BISMARCK, N.D., Nov. 2, 2023
/PRNewswire/ -- MDU Resources Group, Inc. (NYSE: MDU) today
reported third quarter earnings on a generally accepted accounting
principles (GAAP) basis of $74.9
million, or 37 cents per
share, compared to third quarter 2022 GAAP earnings of $147.9 million, or 73
cents per share.
Third quarter 2023 income from continuing operations, which
reflects the May 31 spinoff of Knife
River Corporation, was $78.2 million,
or 38 cents per share, compared to
third quarter 2022 income from continuing operations of
$42.3 million, or 21 cents per share.
When adjusting for items related to the spinoff of Knife River,
including the unrealized gain on the approximately 10% retained
shares, as well as adjusting for items related to the company's
strategic initiatives, MDU Resources' third quarter adjusted
income from continuing operations was $58.6
million, or 29 cents per
share, compared to third quarter 2022 adjusted income from
continuing operations of $42.3
million, or 21 cents per
share.
"We continue to see very strong results from all our companies,"
said David L. Goodin, president and
CEO of MDU Resources. "Our construction services business had
record third quarter earnings and EBITDA. Our pipeline business
also had record third quarter earnings and natural gas
transportation volumes. Our electric utility saw significant
commercial retail volume increases related to serving a data center
in its territory and has filed a request with the North Dakota
Public Service Commission to serve another data center that is
expected to come on line in 2024."
Today, in addition to announcing third quarter results, MDU
Resources announced in a separate news release that it intends to
pursue a tax-free spinoff of its construction services subsidiary,
MDU Construction Services Group. MDU Resources intends to become a
pure-play energy delivery business.
For the nine months ended Sept. 30,
2023, MDU Resources had earnings on a GAAP basis of
$244.0 million, or $1.20 per share, compared to GAAP earnings of
$250.4 million, or $1.23 per share for the same period in 2022.
Income from continuing operations for the same period in 2023
was $309.7 million, or $1.52 per share, compared to $146.9 million, or 72
cents per share, for the nine months ended Sept. 30, 2022.
For the nine months ended Sept. 30,
2023, income from continuing operations when adjusted for
the items previously noted was $205.9
million, or $1.01 per share,
compared to adjusted income from continuing operations of
$146.9 million, or 72 cents per share, for the same period in
2022.
Results at each of MDU Resources' businesses were positively
impacted for the first nine months of the year on a noncash basis
by higher investment returns on nonqualified benefit plans.
Collectively through Sept. 30, the
positive earnings variance is approximately $15.9 million, or 8
cents per share, compared to the same period in 2022. The
company attributes this change in investment returns to
fluctuations in the financial markets.
For an explanation of non-GAAP adjustments, see the "Non-GAAP
Financial Measures" section in this news release.
"With the outstanding performance we've seen for the first nine
months of the year and continued strength of our operations, we are
increasing our guidance for 2023 results," Goodin said.
Regulated Energy Delivery Highlights
Electric and
Natural Gas Utility
The electric and natural gas utility
earned $3.2 million in the third
quarter, compared to $3.5 million in
the third quarter of 2022.
Residential electric use decreased during the quarter with
cooler temperatures, however commercial volumes were higher
primarily from a data center that came on line earlier this year in
the company's service territory. Total electric retail sales
volumes were 36.6% higher compared to the same period last year
while natural gas retail sales volumes were 9.3% lower.
Higher utility operation and maintenance expense, primarily
payroll-related costs, negatively impacted earnings, which was
largely offset by rate relief in certain electric and natural gas
jurisdictions.
Regulatory update:
- New North Dakota electric
rates took effect July 1, as approved
June 6 by the North Dakota Public
Service Commission, allowing for a 7.4% revenue increase of
$15.3 million.
- New Idaho natural gas rates
took effect July 1, as approved
June 30 by the Idaho Public Utilities
Commission, allowing for a 0.73% revenue increase of $3.1 million.
- New Montana electric rates
took effect Oct. 1, as approved
Aug. 8 by the Montana Public Service
Commission, allowing for a 9.1% annual revenue increase of
$6.1 million.
- On Aug. 15, the utility filed
with the South Dakota Public Utilities Commission an electric rate
case requesting a 17.3% revenue increase of $3 million.
- On Aug. 15, the utility filed
with the South Dakota Public Utilities Commission a natural gas
rate case requesting an 11.2% revenue increase of $7.4 million.
- On Oct. 2, the utility filed with
the North Dakota Public Service Commission an electric service
agreement request to serve an additional data center in its service
territory.
- On Nov. 1, the utility filed with
the North Dakota Public Service Commission a natural gas rate case
requesting a 7.5% revenue increase of $11.6
million.
The company's new Heskett Unit IV, an 88-megawatt natural
gas-fired, simple-cycle combustion turbine electric generating
facility near Mandan, North
Dakota, is undergoing performance and environmental testing.
It is expected to be fully operational before year-end.
Pipeline
The pipeline business had record third
quarter earnings of $11.9 million,
compared to $9.8 million in the third
quarter of 2022. Results were positively impacted by:
- Record quarterly natural gas transportation volumes, largely
from increased contracted volume commitments on its North Bakken
Expansion project that was placed in service in February 2022.
- Higher storage-related revenues.
- The implementation of new transportation and storage settlement
rates, which are pending FERC approval.
The company began construction in the second quarter on three
pipeline expansion projects. Two of those projects were placed in
service on Nov. 1 and will add
natural gas transportation capacity of 119 million cubic feet per
day. The third project is expected to be complete in early 2024,
adding an additional 175 million cubic feet per day.
Regulatory update:
- The company settled its rate case with customers and FERC
staff, and it implemented the new transportation and storage
service rates as of Aug. 1. The
rates, which are pending final FERC approval, are expected to
result in a 7% revenue increase of approximately $10 million on an annual basis.
