie Refining and Fidelity) are classified as held for sale, with results shown in income (loss) from discontinued operations[444](index=444&type=chunk) Accounts Receivable Retainage (December 31, 2018 & 2019, in thousands) | Retainage Type | 2019 | 2018 | | :--------------- | :------ | :------ | | Short-term | $75,590 | $56,228 | | Long-term | $14,228 | $4,152 | | **Total** | **$89,818**| **$60,380**| Inventories (December 31, 2018 & 2019, in thousands) | Inventory Type | 2019 | 2018 | | :----------------------- | :------ | :------ | | Aggregates held for resale | $147,723| $139,681| | Asphalt oil | $41,912 | $54,741 | | Materials and supplies | $22,512 | $23,611 | | Merchandise for resale | $22,232 | $22,552 | | Natural gas in storage (current) | $22,058 | $22,117 | | Other | $21,970 | $24,607 | | **Total** | **$278,407**| **$287,309**| Allowance for Funds Used During Construction (AFUDC) (2017-2019, in thousands) | AFUDC Type | 2019 | 2018 | 2017 | | :--------- | :---- | :---- | :---- | | Borrowed | $2,807| $2,290| $966 | | Equity | $698 | $1,897| $909 | - The Company adopted ASU 2017-04 (Simplifying the Test for Goodwill Impairment) in Q4 2019, eliminating Step 2 of the impairment test, with no material impact[490](index=490&type=chunk) - The Company adopted ASU 2018-15 (Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract) effective January 1, 2019, with no material impact[491](index=491&type=chunk) - The Company adopted ASU 2016-13 (Measurement of Credit Losses on Financial Instruments) on January 1, 2020, with no material impact[492](index=492&type=chunk)[493](index=493&type=chunk) [Note 2 - Revenue from Contracts with Customers](index=83&type=section&id=Note%202%20-%20Revenue%20from%20Contracts%20with%20Customers) - Revenue is recognized when control over a product or service is transferred to a customer, measured by the consideration expected in the contract, excluding sales incentives and third-party taxes[502](index=502&type=chunk) Disaggregated Revenue by Customer/Service and Segment (2019, in thousands) | Revenue Type | Electric | Natural gas distribution | Pipeline and midstream | Construction materials and contracting | Construction services | Other | Total | | :----------------------- | :------- | :----------------------- | :--------------------- | :------------------------------------- | :-------------------- | :---- | :-------- | | Residential utility sales| $125,369 | $483,452 | — | — | — | — | $608,821 | | Commercial utility sales | $141,596 | $296,835 | — | — | — | — | $438,431 | | Industrial utility sales | $37,765 | $26,895 | — | — | — | — | $64,660 | | Natural gas transportation | — | $45,449 | $101,665 | — | — | — | $147,114 | | Contracting services | — | — | — | $1,088,633 | — | — | $1,088,633| | Construction materials | — | — | — | $1,627,833 | — | — | $1,627,833| | Inside specialty contracting | — | — | — | — | $1,266,196 | — | $1,266,196| | Outside specialty contracting | — | — | — | — | $531,882 | — | $531,882 | | **Total external operating revenues** | **$351,725**| **$865,222**| **$84,192**| **$2,189,651**| **$1,845,896**| **$90**| **$5,336,776**| - The Company recognized **$89.0 million** in revenue in 2019 from amounts previously included in contract liabilities at December 31, 2018[509](index=509&type=chunk) - At December 31, 2019, the Company's remaining performance obligations (backlog) were **$2.0 billion**, with **$1.5 billion** expected to be recognized within the next 12 months[512](index=512&type=chunk) [Note 3 - Business Combinations](index=86&type=section&id=Note%203%20-%20Business%20Combinations) - Acquisitions are accounted for using the acquisition method, recording acquired assets and assumed liabilities at fair value, with the excess purchase price as goodwill[514](index=514&type=chunk)[515](index=515&type=chunk) - In 2019, the Company acquired Roadrunner Ready Mix, Inc. (Idaho) and Viesko Redi-Mix, Inc. (Oregon) in the construction materials and contracting segment, and Pride Electric, Inc. (Washington) in the construction services segment[517](index=517&type=chunk) - Gross aggregate consideration for 2019 acquisitions was **$56.8 million**, including **$1.2 million** of assumed debt, with **$23.1 million** allocated to goodwill[518](index=518&type=chunk) - In 2018, the Company acquired Sweetman Construction Company, Molalla Redi-Mix and Rock Products, Inc., Tri-City Paving, Inc., and Teevin & Fischer Quarry, LLC[517](index=517&type=chunk) - Gross aggregate consideration for 2018 acquisitions was **$168.1 million** in cash and **721,610** common shares (fair value **$18.2 million**)[519](index=519&type=chunk) [Note 4 - Discontinued Operations](index=87&type=section&id=Note%204%20-%20Discontinued%20Operations) - Discontinued operations include Dakota Prairie Refining (sold in 2016) and Fidelity's oil and natural gas assets (substantially sold in 2015-2018), classified as held for sale[521](index=521&type=chunk)[523](index=523&type=chunk) Assets and Liabilities Held for Sale (December 31, 2018 & 2019, in thousands) | December 31, | 2019 | 2018 | | :----------------------- | :------------ | :------------ | | Total assets held for sale | $1,851 | $2,517 | | Total liabilities held for sale | $3,511 | $4,001 | Income (Loss) from Discontinued Operations (2017-2019, in thousands) | Years ended December 31, | 2019 | 2018 | 2017 | | :----------------------- | :---- | :---- | :---- | | Operating revenues | $103 | $(459)| $465 | | Operating income (loss) | $(187)| $(1,380)| $5,072| | Income (loss) from discontinued operations | $287 | $2,932| $(3,783)| [Note 5 - Leases](index=88&type=section&id=Note%205%20-%20Leases) - The Company accounts for all leases under ASC 842, recognizing operating lease liabilities and corresponding right-of-use assets on the balance sheet[525](index=525&type=chunk)[527](index=527&type=chunk) - Leases with an original term of 12 months or less are expensed on a straight-line basis and not recognized on the balance sheet[460](index=460&type=chunk) Operating Lease Costs (2019, in thousands) | Lease Cost Type | 2019 | | :----------------- | :------ | | Operating lease cost | $43,759 | | Variable lease cost| $1,555 | | Short-term lease cost| $120,030| | **Total lease costs**| **$165,344**| Operating Lease Liabilities Reconciliation (December 31, 2019, in thousands) | Year | Undiscounted Cash Flows | | :---------- | :---------------------- | | 2020 | $35,156 | | 2021 | $24,893 | | 2022 | $16,932 | | 2023 | $10,227 | | 2024 | $7,368 | | Thereafter | $47,926 | | **Total** | **$142,502** | | Less discount | $27,096 | | **Total operating lease liabilities*

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 September 30, 2019 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) Delaware 30-1133956 (St ...

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, 2019 OR MDU RESOURCES GROUP INC (Exact name of registrant as specified in its charter) | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, par value $1.00 per share | MDU | New York Stock Exchange | Delaware 30-1133956 (State or ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR o 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) Delaware 30-1133956 (Stat ...

