MDU Resources Group, Inc. (MDU)

MDU 
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MDU Resources Group, Inc. (MDU)

Q4 2009 Earnings Call

February 1, 2010 1:00 pm ET

Executives

Terry Hildestad – President & CEO

Vernon Raile – EVP & CFO

Bill Schneider - President & CEO Knife River Corporation

Steve Bietz - President & CEO WBI Holdings

Dave Goodin - President & CEO Montana Dakota Great Plains Natural Gas, Cascade Natural & Intermountain Gas

John Harp - President & CEO MDU Construction Services Group

Doran Schwartz – VP & CAO

Analysts

Paul Paterson - Glenrock Associates

Chris Ellinghaus - Shields & Co.

Becca Followill - Tudor Pickering Holt

Paul Ridzon - KeyBanc

Nancy Doyle – Met Life

James Bellessa – DA Davidson & Co.

Scott Walker – MFS


Presentation

Operator

Good afternoon, at this time I would like to welcome everyone to the MDU Resources Group 2009 year-end and 2010 guidance conference call. (Operator Instructions)

This call will be available for replay beginning at 4:00 pm Eastern Time today through 11:59 pm Eastern Time on February 16. The conference ID number for the replay is 45709171. The number to dial for the replay is 1-800-642-1687 or 706-645-9291.

I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Accounting Officer of MDU Resources Group; you may begin your conference.

Doran Schwartz

Welcome to our earnings release conference call. Before I turn the presentation over to Terry Hildestad, our President and Chief Executive Officer, I would like to mention that this conference call is being broadcast live to the public over the Internet and slides will accompany our remarks. If you’d like to view the slides, go to our website at www.mdu.com and follow the link to the conference call. Our earnings release is also available on our website.

During the course of this presentation we will make certain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially.

For a discussion of factors that may cause actual results to differ, refer to Item 1A, Risk Factors, in our most recent Form 10-K as well as our Form 10-Q and the Risk Factors section in our most recent Form 8-K.

Our format today will include formal remarks by Terry followed by a Q&A session. Other members of our management team who will be available to answer questions during the Q&A session are Dave Goodin, President and CEO of Montana Dakota Great Plans Natural Gas, Cascade Natural Gas and Intermountain Gas; John Harp, President and CEO of MDU Construction Services Group; Steve Bietz, President and CEO of WBI Holdings; Bill Schneider, President and CEO of Knife River Corporation; and Nicole Kivisto, Controller for MDU Resource.

With that, I’ll turn the presentation over to Terry for his formal remarks.

Terry Hildestad

Thank you Doran, good afternoon. Before I begin as we previously announced Vernon Raile is retiring from MDU Resources effective February 16, after 30 years of outstanding service. Vernon helped to see the company through extensive growth from a small utility with revenues of $182 million to a diversified Fortune 500 company. We will miss Vernon but he will long be remembered for his contributions to MDU Resources’ success.

Now thank you for joining us today, we appreciate your interest in MDU Resources. I’d like to start by commending the employees of MDU Resources for strong operating performance in 2009. Its their expertise, innovation, and overall commitment to excellence that provided solid operating results.

Our businesses generated record operating cash flows of approximately $845 million. This performance allowed us to increase our dividend for the 19th consecutive year this past November. The results again demonstrate the value our diversified business strategy. We’re very proud of our record of consistently rewarding our shareholders with a growing dividend while also retaining earnings to fund growth opportunities.

Consolidated earnings for 2009 were $260.4 million, compared to $377.2 million a year ago. These numbers exclude the effects of the noncash ceiling charges of $384.4 million and $84.2 million respectively. The noncash charge was due to the low spot natural gas and oil prices.

Earnings per common share excluding these charges were $1.40 in 2009 compared to $2.05 for 2008. I’m pleased to report that our fourth quarter we had consolidated earnings of $72.5 million or $0.38 per share nearly equal to the earnings for the fourth quarter of 2008.

Last year’s earnings were $72.8 million or $0.40 excluding the noncash charge. Now I’ll discuss our individual company results and outlook. Our combined utility businesses reported record earnings of $54.9 million, compared to earnings of $53.5 million in 2008. The increase reflects lower operating and maintenance expense at existing operations largely payroll and benefit related costs.

The results were reflect a full year of Intermountain Gas company earnings which was acquired in October of 2008. Partially offsetting the earnings increase was the absence of a $4.4 million gain on the sale of Cascade’s Natural Gas marketing service in 2008. Our focus on integrating best practices across our four utilities involve standardization of our operations, shared services, and back office consolidation.

These efforts produced efficiencies that have reduced costs and improved services to our 950,000 customers. We continue to pursue projects for accommodating load growth and replacing purchase power contracts with company owned generation that is reliable and cost beneficial for our customers.

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