- On Oct. 19, the company received
FERC approval for its Wahpeton Expansion project in eastern
North Dakota. The project,
expected to cost approximately $75
million, will allow for an additional 20 million cubic feet
per day of natural gas transportation capacity. It is supported by
long-term customer commitments and is expected to be in service in
late 2024.
Construction Services Highlights
The construction
services business had record third quarter earnings of $36.0 million, up 29% compared to earnings of
$28.0 million in the third quarter of
2022. It also had record EBITDA of $58.0
million in third quarter 2023, compared to EBITDA of
$43.9 million in third quarter
2022.
The company experienced continued strong demand for its
institutional construction services work, particularly for health
care and government clients, as well as higher demand for
utility-related transmission and distribution work. Margins
increased due to efficiency gains on projects. The earnings
increase was somewhat offset by higher labor costs and interest
expense.
Backlog for construction services remained strong at
$1.85 billion as of Sept. 30, compared to $2.0
billion at Sept. 30, 2022.
Discontinued Operations and Adjusted Earnings
On
May 31, 2023, MDU Resources completed
a spinoff of approximately 90% of the outstanding shares of its
construction materials subsidiary, Knife River Corporation, which
became an independent, publicly traded company. MDU Resources has
reported Knife River's results and the transaction costs and
certain interest expenses associated with the spinoff as
discontinued operations, and MDU Resources' prior period results
have been restated to reflect the spinoff. The unrealized gains
from the retained shares of Knife River's outstanding stock are
reported as part of MDU Resources' continuing operations in its
Other segment.
MDU Resources is reporting adjusted income from continuing
operations that excludes the unrealized gain on the retained shares
of Knife River as well as costs associated with MDU Resources'
strategic initiatives. Adjusted income from continuing operations
is a non-GAAP measure. The "Non-GAAP Financial Measures" section of
this news release explains the earnings adjustments. More
information about MDU Resources' strategic initiatives can be found
on the company's website at www.mdu.com.
Guidance
Because of MDU Resources' strategic
initiatives, the company is providing guidance for its 2023 results
by business. It also is raising guidance for 2023 as it now
expects:
- Earnings from its regulated energy delivery businesses in the
range of $155 million to $165 million, up from $150
million to $160 million.
- Construction services revenues in the range of $2.80 billion to $3.00
billion, with higher margins compared to 2022, and EBITDA of
$210 million to $230 million, up from $200
million to $225 million.
Conference Call
MDU Resources' management will discuss
on a webcast at 2 p.m. EDT today the
company's third quarter results and the planned spinoff of MDU
Construction Services Group. The webcast can be accessed at
www.mdu.com under the "Investor Relations" heading. Select "Events
& Presentations," and click on "3Q 2023 Earnings Conference
Call." A replay of the webcast will be available at the same
location.
MDU Resources also will postpone its Analyst and Investor Day,
originally slated for Nov. 21, until
late in the first quarter of 2024 to provide more details on the
planned spinoff of MDU Construction Services Group.
About MDU Resources
MDU Resources Group, Inc., a
member of the S&P MidCap 400 index, provides essential products
and services through its regulated energy delivery and construction
services businesses. For more information about MDU Resources, see
the company's website at www.mdu.com or contact the Investor
Relations Department at investor@mduresources.com.
Media Contact: Laura
Lueder, manager of communications and public relations,
701-530-1095
Financial Contact: Brent
Miller, assistant treasurer, 701-530-1730
Forward-Looking Statements
The information in this news release highlights the key
growth strategies, projections and certain assumptions for the
company and its subsidiaries and other matters for each of the
company's businesses. Many of these highlighted statements and
other statements not historical in nature are "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. Although the company believes that its
expectations are based on reasonable assumptions, there is no
assurance the company's projections, including estimates for
growth, shareholder value creation and financial guidance or other
proposed strategies, including the pursuit of a tax-advantaged
separation of its construction services business and proposed
future structure of a pure-play regulated energy delivery company
will be achieved. Please refer to assumptions contained in this
news release, as well as the various important factors listed in
Part I, Item 1A - Risk Factors in the company's most recent Form
10-K and subsequent filings with the Securities and Exchange
Commission.
Changes in such assumptions and factors could cause actual
future results to differ materially from growth and financial
guidance. All forward-looking statements in this news release are
expressly qualified by such cautionary statements and by reference
to the underlying assumptions. Undue reliance should not be placed
on forward-looking statements, which speak only as of the date they
are made. Except as required by law, the company does not undertake
to update forward-looking statements, whether as a result of new
information, future events or otherwise.
Throughout this news release, the company presents financial
information prepared in accordance with GAAP, as well as EBITDA by
operating segment, EBITDA from continuing operations, 2023 EBITDA
guidance, adjusted EBITDA from continuing operations, adjusted
income from continuing operations, and adjusted earnings per share
from continuing operations, which are considered non-GAAP financial
measures. The use of these non-GAAP financial measures should not
be construed as alternatives to earnings, operating income or
operating cash flows. The company believes the use of these
non-GAAP financial measures are beneficial in evaluating the
company's financial performance due to its diverse operations.
Please refer to the "Non-GAAP Financial Measures" section contained
in this document for additional information.