[Part I](index=6&type=section&id=Part%20I) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section highlights that the 10-K report contains forward-looking statements, which are not historical facts and involve risks and uncertainties that could cause actual results to differ materially. The company disclaims any obligation to update these statements. - Forward-looking statements are identified by words like "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and involve risks and uncertainties that could cause actual results to differ materially[17](index=17&type=chunk)[18](index=18&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the statement's date[19](index=19&type=chunk) [Business and Properties](index=6&type=section&id=Items%201%20and%202.%20Business%20and%20Properties) MDU Resources Group, Inc. operates a two-platform business model: regulated energy delivery and construction materials and services, organized into five reportable segments. - MDU Resources Group, Inc. operates a two-platform business model: regulated energy delivery and construction materials and services, designed to balance seasonality and industry-specific risks[22](index=22&type=chunk) - The company completed a Holding Company Reorganization on January 2, 2019, making Montana-Dakota and Great Plains subsidiaries[21](index=21&type=chunk) - The company is organized into five reportable business segments: electric, natural gas distribution, pipeline and midstream, construction materials and contracting, and construction services[23](index=23&type=chunk) [General Business Overview](index=6&type=section&id=General) The company, incorporated in 2018, completed a holding company reorganization in January 2019 to make public utility divisions subsidiaries, operating a two-platform model with **11,797 employees** as of December 31, 2018. - MDU Resources Group, Inc. completed an internal holding company reorganization on January 1, 2019, making Montana-Dakota and Great Plains subsidiaries[15](index=15&type=chunk)[21](index=21&type=chunk) - The company operates with a two-platform business model: regulated energy delivery (electric, natural gas distribution, pipeline and midstream) and construction materials and services (construction materials and contracting, construction services)[22](index=22&type=chunk)[23](index=23&type=chunk) Employee Count by Segment (as of December 31, 2018) | Segment | Employees | | :----------------------------- | :-------- | | MDU Resources Group, Inc. | 218 | | Montana-Dakota | 1,004 | | Cascade | 338 | | Intermountain | 242 | | WBI Holdings | 317 | | Knife River | 3,967 | | MDU Construction Services | 5,711 | | **Total** | **11,797**| [Electric Segment](index=8&type=section&id=Electric) The Electric segment provides retail electric service to over **143,000 customers** across four states, with a net electric plant investment of **$1.5 billion** and **$312.1 million** in 2018 revenues, **21%** from renewable resources. - Montana-Dakota provides electric service to **143,022 customers** in 184 communities across Montana, North Dakota, South Dakota, and Wyoming as of December 31, 2018[39](index=39&type=chunk) Electric Retail Customers and Revenues by Class (2016-2018) | Year | Customers Served | Revenues (Thousands of Dollars) | | :--- | :--------------- | :---------------------------- | | **2018** | | | | Residential | 118,426 | 126,173 | | Commercial | 22,756 | 141,961 | | Industrial | 236 | 36,081 | | Other | 1,604 | 7,882 | | **Total** | **143,022** | **312,097** | | **2017** | | | | Residential | 118,379 | 121,171 | | Commercial | 22,764 | 140,856 | | Industrial | 242 | 34,417 | | Other | 1,516 | 8,275 | | **Total** | **142,901** | **304,719** | | **2016** | | | | Residential | 118,483 | 117,014 | | Commercial | 22,693 | 135,390 | | Industrial | 244 | 31,913 | | Other | 1,528 | 7,580 | | **Total** | **142,948** | **291,897** | - Approximately **21%** of electricity delivered from Montana-Dakota's owned generation in 2018 was from renewable resources, and carbon dioxide emission intensity has been reduced by approximately **24%** since 2003[46](index=46&type=chunk) Electric Environmental Capital Expenditures (2018-2021 Estimates) | Year | Estimated Expenditures (Millions of Dollars) | | :--- | :----------------------------------------- | | 2018 | 9.2 | | 2019 | 6.8 | | 2020 | 2.7 | | 2021 | 1.8 | [Natural Gas Distribution Segment](index=12&type=section&id=Natural%20Gas%20Distribution) The Natural Gas Distribution segment serves **957,727 customers** across eight states with **$1.7 billion** net plant investment and **$768.8 million** retail sales revenues in 2018, facing minimal environmental expenditures. - The natural gas distribution operations serve **957,727 residential, commercial, and industrial customers** in 339 communities across eight states as of December 31, 2018[68](index=68&type=chunk) Natural Gas Distribution Retail Customers and Revenues by Class (2016-2018) | Year | Customers Served | Revenues (Thousands of Dollars) | | :--- | :--------------- | :---------------------------- | | **2018** | | | | Residential | 850,595 | 464,697 | | Commercial | 106,297 | 279,566 | | Industrial | 835 | 24,555 | | **Total** | **957,727** | **768,818** | | **2017** | | | | Residential | 833,255 | 477,699 | | Commercial | 104,795 | 283,899 | | Industrial | 817 | 24,030 | | **Total** | **938,867** | **785,628** | | **2016** | | | | Residential | 818,163 | 429,828 | | Commercial | 103,438 | 253,333 | | Industrial | 807 | 23,337 | | **Total** | **922,408** | **706,498** | Natural Gas Distribution Retail Sales Revenues by Jurisdiction (2016-2018) | Jurisdiction | 2018 | 2017 | 2016 | | :------------- | :--- | :--- | :--- | | Idaho | 30% | 33% | 34% | | Washington | 26% | 26% | 26% | | North Dakota | 15% | 13% | 13% | | Montana | 9% | 9% | 8% | | Oregon | 8% | 8% | 8% | | South Dakota | 7% | 6% | 6% | | Minnesota | 3% | 3% | 3% | | Wyoming | 2% | 2% | 2% | - The natural gas distribution operations did not incur any material environmental expenditures in 2018 and do not expect to incur any material capital expenditures related to environmental compliance through 2021[83](index=83&type=chunk) [Pipeline and Midstream Segment](index=14&type=section&id=Pipeline%20and%20Midstream) The Pipeline and Midstream segment, operated by WBI Energy, includes **4,000 miles** of regulated natural gas transmission and **800 miles** of nonregulated gathering facilities, with **353 Bcf** storage capacity and no material environmental expenditures expected through 2021. - WBI Energy Transmission, the regulated business of this segment, owns and operates approximately **4,000 miles** of natural gas transmission, gathering, and storage lines[85](index=85&type=chunk) - The nonregulated business operates approximately **800 miles** of field gathering lines in Montana and Wyoming[86](index=86&type=chunk) - WBI Energy Transmission's underground natural gas storage facilities have a certificated storage capacity of approximately **353 Bcf**, including **193 Bcf** of working gas capacity[89](index=89&type=chunk) - The pipeline and midstream operations did not incur any material environmental expenditures in 2018 and do not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2021[97](index=97&type=chunk) [Construction