MDU RESOURCES GROUP INC - Quarter Report: 2022 March (Form 10-Q)

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 March 31, 2022


☐			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
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1200 West Century Avenue

P.O. Box 5650

Bismarck, North Dakota 58506-5650

(Address of principal executive offices)

(Zip Code)

(701) 530-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 28, 2022: 203,350,740 shares.


Index
			Page
Definitions			3
Introduction			5
Part I -- Financial Information
Item 1. Financial Statements			6
Consolidated Statements of Income -- Three Months Ended March 31, 2022 and 2021			6
Consolidated Statements of Comprehensive Income -- Three Months Ended March 31, 2022 and 2021			7
Consolidated Balance Sheets -- March 31, 2022 and 2021, and December 31, 2021			8
Consolidated Statements of Equity -- Three Months Ended March 31, 2022 and 2021			9
Consolidated Statements of Cash Flows -- Three Months Ended March 31, 2022 and 2021			10
Notes to Consolidated Financial Statements			11
1. Basis of presentation			11
2. New accounting standards			11
3. Seasonality of operations			11
4. Receivables and allowance for expected credit losses			12
5. Inventories and natural gas in storage			12
6. Earnings per share			13
7. Equity			13
8. Accumulated other comprehensive loss			13
9. Revenue from contracts with customers			15
10. Business combinations			16
11. Leases			17
12. Goodwill and other intangible assets			17
13. Regulatory assets and liabilities			19
14. Fair value measurements			20
15. Debt			22
16. Cash flow information			23
17. Business segment data			24
18. Employee benefit plans			26
19. Regulatory matters			26
20. Contingencies			27

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			47
Item 4. Controls and Procedures			48
Part II -- Other Information
Item 1. Legal Proceedings			49
Item 1A. Risk Factors			49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 4. Mine Safety Disclosures			49
Item 5. Other Information			49
Item 6. Exhibits			49
Exhibits Index			50
Signatures			51

Index

Definitions

The following abbreviations and acronyms used in this Form 10-Q are defined below:


Abbreviation or Acronym
2021 Annual Report			Company's Annual Report on Form 10-K for the year ended December 31, 2021
AFUDC			Allowance for funds used during construction
ASC			FASB Accounting Standards Codification
ASU			FASB Accounting Standards Update
Cascade			Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital
Centennial			Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of the Company
Centennial Capital			Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial
Company			MDU Resources Group, Inc.
COVID-19			Coronavirus disease 2019. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency.
Coyote Creek			Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation
Coyote Station			427-MW coal-fired electric generating facility near Beulah, North Dakota (25 percent ownership)
dk			Decatherm
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act
EPA			United States Environmental Protection Agency
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
Fidelity			Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings (previously referred to as the Company's exploration and production segment)
GAAP			Accounting principles generally accepted in the United States of America
GHG			Greenhouse gas
Great Plains			Great Plains Natural Gas Co., a public utility division of Montana-Dakota
Intermountain			Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital
IRS			Internal Revenue Service
Knife River			Knife River Corporation, a direct wholly owned subsidiary of Centennial
kWh			Kilowatt-hour
LIBOR			London Inter-bank Offered Rate
MDU Construction Services			MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial
MDU Energy Capital			MDU Energy Capital, LLC, a direct wholly owned subsidiary of the Company
MISO			Midcontinent Independent System Operator, Inc., the organization that provides open-access transmission services and monitors the high-voltage transmission system in the Midwest United States and Manitoba, Canada and a southern United States region which includes much of Arkansas, Mississippi, and Louisiana.
MMcf			Million cubic feet
MMdk			Million dk
MNPUC			Minnesota Public Utilities Commission
Montana-Dakota			Montana-Dakota Utilities Co., a direct wholly owned subsidiary of MDU Energy Capital
MW			Megawatt
NDDEQ			North Dakota Department of Environmental Quality
NDPSC			North Dakota Public Service Commission
Oil			Includes crude oil and condensate
PHMSA			Pipeline and Hazardous Materials Safety Administration

Index


Regional Haze Rule			The EPA developed the Regional Haze Rule requiring states to develop and implement comprehensive plans to reduce human-caused regional haze in designated areas such as national parks and wilderness areas.
SDPUC			South Dakota Public Utilities Commission
SEC			United States Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate
VIE			Variable interest entity
Washington DOE			Washington State Department of Ecology
WBI Energy			WBI Energy, Inc., an indirect wholly owned subsidiary of WBI Holdings
WBI Holdings			WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial
WUTC			Washington Utilities and Transportation Commission
Wygen III			100-MW coal-fired electric generating facility near Gillette, Wyoming (25 percent ownership)

Index

Introduction

The Company is a regulated energy delivery and construction materials and services business. Its principal executive offices are located at 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701) 530-1000.

Montana-Dakota was incorporated under the state laws of Delaware in 1924. The Company was incorporated under the state laws of Delaware in 2018 upon the completion of an internal holding company reorganization, which resulted in Montana-Dakota becoming a subsidiary of the Company.

The Company's mission is to deliver superior value to stakeholders by providing essential infrastructure and services to America. The Company's strategy is to deliver superior value with a two-platform model of regulated energy delivery and construction materials and services, while pursuing organic growth opportunities and strategic acquisitions of well-managed companies and properties. Each of the Company's platforms are comprised of different operating segments. Most of these segments experience seasonality related to the industries in which they operate. The two-platform approach helps balance this seasonality and the risks associated with each type of industry. Through its regulated energy delivery platform, the Company generates, transmits and distributes electricity and provides natural gas distribution, transportation and storage services. These businesses are regulated by state public service commissions and/or the FERC. The construction materials and services platform provides construction services to a variety of industries, including commercial, industrial and utility customers, and provides construction materials through aggregate mining and marketing of related products, such as ready-mix concrete, asphalt and asphalt oil.

The Company is organized into five reportable business segments. These business segments include: electric, natural gas distribution, pipeline, construction materials and contracting, and construction services. The Company's business segments are determined based on the Company's method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The internal reporting of these segments is defined based on the reporting and review process used by the Company's chief executive officer.

The Company, through its wholly owned subsidiary, MDU Energy Capital, owns Montana-Dakota, Cascade and Intermountain. The electric segment is comprised of Montana-Dakota while the natural gas distribution segment is comprised of Montana-Dakota, Cascade and Intermountain.

The Company, through its wholly owned subsidiary, Centennial, owns WBI Energy, Knife River, MDU Construction Services and Centennial Capital. WBI Energy is the pipeline segment, Knife River is the construction materials and contracting segment, MDU Construction Services is the construction services segment and Centennial Capital is reflected in the Other category.

For more information on the Company's business segments, see Note 17 of the Notes to Consolidated Financial Statements.

Index

Part I -- Financial Information

Item 1. Financial Statements


MDU Resources Group, Inc.
Consolidated Statements of Income
(Unaudited)
	Three Months Ended
	March 31,
		2022		2021
		(In thousands, except per share amounts)
Operating revenues:
Electric, natural gas distribution and regulated pipeline		$	553,456	$	442,381
Non-regulated pipeline, construction materials and contracting, construction services and other		863,103		785,557
Total operating revenues		1,416,559		1,227,938
Operating expenses:
Operation and maintenance:
Electric, natural gas distribution and regulated pipeline		97,665		94,333
Non-regulated pipeline, construction materials and contracting, construction services and other		810,232		717,326
Total operation and maintenance		907,897		811,659
Purchased natural gas sold		267,353		176,237
Depreciation, depletion and amortization		80,121		73,723
Taxes, other than income		67,484		62,534
Electric fuel and purchased power		26,361		18,621
Total operating expenses		1,349,216		1,142,774
Operating income		67,343		85,164
Other income (expense)		(2,400)		3,354
Interest expense		25,260		23,453
Income before income taxes		39,683		65,065
Income taxes		7,950		12,949
Income from continuing operations		31,733		52,116
Income from discontinued operations, net of tax		30		15
Net income		$	31,763	$	52,131
Earnings per share - basic:
Income from continuing operations		$	.16	$	.26
Discontinued operations, net of tax		—		—
Earnings per share - basic		$	.16	$	.26
Earnings per share - diluted:
Income from continuing operations		$	.16	$	.26
Discontinued operations, net of tax		—		—
Earnings per share - diluted		$	.16	$	.26
Weighted average common shares outstanding - basic		203,351		200,708
Weighted average common shares outstanding - diluted		203,391		200,952

The accompanying notes are an integral part of these consolidated financial statements.

Index


MDU Resources Group, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
	Three Months Ended
	March 31,
		2022		2021
		(In thousands)
Net income		$	31,763	$	52,131
Other comprehensive income:
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $36 and $37 for the three months ended in 2022 and 2021, respectively		112		111
Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $164 and $151 for the three months ended in 2022 and 2021, respectively		445		466
Net unrealized loss on available-for-sale investments:
Net unrealized loss on available-for-sale investments arising during the period, net of tax of $(85) and $(12) for the three months ended in 2022 and 2021, respectively		(320)		(44)
Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $8 and $9 for the three months ended in 2022 and 2021, respectively		32		35
Net unrealized loss on available-for-sale investments		(288)		(9)
Other comprehensive income		269		568
Comprehensive income attributable to common stockholders		$	32,032	$	52,699

The accompanying notes are an integral part of these consolidated financial statements.

Index


MDU Resources Group, Inc.
Consolidated Balance Sheets
(Unaudited)
	March 31, 2022		March 31, 2021		December 31, 2021
Assets	(In thousands, except shares and per share amounts)
Current assets:
Cash and cash equivalents	$	64,904	$	55,094	$	54,161
Receivables, net	948,024		784,582		946,741
Inventories	380,316		316,737		335,609
Current regulatory assets	89,078		98,452		118,691
Prepayments and other current assets	89,586		68,409		95,741
Total current assets	1,571,908		1,323,274		1,550,943
Noncurrent assets:
Property, plant and equipment	8,958,600		8,288,879		8,972,849
Less accumulated depreciation, depletion and amortization	3,158,091		3,096,371		3,216,461
Net property, plant and equipment	5,800,509		5,192,508		5,756,388
Goodwill	763,262		714,963		765,386
Other intangible assets, net	21,389		23,961		22,578
Regulatory assets	359,228		379,917		357,851
Investments	174,555		167,741		175,476
Operating lease right-of-use assets	119,845		116,663		124,138
Other	160,019		150,248		157,675
Total noncurrent assets	7,398,807		6,746,001		7,359,492
Total assets	$	8,970,715	$	8,069,275	$	8,910,435
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings	$	99,958	$	50,000	$	—
Long-term debt due within one year	147,953		1,552		148,053
Accounts payable	449,746		379,348		478,933
Taxes payable	90,572		88,711		80,372
Dividends payable	44,229		42,740		44,229
Accrued compensation	64,796		69,612		81,904
Operating lease liabilities due within one year	34,618		32,562		35,368
Regulatory liabilities due within one year	31,186		34,266		16,303
Other accrued liabilities	203,670		201,246		207,078
Total current liabilities	1,166,728		900,037		1,092,240
Noncurrent liabilities:
Long-term debt	2,599,810		2,251,722		2,593,847
Deferred income taxes	587,940		528,551		591,962
Asset retirement obligations	463,080		445,170		458,061
Regulatory liabilities	433,628		429,060		428,790
Operating lease liabilities	85,874		84,494		89,253
Other	272,937		329,935		273,408
Total noncurrent liabilities	4,443,269		4,068,932		4,435,321
Commitments and contingencies
Stockholders' equity:
Common stock Authorized - 500,000,000 shares, $1.00 par value Shares issued - 203,889,661 at March 31, 2022, 201,733,458 at March 31, 2021 and 203,889,661 at December 31, 2021	203,889		201,733		203,889
Other paid-in capital	1,451,464		1,382,158		1,461,205
Retained earnings	1,749,726		1,567,551		1,762,410
Accumulated other comprehensive loss	(40,735)		(47,510)		(41,004)
Treasury stock at cost - 538,921 shares	(3,626)		(3,626)		(3,626)
Total stockholders' equity	3,360,718		3,100,306		3,382,874
Total liabilities and stockholders' equity	$	8,970,715	$	8,069,275	$	8,910,435

The accompanying notes are an integral part of these consolidated financial statements.