Consolidated
Statements of Income
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
(In millions, except
per share amounts)
|
Operating
revenues:
|
(Unaudited)
|
Electric, natural gas
distribution and regulated pipeline
|
$
279.5
|
$
263.8
|
$
1,294.0
|
$
1,141.0
|
Non-regulated pipeline,
construction services and other
|
721.3
|
738.7
|
2,228.0
|
1,978.3
|
Total operating
revenues
|
1,000.8
|
1,002.5
|
3,522.0
|
3,119.3
|
Operating
expenses:
|
|
|
|
|
Operation and
maintenance:
|
|
|
|
|
Electric, natural gas
distribution and regulated pipeline
|
99.3
|
89.7
|
296.8
|
281.9
|
Non-regulated
pipeline, construction services and other
|
639.3
|
677.8
|
2,008.0
|
1,795.7
|
Total operation and
maintenance
|
738.6
|
767.5
|
2,304.8
|
2,077.6
|
Purchased natural gas
sold
|
56.0
|
61.8
|
542.8
|
444.5
|
Depreciation, depletion
and amortization
|
53.1
|
51.8
|
158.9
|
158.6
|
Taxes, other than
income
|
39.5
|
40.3
|
156.5
|
139.3
|
Electric fuel and
purchased power
|
29.0
|
20.1
|
73.8
|
68.3
|
Total operating
expenses
|
916.2
|
941.5
|
3,236.8
|
2,888.3
|
Operating
income
|
84.6
|
61.0
|
285.2
|
231.0
|
Unrealized gain on
investment in Knife River
|
30.2
|
—
|
170.2
|
—
|
Other income
|
8.8
|
5.8
|
29.2
|
2.5
|
Interest
expense
|
32.1
|
20.2
|
82.6
|
58.3
|
Income before income
taxes
|
91.5
|
46.6
|
402.0
|
175.2
|
Income tax
expense
|
13.3
|
4.3
|
92.3
|
28.3
|
Income from continuing
operations
|
78.2
|
42.3
|
309.7
|
146.9
|
Discontinued
operations, net of tax
|
(3.3)
|
105.6
|
(65.7)
|
103.5
|
Net income
|
$
74.9
|
$
147.9
|
$
244.0
|
$
250.4
|
|
|
|
|
|
Earnings per share –
basic:
|
|
|
|
|
Income from continuing
operations
|
$
.38
|
$
.21
|
$
1.52
|
$
.72
|
Discontinued
operations, net of tax
|
(.01)
|
.52
|
(.32)
|
.51
|
Earnings per share –
basic
|
$
.37
|
$
.73
|
$
1.20
|
$
1.23
|
Earnings per share –
diluted:
|
|
|
|
|
Income from continuing
operations
|
$
.38
|
$
.21
|
$
1.52
|
$
.72
|
Discontinued
operations, net of tax
|
(.01)
|
.52
|
(.32)
|
.51
|
Earnings per share –
diluted
|
$
.37
|
$
.73
|
$
1.20
|
$
1.23
|
Weighted average common
shares outstanding – basic
|
203.6
|
203.4
|
203.6
|
203.4
|
Weighted average common
shares outstanding – diluted
|
203.9
|
203.6
|
203.9
|
203.4
|
Selected Cash Flows
Information*
|
|
Nine Months
Ended
|
|
September 30,
|
|
2023
|
2022
|
|
(In
millions)
|
Net cash provided by
operating activities
|
$
174.9
|
$
284.9
|
Net cash used in
investing activities
|
(415.7)
|
(465.4)
|
Net cash provided by
financing activities
|
192.8
|
200.9
|
Increase (decrease) in
cash and cash equivalents
|
(48.0)
|
20.4
|
Cash and cash
equivalents - beginning of year
|
80.5
|
54.2
|
Cash and cash
equivalents - end of period
|
$
32.5
|
$
74.6
|
*Includes cash flows
from discontinued operations.
|
Capital
Expenditures
|
|
Business
Line
|
2023
Estimated
|
|
(In
millions)
|
Electric
|
$
102
|
Natural gas
distribution
|
256
|
Pipeline
|
134
|
Construction
services
|
38
|
Total capital
expenditures*
|
$
530
|
|
|
*
Excludes "Other" category, as well as net
proceeds from the sale or disposition of property
|
Note: Total capital
expenditures is presented on a gross basis
|
The capital program is subject to continued review and
modification by the company. Actual expenditures may vary from the
estimates due to changes in project timing.
Non-GAAP Financial Measures
The company, in addition
to presenting its earnings in conformity with GAAP, has provided
non-GAAP financial measures of EBITDA by operating segment, EBITDA
from continuing operations, adjusted EBITDA from continuing
operations, 2023 EBITDA guidance, adjusted income from continuing
operations and adjusted earnings per share from continuing
operations. The company defines EBITDA as net income (loss)
attributable to the operating segment before interest; taxes; and
depreciation, depletion and amortization; EBITDA from continuing
operations as income (loss) from continuing operations before
interest; taxes; and depreciation, depletion and amortization; and
adjusted EBITDA from continuing operations as income (loss) from
continuing operations before interest; taxes; and depreciation,
depletion and amortization before any transaction-related impacts
from strategic initiatives. The company defines adjusted income
(loss) from continuing operations as income from continuing
operations attributable to the company before any
transaction-related impacts from strategic initiatives, including
the unrealized gain on the investment in Knife River; and adjusted
earnings per share from continuing operations as earnings per share
from continuing operations before any transaction-related impacts
from strategic initiatives, including the unrealized gain on the
investment in Knife River.
The company believes these non-GAAP financial measures provide
meaningful information to investors about operational efficiency
compared to the company's peers by excluding the impacts of
differences in tax jurisdictions and structures, debt levels,
capital investment, the gain on the investment in Knife River and
the one-time costs associated with the company's strategic
initiatives. The company's management uses the non-GAAP financial
measures in conjunction with GAAP results when evaluating the
company's operating results and calculating compensation packages.