Materials and Contracting Segment](index=15&type=section&id=Construction%20Materials%20and%20Contracting) Knife River operates the Construction Materials and Contracting segment, mining and selling aggregates, asphalt mix, and ready-mixed concrete across 12 states, with backlog increasing to **$706 million** at December 31, 2018, and holding **1.0 billion tons** of aggregate reserves. - Knife River operates construction materials and contracting businesses across 12 states, focusing on mining, processing, and selling construction aggregates, asphalt mix, and ready-mixed concrete[98](index=98&type=chunk) Knife River Backlog (2016-2018) | Date | Backlog (Millions of Dollars) | | :--- | :-------------------------- | | Dec 31, 2018 | 706 | | Dec 31, 2017 | 486 | | Dec 31, 2016 | 538 | - As of December 31, 2018, Knife River had **1.0 billion tons** of estimated aggregate reserves, with approximately **938 million tons** permitted[110](index=110&type=chunk) Aggregate Reserves and Sales (2016-2018) | Metric | 2018 | 2017 | 2016 | | :-------------------- | :----- | :----- | :----- | | Tons Sold (000's) | 29,795 | 28,213 | 27,580 | | Aggregate Reserves (000's tons) | 1,014,431 | 965,036 | 989,084 | [Construction Services Segment](index=19&type=section&id=Construction%20Services) MDU Construction Services provides inside and outside specialty contracting services, with backlog increasing to **$939 million** at December 31, 2018, driven by increased customer demand in a highly competitive environment. - MDU Construction Services provides inside and outside specialty contracting services, including electrical distribution and transmission, substations, lighting, traffic signals, gas pipelines, and renewable energy projects[127](index=127&type=chunk)[128](index=128&type=chunk) MDU Construction Services Backlog (2016-2018) | Date | Backlog (Millions of Dollars) | | :--- | :-------------------------- | | Dec 31, 2018 | 939 | | Dec 31, 2017 | 708 | | Dec 31, 2016 | 475 | - The increase in backlog at December 31, 2018, was primarily due to increased projects from all revenue streams based on customer demand[130](index=130&type=chunk) - MDU Construction Services operates in a highly competitive business environment, with competition based primarily on price and reputation for quality, safety, and reliability[133](index=133&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from government regulations, economic volatility, aging infrastructure, climate change, seasonality, competition, and labor shortages, which could materially affect its business and financial results. - The Company is subject to comprehensive government regulations that may delay or negatively impact its business, including allowed rates of return, cost recovery, and financing[140](index=140&type=chunk)[141](index=141&type=chunk) - Economic volatility, including public and private expenditure levels, and economic conditions in service areas, can negatively affect demand for products and services, particularly in construction and utility businesses[144](index=144&type=chunk)[145](index=145&type=chunk) - Aging infrastructure in utility and pipeline operations increases risks of equipment failure, leaks, and fires, leading to higher maintenance/replacement costs and potential regulatory scrutiny[160](index=160&type=chunk)[161](index=161&type=chunk) - Climate change may increase the frequency and severity of extreme weather events, potentially damaging facilities, increasing repair costs, disrupting supply, and impacting regional economic health[166](index=166&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - The Company's businesses are seasonal and subject to weather conditions, which influence demand for electricity and natural gas, and affect construction activities[186](index=186&type=chunk)[187](index=187&type=chunk) [Unresolved Staff Comments](index=28&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[204](index=204&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 19 of the financial statements. - Information regarding legal proceedings is provided in Item 8 - Note 19[205](index=205&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Information regarding mine safety violations and other regulatory matters is incorporated by reference from Exhibit 95 of this Form 10-K. - Information regarding mine safety violations or other regulatory matters is provided in Exhibit 95 to this Form 10-K[206](index=206&type=chunk) [Part II](index=29&type=section&id=Part%20II) [Market for Common Equity, Stockholder Matters and Issuer Purchases](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 is listed on the NYSE under 'MDU' and had approximately **11,300 stockholders** of record as of December 31, 2018, with a long history of paying quarterly dividends. - The Company's common stock is listed on the New York Stock Exchange under the symbol **"MDU"**[209](index=209&type=chunk) - As of December 31, 2018, the Company had approximately **11,300 stockholders** of record[209](index=209&type=chunk) - The Company has paid quarterly dividends for over **80 consecutive years**, with increases for the last **28 consecutive years**, subject to limitations from credit agreements, laws, and regulatory bodies[210](index=210&type=chunk) Issuer Purchases of Equity Securities (November 2018) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------- | :----------------------------- | :--------------------------- | | November 1 through November 30, 2018 | 38,605 | $26.55 | [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, showing total operating revenues increased to **$4.53 billion** in 2018 from **$4.44 billion** in 2017, while operating income decreased slightly to **$401.7 million** from **$424.0 million**. Selected Consolidated Financial Data (2016-2018) | Metric | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :------------------------------------- | :--------------- | :--------------- | :--------------- | | Operating revenues | $4,531,552 | $4,443,351 | $4,128,828 | | Operating income | $401,723 | $424,048 | $408,909 | | Earnings on common stock | $272,318 | $280,432 | $63,748 | | Earnings per common share - diluted | $1.39 | $1.43 | $0.33 | | Dividends declared per common share | $0.7950 | $0.7750 | $0.7550 | | Total assets | $6,988,110 | $6,334,666 | $6,284,467 | | Total long-term debt | $2,108,695 | $1,714,853 | $1,790,159 | | Total equity capitalization ratio | 55% | 59% | 56% | | Total debt capitalization ratio | 45% | 41% | 44% | Selected Segment Operating Revenues (2016-2018) | Segment | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :----------------------------- | :--------------- | :--------------- | :--------------- | | Electric | $335,123 | $342,805 | $322,356 | | Natural gas distribution | $823,247 | $848,388 | $766,115 | | Pipeline and midstream | $128,923 | $122,213 | $141,602 | | Construction materials and contracting | $1,925,854 | $1,812,529 | $1,874,270 | | Construction services | $1,371,453 | $1,367,602 | $1,073,272 | Selected Segment Operating Income (2016-2018) | Segment | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :----------------------------- | :--------------- | :--------------- | :--------------- | | Electric | $65,148 | $79,902 | $67,929 | | Natural gas distribution | $72,336 | $84,239 | $66,166 | | Pipeline and midstream | $36,128 | $36,004 | $42,864 | | Construction materials and contracting | $141,426 | $143,230 | $178,753 | | Construction services | $86,764 | $81,292 | $53,546 | [Management's Discussion and Analysis (MD&A)](index=32&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This MD&A provides an overview of the Company's financial condition and results of operations, emphasizing its two-platform business model, strategic focus on organic growth and acquisitions, and detailing segment-specific performance, liquidity, and critical accounting policies. - The Company's strategy is to increase market share, profitability, and shareholder value through organic growth and strategic acquisitions in regulated energy delivery and construction materials and services[220](index=220&type=chunk) - The Tax Cuts and Jobs Act (TCJA) significantly impacted the Company by reducing corporate tax rates, repealing the domestic production deduction, and disallowing immediate expensing for regulated utility property[222](index=222&type=chunk) - The Company funds its growth and operations through internally generated funds, commercial paper, revolving credit facilities, and debt/equity issuances[221](index=221&type=chunk) [Consolidated Earnings Overview](index=35&type=section&id=Consolidated%20Earnings%20Overview) The Company's consolidated earnings decreased by **$8.1 million** in 2018 due to the absence of a **$39.5 million** TCJA tax benefit from 2017, partially offset by a lower tax rate and higher construction services margins, while 2017 saw a **$216.7 million** increase over 2016. Consolidated Earnings by Segment (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :------------------------------------- | :-------------- | :-------------- | :-------------- | | Electric | $47.0 | $49.4 | $42.2 | | Natural gas distribution | $37.7 | $32.2 | $27.1 | | Pipeline and midstream | $28.5 | $20.5 | $23.4 | | Construction materials and contracting | $92.6 | $123.4 | $102.7 | | Construction services | $64.3 | $53.3 | $33.9 | | Other | $(0.7) | $(1.5) | $(3.2) | | Intersegment eliminations | $— | $6.9 | $6.3 | | Earnings before discontinued operations| $269.4 | $284.2 | $232.4 | | Income (loss) from discontinued operations, net of tax | $2.9 | $(3.8) | $(300.4) | | Loss from discontinued operations attributable to noncontrolling interest | $— | $— | $(131.7) | | Earnings on common stock | $272.3 | $280.4 | $63.7 | - Consolidated earnings decreased by **$8.1 million** in 2018 compared to 2017, primarily due to the absence of a **$39.5 million** tax benefit from the TCJA revaluation in 2017, partially offset by a lower federal statutory tax rate in 2018[225](index=225&type=chunk)[226](index=226&type=chunk) - Consolidated earnings increased by **$216.7 million** in 2017 compared to 2016, largely due to the absence of a loss from the refining business sale (discontinued operations) and a **$39.5 million** income tax benefit from TCJA deferred tax revaluation[227](index=227&type=chunk)[228](index=228&type=chunk) [Business Segment Financial and Operating Data](index=36&type=section&id=Business%20Segment%20Financial%20and%20Operating%20Data) This section details the financial performance, strategies, and challenges for each of the Company's five reportable business segments, highlighting segment-specific earnings, revenue drivers, operational costs, and future outlooks. [Electric and Natural Gas Distribution](index=36&type=section&id=Electric%20and%20Natural%20Gas%20Distribution) The Electric segment's earnings decreased by **$2.4 million (5%)** in 2018 due to lower adjusted gross margin, while Natural Gas Distribution earnings increased by **$5.5 million (17%)** from weather normalization and higher basic service charges, with both segments anticipating **5% annual rate base growth**. Electric Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $335.1 | $342.8 | $322.3 | | Adjusted gross margin | $253.7 | $263.3 | $246.2 | | Operating income | $65.2 | $79.9 | $67.9 | | Net income | $47.0 | $50.0 | $42.8 | | Earnings | $47.0 | $49.4 | $42.2 | - Electric earnings decreased **$2.4 million (5%)** in 2018, primarily due to a **$9.6 million** decrease in adjusted gross margin from tax reform refunds and a transmission formula rate adjustment, partially offset by increased retail sales volumes[240](index=240&type=chunk) Natural Gas Distribution Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $823.2 | $848.4 | $766.1 | | Adjusted gross margin | $339.9 | $338.5 | $308.1 | | Operating income | $72.3 | $84.3 | $66.2 | | Net income | $37.7 | $32.3 | $27.2 | | Earnings | $37.7 | $32.2 | $27.1 | - Natural gas distribution earnings increased **$5.5 million (17%)** in 2018, driven by a **$1.4 million** increase in adjusted gross margin from weather normalization and higher basic service charges, despite a **$9.1 million** increase in operation and maintenance expenses[249](index=249&type=chunk)[250](index=250&type=chunk) - The Electric and Natural Gas Distribution segments expect to grow rate base by approximately **5% annually** over the next five years and anticipate **1% to 2% annual customer growth**[256](index=256&type=chunk) - The Company plans to retire three aging coal-fired electric generation units by late 2021 and construct a new simple-cycle natural gas combustion turbine peaking unit in Mandan, North Dakota[259](index=259&type=chunk) [Pipeline and Midstream](index=41&type=section&id=Pipeline%20and%20Midstream) The Pipeline and Midstream segment's earnings increased by **$8.0 million (39%)** in 2018, primarily due to a **$6.7 million** increase in revenues from higher natural gas transportation volumes and nonregulated project workloads, and a **$9.6 million** decrease in income taxes due to the TCJA. Pipeline and Midstream Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $128.9 | $122.2 | $141.6 | | Operating income | $36.1 | $36.0 | $42.9 | | Earnings | $28.5 | $20.5 | $23.4 | - Pipeline and midstream earnings increased **$8.0 million (39%)** in 2018, driven by a **$6.7 million** increase in revenues from higher natural gas transportation volumes and nonregulated project workloads, and a **$9.6 million** decrease in income taxes due to the TCJA[270](index=270&type=chunk)[273](index=273&type=chunk) - The Company plans to construct the North Bakken Expansion project (approximately **67 miles** of new pipeline, **$220 million** estimated cost) with expected completion in late 2021[279](index=279&type=chunk) - The Valley Expansion project (**38-mile** pipeline) and Line Section 27 Expansion project (**13 miles** of new pipeline) were completed and placed into service in November 2018 and September 2018, respectively[280](index=280&type=chunk)[281](index=281&type=chunk) [Construction Materials and Contracting](index=43&type=section&id=Construction%20Materials%20and%20Contracting) The Construction Materials and Contracting segment's earnings decreased by **$30.8 million (25%)** in 2018, primarily due to a **$23.0 million** increase in income taxes from the absence of a 2017 TCJA tax benefit, despite a **$3.6 million** increase in gross margin, with backlog increasing to **$706 million**. Construction