Index


MDU Resources Group, Inc.
Consolidated Statements of Equity
(Unaudited)
				Other Paid-in Capital		Retained Earnings		Accumu-lated Other Compre-hensive Loss
	Common Stock									Treasury Stock
	Shares	Amount								Shares	Amount		Total
	(In thousands, except shares)
At December 31, 2021	203,889,661	$	203,889	$	1,461,205	$	1,762,410	$	(41,004)	(538,921)	$	(3,626)	$	3,382,874
Net income	—	—		—		31,763		—		—	—		31,763
Other comprehensive income	—	—		—		—		269		—	—		269
Dividends declared on common stock	—	—		—		(44,447)		—		—	—		(44,447)
Stock-based compensation	—	—		2,689		—		—		—	—		2,689
Repurchase of common stock	—	—		—		—		—		(266,821)	(7,399)		(7,399)
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	—	—		(12,303)		—		—		266,821	7,399		(4,904)
Issuance of common stock	—	—		(127)		—		—		—	—		(127)
At March 31, 2022	203,889,661	$	203,889	$	1,451,464	$	1,749,726	$	(40,735)	(538,921)	$	(3,626)	$	3,360,718





		Other Paid-in Capital	Retained Earnings		Accumu-lated Other Compre-hensive Loss
	Common Stock						Treasury Stock
							Shares		Amount		Shares	Amount		Total
			(In thousands, except shares)
At December 31, 2020		201,061,198	$	201,061	$	1,371,385	$	1,558,363	$	(48,078)	(538,921)	$	(3,626)	$	3,079,105
Net income		—	—		—		52,131		—		—	—		52,131
Other comprehensive income		—	—		—		—		568		—	—		568
Dividends declared on common stock		—	—		—		(42,943)		—		—	—		(42,943)
Stock-based compensation		—	—		2,574		—		—		—	—		2,574
Repurchase of common stock		—	—		—		—		—		(392,294)	(6,701)		(6,701)
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings		—	—		(10,828)		—		—		392,294	6,701		(4,127)
Issuance of common stock		672,260	672		19,027		—		—		—	—		19,699
At March 31, 2021		201,733,458	$	201,733	$	1,382,158	$	1,567,551	$	(47,510)	(538,921)	$	(3,626)	$	3,100,306

The accompanying notes are an integral part of these consolidated financial statements.

Index


MDU Resources Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
	Three Months Ended
	March 31,
	2022		2021
	(In thousands)
Operating activities:
Net income	$	31,763	$	52,131
Income from discontinued operations, net of tax	30		15
Income from continuing operations	31,733		52,116
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	80,121		73,723
Deferred income taxes	(6,466)		9,843
Provision for credit losses	1,735		(317)
Amortization of debt issuance costs	341		332
Employee stock-based compensation costs	2,689		2,574
Pension & postretirement benefit plan net periodic benefit credit	(1,491)		(1,226)
Unrealized losses on investments	5,147		529
Gains on sales of assets	(3,136)		(2,919)
Changes in current assets and liabilities, net of acquisitions:
Receivables	(5,723)		89,724
Inventories	(44,080)		(25,613)
Other current assets	34,491		(46,837)
Accounts payable	2,980		(41,965)
Other current liabilities	13,086		(13,977)
Pension & postretirement benefit plan contributions	(149)		(119)
Other noncurrent changes	1,139		(223)
Net cash provided by continuing operations	112,417		95,645
Net cash used in discontinued operations	(7)		(25)
Net cash provided by operating activities	112,410		95,620
Investing activities:
Capital expenditures	(150,288)		(111,091)
Acquisitions, net of cash acquired	(524)		(1,023)
Net proceeds from sale or disposition of property and other	4,586		9,035
Investments	(4,442)		(3,248)
Net cash used in investing activities	(150,668)		(106,327)
Financing activities:
Issuance of short-term borrowings	100,000		50,000
Repayment of short-term borrowings	—		(50,000)
Issuance of long-term debt	150,000		93,298
Repayment of long-term debt	(143,622)		(53,301)
Debt issuance costs	(718)		(3)
Net proceeds from issuance of common stock	(127)		19,699
Dividends paid	(44,229)		(42,611)
Repurchase of common stock	(7,399)		(6,701)
Tax withholding on stock-based compensation	(4,904)		(4,127)
Net cash provided by financing activities	49,001		6,254
Increase (decrease) in cash and cash equivalents	10,743		(4,453)
Cash and cash equivalents -- beginning of year	54,161		59,547
Cash and cash equivalents -- end of period	$	64,904	$	55,094

The accompanying notes are an integral part of these consolidated financial statements.

Index

MDU Resources Group, Inc.

Notes to Consolidated

Financial Statements

March 31, 2022 and 2021

(Unaudited)

Note 1 - Basis of presentation

The accompanying consolidated interim financial statements were prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Interim financial statements do not include all disclosures provided in annual financial statements and, accordingly, these financial statements should be read in conjunction with those appearing in the 2021 Annual Report. The information is unaudited but includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the accompanying consolidated interim financial statements and are of a normal recurring nature. Depreciation, depletion and amortization expense is reported separately on the Consolidated Statements of Income and therefore is excluded from the other line items within operating expenses.

The assets and liabilities of the Company's discontinued operations have been classified as held for sale and are included in prepayments and other current assets, noncurrent assets - other and other accrued liabilities on the Consolidated Balance Sheets. The results and supporting activities are shown in income from discontinued operations on the Consolidated Statements of Income. Unless otherwise indicated, the amounts presented in the accompanying notes to the consolidated financial statements relate to the Company's continuing operations.

In the fourth quarter of 2021, the Company made changes to the presentation of the Consolidated Statements of Cash Flows to provide further clarity on the sources and uses of net cash provided by operating activities and net cash provided by (used in) financing activities. Certain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications did not impact total net cash provided by operating activities or net cash provided by financing activities for the three months ended March 31, 2021.

Management has also evaluated the impact of events occurring after March 31, 2022, up to the date of the issuance of these consolidated interim financial statements on May 5, 2022, that would require recognition or disclosure in the Consolidated Financial Statements.

Note 2 - New accounting standards

The following table provides a brief description of the accounting pronouncements applicable to the Company and the potential impact on its Consolidated Financial Statements and/or disclosures:


Standard	Description	Effective date	Impact on financial statements/disclosures
ASU 2021-10 - Government Assistance	In November 2021, the FASB issued guidance on modifying the disclosure requirements to increase the transparency of government assistance including disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's financial statements.	January 1, 2022	The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2022.
ASU 2020-04 - Reference Rate Reform	In March 2020, the FASB issued optional guidance to ease the facilitation of the effects of reference rate reform on financial reporting. The guidance applies to certain contract modifications, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Beginning January 1, 2022, LIBOR or other discontinued reference rates cannot be applied to new contracts. New contracts will incorporate a new reference rate, which includes SOFR. LIBOR or other discontinued reference rates cannot be applied to contract modifications or hedging relationships entered into or evaluated after December 31, 2022. Existing contracts referencing LIBOR or other reference rates expected to be discontinued must identify a replacement rate by June 30, 2023.	Effective as of March 12, 2020 and will continue through December 31, 2022	The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going. The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows or disclosures.

Note 3 - Seasonality of operations

Some of the Company's operations are highly seasonal and revenues from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Accordingly, the interim results for particular businesses, and for the Company as a whole, may not be indicative of results for the full fiscal year.

Index

Note 4 - Receivables and allowance for expected credit losses

Receivables consists primarily of trade receivables from the sale of goods and services, which are recorded at the invoiced amount, and contract assets, net of expected credit losses. For more information on contract assets, see Note 9. The Company's trade receivables are all due in 12 months or less. The total balance of receivables past due 90 days or more was $50.7 million, $33.9 million and $44.8 million at March 31, 2022 and 2021, and December 31, 2021, respectively.

The Company's expected credit losses are determined through a review using historical credit loss experience; changes in asset specific characteristics; current conditions; and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses at each of its reportable business segments. Risk characteristics used by the business segments may include customer mix, knowledge of customers and general economic conditions of the various local economies, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable.

Details of the Company's expected credit losses were as follows:


	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Total
	(In thousands)
At December 31, 2021	$	269	$	1,506	$	2	$	5,406	$	2,533	$	9,716
Current expected credit loss provision	565		1,369		—		(253)		54		1,735
Less write-offs charged against the allowance	597		932		—		27		71		1,627
Credit loss recoveries collected	124		180		—		—		28		332
At March 31, 2022	$	361	$	2,123	$	2	$	5,126	$	2,544	$	10,156


	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Total
	(In thousands)
At December 31, 2020	$	899	$	2,571	$	2	$	6,164	$	5,722	$	15,358
Current expected credit loss provision	538		1,273		—		(1,049)		(1,079)		(317)
Less write-offs charged against the allowance	888		1,107		—		273		401		2,669
Credit loss recoveries collected	129		213		—		—		—		342
At March 31, 2021	$	678	$	2,950	$	2	$	4,842	$	4,242	$	12,714

Note 5 - Inventories and natural gas in storage

Natural gas in storage for the Company's regulated operations is generally valued at lower of cost or market using the last-in, first-out method or lower of cost or net realizable value using the average cost or first-in, first-out method. The majority of all other inventories are valued at the lower of cost or net realizable value using the average cost method. The portion of the cost of natural gas in storage expected to be used within 12 months was included in inventories. Inventories on the Consolidated Balance Sheets were as follows:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Aggregates held for resale	$	195,489	$	180,450	$	184,363
Asphalt oil	93,816		59,853		57,002
Materials and supplies	35,967		26,481		30,629
Merchandise for resale	33,393		24,319		28,501
Natural gas in storage (current)	10,801		8,113		18,867
Other	10,850		17,521		16,247
Total	$	380,316	$	316,737	$	335,609

The remainder of natural gas in storage, which largely represents the cost of gas required to maintain pressure levels for normal operating purposes, was included in noncurrent assets - other and was $47.5 million at March 31, 2022 and 2021, and December 31, 2021.