Non-GAAP financial measures are not standardized; therefore, it may
not be possible to compare such financial measures with other
companies' non-GAAP financial measures having the same or similar
names. The presentation of this additional information is not meant
to be considered a substitution for financial measures prepared in
accordance with GAAP. The company strongly encourages investors to
review the consolidated financial statements in their entirety and
to not rely on any single financial measure.
The following tables provide a reconciliation of consolidated
income from continuing operations to adjusted income from
continuing operations, earnings per share from continuing
operations to adjusted earnings per share from continuing
operations, GAAP net income to EBITDA from continuing operations,
and GAAP net income to adjusted EBITDA from continuing operations
for actual as well as forecasted results, as applicable. The
reconciliation for each operating segment's EBITDA is included
within each operating segment's condensed income statement.
|
Three Months
Ended
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|
2023
|
2022
|
2023
|
2022
|
|
(In millions, except
per share amounts)
|
|
(Unaudited)
|
Income from continuing
operations
|
$
78.2
|
$
42.3
|
$
309.7
|
$
146.9
|
Adjustments:
|
|
|
|
|
Less: Unrealized
gain on investment in Knife River, net of tax*
|
22.8
|
—
|
113.6
|
—
|
Costs attributable to
strategic initiatives, net of tax*
|
3.2
|
—
|
9.8
|
—
|
Adjusted income from
continuing operations
|
$
58.6
|
$
42.3
|
$
205.9
|
$
146.9
|
*
Includes unrealized gain of $30.2
million, net of tax of $7.4 million quarter to date and $170.2
million, net of tax of
$56.6 million year to date 2023 on retained
shares investment in Knife River and costs attributable to
strategic
initiatives of $4.3 million, net of tax of $1.1
million quarter to date and $12.9 million, net of tax of $3.1
million year to
date 2023, which were not included in
discontinued operations.
|
|
|
|
|
|
Earnings Per Share
Reconciliation
|
|
|
|
|
Earnings per share from
continuing operations
|
$
.38
|
$
.21
|
$
1.52
|
$
.72
|
Adjustments:
|
|
|
|
|
Less: Earnings
per share attributable to unrealized gain on investment in Knife
River
|
.11
|
—
|
.56
|
—
|
Loss per share
attributable to strategic initiative costs
|
.02
|
—
|
.05
|
—
|
Adjusted earnings per
share from continuing operations
|
$
.29
|
$
.21
|
$
1.01
|
$
.72
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
(In
millions)
|
Net income
|
$
74.9
|
$
147.9
|
$
244.0
|
$
250.4
|
Discontinued
operations, net of tax
|
(3.3)
|
105.6
|
(65.7)
|
103.5
|
Income from continuing
operations
|
78.2
|
42.3
|
309.7
|
146.9
|
Adjustments:
|
|
|
|
|
Interest
expense
|
32.1
|
20.2
|
82.6
|
58.3
|
Income
taxes
|
13.3
|
4.3
|
92.3
|
28.3
|
Depreciation,
depletion and amortization
|
53.1
|
51.8
|
158.9
|
158.6
|
EBITDA from continuing
operations
|
$
176.7
|
$
118.6
|
$
643.5
|
$
392.1
|
Adjustments:
|
|
|
|
|
Less: Unrealized
gain on investment in Knife River, net of tax*
|
22.8
|
—
|
113.6
|
—
|
Costs attributable to
strategic initiatives, net of tax*
|
3.2
|
—
|
9.8
|
—
|
Adjusted EBITDA from
continuing operations
|
$
157.1
|
$
118.6
|
$
539.7
|
$
392.1
|
EBITDA Guidance
Reconciliation for 2023
|
|
|
|
Construction
Services
|
|
Low
|
High
|
|
(In
millions)
|
Income from continuing
operations
|
$
125.0
|
$
140.0
|
Adjustments:
|
|
|
Interest
expense
|
20.0
|
20.0
|
Income
taxes
|
40.0
|
45.0
|
Depreciation,
depletion and amortization
|
25.0
|
25.0
|
EBITDA from continuing
operations
|
$
210.0
|
$
230.0
|
|
|
|
|
|
|
|
|
Electric
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
|
(In
millions)
|
Operating
revenues
|
$ 108.1
|
$ 99.3
|
9 %
|
|
$ 294.8
|
$ 278.6
|
6 %
|
Operating
expenses:
|
|
|
|
|
|
|
|
Electric fuel and
purchased power
|
29.0
|
20.1
|
44 %
|
|
73.8
|
68.3
|
8 %
|
Operation and
maintenance
|
30.1
|
28.7
|
5 %
|
|
88.5
|
91.0
|
(3) %
|
Depreciation,
depletion and amortization
|
16.0
|
15.7
|
2 %
|
|
47.8
|
52.0
|
(8) %
|
Taxes, other than
income
|
4.3
|
4.4
|
(2) %
|
|
13.3
|
13.5
|
(1) %
|
Total operating
expenses
|
79.4
|
68.9
|
15 %
|
|
223.4
|
224.8
|
(1) %
|
Operating
income
|
28.7
|
30.4
|
(6) %
|
|
71.4
|
53.8
|
33 %
|
Other income
(expense)
|
1.3
|
.5
|
160 %
|
|
3.4
|
(0.8)
|
NM
|
Interest
expense
|
7.0
|
7.0
|
— %
|
|
20.5
|
21.0
|
(2) %
|
Income before
taxes
|
23.0
|
23.9
|
(4) %
|
|
54.3
|
32.0
|
70 %
|
Income tax (benefit)
expense
|
2.1
|
2.3
|
(9) %
|
|
0.4
|
(5.5)
|
107 %
|
Net income
|
$ 20.9
|
$ 21.6
|
(3) %
|
|
$ 53.9
|
$ 37.5
|
44 %
|
Adjustments:
|
|
|
|
|
|
|
|
Interest
expense
|
7.0
|
7.0
|
— %
|
|
20.5
|
21.0
|
(2) %
|