Materials and Contracting Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $1,925.9 | $1,812.5 | $1,874.3 | | Gross margin | $225.5 | $221.9 | $249.5 | | Operating income | $141.4 | $143.2 | $178.7 | | Earnings | $92.6 | $123.4 | $102.7 | - Construction materials and contracting earnings decreased **$30.8 million (25%)** in 2018, largely due to a **$23.0 million** increase in income taxes from the absence of a **$41.9 million** tax benefit recorded in 2017 related to TCJA deferred tax revaluation[292](index=292&type=chunk) - The segment's gross margin increased by **$3.6 million** in 2018, driven by higher asphalt product and aggregate volumes and margins, and increased realized prices[290](index=290&type=chunk) - The Company completed **four acquisitions** in 2018 (Teevin & Fischer Quarry, Tri-City Paving, Molalla Redi-Mix and Rock Products, Sweetman Construction Company) to expand its market presence in higher-margin materials[300](index=300&type=chunk) - Backlog for this segment increased to **$706 million** at December 31, 2018, up from **$486 million** at December 31, 2017, primarily due to work for state transportation departments, airports, military, homebuilders, and commercial developers[301](index=301&type=chunk) [Construction Services](index=45&type=section&id=Construction%20Services) The Construction Services segment's earnings increased by **$11.0 million (21%)** in 2018, primarily due to higher outside specialty contracting gross margins and a **$5.6 million** decrease in income taxes due to the TCJA, with backlog growing to **$939 million**. Construction Services Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $1,371.5 | $1,367.6 | $1,073.3 | | Gross margin | $164.8 | $156.1 | $119.2 | | Operating income | $86.8 | $81.3 | $53.5 | | Earnings | $64.3 | $53.3 | $33.9 | - Construction services earnings increased **$11.0 million (21%)** in 2018, largely due to higher outside specialty contracting gross margins from increased equipment sales and rentals, and a **$5.6 million** decrease in income taxes due to the TCJA[307](index=307&type=chunk)[308](index=308&type=chunk) - Backlog for this segment increased to **$939 million** at December 31, 2018, up from **$708 million** at December 31, 2017, driven by new project opportunities in inside specialty electrical and mechanical contracting, and outside power, communications, and natural gas operations[314](index=314&type=chunk) [Other](index=47&type=section&id=Other) The 'Other' category includes general and administrative costs and interest expense previously allocated to discontinued businesses, with an operating loss of **$(0.1) million** in 2018, an improvement from **$(0.6) million** in 2017, due to Holding Company Reorganization costs. Other Segment Earnings Overview (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $11.3 | $7.9 | $8.6 | | Operating loss | $(0.1) | $(0.6) | $(0.3) | | Loss | $(0.7) | $(1.5) | $(3.2) | - The 'Other' category includes general and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that do not meet discontinued operations criteria[315](index=315&type=chunk) - Operation and maintenance expense in 2018 increased due to costs associated with the Holding Company Reorganization[315](index=315&type=chunk) [Discontinued Operations](index=47&type=section&id=Discontinued%20Operations) Income from discontinued operations attributable to the Company was **$2.9 million** in 2018, primarily from income tax adjustments, compared to a loss of **$3.8 million** in 2017 and a significant loss in 2016 associated with the refining business sale. Income (Loss) from Discontinued Operations (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------------------------------------- | :-------------- | :-------------- | :-------------- | | Income (loss) from discontinued operations, net of tax | $2.9 | $(3.8) | $(300.4) | | Loss from discontinued operations attributable to noncontrolling interest | $— | $— | $(131.7) | | Income (loss) from discontinued operations attributable to the Company, net of tax | $2.9 | $(3.8) | $(168.7) | - Income from discontinued operations attributable to the Company was **$2.9 million** in 2018, primarily related to income tax adjustments, compared to a loss of **$3.8 million** in 2017[316](index=316&type=chunk) - The decreased loss in 2017 compared to 2016 was largely due to the absence of a loss associated with the sale of the refining business in June 2016 and the reversal of a previously accrued legal liability[317](index=317&type=chunk)[318](index=318&type=chunk) [Intersegment Transactions](index=48&type=section&id=Intersegment%20Transactions) Intersegment transactions, primarily operating revenues, are eliminated in the consolidated financial statements, with intersegment operating revenues totaling **$64.3 million** in 2018, up from **$58.0 million** in 2017. Intersegment Transactions (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating revenues | $64.3 | $58.0 | $57.4 | | Operation and maintenance| $13.7 | $9.1 | $8.7 | | Purchased natural gas sold | $50.6 | $48.9 | $48.7 | | Income from continuing operations* | $— | $(6.9) | $(6.3) | - Intersegment transactions are eliminated in the Company's Consolidated Statements of Income[319](index=319&type=chunk) [Liquidity and Capital Commitments](index=48&type=section&id=Liquidity%20and%20Capital%20Commitments) The Company's liquidity is supported by **$53.9 million** in cash and **$384.6 million** in available borrowing capacity as of December 31, 2018, with operating cash flows increasing by **$51.9 million** and capital expenditures significantly rising to **$769 million** in 2018. - At December 31, 2018, the Company had **$53.9 million** in cash and cash equivalents and **$384.6 million** in available borrowing capacity under outstanding credit facilities[320](index=320&type=chunk) - Cash flows provided by operating activities increased **$51.9 million** in 2018 from 2017, driven by stronger collection of accounts receivable and bonus depreciation for tax purposes[321](index=321&type=chunk)[322](index=322&type=chunk) Capital Expenditures from Continuing Operations (2016-2021 Estimates) | Segment | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | 2019 Est. (Millions) | 2020 Est. (Millions) | 2021 Est. (Millions) | | :----------------------------- | :-------------- | :-------------- | :-------------- | :------------------- | :------------------- | :------------------- | | Electric | $186 | $109 | $111 | $104 | $103 | $88 | | Natural gas distribution | $206 | $147 | $126 | $204 | $180 | $158 | | Pipeline and midstream | $70 | $31 | $35 | $113 | $93 | $204 | | Construction materials and contracting | $280 | $44 | $38 | $133 | $135 | $127 | | Construction services | $25 | $19 | $60 | $25 | $17 | $18 | | Other | $2 | $2 | $2 | $5 | $3 | $3 | | **Total capital expenditures** | **$769** | **$352** | **$372** | **$584** | **$531** | **$598** | Outstanding Revolving Credit Facilities (December 31, 2018) | Company | Facility Limit (Millions) | Amount Outstanding (Millions) | Letters of Credit (Millions) | Expiration Date | | :----------------------------- | :------------------------ | :---------------------------- | :--------------------------- | :-------------- | | MDU Resources Group, Inc. | $175.0 | $48.5 | $— | 6/8/23 | | Cascade Natural Gas Corporation| $75.0 | $53.8 | $2.2 | 4/24/20 | | Intermountain Gas Company | $85.0 | $56.3 | $— | 4/24/20 | | Centennial Energy Holdings, Inc.