Index

Note 6 - Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed by dividing net income by the total of the weighted average number of shares of common stock outstanding during the applicable period, plus the effect of non-vested performance share awards and restricted stock units. Common stock outstanding includes issued shares less shares held in treasury. Net income was the same for both the basic and diluted earnings per share calculations. A reconciliation of the weighted average common shares outstanding used in the basic and diluted earnings per share calculations follows:


	Three Months Ended
	March 31,
	2022		2021
	(In thousands, except per share amounts)
Weighted average common shares outstanding - basic	203,351		200,708
Effect of dilutive performance share awards and restricted stock units	40		244
Weighted average common shares outstanding - diluted	203,391		200,952
Shares excluded from the calculation of diluted earnings per share	—		—
Dividends declared per common share	$	.2175	$	.2125

Note 7 - Equity

The Company currently has a shelf registration statement on file with the SEC, under which the Company may issue and sell any combination of common stock and debt securities. The Company may sell such securities if warranted by market conditions and the Company's capital requirements.

In August 2020, the Company amended the Distribution Agreement dated February 22, 2019, with J.P. Morgan Securities LLC and MUFG Securities Americas Inc., as sales agents. This agreement, as amended, allows the offering, issuance and sale of up to 6.4 million shares of the Company's common stock in connection with an "at-the-market" offering. The common stock may be offered for sale, from time to time, in accordance with the terms and conditions of this agreement. As of March 31, 2022, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program.

Details of the Company's "at-the-market" offering activity was as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In millions)
Shares issued	—		.7
Net proceeds *	$	(.1)	$	19.7	**

* Net proceeds include issuance costs of $127,000 and $300,000 for the three months ended March 31, 2022 and 2021, respectively

** Net proceeds were used for capital expenditures.

Note 8 - Accumulated other comprehensive loss

The after-tax changes in the components of accumulated other comprehensive loss were as follows:


	Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Hedges		Postretirement Liability Adjustment		Net Unrealized Gain (Loss) on Available-for-sale Investments		Total Accumulated Other Comprehensive Loss
	(In thousands)
At December 31, 2021	$	(538)	$	(40,461)	$	(5)	$	(41,004)
Other comprehensive loss before reclassifications	—		—		(320)		(320)
Amounts reclassified from accumulated other comprehensive loss	112		445		32		589
Net current-period other comprehensive income (loss)	112		445		(288)		269
At March 31, 2022	$	(426)	$	(40,016)	$	(293)	$	(40,735)

Index


	Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Hedges		Postretirement Liability Adjustment		Net Unrealized Gain (Loss) on Available-for-sale Investments		Total Accumulated Other Comprehensive Loss
	(In thousands)
At December 31, 2020	$	(984)	$	(47,207)	$	113	$	(48,078)
Other comprehensive loss before reclassifications	—		—		(44)		(44)
Amounts reclassified from accumulated other comprehensive loss	111		466		35		612
Net current-period other comprehensive income (loss)	111		466		(9)		568
At March 31, 2021	$	(873)	$	(46,741)	$	104	$	(47,510)

The following amounts were reclassified out of accumulated other comprehensive loss into net income. The amounts presented in parenthesis indicate a decrease to net income on the Consolidated Statements of Income. The reclassifications were as follows:


	Three Months Ended				Location on Consolidated Statements of Income
	March 31,
	2022		2021
	(In thousands)
Reclassification adjustment for loss on derivative instruments included in net income	$	(148)	$	(148)		Interest expense
	36		37			Income taxes
	(112)		(111)
Amortization of postretirement liability losses included in net periodic benefit credit	(609)		(617)			Other income
	164		151			Income taxes
	(445)		(466)
Reclassification adjustment on available-for-sale investments included in net income	(40)		(44)			Other income
	8		9			Income taxes
	(32)		(35)
Total reclassifications	$	(589)	$	(612)

Index

Note 9 - Revenue from contracts with customers

Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes.

Disaggregation

In the following tables, revenue is disaggregated by the type of customer or service provided. The Company believes this level of disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table also includes a reconciliation of the disaggregated revenue by reportable segments. For more information on the Company's business segments, see Note 17.


Three Months Ended March 31, 2022	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
	(In thousands)
Residential utility sales	$	37,304	$	258,816	$	—	$	—	$	—	$	—	$	296,120
Commercial utility sales	35,600		163,609		—		—		—		—		199,209
Industrial utility sales	10,306		13,024		—		—		—		—		23,330
Other utility sales	1,750		—		—		—		—		—		1,750
Natural gas transportation	—		12,381		31,574		—		—		—		43,955
Natural gas storage	—		—		3,719		—		—		—		3,719
Contracting services	—		—		—		114,267		—		—		114,267
Construction materials	—		—		—		241,732		—		—		241,732
Intrasegment eliminations	—		—		—		(46,033)		—		—		(46,033)
Electrical & mechanical specialty contracting	—		—		—		—		392,808		—		392,808
Transmission & distribution specialty contracting	—		—		—		—		148,466		—		148,466
Other	12,753		2,609		1,709		—		48		4,341		21,460
Intersegment eliminations	(124)		(136)		(25,940)		(130)		(1,059)		(4,341)		(31,730)
Revenues from contracts with customers	97,589		450,303		11,062		309,836		540,263		—		1,409,053
Revenues out of scope	(3,995)		115		58		—		11,328		—		7,506
Total external operating revenues	$	93,594	$	450,418	$	11,120	$	309,836	$	551,591	$	—	$	1,416,559


Three Months Ended March 31, 2021	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
	(In thousands)
Residential utility sales	$	33,436	$	203,137	$	—	$	—	$	—	$	—	$	236,573
Commercial utility sales	32,928		120,052		—		—		—		—		152,980
Industrial utility sales	10,029		8,812		—		—		—		—		18,841
Other utility sales	1,566		—		—		—		—		—		1,566
Natural gas transportation	—		12,452		29,417		—		—		—		41,869
Natural gas storage	—		—		4,029		—		—		—		4,029
Contracting services	—		—		—		96,025		—		—		96,025
Construction materials	—		—		—		216,412		—		—		216,412
Intrasegment eliminations	—		—		—		(46,716)		—		—		(46,716)
Electrical & mechanical specialty contracting	—		—		—		—		355,190		—		355,190
Transmission & distribution specialty contracting	—		—		—		—		151,363		—		151,363
Other	9,773		3,009		2,660		—		36		3,341		18,819
Intersegment eliminations	(136)		(142)		(26,229)		(62)		(1,042)		(3,324)		(30,935)
Revenues from contracts with customers	87,596		347,320		9,877		265,659		505,547		17		1,216,016
Revenues out of scope	(2,923)		2,886		36		—		11,923		—		11,922
Total external operating revenues	$	84,673	$	350,206	$	9,913	$	265,659	$	517,470	$	17	$	1,227,938

Presented in the previous tables are intrasegment revenues within the construction materials and contracting segment to highlight the focus on vertical integration as this segment sells materials to both third parties and internal customers. Due to consolidation requirements, these revenues must be eliminated against construction materials to arrive at the external operating revenue total for the segment.

Index

Contract balances

The timing of revenue recognition may differ from the timing of invoicing to customers. The timing of invoicing to customers does not necessarily correlate with the timing of revenues being recognized under the cost-to-cost method of accounting. Contracts from contracting services are billed as work progresses in accordance with agreed upon contractual terms. Generally, billing to the customer occurs contemporaneous to revenue recognition. A variance in timing of the billings may result in a contract asset or a contract liability. A contract asset occurs when revenues are recognized under the cost-to-cost measure of progress, which exceeds amounts billed on uncompleted contracts. Such amounts will be billed as standard contract terms allow, usually based on various measures of performance or achievement. A contract liability occurs when there are billings in excess of revenues recognized under the cost-to-cost measure of progress on uncompleted contracts. Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation.

The changes in contract assets and liabilities were as follows:


	March 31, 2022		December 31, 2021		Change		Location on Consolidated Balance Sheets
	(In thousands)
Contract assets	$	164,622	$	125,742	$	38,880	Receivables, net
Contract liabilities - current	(154,136)		(179,140)		25,004		Accounts payable
Contract liabilities - noncurrent	(40)		(118)		78		Noncurrent liabilities - other
Net contract assets (liabilities)	$	10,446	$	(53,516)	$	63,962

The Company recognized $121.8 million in revenue for the three months ended March 31, 2022, which was previously included in contract liabilities at December 31, 2021. The Company recognized $123.4 million in revenue for the three months ended March 31, 2021, which was previously included in contract liabilities at December 31, 2020.

The Company recognized a net increase in revenues of $23.5 million and $34.3 million for the three months ended March 31, 2022 and 2021, respectively, from performance obligations satisfied in prior periods.

Remaining performance obligations

The remaining performance obligations, also referred to as backlog, at the construction materials and contracting and construction services segments include unrecognized revenues that the Company reasonably expects to be realized. These unrecognized revenues can include: projects that have a written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms and conditions and change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under master service agreements. The majority of the Company's construction contracts have an original duration of less than two years.

The remaining performance obligations at the pipeline segment include firm transportation contracts with fixed pricing and fixed volumes. The Company has applied the practical expedient, which does not require additional disclosures for contracts with an original duration of less than 12 months, to certain firm transportation and non-regulated contracts. The Company's firm transportation contracts included in the remaining performance obligations have weighted average remaining durations of approximately five years.

At March 31, 2022, the Company's remaining performance obligations were $3.1 billion. The Company expects to recognize the following revenue amounts in future periods related to these remaining performance obligations: $2.4 billion within the next 12 months or less; $311.1 million within the next 13 to 24 months; and $407.2 million in 25 months or more.

Note 10 - Business combinations

The following acquisitions were accounted for as business combinations in accordance with ASC 805 - Business Combinations. The results of the acquired businesses have been included in the Consolidated Financial Statements beginning on the acquisition date. Pro forma financial amounts reflecting the effects of the business combinations are not presented, as none of these business combinations, individually or in the aggregate, were material to the Company's financial position or results of operations.

The acquisitions are also subject to customary adjustments based on, among other things, the amount of cash, debt and working capital in the business as of the closing date. The amounts included in the Consolidated Balance Sheets for these adjustments are considered provisional until final settlement has occurred.