Income tax (benefit)
expense
|
2.1
|
2.3
|
(9) %
|
|
0.4
|
(5.5)
|
107 %
|
Depreciation,
depletion and amortization
|
16.0
|
15.7
|
2 %
|
|
47.8
|
52.0
|
(8) %
|
EBITDA
|
$ 46.0
|
$ 46.6
|
(1) %
|
|
$ 122.6
|
$ 105.0
|
17 %
|
NM - not
meaningful
|
Operating
Statistics
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Revenues
(millions)
|
|
|
|
|
|
Retail
sales:
|
|
|
|
|
|
Residential
|
$
33.6
|
$
36.6
|
|
$
100.0
|
$
100.6
|
Commercial
|
47.1
|
38.4
|
|
118.1
|
105.3
|
Industrial
|
10.5
|
10.8
|
|
31.0
|
31.3
|
Other
|
1.8
|
2.0
|
|
5.1
|
5.4
|
|
93.0
|
87.8
|
|
254.2
|
242.6
|
Other
|
15.1
|
11.5
|
|
40.6
|
36.0
|
|
$
108.1
|
$
99.3
|
|
$
294.8
|
$
278.6
|
Volumes (million
kWh)
|
|
|
|
|
|
Retail
sales:
|
|
|
|
|
|
Residential
|
275.5
|
304.9
|
|
899.3
|
906.7
|
Commercial
|
692.1
|
358.3
|
|
1,619.9
|
1,051.7
|
Industrial
|
143.5
|
143.7
|
|
435.7
|
431.7
|
Other
|
20.6
|
21.6
|
|
61.5
|
61.7
|
|
1,131.7
|
828.5
|
|
3,016.4
|
2,451.8
|
Average cost of
electric fuel and purchased power per kWh
|
$
.024
|
$
.022
|
|
$
.023
|
$
.026
|
The electric business reported net income of $20.9 million in the third quarter, compared
to $21.6 million for the same
period in 2022. This decrease was largely the result of lower
residential volumes due to cooler weather and higher operation and
maintenance expense, primarily payroll-related costs. The decrease
was partially offset by higher retail sales revenue due to rate
relief in North Dakota and
Montana, an electric service
agreement to provide power to a data center near Ellendale, North Dakota, and higher
transmission revenue.
The previous table also reflects items that are passed through
to customers resulting in minimal impact to earnings. These items
include $8.9 million in higher
electric fuel and purchased power costs, which increased both
operating revenues and electric fuel and purchased power, and
higher production tax credits during the quarter, which
reduced operating revenues and increased income tax benefits.
The electric business's EBITDA decreased $600,000 in the third quarter of 2023, compared
to 2022, primarily the result of lower residential volumes and
higher operation and maintenance expense, partially offset by
higher retail revenue, as previously discussed.
Natural Gas
Distribution
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
|
(In
millions)
|
Operating
revenues
|
$ 135.0
|
$ 132.2
|
2 %
|
|
$ 919.7
|
$ 793.3
|
16 %
|
Operating
expenses:
|
|
|
|
|
|
|
|
Purchased natural gas
sold
|
59.6
|
65.3
|
(9) %
|
|
580.3
|
481.3
|
21 %
|
Operation and
maintenance
|
55.5
|
49.5
|
12 %
|
|
165.3
|
154.4
|
7 %
|
Depreciation,
depletion and amortization
|
23.9
|
22.7
|
5 %
|
|
70.6
|
67.4
|
5 %
|
Taxes, other than
income
|
11.3
|
11.4
|
(1) %
|
|
57.8
|
51.3
|
13 %
|
Total operating
expenses
|
150.3
|
148.9
|
1 %
|
|
874.0
|
754.4
|
16 %
|
Operating income
(loss)
|
(15.3)
|
(16.7)
|
8 %
|
|
45.7
|
38.9
|
17 %
|
Other income
|
4.7
|
1.4
|
236 %
|
|
14.5
|
0.3
|
NM
|
Interest
expense
|
14.4
|
10.7
|
35 %
|
|
42.2
|
29.8
|
42 %
|
Income (loss) before
taxes
|
(25.0)
|
(26.0)
|
4 %
|
|
18.0
|
9.4
|
91 %
|
Income tax (benefit)
expense
|
(7.3)
|
(7.9)
|
(8) %
|
|
—
|
(1.4)
|
(100) %
|
Net income
(loss)
|
$ (17.7)
|
$ (18.1)
|
2 %
|
|
$ 18.0
|
$ 10.8
|
67 %
|
Adjustments:
|
|
|
|
|
|
|
|
Interest
expense
|
14.4
|
10.7
|
35 %
|
|
42.2
|
29.8
|
42 %
|
Income tax (benefit)
expense
|
(7.3)
|
(7.9)
|
8 %
|
|
—
|
(1.4)
|
100 %
|
Depreciation,
depletion and amortization
|
23.9
|
22.7
|
5 %
|
|
70.6
|
67.4
|
5 %
|
EBITDA
|
$ 13.3
|
$
7.4
|
80 %
|
|
$ 130.8
|
$ 106.6
|
23 %
|
NM - not
meaningful
|
Operating
Statistics
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Revenues
(millions)
|
|
|
|
|
|
Retail
Sales:
|
|
|
|
|
|
Residential
|
$
69.5
|
$
64.9
|
|
$
516.2
|
$
438.5
|
Commercial
|
41.0
|
44.5
|
|
314.6
|
278.3
|
Industrial
|
7.2
|
7.2
|
|
33.1
|
29.2
|
|
117.7
|
116.6
|
|
863.9
|
746.0
|
Transportation
and other
|
17.3
|
15.6
|
|
55.8
|
47.3
|
|
$
135.0
|
$
132.2
|
|
$
919.7
|
$
793.3
|
Volumes
(MMdk)
|
|
|
|
|
|
Retail
sales:
|
|
|
|
|
|
Residential
|
4.0
|
4.5
|
|
46.5
|
47.3
|
Commercial
|
3.8
|
4.2
|
|
32.5
|
32.9
|
Industrial
|
.9
|
.9
|
|
3.8
|
3.9
|
|
8.7
|
9.6
|
|
82.8
|
84.1
|
Transportation
sales:
|
|
|
|
|
|
Commercial
|
.3
|
.3
|
|
1.4
|
1.4
|
Industrial
|
50.1
|
42.1
|
|
135.9
|
118.0
|
|
50.4
|
42.4
|
|
137.3
|
119.4
|
Total
throughput
|
59.1
|
52.0
|
|
220.1
|
203.5
|
Average cost of natural
gas per dk
|
$
6.85
|
$
6.82
|
|
$
7.01
|
$
5.72
|
The natural gas distribution business reported a seasonal loss
of $17.7 million in the third
quarter, compared to a loss of $18.1 million for the same period in 2022.