| $500.0 | $289.6 | $— | 9/23/21 | [New Accounting Standards](index=52&type=section&id=New%20Accounting%20Standards) Information regarding new accounting standards is incorporated by reference from Note 1 of the financial statements. - Information regarding new accounting standards is provided in Item 8 - Note 1[359](index=359&type=chunk) [Critical Accounting Policies Involving Significant Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20Involving%20Significant%20Estimates) The Company's financial statements rely on significant estimates for impairment testing, fair values in business combinations, aggregate reserves, tax provisions, and revenue recognition for construction contracts, with annual goodwill impairment testing and revenue recognition over time using the cost-to-cost method. - The Company's financial statements require management to make estimates and assumptions for items such as impairment testing of long-lived assets and goodwill, fair values of acquired assets and liabilities, and revenue recognition[361](index=361&type=chunk) - Goodwill impairment testing is performed annually in the fourth quarter, comparing the fair value of each reporting unit (determined by weighted income and market approaches) to its carrying value[364](index=364&type=chunk)[366](index=366&type=chunk) - Revenue for construction contracts is recognized over time using the cost-to-cost measure of progress, which depends on reasonably dependable estimates of completion, revenues, and costs[376](index=376&type=chunk) - Pension and other postretirement benefit costs are dependent on actuarial assumptions, including discount rates, expected return on plan assets, and health care cost trend rates, which are subject to market fluctuations[383](index=383&type=chunk)[384](index=384&type=chunk) [Non-GAAP Financial Measures](index=55&type=section&id=Non-GAAP%20Financial%20Measures) The Company uses 'adjusted gross margin' as a non-GAAP financial measure for its electric and natural gas distribution segments, calculated by adding back operation and maintenance, depreciation, and certain non-income taxes to operating income, to provide a supplemental understanding of operating performance. - Adjusted gross margin is a non-GAAP financial measure used for the electric and natural gas distribution segments to evaluate operating performance[390](index=390&type=chunk) - Adjusted gross margin is calculated by adding back operation and maintenance expense, depreciation, depletion and amortization expense, and certain non-income taxes to operating income (loss)[391](index=391&type=chunk) Electric Segment Adjusted Gross Margin Reconciliation (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating income | $65.2 | $79.9 | $67.9 | | Adjustments: | | | | | Operation and maintenance| $123.0 | $122.2 | $115.8 | | Depreciation, depletion and amortization | $51.0 | $47.7 | $50.2 | | Taxes, other than income | $14.5 | $13.5 | $12.3 | | **Adjusted gross margin**| **$253.7** | **$263.3** | **$246.2** | Natural Gas Distribution Segment Adjusted Gross Margin Reconciliation (2016-2018) | Years ended December 31, | 2018 (Millions) | 2017 (Millions) | 2016 (Millions) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Operating income | $72.3 | $84.3 | $66.2 | | Adjustments: | | | | | Operation and maintenance| $173.4 | $164.3 | $156.9 | | Depreciation, depletion and amortization | $72.5 | $69.4 | $65.4 | | Taxes, other than income | $21.7 | $20.5 | $19.6 | | **Adjusted gross margin**| **$339.9** | **$338.5** | **$308.1** | [Effects of Inflation](index=56&type=section&id=Effects%20of%20Inflation) Inflation did not have a significant effect on the Company's operations in 2018, 2017, or 2016. - Inflation did not have a significant effect on the Company's operations in 2018, 2017, or 2016[396](index=396&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is exposed to interest rate market fluctuations, which it manages through policies and occasional derivatives, with **$2.11 billion** in long-term debt at December 31, 2018, carrying a weighted average interest rate of **4.6%** for fixed-rate debt and **3.2%** for variable-rate debt. - The Company is exposed to market fluctuations associated with interest rates and manages this risk by timing long-term financing and occasionally utilizing interest rate swap agreements[397](index=397&type=chunk)[398](index=398&type=chunk) Long-Term Debt and Weighted Average Interest Rates (December 31, 2018) | Debt Type | 2019 (Millions) | 2020 (Millions) | 2021 (Millions) | 2022 (Millions) | 2023 (Millions) | Thereafter (Millions) | Total (Millions) | Weighted Average Interest Rate | | :---------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------------- | :--------------- | :----------------------------- | | Fixed rate | $51.9 | $15.8 | $0.8 | $147.3 | $77.2 | $1,173.0 | $1,466.0 | 4.6% | | Variable rate | $200.0 | $110.1 | $289.6 | $— | $48.5 | $— | $648.2 | 3.2% | - At December 31, 2018 and 2017, the Company had no outstanding interest rate hedges[399](index=399&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the Company's audited consolidated financial statements, including statements of income, comprehensive income, balance sheets, equity, and cash flows for 2016-2018, along with management's report on internal control, independent auditor's reports, and detailed notes covering accounting policies and segment data. - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[404](index=404&type=chunk) - Deloitte & Touche LLP expressed an unqualified opinion on the Company's consolidated financial statements and internal control over financial reporting as of December 31, 2018[407](index=407&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=58&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management of MDU Resources Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, concluding its effectiveness as of December 31, 2018, based on the COSO framework. - Management is responsible for establishing and maintaining adequate internal control over financial reporting[401](index=401&type=chunk) - Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2018, using the COSO Internal Control-Integrated Framework (2013)[403](index=403&type=chunk) - Based on the evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2018[404](index=404&type=chunk) [Report of Independent Registered Public Accounting Firm (Financial Statements)](index=59&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP audited the consolidated financial statements for the three years ended December 31, 2018, expressing an unqualified opinion that they present fairly the financial position, results of operations, and cash flows in conformity with GAAP. - Deloitte & Touche LLP audited the consolidated financial statements for the three years ended December 31, 2018[406](index=406&type=chunk) - The auditors expressed an unqualified opinion that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP[406](index=406&type=chunk) [Report of Independent Registered Public