The Company had no acquisitions during the first quarter of 2022.

Index

In 2021, the construction materials and contracting segment's acquisitions included:

•Baker Rock Resources and Oregon Mainline Paving, two premier construction materials companies located around the Portland, Oregon metro area, acquired in November 2021. At March 31, 2022, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

•Mt. Hood Rock, a construction aggregates business in Oregon, acquired in April 2021. As of March 31, 2022, the purchase price allocation was settled with no material adjustments to the provisional accounting.

In 2021, the total purchase price for acquisitions was $236.1 million, subject to certain adjustments, with cash acquired totaling $900,000. The purchase price includes consideration paid of $235.2 million. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2021 were as follows: $17.0 million to current assets; $179.8 million to property, plant and equipment; $50.6 million to goodwill; $2.2 million to other intangible assets; $8.7 million to current liabilities; $2.5 million to noncurrent liabilities - other; and $3.2 million to deferred tax liabilities. During the first quarter of 2022, measurement period adjustments were made to previously reported provisional amounts, which decreased goodwill and increased property, plant and equipment by $2.1 million. The Company issued debt to finance the acquisitions.

Costs incurred for acquisitions are included in operation and maintenance expense on the Consolidated Statements of Income and were not material for the three months ended March 31, 2022 and 2021.

Note 11 - Leases

The Company's leases primarily include operating leases for equipment, buildings, easements and vehicles. The Company leases certain equipment to third parties through its utility and construction services segments, which are considered short-term operating leases with terms of less than 12 months.

The Company recognized revenue from operating leases of $11.4 million and $12.0 million for the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, the Company had $8.4 million of lease receivables with a majority due within 12 months.

Note 12 - Goodwill and other intangible assets

The changes in the carrying amount of goodwill were as follows:


	Balance at January 1, 2022		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at March 31, 2022
	(In thousands)
Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	276,426		—		(2,124)		274,302
Construction services	143,224		—		—		143,224
Total	$	765,386	$	—	$	(2,124)	$	763,262


	Balance at January 1, 2021		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at March 31, 2021
	(In thousands)
Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	226,003		—		—		226,003
Construction services	143,224		—		—		143,224
Total	$	714,963	$	—	$	—	$	714,963


	Balance at January 1, 2021		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at December 31, 2021
	(In thousands)
Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	226,003		50,640		(217)		276,426
Construction services	143,224		—		—		143,224
Total	$	714,963	$	50,640	$	(217)	$	765,386

Index

Other amortizable intangible assets were as follows:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Customer relationships	$	28,990	$	28,836	$	29,740
Less accumulated amortization	10,846		7,792		10,650
	18,144		21,044		19,090
Noncompete agreements	4,591		3,941		4,591
Less accumulated amortization	3,016		2,441		2,856
	1,575		1,500		1,735
Other	6,969		11,957		12,601
Less accumulated amortization	5,299		10,540		10,848
	1,670		1,417		1,753
Total	$	21,389	$	23,961	$	22,578

The previous tables include goodwill and intangible assets associated with the business combinations completed during 2021. For more information related to these business combinations, see Note 10.

Amortization expense for amortizable intangible assets for the three months ended March 31, 2022 and 2021, was $1.2 million and $1.5 million, respectively. Estimated amortization expense for identifiable intangible assets as of March 31, 2022, was:


	Remainder of 2022		2023		2024		2025		2026		Thereafter
	(In thousands)
Amortization expense	$	3,630	$	4,470	$	4,200	$	2,206	$	1,716	$	5,167

Index

Note 13 - Regulatory assets and liabilities

The following table summarizes the individual components of unamortized regulatory assets and liabilities:


	Estimated Recovery or Refund Period as of March 31, 2022	*	March 31, 2022		March 31, 2021		December 31, 2021
			(In thousands)
Regulatory assets:
Current:
Natural gas costs recoverable through rate adjustments	Up to 1 year		$	66,132	$	76,782	$	86,371
Decoupling	Up to 1 year		7,609		4,180		9,131
Conservation programs	Up to 1 year		7,567		6,679		8,225
Cost recovery mechanisms	Up to 1 year		3,432		7,130		4,536
Other	Up to 1 year		4,338		3,681		10,428
			89,078		98,452		118,691
Noncurrent:
Pension and postretirement benefits	**		142,681		155,924		142,681
Cost recovery mechanisms	Up to 10 years		67,989		15,508		44,870
Plant costs/asset retirement obligations	Over plant lives		63,325		72,250		63,116
Plant to be retired	-		29,452		73,498		50,070
Manufactured gas plant site remediation	-		26,089		26,002		26,053
Taxes recoverable from customers	Over plant lives		12,492		10,800		12,339
Long-term debt refinancing costs	Up to 38 years		3,636		4,268		3,794
Natural gas costs recoverable through rate adjustments	Up to 2 years		3,246		15,158		5,186
Other	Up to 17 years		10,318		6,509		9,742
			359,228		379,917		357,851
Total regulatory assets			$	448,306	$	478,369	$	476,542
Regulatory liabilities:
Current:
Natural gas costs refundable through rate adjustments	Up to 1 year		$	13,107	$	16,344	$	6,700
Taxes refundable to customers	Up to 1 year		3,470		3,092		3,841
Electric fuel and purchased power deferral	Up to 1 year		—		2,001		—
Other	Up to 1 year		14,609		12,829		5,762
			31,186		34,266		16,303
Noncurrent:
Taxes refundable to customers	Over plant lives		212,472		224,795		215,421
Plant removal and decommissioning costs	Over plant lives		171,485		169,430		168,152
Pension and postretirement benefits	**		20,434		16,965		20,434
Accumulated deferred investment tax credit	Up to 20 years		13,352		11,428		12,696
Other	Up to 20 years		15,885		6,442		12,087
			433,628		429,060		428,790
Total regulatory liabilities			$	464,814	$	463,326	$	445,093
Net regulatory position			$	(16,508)	$	15,043	$	31,449

*Estimated recovery or refund period for amounts currently being recovered or refunded in rates to customers.

** Recovered as expense is incurred or cash contributions are made.

Regulatory assets not earning a rate of return were approximately $268.1 million and $361.4 million at March 31, 2022 and 2021, respectively, and $296.6 million at December 31, 2021; however, these regulatory assets are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and postretirement benefits, asset retirement obligations, accelerated depreciation on plant retirement and the estimated future cost of manufactured gas plant site remediation.

In February 2021, a prolonged period of unseasonably cold temperatures in the central United States significantly increased the demand for electric and natural gas services and contributed to increased market prices. Overall, Montana-Dakota and Great Plains incurred approximately $44.0 million in increased natural gas costs in order to maintain services for its customers. These extraordinary gas costs were recorded as regulatory assets as they are expected to be recovered from customers. Montana-Dakota and Great Plains have received approval for the recovery of purchased gas adjustments related to the cold-weather event in all

Index

jurisdictions impacted, including out-of-cycle purchased gas adjustment requests in most jurisdictions. For a discussion of the Company's most recent cases by jurisdiction, see Note 19.

In 2019, the Company experienced increased natural gas costs in Washington from the rupture of the Enbridge pipeline in Canada in late 2018. As a result, the Company requested, and the WUTC approved, recovery through 2022 of the balance of natural gas costs recoverable related to this period of time, which was over three years rather than its normal one-year recovery period.

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units. The Company accelerated the depreciation related to these facilities in property, plant and equipment and recorded the difference between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets. Requests were filed with the NDPSC and SDPUC, and subsequently approved, to offset the savings associated with the cessation of operations of these units with the amortization of the deferred regulatory assets. The Company ceased operations of Lewis & Clark Station in March 2021 and Units 1 and 2 at Heskett Station in February 2022. The Company subsequently moved the costs being recovered for these facilities from plant retirement to cost recovery mechanisms in the previous table and began amortizing the associated plant retirement and closure costs in the jurisdictions where requests were filed, as previously discussed. The Company expects to recover the regulatory assets related to the plant retirements in future rates.

If, for any reason, the Company's regulated businesses cease to meet the criteria for application of regulatory accounting for all or part of their operations, the regulatory assets and liabilities relating to those portions ceasing to meet such criteria would be removed from the balance sheet and included in the statement of income or accumulated other comprehensive loss in the period in which the discontinuance of regulatory accounting occurs.

Note 14 - Fair value measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations under its unfunded, nonqualified defined benefit and defined contribution plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $105.4 million, $101.6 million and $109.6 million, at March 31, 2022 and 2021, and December 31, 2021, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized loss on these investments was $5.8 million for the three months ended March 31, 2022. The net unrealized gain on these investments was $127,000 for the three months ended March 31, 2021. The change in fair value, which is considered part of the cost of the plan, is classified in other income on the Consolidated Statements of Income.

The Company did not elect the fair value option, which records gains and losses in income, for its available-for-sale securities, which include mortgage-backed securities and U.S. Treasury securities. These available-for-sale securities are recorded at fair value and are classified as investments on the Consolidated Balance Sheets. Unrealized gains or losses are recorded in accumulated other comprehensive loss. Details of available-for-sale securities were as follows:


March 31, 2022	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Mortgage-backed securities	$	8,778	$	3	$	310	$	8,471
U.S. Treasury securities	2,688		—		63		2,625
Total	$	11,466	$	3	$	373	$	11,096


March 31, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Mortgage-backed securities	$	8,709	$	155	$	10	$	8,854
U.S. Treasury securities	2,636		—		14		2,622
Total	$	11,345	$	155	$	24	$	11,476

Index


December 31, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Mortgage-backed securities	$	8,702	$	51	$	47	$	8,706
U.S. Treasury securities	2,407		—		11		2,396
Total	$	11,109	$	51	$	58	$	11,102

The Company's assets measured at fair value on a recurring basis were as follows:


	Fair Value Measurements at March 31, 2022, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at March 31, 2022
	(In thousands)
Assets:
Money market funds	$	—	$	13,131	$	—	$	13,131
Insurance contracts*	—		105,371		—		105,371
Available-for-sale securities:
Mortgage-backed securities	—		8,471		—		8,471
U.S. Treasury securities	—		2,625		—		2,625

Total assets measured at fair value	$	—	$	129,598	$	—	$	129,598

* The insurance contracts invest approximately 61 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 6 percent in target date investments and 2 percent in cash equivalents.


	Fair Value Measurements at March 31, 2021, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at March 31, 2021
	(In thousands)
Assets:
Money market funds	$	—	$	9,388	$	—	$	9,388
Insurance contracts*	—		101,632		—		101,632
Available-for-sale securities:
Mortgage-backed securities	—		8,854		—		8,854
U.S. Treasury securities	—		2,622		—		2,622

Total assets measured at fair value	$	—	$	122,496	$	—	$	122,496

* The insurance contracts invest approximately 54 percent in fixed-income investments, 19 percent in common stock of large-cap companies, 10 percent in common stock of mid-cap companies, 9 percent in common stock of small-cap companies, 6 percent in target date investments and 2 percent in cash equivalents.