Earnings increased due to recovery of short-term debt interest
expense in Idaho, related to
increased gas costs and rate relief in Idaho and Washington, partially offset by higher
operation and maintenance expense, primarily payroll-related costs.
The business also experienced a 9.3% decrease in retail sales
volumes to all customer classes due to seasonal weather patterns,
which was partially offset by weather normalization and decoupling
mechanisms.
The previous table also reflects items that are passed through
to customers resulting in minimal impact to earnings. These items
include $5.7 million in lower natural
gas costs, which decreased both operating revenues and purchased
natural gas sold, and $900,000 in
higher revenue-based taxes that increased both operating revenues
and taxes, other than income.
The natural gas distribution business's EBITDA increased
$5.9 million in the third quarter,
compared to 2022, primarily the result of higher retail revenue,
partially offset by higher operation and maintenance expense and
lower volumes, as previously discussed.
Pipeline
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
|
(In millions)
|
Operating
revenues
|
$ 44.1
|
$ 39.7
|
11 %
|
|
$ 127.0
|
$ 114.3
|
11 %
|
Operating
expenses:
|
|
|
|
|
|
|
|
Operation and
maintenance
|
17.0
|
14.6
|
16 %
|
|
52.7
|
44.9
|
17 %
|
Depreciation,
depletion and amortization
|
6.3
|
6.9
|
(9) %
|
|
20.0
|
20.0
|
— %
|
Taxes, other than
income
|
3.0
|
3.2
|
(6) %
|
|
9.6
|
10.0
|
(4) %
|
Total operating
expenses
|
26.3
|
24.7
|
6 %
|
|
82.3
|
74.9
|
10 %
|
Operating
income
|
17.8
|
15.0
|
19 %
|
|
44.7
|
39.4
|
13 %
|
Other income
|
.9
|
.6
|
50 %
|
|
2.3
|
—
|
NM
|
Interest
expense
|
3.3
|
2.6
|
27 %
|
|
9.5
|
7.4
|
28 %
|
Income before
taxes
|
15.4
|
13.0
|
18 %
|
|
37.5
|
32.0
|
17 %
|
Income tax
expense
|
3.5
|
2.8
|
25 %
|
|
8.1
|
7.2
|
13 %
|
Income from continuing
operations
|
11.9
|
10.2
|
17 %
|
|
29.4
|
24.8
|
19 %
|
Discontinued
operations, net of tax*
|
—
|
(.4)
|
(100) %
|
|
(.5)
|
(.5)
|
— %
|
Net income
|
$ 11.9
|
$
9.8
|
21 %
|
|
$ 28.9
|
$ 24.3
|
19 %
|
Adjustments:
|
|
|
|
|
|
|
|
Interest
expense
|
3.3
|
2.6
|
10 %
|
|
9.5
|
7.4
|
17 %
|
Interest expense
included in discontinued operations, net of tax
|
—
|
.4
|
(100) %
|
|
.5
|
.5
|
— %
|
Income tax
expense
|
3.5
|
2.8
|
25 %
|
|
8.1
|
7.2
|
16 %
|
Depreciation,
depletion and amortization
|
6.3
|
6.9
|
(9) %
|
|
20.0
|
20.0
|
— %
|
EBITDA
|
$ 25.0
|
$ 22.5
|
11 %
|
|
$ 67.0
|
$ 59.4
|
12 %
|
*Discontinued
operations includes interest on debt facilities repaid in
connection with the Knife River separation.
|
Operating
Statistics
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Transportation volumes
(MMdk)
|
146.9
|
130.9
|
|
419.2
|
357.1
|
Customer natural gas
storage balance (MMdk):
|
|
|
|
|
|
Beginning of
period
|
27.8
|
14.8
|
|
21.2
|
23.0
|
Net
injection
|
15.0
|
13.3
|
|
21.6
|
5.1
|
End of
period
|
42.8
|
28.1
|
|
42.8
|
28.1
|
The pipeline business reported record net income of $11.9 million in the third quarter, compared to
$9.8 million for the same period in
2022. The earnings increase was driven by higher transportation
revenue, primarily a result of increased contracted volume
commitments from the North Bakken Expansion project, higher
storage-related revenue and new transportation and storage service
rates effective Aug. 1, 2023. The
business also benefited from higher allowance for funds used during
construction on the company's organic growth projects. The increase
was offset in part by higher operation and maintenance expense
primarily attributable to payroll-related costs. The business also
incurred higher interest expense as a result of higher interest
rates and higher debt balances.