Accounting Firm (Internal Control)](index=60&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm_2) Deloitte & Touche LLP audited the effectiveness of MDU Resources Group, Inc.'s internal control over financial reporting as of December 31, 2018, based on COSO criteria, expressing an unqualified opinion that the Company maintained effective internal control. - Deloitte & Touche LLP audited the internal control over financial reporting as of December 31, 2018, based on COSO criteria[412](index=412&type=chunk) - The auditors expressed an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018[412](index=412&type=chunk) [Consolidated Statements of Income](index=61&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income show total operating revenues of **$4.53 billion** in 2018, up from **$4.44 billion** in 2017, with operating income at **$401.7 million** and diluted earnings per common share at **$1.39** in 2018. Consolidated Statements of Income (2016-2018) | Metric | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :----------------------------------------------------- | :--------------- | :--------------- | :--------------- | | Total operating revenues | $4,531,552 | $4,443,351 | $4,128,828 | | Total operating expenses | $4,129,829 | $4,019,303 | $3,719,919 | | Operating income | $401,723 | $424,048 | $408,909 | | Income before income taxes | $316,871 | $350,027 | $326,228 | | Income taxes | $47,485 | $65,041 | $93,132 | | Income from continuing operations | $269,386 | $284,986 | $233,096 | | Income (loss) from discontinued operations, net of tax | $2,932 | $(3,783) | $(300,354) | | Net income (loss) | $272,318 | $281,203 | $(67,258) | | Earnings on common stock | $272,318 | $280,432 | $63,748 | | Earnings per common share - diluted | $1.39 | $1.43 | $0.33 | [Consolidated Statements of Comprehensive Income](index=62&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income show net income of **$272.3 million** in 2018, with total comprehensive income of **$279.3 million**, including reclassification adjustments for derivative instruments, postretirement liability adjustments, and foreign currency translation. Consolidated Statements of Comprehensive Income (2016-2018) | Metric | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :----------------------------------------------------- | :--------------- | :--------------- | :--------------- | | Net income (loss) | $272,318 | $281,203 | $(67,258) | | Other comprehensive income (loss) | $6,951 | $(1,601) | $1,415 | | Comprehensive income (loss) | $279,269 | $279,602 | $(65,843) | | Comprehensive income attributable to common stockholders | $279,269 | $279,602 | $65,848 | - Other comprehensive income (loss) components include reclassification adjustments for derivative instruments, postretirement liability adjustments, foreign currency translation adjustments, and net unrealized loss on available-for-sale investments[421](index=421&type=chunk) [Consolidated Balance Sheets](index=63&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show total assets of **$6.99 billion** at December 31, 2018, an increase from **$6.33 billion** in 2017, with net property, plant and equipment rising to **$4.58 billion** and total stockholders' equity increasing to **$2.57 billion**. Consolidated Balance Sheets (December 31, 2017-2018) | Metric | 2018 (Thousands) | 2017 (Thousands) | | :------------------------------------- | :--------------- | :--------------- | | **Assets** | | | | Total current assets | $1,184,132 | $1,069,995 | | Net property, plant and equipment | $4,578,677 | $4,079,188 | | Total deferred charges and other assets| $1,086,681 | $1,047,870 | | **Total assets** | **$6,988,110** | **$6,334,666** | | **Liabilities and Stockholders' Equity**| | | | Total current liabilities | $986,050 | $812,858 | | Long-term debt | $1,856,841 | $1,566,354 | | Total deferred credits and other liabilities | $1,578,444 | $1,526,411 | | **Total liabilities** | **$4,421,335** | **$3,905,623** | | Total stockholders' equity | $2,566,775 | $2,429,043 | | **Total liabilities and stockholders' equity** | **$6,988,110** | **$6,334,666** | - Total assets increased to **$6.99 billion** at December 31, 2018, from **$6.33 billion** in 2017, driven by increases in property, plant and equipment, and deferred charges and other assets[423](index=423&type=chunk) - Total stockholders' equity increased to **$2.57 billion** at December 31, 2018, from **$2.43 billion** in 2017[423](index=423&type=chunk) [Consolidated Statements of Equity](index=64&type=section&id=Consolidated%20Statements%20of%20Equity) The Consolidated Statements of Equity detail changes in stockholders' equity for 2016-2018, showing total equity increased from **$2.32 billion** in 2016 to **$2.57 billion** in 2018, reflecting net income, other comprehensive income/loss, dividends, and stock-based compensation. Consolidated Statements of Equity Summary (2016-2018) | Metric | December 31, 2016 (Thousands) | December 31, 2017 (Thousands) | December 31, 2018 (Thousands) | | :------------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Total Stockholders' Equity (Beginning) | $2,520,548 | $2,316,244 | $2,429,043 | | Net income (loss) | $(67,258) | $281,203 | $272,318 | | Other comprehensive income (loss) | $1,415 | $(1,601) | $6,951 | | Dividends declared on common stock | $(147,821) | $(151,966) | $(156,453) | | Stock-based compensation | $4,383 | $3,375 | $5,060 | | Cumulative effect of adoption of ASU 2014-09 | $— | $— | $(970) | | Total Stockholders' Equity (End) | $2,316,244 | $2,429,043 | $2,566,775 | - Total stockholders' equity increased from **$2.32 billion** at December 31, 2016, to **$2.57 billion** at December 31, 2018[425](index=425&type=chunk)[426](index=426&type=chunk) - The cumulative effect of adopting ASU 2014-09 (Revenue from Contracts with Customers) resulted in a **$(970) thousand** adjustment to retained earnings at January 1, 2018[425](index=425&type=chunk)[481](index=481&type=chunk) [Consolidated Statements of Cash Flows](index=66&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show net cash provided by operating activities increased to **$499.9 million** in 2018 from **$448.0 million** in 2017, while net cash used in investing activities significantly increased to **$710.9 million** due to higher capital expenditures and acquisitions. Consolidated Statements of Cash Flows (2016-2018) | Metric | 2018 (Thousands) | 2017 (Thousands) | 2016 (Thousands) | | :------------------------------------- | :--------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $499,881 | $448,011 | $462,209 | | Net cash used in investing activities | $(710,907) | $(214,168) | $(305,095) | | Net cash provided by (used in) financing activities | $230,376 | $(245,350) | $(194,914) | | Increase (decrease) in cash and cash equivalents | $19,349 | $(11,508) | $(37,796) | | Cash and cash equivalents - end of year | $53,948 | $34,599 | $46,107 | - Net cash provided by operating activities increased by **$51.9 million** in 2018, largely due to stronger collection of accounts receivable and bonus depreciation[321](index=321&type=chunk)[322](index=322&type=chunk) - Net cash used in investing activities increased by **$496.7 million** in 2018, primarily due to