Index


	Fair Value Measurements at December 31, 2021, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2021
	(In thousands)
Assets:
Money market funds	$	—	$	10,190	$	—	$	10,190
Insurance contracts*	—		109,603		—		109,603
Available-for-sale securities:
Mortgage-backed securities	—		8,706		—		8,706
U.S. Treasury securities	—		2,396		—		2,396

Total assets measured at fair value	$	—	$	130,895	$	—	$	130,895

* The insurance contracts invest approximately 61 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 7 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

The Company's money market funds are valued at the net asset value of shares held at the end of the quarter, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the Company's mortgage-backed securities and U.S. Treasury securities are based on comparable market transactions, other observable inputs or other sources, including pricing from outside sources. The estimated fair value of the Company's insurance contracts are based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.

The Company applies the provisions of the fair value measurement standard to its nonrecurring, non-financial measurements, including long-lived asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. The Company reviews the carrying value of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable.

The Company performed fair value assessments of the assets acquired and liabilities assumed in the business combinations that occurred during 2021. The fair value of these assets and liabilities were determined based on Level 2 and Level 3 inputs.

The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only. The fair value was categorized as Level 2 in the fair value hierarchy and was based on discounted future cash flows using current market interest rates. The estimated fair value of the Company's Level 2 long-term debt was as follows:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Carrying amount	$	2,747,763	$	2,253,274	$	2,741,900
Fair value	$	2,755,041	$	2,473,806	$	2,984,866

The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair values.

Note 15 - Debt

Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the debt agreements, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at March 31, 2022. In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.

Montana-Dakota's and Centennial's respective commercial paper programs are supported by revolving credit agreements. While the amount of commercial paper outstanding does not reduce available capacity under the respective revolving credit agreements, Montana-Dakota and Centennial do not issue commercial paper in an aggregate amount exceeding the available capacity under the credit agreements. The commercial paper borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of the Company's subsidiaries.

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Short-term debt

Centennial On March 18, 2022, Centennial entered into a $100.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of March 17, 2023. The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments.

Long-term debt

Long-term Debt Outstanding Long-term debt outstanding was as follows:


	Weighted Average Interest Rate at March 31, 2022		March 31, 2022		March 31, 2021		December 31, 2021
			(In thousands)
Senior Notes due on dates ranging from October 22, 2022 to September 15, 2061	4.28	%	$	2,275,000	$	1,950,000	$	2,125,000
Commercial paper supported by revolving credit agreements	.90	%	348,500		218,900		450,300
Credit agreements due on June 7, 2024	3.25	%	85,800		43,350		127,500
Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029	7.32	%	35,000		35,000		35,000
Term Loan Agreement due on September 3, 2032	2.00	%	7,700		8,400		7,700
Other notes due on dates ranging from January 1, 2024 to January 1, 2061	.95	%	2,445		3,282		2,564
Less unamortized debt issuance costs			6,605		5,655		6,090
Less discount			77		3		74
Total long-term debt			2,747,763		2,253,274		2,741,900
Less current maturities			147,953		1,552		148,053
Net long-term debt			$	2,599,810	$	2,251,722	$	2,593,847

Schedule of Debt Maturities Long-term debt maturities, which excludes unamortized debt issuance costs and discount, at March 31, 2022, were as follows:


	Remainder of 2022		2023		2024		2025		2026		Thereafter
	(In thousands)
Long-term debt maturities	$	147,953	$	77,925	$	495,104	$	177,802	$	140,802	$	1,714,859

Note 16 - Cash flow information

Cash expenditures for interest and income taxes were as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In thousands)
Interest, net*	$	15,657	$	14,303
Income taxes paid (refunded), net	$	(363)	$	13,880

* AFUDC - borrowed was $586,000 and $348,000 for the three months ended March 31, 2022 and 2021, respectively.

Noncash investing and financing transactions were as follows:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Right-of-use assets obtained in exchange for new operating lease liabilities	$	10,175	$	9,236	$	55,987
Property, plant and equipment additions in accounts payable	$	25,730	$	20,594	$	57,605
Debt assumed in connection with a business combination	$	—	$	—	$	10

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Note 17 - Business segment data

The Company's reportable segments are those that are based on the Company's method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The internal reporting of these operating segments is defined based on the reporting and review process used by the Company's chief executive officer. The Company's operations are located within the United States.

The electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The natural gas distribution segment distributes natural gas in those states, as well as in Idaho, Minnesota, Oregon and Washington. These operations also supply related value-added services.

The pipeline segment provides natural gas transportation and underground storage services through a regulated pipeline system primarily in the Rocky Mountain and northern Great Plains regions of the United States. This segment also provides non-regulated cathodic protection and other energy-related services.

The construction materials and contracting segment mines, processes and sells construction aggregates (crushed stone, sand and gravel); produces and sells asphalt mix; and supplies ready-mix concrete. This segment focuses on vertical integration of its contracting services with its construction materials to support the aggregate-based product lines including aggregate placement, asphalt and concrete paving, and site development and grading. Although not common to all locations, other products include the sale of cement, asphalt oil for various commercial and roadway applications, various finished concrete products and other building materials and related contracting services. This segment operates in the central, southern and western United States, including Alaska and Hawaii.

The construction services segment provides a full spectrum of construction services through its electrical and mechanical and transmission and distribution specialty contracting services across the country. These specialty contracting services are provided to utilities and manufacturing, transportation, commercial, industrial, institutional, renewable and governmental customers. Its electrical and mechanical contracting services include construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical piping and services. Its transmission and distribution contracting services include construction and maintenance of overhead and underground electrical, gas and communication infrastructure, as well as manufacturing and distribution of transmission line construction equipment and tools.

The Other category includes the activities of Centennial Capital, which, through its subsidiary InterSource Insurance Company, insures various types of risks as a captive insurer for certain of the Company's subsidiaries. The function of the captive insurer is to fund the self-insured layers of the insured Company's general liability, automobile liability, pollution liability and other coverages. Centennial Capital also owns certain real and personal property. In addition, the Other category includes certain assets, liabilities and tax adjustments of the holding company primarily associated with corporate functions and certain general and administrative costs (reflected in operation and maintenance expense) and interest expense, which were previously allocated to the refining business and Fidelity and do not meet the criteria for income (loss) from discontinued operations.

Discontinued operations include the supporting activities of Fidelity other than certain general and administrative costs and interest expense as described above.

The information below follows the same accounting policies as described in Note 2 of the Notes to Consolidated Financial Statements in the 2021 Annual Report. Information on the Company's segments was as follows:


	Three Months Ended
	March 31,
		2022		2021
		(In thousands)
External operating revenues:
Regulated operations:
Electric		$	93,594	$	84,673
Natural gas distribution		450,418		350,206
Pipeline		9,444		7,502
		553,456		442,381
Non-regulated operations:
Pipeline		1,676		2,411
Construction materials and contracting		309,836		265,659
Construction services		551,591		517,470
Other		—		17
		863,103		785,557
Total external operating revenues		$	1,416,559	$	1,227,938

Index


	Three Months Ended
	March 31,
		2022		2021
		(In thousands)
Intersegment operating revenues:
Regulated operations:
Electric		$	124	$	136
Natural gas distribution		136		142
Pipeline		25,933		25,990
		26,193		26,268
Non-regulated operations:
Pipeline		7		239
Construction materials and contracting		130		62
Construction services		1,059		1,042
Other		4,341		3,324
		5,537		4,667
Intersegment eliminations		(31,730)		(30,935)
Total intersegment operating revenues		$	—	$	—

Operating income (loss):
Electric		$	15,044	$	13,865
Natural gas distribution		56,256		53,573
Pipeline		11,882		12,536
Construction materials and contracting		(44,605)		(34,889)
Construction services		29,498		40,277
Other		(732)		(198)
Total operating income		$	67,343	$	85,164

Net income (loss):
Regulated operations:
Electric		$	11,278	$	10,749
Natural gas distribution		36,315		36,178
Pipeline		7,956		9,194
		55,549		56,121
Non-regulated operations:
Pipeline		(619)		(296)
Construction materials and contracting		(40,010)		(30,813)
Construction services		21,324		29,825
Other		(4,511)		(2,721)
		(23,816)		(4,005)
Income from continuing operations		31,733		52,116
Income from discontinued operations, net of tax		30		15
Net income		$	31,763	$	52,131

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Note 18 - Employee benefit plans

Pension and other postretirement plans

The Company has noncontributory qualified defined benefit pension plans and other postretirement benefit plans for certain eligible employees.

Components of net periodic benefit credit for the Company's pension benefit plans were as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In thousands)
Components of net periodic benefit credit:

Interest cost	$	2,631	$	2,455
Expected return on assets	(4,864)		(4,894)

Amortization of net actuarial loss	1,671		2,004
Net periodic benefit credit	$	(562)	$	(435)

Components of net periodic benefit credit for the Company's other postretirement benefit plans were as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In thousands)
Components of net periodic benefit credit:
Service cost	$	354	$	400
Interest cost	474		466
Expected return on assets	(1,322)		(1,275)
Amortization of prior service credit	(350)		(349)
Amortization of net actuarial (gain) loss	(54)		6
Net periodic benefit credit, including amount capitalized	(898)		(752)
Less amount capitalized	31		39
Net periodic benefit credit	$	(929)	$	(791)

The components of net periodic benefit credit, other than the service cost component, are included in other income on the Consolidated Statements of Income. The service cost component is included in operation and maintenance expense on the Consolidated Statements of Income.

Nonqualified defined benefit plans

In addition to the qualified defined benefit pension plans reflected in the table at the beginning of this note, the Company also has unfunded, nonqualified defined benefit plans for executive officers and certain key management employees. The Company's net periodic benefit cost for these plans was $773,000 and $769,000 for the three months ended March 31, 2022 and 2021, respectively. The components of net periodic benefit cost for these plans are included in other income on the Consolidated Statements of Income.

Note 19 - Regulatory matters

The Company regularly reviews the need for electric and natural gas rate changes in each of the jurisdictions in which service is provided. The Company files for rate adjustments to seek recovery of operating costs and capital investments, as well as reasonable returns as allowed by regulators. Certain regulatory proceedings and cases may also contain recurring mechanisms that can have an annual true-up. Examples of these recurring mechanisms include: infrastructure riders, transmission trackers, renewable resource cost adjustment riders, as well as weather normalization and decoupling mechanisms. The following paragraphs summarize the Company's significant open regulatory proceedings and cases by jurisdiction including updates to those reported in the 2021 Annual Report. The Company is unable to predict the ultimate outcome of these matters, the timing of final decisions of the various regulators and courts, or the effect on the Company's results of operations, financial position or cash flows.