The pipeline business's EBITDA increased $2.5 million in the third quarter, compared to
2022, primarily from higher transportation and storage revenues,
partially offset by higher operating costs, as previously
discussed.
Construction
Services
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
|
(In
millions)
|
Operating
revenues
|
$ 717.4
|
$ 737.0
|
(3) %
|
|
$
2,218.7
|
$
1,975.1
|
12 %
|
Cost of
sales:
|
|
|
|
|
|
|
|
Operation and
maintenance
|
607.9
|
651.8
|
(7) %
|
|
1,891.1
|
1,708.1
|
11 %
|
Depreciation,
depletion and amortization
|
4.7
|
4.3
|
9 %
|
|
13.6
|
12.6
|
8 %
|
Taxes, other
than income
|
19.9
|
20.2
|
(1) %
|
|
71.9
|
60.5
|
19 %
|
Total cost of
sales
|
632.5
|
676.3
|
(6) %
|
|
1,976.6
|
1,781.2
|
11 %
|
Gross profit
|
84.9
|
60.7
|
40 %
|
|
242.1
|
193.9
|
25 %
|
Selling, general and
administrative expense:
|
|
|
|
|
|
|
|
Operation and
maintenance
|
32.6
|
23.5
|
39 %
|
|
94.9
|
76.0
|
25 %
|
Depreciation,
depletion and amortization
|
1.2
|
1.2
|
— %
|
|
3.7
|
3.3
|
12 %
|
Taxes, other
than income
|
1.0
|
1.1
|
(9) %
|
|
3.9
|
4.0
|
(3) %
|
Total selling, general
and administrative expense
|
34.8
|
25.8
|
35 %
|
|
102.5
|
83.3
|
23 %
|
Operating
income
|
50.1
|
34.9
|
44 %
|
|
139.6
|
110.6
|
26 %
|
Other income
|
2.0
|
3.5
|
(43) %
|
|
7.5
|
4.7
|
60 %
|
Interest
expense
|
4.7
|
—
|
NM
|
|
6.6
|
.2
|
NM
|
Income before
taxes
|
47.4
|
38.4
|
23 %
|
|
140.5
|
115.1
|
22 %
|
Income tax
expense
|
11.4
|
9.2
|
24 %
|
|
34.5
|
28.5
|
21 %
|
Income from continuing
operations
|
36.0
|
29.2
|
23 %
|
|
106.0
|
86.6
|
22 %
|
Discontinued
operations, net of tax*
|
—
|
(1.2)
|
(100) %
|
|
(5.2)
|
(2.8)
|
86 %
|
Net income
|
$ 36.0
|
$ 28.0
|
29 %
|
|
$ 100.8
|
$ 83.8
|
20 %
|
Adjustments:
|
|
|
|
|
|
|
|
Interest
expense
|
4.7
|
—
|
176 %
|
|
6.6
|
.2
|
74 %
|
Interest expense
included in discontinued operations, net of tax
|
—
|
1.2
|
(100) %
|
|
5.2
|
2.8
|
86 %
|
Income tax
expense
|
11.4
|
9.2
|
31 %
|
|
34.5
|
28.5
|
25 %
|
Depreciation,
depletion and amortization
|
5.9
|
5.5
|
7 %
|
|
17.3
|
15.9
|
9 %
|
EBITDA
|
$ 58.0
|
$ 43.9
|
32 %
|
|
$ 164.4
|
$ 131.2
|
21 %
|
*Discontinued
operations includes interest on debt facilities repaid in
connection with the Knife River separation.
|
NM - not
meaningful
|
Operating
Statistics
|
Revenue
|
|
Gross profit
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
September 30,
|
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
2023
|
2022
|
2023
|
2022
|
Business
Line:
|
(In
millions)
|
Electrical &
mechanical
|
|
|
|
|
|
|
|
|
|
Commercial
|
$ 266.6
|
$ 276.6
|
$ 947.8
|
$ 706.6
|
|
$ 32.7
|
$ 21.8
|
$
99.8
|
$
67.2
|
Industrial
|
116.0
|
132.3
|
367.3
|
339.4
|
|
8.3
|
11.3
|
35.2
|
33.4
|
Institutional
|
76.3
|
58.9
|
195.2
|
155.0
|
|
6.1
|
1.0
|
11.8
|
2.3
|
Renewables
|
19.2
|
43.4
|
43.9
|
122.8
|
|
1.8
|
(3.9)
|
2.3
|
.1
|
Service &
other
|
38.8
|
35.3
|
126.0
|
127.0
|
|
3.6
|
3.7
|
14.3
|
14.7
|
|
516.9
|
546.5
|
1,680.2
|
1,450.8
|
|
52.5
|
33.9
|
163.4
|
117.7
|
Transmission &
distribution
|
|
|
|
|
|
|
|
|
|
Utility
|
188.8
|
179.6
|
508.9
|
477.5
|
|
31.1
|
25.8
|
76.9
|
72.2
|
Transportation
|
15.7
|
16.1
|
40.6
|
59.5
|
|
1.3
|
1.0
|
1.8
|
4.0
|
|
204.5
|
195.7
|
549.5
|
537.0
|
|
32.4
|
26.8
|
78.7
|
76.2
|
Intrasegment
eliminations
|
(4.0)
|
(5.2)
|
(11.0)
|
(12.7)
|
|
—
|
—
|
—
|
—
|
Total
|
$ 717.4
|
$ 737.0
|
$
2,218.7
|
$
1,975.1
|
|
$ 84.9
|
$ 60.7
|
$ 242.1
|
$ 193.9
|
|
Backlog at
September 30,
|
|
2023
|
2022
|
|
(In
millions)
|
Electrical &
mechanical
|
$
1,526
|
$
1,724
|
Transmission &
distribution
|
324
|
278
|
|
$
1,850
|
$
2,002
|
The construction services business reported record third quarter
net income of $36.0 million, compared
to $28.0 million for the same period
in 2022. The electrical and mechanical gross profit increase was
largely attributable to the commercial, renewable and institutional
markets as a result of efficiency on certain projects from labor
and materials, and project mix, partially offset by lower
industrial gross profit as a result of lower workloads.