acquisition activity and higher capital expenditures[325](index=325&type=chunk) - Net cash provided by financing activities increased by **$475.7 million** in 2018, mainly due to increased debt issuance for acquisitions and capital projects[327](index=327&type=chunk) [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information supporting the consolidated financial statements, covering significant accounting policies, revenue recognition, acquisitions, discontinued operations, goodwill, regulatory assets, fair value measurements, debt, asset retirement obligations, equity, employee benefits, jointly owned facilities, regulatory matters, and commitments and contingencies. - The Company's regulated businesses apply regulatory accounting, deferring certain income and expense items based on expected regulatory treatment[431](index=431&type=chunk) - The TCJA's reduced corporate tax rate required a one-time revaluation of deferred tax assets and liabilities in Q4 2017, with regulated impacts deferred as regulatory liabilities[434](index=434&type=chunk)[435](index=435&type=chunk) - The Company adopted ASU 2014-09 (Revenue from Contracts with Customers) on January 1, 2018, using the modified retrospective approach, with no material cumulative effect adjustments to retained earnings[479](index=479&type=chunk)[480](index=480&type=chunk) [Note 1 - Summary of Significant Accounting Policies](index=67&type=section&id=Note%201%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's basis of presentation, including consolidation, regulatory accounting, and the impact of the Holding Company Reorganization, detailing policies for cash, receivables, inventories, investments, property, plant and equipment, goodwill, revenue recognition, asset retirement obligations, legal costs, stock-based compensation, and income taxes, along with new accounting standard adoptions and TCJA impacts. - The Company's consolidated financial statements include electric, natural gas distribution, pipeline and midstream, construction materials and contracting, construction services, and other businesses, with intercompany balances and transactions eliminated[429](index=429&type=chunk) - The Holding Company Reorganization, completed January 2, 2019, made Montana-Dakota and Great Plains subsidiaries of the Company[433](index=433&type=chunk) - The Company adopted ASU 2014-09 (Revenue from Contracts with Customers) on January 1, 2018, using the modified retrospective approach, with no material cumulative effect adjustments to retained earnings[479](index=479&type=chunk)[480](index=480&type=chunk) - The TCJA's reduction in corporate tax rate required a one-time revaluation of deferred tax assets and liabilities in Q4 2017, with regulated impacts deferred as regulatory liabilities[434](index=434&type=chunk)[435](index=435&type=chunk) [Note 2 - Revenue from Contracts with Customers](index=81&type=section&id=Note%202%20-%20Revenue%20from%20Contracts%20with%20Customers) This note disaggregates revenue by customer type or service for 2018, showing total external operating revenues of **$4.53 billion**, explaining revenue recognition timing, contract assets and liabilities, and a **$36.7 million** net increase in revenues from prior period performance obligations. Disaggregated Revenue by Segment and Service (Year ended December 31, 2018) | Revenue Type | Electric (Thousands) | Natural gas distribution (Thousands) | Pipeline and midstream (Thousands) | Construction materials and contracting (Thousands) | Construction services (Thousands) | Other (Thousands) | Total (Thousands) | | :----------------------------- | :------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------- | :-------------------------------- | :---------------- | :---------------- | | Residential utility sales | $121,477 | $457,959 | $— | $— | $— | $— | $579,436 | | Commercial utility sales | $136,236 | $276,716 | $— | $— | $— | $— | $412,952 | | Industrial utility sales | $34,353 | $24,603 | $— | $— | $— | $— | $58,956 | | Other utility sales | $7,556 | $— | $— | $— | $— | $— | $7,556 | | Natural gas transportation | $— | $43,238 | $89,159 | $— | $— | $— | $132,397 | | Natural gas gathering | $— | $— | $9,159 | $— | $— | $— | $9,159 | | Natural gas storage | $— | $— | $11,543 | $— | $— | $— | $11,543 | | Contracting services | $— | $— | $— | $968,755 | $— | $— | $968,755 | | Construction materials | $— | $— | $— | $1,423,068 | $— | $— | $1,423,068 | | Inside specialty contracting | $— | $— | $— | $— | $926,875 | $— | $926,875 | | Outside specialty contracting | $— | $— | $— | $— | $392,544 | $— | $392,544 | | Other | $31,568 | $14,579 | $18,865 | $— | $525 | $11,259 | $76,796 | | **Total external operating revenues** | **$335,123** | **$823,247** | **$78,018** | **$1,925,185** | **$1,369,772** | **$207** | **$4,531,552** | Net Contract Assets and Liabilities (December 31, 2017-2018) | Metric | December 31, 2018 (Thousands) | December 31, 2017 (Thousands) | Change (Thousands) | | :-------------------------- | :---------------------------- | :---------------------------- | :----------------- | | Contract assets | $104,239 | $109,540 | $(5,301) | | Contract liabilities - current | $(93,901) | $(84,123) | $(9,778) | | Contract liabilities - noncurrent | $(135) | $— | $(135) | | **Net contract assets** | **$10,203** | **$25,417** | **$(15,214)** | - The Company recognized a net increase in revenues of **$36.7 million** for the year ended December 31, 2018, from performance obligations satisfied in prior periods[510](index=510&type=chunk) [Note 3 - Acquisitions](index=83&type=section&id=Note%203%20-%20Acquisitions) In 2018, the Company completed **four acquisitions** in its construction materials and contracting segment for **$168.1 million** in cash and **$18.2 million** in common stock, resulting in a **$33.1 million** increase in goodwill and **$8.2 million** in other intangible assets, with purchase price allocation remaining provisional. - In 2018, the Company acquired Teevin & Fischer Quarry, Tri-City Paving, Molalla Redi-Mix and Rock Products, and Sweetman Construction Company, all included in the construction materials and contracting segment[511](index=511&type=chunk)[514](index=514&type=chunk) - The gross aggregate consideration for these acquisitions was **$168.1 million** in cash and **721,610 shares** of common stock (fair value of approximately **$18.2 million**)[512](index=512&type=chunk) Preliminary Purchase Price Allocation for 2018 Acquisitions | Asset/Liability Category | 2018 Acquisitions (Thousands) | | :----------------------------- | :---------------------------- | | Total assets acquired | $203,879 | | Total liabilities assumed | $17,601 | | **Total consideration (fair value)** | **$186,278** | | Goodwill | $33,131 | | Other intangible assets, net | $8,227 | [Note 4 - Discontinued Operations](index=84&type=section&id=Note%204%20-%20Discontinued%20Operations) This note details the discontinued operations of Dakota Prairie Refining, sold in June 2016 with a **$251.9 million** impairment loss, and Fidelity, with most assets sold by July 2018, resulting in **$2.9 million** income from discontinued operations in 2018. - Dakota Prairie Refining was sold on June 27, 2016, and Fidelity's oil and natural g