Index

MNPUC

Great Plains defers the difference between the actual cost of gas spent to serve customers and that recovered from customers on a monthly basis. Annually, Great Plains prepares a true-up pursuant to the purchased gas adjustment tariff. On August 30, 2021, the MNPUC issued an order to allow Great Plains recovery of an out-of-cycle cost of gas adjustment of $8.8 million over a period of 27 months. The order was effective September 1, 2021, and is subject to a prudence review by the MNPUC. The requested increase was for the February 2021 extreme cold weather, primarily in the central United States, and market conditions surrounding the natural gas commodity market. The MNPUC prudence review is pending with an order to be issued on or before August 29, 2022.

SDPUC

Montana-Dakota has a transmission cost recovery rider that allows annual updates to rates for actual costs associated with transmission-related projects and services. On March 1, 2022, Montana-Dakota filed an annual update to its transmission cost recovery rider to recover a revenue requirement of approximately $2.5 million annually, which reflects a true-up of the prior period adjustment, resulting in an increase in current rates of approximately $1.5 million. This matter is pending before the SDPUC.

Montana-Dakota has an infrastructure rider rate tariff that allows for annual adjustments for recent projected capital costs and related expenses for projects determined to be recoverable under the electric tariff. On March 1, 2022, Montana-Dakota filed an annual update to its infrastructure rider requesting to recover a revenue requirement of approximately $940,000 annually, which reflects a true-up of the prior period adjustment, resulting in a decrease in current rates of approximately $88,000. On April 28, 2022, the SDPUC approved the rates as requested with an effective date of May 1, 2022.

WUTC

On September 30, 2021, Cascade filed an application with the WUTC for a natural gas rate increase of approximately $13.7 million annually or approximately 5.1 percent above current rates. The requested increase was primarily to recover investments made in infrastructure upgrades, as well as to recover 2021 wage increases. On March 22, 2022, Cascade filed a multi-party settlement and stipulation on behalf of Cascade and the staff of the WUTC that would result in a revenue requirement increase of approximately $10.7 million annually or approximately 4.0 percent above current rates. The WUTC has 11 months to render a final decision on the rate case. This matter is pending before the WUTC.

On March 24, 2022, Cascade filed a request for a tariff revision with the WUTC to rectify an inadvertent IRS normalization violation resulting from its tariff established in 2018 that passes back to customers the reversal of plant-related excess deferred income taxes through an annual rate adjustment. This request was made in response to the issuance of an IRS private letter ruling to another Washington utility with the same annual rate adjustment tariff, which addressed its normalization violation. The private letter ruling concluded the tariff to refund excess deferred income taxes without corresponding adjustments for other components of rate base or changes in depreciation or income tax expense, is an impermissible methodology under the IRS normalization and consistency rules. Cascade's request proposes a similar remedy through the tariff to recover the excess amounts refunded to customers while this tariff has been in place, and revises the method going forward to reflect excess deferred income taxes in rates in the same manner as other components of rate base from its most recent general rate case. Cascade has requested recovery of the excess refunded to customers of approximately $3.3 million and elimination of the currently deferred, but not yet refunded balance. This matter is pending before the WUTC.

Note 20 - Contingencies

The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries, which may include, but are not limited to, matters involving property damage, personal injury, and environmental, contractual, statutory and regulatory obligations. The Company accrues a liability for those contingencies when the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss. Accruals are based on the best information available, but in certain situations management is unable to estimate an amount or range of a reasonably possible loss including, but not limited to when: (1) the damages are unsubstantiated or indeterminate, (2) the proceedings are in the early stages, (3) numerous parties are involved, or (4) the matter involves novel or unsettled legal theories.

At March 31, 2022 and 2021, and December 31, 2021, the Company accrued liabilities, which have not been discounted, of $30.0 million, $55.0 million and $37.0 million, respectively. At March 31, 2022 and 2021, and December 31, 2021, the Company also recorded corresponding insurance receivables of $7.1 million, $31.6 million and $14.1 million, respectively, and regulatory assets of $20.8 million, $20.9 million and $21.2 million, respectively, related to the accrued liabilities. The accruals are for contingencies resulting from litigation, production taxes, royalty claims and environmental matters. This includes amounts that have been accrued for matters discussed in Environmental matters within this note. The Company will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to probable and reasonably possible losses in excess of the amounts accrued, net of insurance

Index

recoveries, while uncertain, either cannot be estimated or will not have a material effect upon the Company's financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal costs are expensed as they are incurred.

Environmental matters

The Company is a party to claims for the cleanup of environmental contamination at certain manufactured gas plant sites, as well as a superfund site. There were no material changes to the Company's environmental matters that were previously reported in the 2021 Annual Report.

Guarantees

Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the Company. These guarantees are related to construction contracts, insurance deductibles and loss limits, and certain other guarantees. At March 31, 2022, the fixed maximum amounts guaranteed under these agreements aggregate $147.9 million. Certain of the guarantees also have no fixed maximum amounts specified. At March 31, 2022, the amounts of scheduled expiration of the maximum amounts guaranteed under these agreements aggregate to $48.5 million in 2022; $44.3 million in 2023; $44.3 million in 2024; $800,000 in 2025; $800,000 in 2026; $200,000 thereafter; and $9.0 million, which has no scheduled maturity date. There were no amounts outstanding under the previously mentioned guarantees at March 31, 2022. In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee.

Certain subsidiaries have outstanding letters of credit to third parties related to insurance policies and other agreements, some of which are guaranteed by other subsidiaries of the Company. At March 31, 2022, the fixed maximum amounts guaranteed under these letters of credit aggregated $29.2 million. At March 31, 2022, the amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to $28.6 million in 2022 and $600,000 in 2023. There were no amounts outstanding under the previously mentioned letters of credit at March 31, 2022. In the event of default under these letter of credit obligations, the subsidiary guaranteeing the letter of credit would be obligated for reimbursement of payments made under the letter of credit.

In addition, Centennial, Knife River and MDU Construction Services have issued guarantees to third parties related to the routine purchase of maintenance items, materials and lease obligations for which no fixed maximum amounts have been specified. These guarantees have no scheduled maturity date. In the event a subsidiary of the Company defaults under these obligations, Centennial, Knife River or MDU Construction Services would be required to make payments under these guarantees. Any amounts outstanding by subsidiaries of the Company were reflected on the Consolidated Balance Sheet at March 31, 2022.

In the normal course of business, Centennial has surety bonds related to construction contracts and reclamation obligations of its subsidiaries. In the event a subsidiary of Centennial does not fulfill a bonded obligation, Centennial would be responsible to the surety bond company for completion of the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, Centennial will likely continue to enter into surety bonds for its subsidiaries in the future. At March 31, 2022, approximately $1.1 billion of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

Variable interest entities

The Company evaluates its arrangements and contracts with other entities to determine if they are VIEs and if so, if the Company is the primary beneficiary.

Fuel Contract Coyote Station entered into a coal supply agreement with Coyote Creek that provides for the purchase of coal necessary to supply the coal requirements of the Coyote Station for the period May 2016 through December 2040. Coal purchased under the coal supply agreement is reflected in inventories on the Consolidated Balance Sheets and is recovered from customers as a component of electric fuel and purchased power.

The coal supply agreement creates a variable interest in Coyote Creek due to the transfer of all operating and economic risk to the Coyote Station owners, as the agreement is structured so that the price of the coal will cover all costs of operations, as well as future reclamation costs. The Coyote Station owners are also providing a guarantee of the value of the assets of Coyote Creek as they would be required to buy the assets at book value should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of Coyote Creek in that they are required to buy the entity at the end of the contract term at equity value. Although the Company has determined that Coyote Creek is a VIE, the Company has concluded that it is not the primary beneficiary of Coyote Creek because the authority to direct the activities of the entity is shared by the four unrelated owners of the Coyote Station, with no primary beneficiary existing. As a result, Coyote Creek is not required to be consolidated in the Company's financial statements.

At March 31, 2022, the Company's exposure to loss as a result of the Company's involvement with the VIE, based on the Company's ownership percentage, was $31.0 million.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company is Building a Strong America® by providing essential infrastructure and services through its regulated energy delivery and construction materials and services businesses. The Company and its employees work hard to keep the economy of America moving with the products and services provided, which include powering, heating and connecting homes, factories, offices and stores; and building roads, highways, data infrastructure and airports.

The Company's two-platform business model, regulated energy delivery and construction materials and services, are each comprised of different operating segments. Most of these segments experience seasonality related to the industries in which they operate. The two-platform approach helps balance this seasonality and the risks associated with each type of industry. The Company is authorized to conduct business in nearly every state and during peak construction season has employed over 16,000 employees. The Company's organic investments are strong drivers of high-quality earnings and continue to be an important part of the Company's growth. Management believes the Company is well positioned in the industries and markets in which it operates.

The Company continues to effectively execute its strategy and is continually adjusting its businesses in response to the ongoing effects of the COVID-19 pandemic. Most of the Company's products and services are considered essential to America and its communities and, as a result, operations have generally continued. The Company continues to monitor the situation and there have been no material adverse impacts from COVID-19 on the Company's results of operations. For more information on possible impacts to the Company's businesses, see Part I, Item 1A. Risk Factors in the 2021 Form 10-K.

Forward-Looking Statements

The following sections contain forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, trends, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Business Segment Financial and Operating Data.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may not be achieved or accomplished and changes in such assumptions and factors could cause actual future results to differ materially.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements reported in Part I, Item 1A. Risk Factors in the 2021 Annual Report and subsequent filings with the SEC.

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Consolidated Earnings Overview

The following table summarizes the contribution to the consolidated income by each of the Company's business segments.


	Three Months Ended
	March 31,
	2022		2021
	(In millions, except per share amounts)
Electric	$	11.3	$	10.7
Natural gas distribution	36.3		36.2
Pipeline	7.3		8.9
Construction materials and contracting	(40.0)		(30.8)
Construction services	21.3		29.8
Other	(4.5)		(2.7)
Income from continuing operations	31.7		52.1
Discontinued operations, net of tax	—		—
Net income	$	31.7	$	52.1
Earnings per share - basic:
Income from continuing operations	$	.16	$	.26
Discontinued operations, net of tax	—		—
Earnings per share - basic	$	.16	$	.26
Earnings per share - diluted:
Income from continuing operations	$	.16	$	.26
Discontinued operations, net of tax	—		—
Earnings per share - diluted	$	.16	$	.26

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 The Company's consolidated earnings decreased $20.4 million.

