MDU Resources (MDU) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported first quarter earnings of $25.1 million or $0.13 per share, down from $40.9 million or $0.21 per share in Q1 2019 [10] - Combined utility business earnings decreased to $43.7 million from $52 million in the prior year [10] - Electric utility segment earnings fell to $11.4 million from $15.5 million in 2019, attributed to a 7.1% decrease in electric sales volumes and higher depreciation expenses [11] - Natural gas utilities segment net income decreased to $32.3 million from $36.5 million, impacted by a 10.9% decrease in retail sales volumes [12] - Pipeline business earnings increased to $7.4 million from $6.8 million, driven by increased transportation volumes and revenues [14] - Construction services reported net income of $16.8 million, down from $20 million, despite record revenues of $514.7 million, up 22% from the previous year [15] - Construction materials business reported a seasonal loss of $38.2 million, compared to a loss of $34.4 million in the same period of 2019 [17] Business Line Data and Key Metrics Changes - The electric utility segment's earnings were negatively impacted by warmer winter weather and higher depreciation expenses [11] - The natural gas utilities segment faced lower investment returns and decreased retail sales volumes, particularly in jurisdictions without weather normalization [12][13] - The pipeline business benefited from organic growth projects and higher transportation rates, although higher depreciation expenses partially offset gains [14] - Construction services experienced increased workloads, particularly in hospitality and high-tech sectors, despite a $6.7 million out-of-period adjustment affecting net income [15][16] - Construction materials saw increased revenues due to an earlier start to the construction season, but seasonal losses were higher than the previous year [17][18] Market Data and Key Metrics Changes - The company had $116.5 million in cash and $431.8 million in credit facility capacity as of March 31, indicating a strong liquidity position [19] - The company has no significant long-term debt maturities until 2022 and has entered into a $75 million term loan agreement to enhance liquidity [20] - The construction services group reported a record backlog of nearly $1.3 billion, while construction materials backlog stood at $905 million [31][34] Company Strategy and Development Direction - The company is focused on maintaining essential services during the COVID-19 pandemic while ensuring employee safety [23][25] - The North Bakken expansion project is moving forward, with construction expected to begin in 2021, despite lower production outlooks in the basin [29][30] - The company is monitoring COVID-related risks, including decreased fuel consumption and potential impacts on state infrastructure project funding [35] - The company has reduced its 2020 earnings per share guidance to a range of $1.50 to $1.70, while affirming long-term growth expectations of 5% to 8% [37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of warmer weather on utility sales volumes and the need for adjustments in service orders due to COVID-19 [27][28] - The company is optimistic about its construction services business, citing strong bidding environments and a skilled workforce [32] - Management expressed confidence in the ability to provide essential services and maintain operations despite economic uncertainties [39] - The company has committed $500,000 to support COVID-19 relief efforts, in addition to previous charitable contributions [40] Other Important Information - The company has implemented supportive policies for employees affected by COVID-19, including pay protection and health safety measures [24][26] - The company has eliminated late payment fees and discontinued service disconnections to assist customers facing financial difficulties due to the pandemic [28] Q&A Session Summary Question: Can you talk about the North Bakken expansion project and its customer contracts? - Management confirmed that the project is moving forward and is actively monitoring impacts from the Bakken [44] Question: What percentage of your backlog is related to Las Vegas or airports? - Approximately 25% of the backlog is in Las Vegas, with ongoing projects expected to ramp back up [47][48] Question: What is the outlook for bad debt expense in your guidance? - The company has slightly increased its bad debt expense assumption and is proactively assisting customers with payment plans [50][51] Question: How is the morale of employees during the pandemic? - Management reported a strong response from employees, with many adapting to remote work and maintaining productivity [106][109]