Transmission and distribution gross profit increased primarily due
to the utility market as a result of project mix. The business was
negatively impacted by higher selling, general and administrative
costs, due largely to higher payroll-related costs and higher
reserves for uncollectible accounts on certain projects. The
construction services business also was impacted by increased
interest expense from higher working capital needs and higher
interest rates.
The construction services business's EBITDA increased
$14.1 million in the third quarter,
compared to 2022, primarily a result of higher gross profit driven
by efficiency on certain projects and project mix, as previously
discussed. Slightly offsetting these increases were higher selling,
general and administrative costs, as previously discussed.
Other
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
|
(In
millions)
|
Operating
revenues
|
$
1.7
|
$
1.5
|
13 %
|
|
$
6.4
|
$
4.4
|
45 %
|
Operating
expenses:
|
|
|
|
|
|
|
|
Operation and
maintenance
|
(2.6)
|
3.0
|
(187) %
|
|
19.4
|
12.9
|
50 %
|
Depreciation,
depletion and amortization
|
1.0
|
1.1
|
(9) %
|
|
3.2
|
3.3
|
(3) %
|
Total operating
expenses
|
(1.6)
|
4.1
|
(139) %
|
|
22.6
|
16.2
|
40 %
|
Operating income
(loss)
|
3.3
|
(2.6)
|
NM
|
|
(16.2)
|
(11.8)
|
37 %
|
Unrealized gain on
investment in Knife River
|
30.2
|
—
|
NM
|
|
170.2
|
—
|
NM
|
Other income
(expense)
|
5.8
|
—
|
NM
|
|
10.0
|
(1.3)
|
NM
|
Interest
expense
|
8.6
|
.1
|
NM
|
|
12.3
|
.2
|
NM
|
Income (loss) before
income taxes
|
30.7
|
(2.7)
|
NM
|
|
151.7
|
(13.3)
|
NM
|
Income tax
expense
|
3.6
|
(2.2)
|
NM
|
|
49.3
|
(0.5)
|
NM
|
Income (loss) from
continuing operations
|
27.1
|
(0.5)
|
NM
|
|
102.4
|
(12.8)
|
NM
|
Discontinued
operations, net of tax*
|
(3.3)
|
105.6
|
(103) %
|
|
(60.0)
|
106.8
|
(156) %
|
Net income
|
$ 23.8
|
$ 105.1
|
(77) %
|
|
$ 42.4
|
$ 94.0
|
55 %
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
$ 27.1
|
$
(0.5)
|
NM
|
|
$ 102.4
|
$ (12.8)
|
NM
|
Adjustments*:
|
|
|
|
|
|
|
|
Less: Unrealized
gain on investment in Knife River, net of tax*
|
22.8
|
—
|
NM
|
|
113.6
|
—
|
NM
|
Costs attributable to
strategic initiatives, net of tax*
|
3.2
|
—
|
NM
|
|
9.8
|
—
|
NM
|
Adjusted income (loss)
from continuing operations
|
$
7.5
|
$
(.5)
|
NM
|
|
$
(1.4)
|
$ (12.8)
|
89 %
|
*
Includes unrealized gain on investment in
Knife River retained shares of $30.2 million, net of tax of $7.4
million for the quarter
and $170.2 million, net of tax of $56.6 million
for the nine months ended 2023 and costs attributable to strategic
initiatives of
$4.3 million, net of tax of $1.1 million for
the quarter and $12.9 million, net of tax of $3.1 million for the
nine months ended
2023, which were not included in discontinued
operations.
|
NM - not
meaningful
|
On May 31, 2023, the company
completed the separation of Knife River, its former construction
materials and contracting segment, into a new publicly traded
company. As a result of the separation, the historical results of
operations for Knife River are shown in income (loss) from
discontinued operations, except for allocated general corporate
overhead costs of the company, which do not meet the criteria for
income (loss) from discontinued operations. Also included in
discontinued operations are strategic initiative costs associated
with the separation of Knife River.
During the third quarter, Other benefited from an increase of
$22.8 million, net of tax, associated
with an unrealized gain on the company's retained interest in Knife
River. Other also experienced $5.6
million in lower operation and maintenance expense,
attributable to lower insurance claims at the captive insurer and
corporate overhead costs classified as continuing operations
allocated to the construction materials business, partially offset
by strategic initiative costs incurred and corporate overhead costs
classified as continuing operations allocated to the construction
materials business.
Also included in Other are general and administrative costs and
interest expense previously allocated to the exploration and
production and refining businesses that do not meet the criteria
for income (loss) from discontinued operations.
Other Financial
Data
|
|
September 30,
|
|
2023
|
2022*
|
|
(In millions, except
per share amounts)
|
|
(Unaudited)
|
Book value per common
share
|
$
13.54
|
$
16.39
|
Market price per common
share
|
$
19.58
|
$
29.67
|
Market value as a
percent of book value
|
144.6 %
|
181.0 %
|
Total assets
|
$
7,869
|
$
9,607
|
Total equity
|
$
2,757
|
$
3,492
|
Total debt
|
$
2,648
|
$
3,028
|
Capitalization
ratios:
|
|
|
Total equity
|
51.0 %
|
52.8 %
|
Total debt
|
49.0 %
|
47.2 %
|
|
100.0 %
|
100.0 %
|
*2022 amounts include
Knife River
|
|
|
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SOURCE MDU Resources Group, Inc.