The construction materials and contracting business experienced lower margins from higher fuel, repair and maintenance and labor-related costs, partially offset by increased average product pricing. The construction services business experienced decreased gross margin largely attributable to lower industrial margins due to the timing of projects and less storm-repair and fire-hardening power line work that is typically higher-margin work, offset in part by increased commercial margins. The pipeline business experienced decreased natural gas storage-related revenue and higher operating expenses, partially offset by increased demand revenues associated with the North Bakken Expansion project. The Company's earnings were further impacted by $6.2 million in lower returns on certain of the Company's benefit plan investments. Partially offsetting these decreases were higher residential retail sales volumes at the electric business and higher retail sales volumes across all customer classes, as well as approved rate relief in certain jurisdictions, at the natural gas distribution business.

A discussion of key financial data from the Company's business segments follows.

Business Segment Financial and Operating Data

The following sections include key financial and operating data for each of the Company's business segments. Also included are highlights on key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters of the Company's business segments.

For information pertinent to various commitments and contingencies, see the Notes to Consolidated Financial Statements. For a summary of the Company's business segments, see Note 17 of the Notes to Consolidated Financial Statements.

Electric and Natural Gas Distribution

Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as discussed in Note 17. Both segments strive to be top performing utility companies measured by integrity, employee safety and satisfaction, customer service and shareholder return. The segments provide safe, reliable, competitively priced and environmentally responsible energy service to customers while focusing on growth and expansion opportunities within and beyond its existing territories. The Company is focused on cultivating organic growth while managing operating costs and monitoring opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation, transmission and distribution, and natural gas systems, and through selected acquisitions of companies and properties with similar operating and growth objectives at prices that will provide stable cash flows and an opportunity to earn a competitive return on investment. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return, the cost of natural gas, cost of electric fuel and

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purchased power, weather, climate change initiatives, competitive factors in the energy industry, population growth and economic conditions in the segments' service areas.

The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment. The Company is focused on modernizing utility infrastructure to meet the varied energy needs of both its customers and communities while ensuring the delivery of safe, environmentally responsible, reliable and affordable energy. The segments continue to invest in facility upgrades to be in compliance with existing and known future regulations. To assist in the reduction of regulatory lag in obtaining revenue increases to align with increased investments, tracking mechanisms have been implemented in certain jurisdictions. The Company also seeks rate adjustments for operating costs and capital investments, as well as reasonable returns on investments, not covered by tracking mechanisms. For more information on the Company's tracking mechanisms and recent cases, see Note 19 and the 2021 Annual Report.

The segments are also subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. Both segments are faced with the ongoing need to actively evaluate cybersecurity processes and procedures related to its transmission and distribution systems for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing.

To date, many states have enacted and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. The current presidential administration has made climate change a focus, as further discussed in the Outlook section. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns and changing customer conservation patterns. These initiatives could result in increased costs to produce electricity and procure natural gas. The impact of these initiatives on the Company is unknown. The Company will continue to monitor the progress of these initiatives and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.

Revenues are impacted by both customer growth and usage, the latter of which is primarily impacted by weather, as well as impacts associated with commercial and industrial slow-downs, including economic recessions, and energy efficiencies. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among residential and commercial customers. Average consumption among both electric and natural gas customers has tended to decline as more efficient appliances and furnaces are installed, and as the Company has implemented conservation programs. Natural gas weather normalization and decoupling mechanisms in certain jurisdictions have been implemented to largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns on the Company's distribution margins.

The electric and natural gas distribution segments continue to face increased pricing and lead times on delivery of certain raw materials and equipment used in electric transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment as a result of the COVID-19 pandemic and subsequent supply chain issues. In addition, the segments are currently experiencing increased fuel costs as well as other general inflationary pressures. The Company continues to monitor these risks and has practices in place to minimize the impacts of long lead times and inflationary costs such as working with manufacturers to proactively order impacted materials, as well as working with additional suppliers. The segments have not experienced material delays or inflationary pressures. The Company expects these delays and inflationary pressures to continue throughout the remainder of 2022.

The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served and competition from other energy providers and fuels. The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices.

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Earnings overview - The following information summarizes the performance of the electric segment.


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	93.7	$	84.8	10	%
Operating expenses:
Electric fuel and purchased power	26.3		18.6		41	%
Operation and maintenance	30.8		31.3		(2)	%
Depreciation, depletion and amortization	16.9		16.1		5	%
Taxes, other than income	4.6		4.9		(6)	%
Total operating expenses	78.6		70.9		11	%
Operating income	15.1		13.9		9	%
Other income (expense)	(.3)		.5		(160)	%
Interest expense	7.1		6.5		9	%
Income before income taxes	7.7		7.9		(3)	%
Income tax benefit	(3.6)		(2.8)		29	%
Net income	$	11.3	$	10.7	6	%


Operating statistics	Three Months Ended
	March 31,
	2022		2021
Revenues (millions):
Retail sales:
Residential	$	35.2	$	31.9
Commercial	33.6		31.4
Industrial	9.8		9.6
Other	1.6		1.5
	80.2		74.4
Transportation and other	13.5		10.4
	$	93.7	$	84.8
Retail sales (million kWh)
Residential	357.7		334.9
Commercial	364.1		361.8
Industrial	140.3		144.5
Other	19.5		19.2
	881.6		860.4
Average cost of electric fuel and purchased power per kWh	$	.027	$	.019

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Electric earnings increased $600,000 as a result of:

•Revenue increased $8.9 million.

◦Largely due to:

•Higher fuel and purchased power costs recovered in customer rates that were offset in expense, as described below.

•Higher retail sales volumes of 2.5 percent, primarily residential retail sales as a result of colder weather.

•Higher transmission revenues, primarily from higher net transmission of $700,000 and higher transmission interconnect upgrades of $600,000.

◦Partially offset by lower per unit average rates of $900,000.

•Electric fuel and purchased power increased $7.7 million.

•Primarily the result of higher MISO costs of $9.2 million as a result of increased energy costs.

•Partially offset by decreased fuel costs associated with the Lewis & Clark Station and Heskett Station plant closures.

•Operation and maintenance decreased $500,000.

◦Largely resulting from decreased payroll-related costs of $1.0 million, largely due to plant closures, as previously discussed.

◦Partially offset by increased contract service costs, including transmission engineering costs as well as maintenance costs at Coyote Station and Wygen III.

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•Depreciation, depletion and amortization increased $800,000, primarily due to:

◦Increased amortization of plant retirement and closure costs recovered in operating revenues, as discussed in Note 13.

◦Increased property, plant and equipment balances placed in service, largely related to growth and replacement projects.

•Taxes, other than income were comparable to the same period in the prior year.

•Other income (expense) decreased $800,000.

◦Largely lower returns on certain of the Company's benefit plan investments of $1.2 million.

◦Partially offset by higher AFUDC largely due to higher rates.

•Interest expense increased $600,000, largely resulting from higher long-term debt balances from debt issued in 2021.

•Income tax benefit increased $800,000.

◦Largely due to higher production tax credits of $1.1 million driven by higher wind production.

◦Partially offset by lower permanent tax adjustments and excess deferred tax amortization.

Earnings overview - The following information summarizes the performance of the natural gas distribution segment.


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	450.6	$	350.4	29	%
Operating expenses:
Purchased natural gas sold	293.3		202.2		45	%
Operation and maintenance	54.1		51.2		6	%
Depreciation, depletion and amortization	22.2		22.5		(1)	%
Taxes, other than income	24.7		20.9		18	%
Total operating expenses	394.3		296.8		33	%
Operating income	56.3		53.6		5	%
Other income (expense)	(.4)		1.7		(124)	%
Interest expense	9.5		9.2		3	%
Income before income taxes	46.4		46.1		1	%
Income tax expense	10.1		9.9		2	%
Net income	$	36.3	$	36.2	—	%


Operating statistics	Three Months Ended
	March 31,
	2022		2021
Revenues (millions)
Retail sales:
Residential	$	258.6	$	203.9
Commercial	162.7		120.6
Industrial	13.0		8.9
	434.3		333.4
Transportation and other	16.3		17.0
	$	450.6	$	350.4
Volumes (MMdk)
Retail sales:
Residential	31.0		28.8
Commercial	20.5		18.6
Industrial	1.8		1.5
	53.3		48.9
Transportation sales:
Commercial	.7		.7
Industrial	41.0		43.9
	41.7		44.6
Total throughput	95.0		93.5
Average cost of natural gas per dk	$	5.50	$	4.13

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Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Natural gas distribution's earnings increased $100,000 as a result of:

•Operating revenues increased $100.2 million, largely resulting from:

◦Higher purchased natural gas sold recovered in customer rates that was offset in expense, as described below.

◦Higher retail sales volumes of approximately 9.0 percent across all customer classes, partially offset by weather normalization and decoupling mechanisms in certain jurisdictions.

◦Higher revenue-based taxes recovered in rates of $3.8 million that were offset in expense, as described below.

◦Approved rate relief in certain jurisdictions of $1.2 million, as well as higher cost recovery and tracker mechanisms of $1.0 million.

•Purchased natural gas sold increased $91.1 million, primarily due to:

◦Higher natural gas costs as a result of higher market prices.

◦Higher recovery of purchased gas adjustments of $30.0 million related to the February 2021 cold weather event and the 2018 Enbridge pipeline rupture.

•Operation and maintenance increased $2.9 million, due to:

◦Increased contract services of $1.3 million, primarily higher subcontractor costs.

◦Higher payroll-related costs of $1.0 million, largely higher straight-time payroll.

◦Higher software costs.

•Depreciation, depletion and amortization was comparable to the same period in the prior year.

•Taxes, other than income increased $3.8 million resulting from higher revenue-based taxes being recovered in rates.

•Other income (expense) decreased $2.1 million as a result of lower returns on certain of the Company's benefit plan investments.

•Interest expense was comparable to the same period in the prior year.

•Income tax expense was comparable to the same period in the prior year.

Outlook The Company expects these segments will grow rate base by approximately 5 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In 2021, these segments experienced retail customer growth of approximately 1.7 percent, and the Company expects customer growth to continue to average 1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new and replacement electric and natural gas systems.

These segments are exposed to energy price volatility and may be impacted by changes in oil and natural gas exploration and production activity. Rate schedules in the jurisdictions in which the Company's natural gas distribution segment operates contain clauses that permit the Company to file for rate adjustments for changes in the cost of purchased gas. Although changes in the price of natural gas are passed through to customers and have minimal impact on the Company's earnings, the natural gas distribution segment's customers benefit from lower natural gas prices through the Company's utilization of storage and fixed price contracts. During the last half of 2021 and the first quarter of 2022, the Company experienced increased natural gas prices and expects this trend to continue through the next winter heating season due to the increase in demand outpacing the supply along with the impact of global events. The Company will continue to monitor natural gas prices, as well as oil and natural gas production levels.

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units, resulting from the Company's analysis showing that the plants are no longer expected to be cost competitive for customers. The Company ceased operations of Unit 1 at Lewis & Clark Station in Sidney, Montana, in March 2021 and Units 1 and 2 at Heskett Station near Mandan, North Dakota, in February 2022. In addition, the Company will begin construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota, in the second quarter of 2022 with an expected in service date in the first half of 2023.

The Company is one of four owners of Coyote Station and cannot make a unilateral decision on the plant's future; therefore, the Company could be negatively impacted by decisions of the other owners. State implementation of pollution control plans to improve visibility at Class I areas, such as national parks, under the EPA's Regional Haze Rule could require the owners of Coyote Station to incur significant new costs. If the owners decide to incur such costs, the costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows. The NDDEQ submitted a draft state implementation plan to the EPA and federal land managers of the National Park Service, the United States Fish and Wildlife Service and the United States Forest Service for consultation, and the federal land managers have submitted comments back to the NDDEQ for review. North Dakota determined it is not reasonable to require controls during this planning period. The emissions modeling conducted for the combined western state agencies affected by the Regional Haze Rule was delayed and has subsequently delayed the NDDEQ state implementation plan process. The NDDEQ state implementation plan is open for public comment from April 20, 2022 through June 1, 2022, and, as currently drafted, does not require additional controls for any units in North Dakota, including Coyote Station. Therefore, the NDDEQ's state

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implementation plan, which was due to the EPA by July 2021, is anticipated to be submitted to the EPA in the summer of 2022. Additionally, in September 2021, Otter Tail Power Company filed its 2022 Integrated Resource Plan in Minnesota and North Dakota which included its intent to start the process of withdrawal from its 35 percent ownership interest in Coyote Station with an anticipated exit from the plant by December 31, 2028. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and its employees as well as each company's customers and communities served.

On April 22, 2022 through April 24, 2022, a major snow and ice storm in northwest North Dakota caused widespread power outages and significant damage to the Company's electric transmission and distribution system. The Company is working on repairing the damages. Although total storm costs are not yet finalized, anticipated impacts to the financial statements are not expected to be material.

Legislation and rulemaking The Company continues to monitor legislation and rulemaking related to clean energy standards that may impact its segments. Below are some of the specific legislative actions the Company is monitoring.

•The current presidential administration is considering changes to the federal Clean Air Act, some of which were amended by the previous presidential administration. The content and impacts of the changes under consideration are uncertain and the Company continues to monitor for potential actions by the EPA.

•In Oregon, the Climate Protection Program Rule was approved in December 2021, which requires natural gas companies to reduce GHG emissions 50 percent below the baseline by 2035 and 90 percent below the baseline by 2050, which may be achieved through surrendering emissions allowances, investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and purchasing low carbon fuels such as renewable natural gas. The Company expects the compliance costs for these regulations to be recovered through customer rates. The Company, along with the other two local distribution companies in Oregon, filed a lawsuit on March 18, 2022, challenging the Climate Protection Program Rule. The lawsuit was filed on behalf of customers as the Company does not believe the rule accomplishes environmental stewardship in the most effective and affordable way possible.

•In Washington, the Climate Commitment Act signed into law in May 2021 requires natural gas distribution companies to reduce overall GHG emissions 45 percent below 1990 levels by 2030, 70 percent below 1990 levels by 2040 and 95 percent below 1990 levels by 2050, which may be achieved through increased energy efficiency and conservation measures, purchased emission allowances and offsets, and purchases of low carbon fuels. As directed by the Climate Commitment Act, the Washington DOE has begun the Climate Commitment Program rule-making process and is expected to publish a final rule in the fall of 2022. The Company has begun reviewing compliance options and expects the compliance costs for these regulations will be recovered through customer rates.

•On April 22, 2022, the Washington State Building Code Council approved revisions to the state's commercial energy code that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings. The Company is currently assessing the impact of these revisions.

Pipeline

Strategy and challenges The pipeline segment provides natural gas transportation, underground storage and energy-related services, as discussed in Note 17. The segment focuses on utilizing its extensive expertise in the design, construction and operation of energy infrastructure and related services to increase market share and profitability through optimization of existing operations, organic growth and investments in energy-related assets within or in close proximity to its current operating areas. The segment focuses on the continual safety and reliability of its systems, which entails building, operating and maintaining safe natural gas pipelines and facilities. The segment continues to evaluate growth opportunities including the expansion of natural gas facilities; incremental pipeline projects; and expansion of energy-related services leveraging on its core competencies. In support of this strategy, the North Bakken Expansion project in western North Dakota was placed in service in February of 2022. The project has capacity to transport 250 MMcf of natural gas per day and can be increased to 625 MMcf per day with additional compression.

The segment is exposed to energy price volatility which is impacted by the fluctuations in pricing, production and basis differentials of the energy market's commodities. Legislative and regulatory initiatives on increased pipeline safety regulations and environmental matters such as the reduction of methane emissions could also impact the price and demand for natural gas.

The pipeline segment is subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. The Company continues to actively evaluate cybersecurity processes and procedures, including changes in the industry's cybersecurity regulations, for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing. The segment reviews and secures existing permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing basis. Groups opposing natural gas pipelines could also cause negative impacts on the segment with increased costs, potential delays to project completion or cancellation of prospective projects.

The segment regularly experiences extended lead times on raw materials that are critical to the segment's construction and maintenance work. In addition, the segment is currently experiencing increased fuel and raw material costs, as well as other inflationary pressures. Long lead times on materials could delay maintenance work and construction projects potentially causing lost revenues and/or increased costs. Current national supply chain challenges and inflationary costs have not been impactful to the procurement of necessary materials at the pipeline segment, however, the Company is actively monitoring these situations,

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including longer than normal lead times for certain items, and working with its manufacturers and suppliers to help mitigate these risks. The Company expects supply chain challenges and inflationary pressures to continue throughout the remainder of 2022.

The segment focuses on the recruitment and retention of a skilled workforce to remain competitive and provide services to its customers. The industry in which it operates relies on a skilled workforce to construct energy infrastructure and operate existing infrastructure in a safe manner. A shortage of skilled personnel can create a competitive labor market which could increase costs incurred by the segment. Competition from other pipeline companies can also have a negative impact on the segment.

Earnings overview - The following information summarizes the performance of the pipeline segment.


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	37.1	$	36.1	3	%
Operating expenses:
Operation and maintenance	15.4		15.1		2	%
Depreciation, depletion and amortization	6.3		5.2		21	%
Taxes, other than income	3.5		3.3		6	%
Total operating expenses	25.2		23.6		7	%
Operating income	11.9		12.5		(5)	%
Other income	.1		.9		(89)	%
Interest expense	2.5		2.0		25	%
Income before income taxes	9.5		11.4		(17)	%
Income tax expense	2.2		2.5		(12)	%
Net income	$	7.3	$	8.9	(18)	%


Operating statistics	Three Months Ended
	March 31,
	2022	2021
Transportation volumes (MMdk)	110.5	110.8
Customer natural gas storage balance (MMdk):
Beginning of period	23.0	25.5
Net withdrawal	(20.2)	(20.3)
End of period	2.8	5.2

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Pipeline earnings decreased $1.6 million as a result of:

•Revenues increased $1.0 million.

◦Driven by increased transportation revenues of $2.7 million, largely due to the demand associated with the North Bakken Expansion project placed in service in February 2022.

◦Partially offset by lower non-regulated project revenues and lower storage-related revenues.

•Operation and maintenance was comparable to the same period in the prior year. Higher payroll-related costs, software costs and contract services were largely offset by lower non-regulated project costs.

•Depreciation, depletion and amortization increased $1.1 million due to increased property, plant and equipment balances, largely related to the North Bakken Expansion project.

•Taxes, other than income were comparable to the same period in the prior year.

•Other income decreased $800,000, largely due to lower returns on certain of the Company's benefit plan investments.

•Interest expense increased $500,000, primarily due to higher debt balances.

•Income tax expense was comparable to the same period in the prior year.

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Outlook On February 18, 2022, the FERC issued two policy statements regarding the certification of new interstate natural gas facilities. The two policy statements were subsequently converted to draft policy statements by the FERC on March 24, 2022. The first draft policy statement, the Updated Certificate Policy Statement, describes how the FERC will determine whether a new interstate natural gas transportation project is required by public convenience and necessity. It includes increased focus on a project's purpose and need and the environmental impacts; as well as impacts on landowners and environmental justice communities. The FERC also clarified the updated policy statement will not apply to projects that have been filed with the FERC prior to the policy statement being finalized. The second draft policy statement, the Interim GHG Policy Statement, explains how the FERC will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the National Environmental Policy Act and Natural Gas Act. The FERC invited public comment on the draft policy statements which were due April 25, 2022. The Company continues to monitor and assess these initiatives and the potential impacts they may have on its business processes, current and future projects, results of operations and disclosures.

The Company has continued to experience the effect of associated natural gas production in the Bakken, which has provided opportunities for organic growth projects and increased demand. The completion of organic growth projects has contributed to higher volumes of natural gas the Company transports through its system. Increased oil prices have allowed producers to bring wells back online and support new drilling. As a result, associated natural gas production in the Bakken has returned to near pre-pandemic levels and is expected to continue to grow due to new oil wells and increasing gas to oil ratios.

The low levels of natural gas in storage nationally, along with global events, has put upward pressure on natural gas prices and increased volatility. While the Company believes there will continue to be varying pressures on natural gas production levels and prices, the long-term outlook for natural gas prices continues to provide growth opportunity for industrial supply related projects and seasonal pricing differentials provide opportunities for storage services.

The Company continues to focus on growth and improving existing operations through organic projects in all areas in which it operates, which includes additional organic growth projects with local distribution companies and industrial customers in various stages of development.

In July 2021, the Company announced plans for a natural gas pipeline expansion project in eastern North Dakota. The Wahpeton Expansion project consists of 60 miles of pipe and ancillary facilities and is designed to increase capacity by 20 MMcf per day, which is supported by long-term customer agreements with Montana-Dakota and its utility customers. Construction is expected to begin in early 2024, depending on regulatory approvals, with an anticipated completion date later in 2024. On September 22, 2021, the Company filed with the FERC a request to initiate the pre-filing review process and received FERC approval of the pre-filing request on September 27, 2021.

The Company has also entered into long-term customer agreements for the construction of four additional growth projects, three of which are still dependent on regulatory approvals. Estimated capital expenditures for these projects is approximately $108 million and is included in the pipeline segment's estimated capital expenditures for 2022 and 2023. The projects are anticipated to be completed in 2022 and 2023 and will add incremental system capacity of over 300 MMcf per day.

Construction Materials and Contracting

Strategy and challenges The construction materials and contracting segment provides an integrated set of aggregate-based construction services, as discussed in Note 17. The segment focuses on high-growth strategic markets located near major transportation corridors and desirable mid-sized metropolitan areas; strengthening the long-term, strategic aggregate reserve position through available purchase and/or lease opportunities; enhancing profitability through cost containment, margin discipline and vertical integration of the segment's operations; development and recruitment of talented employees; and continued growth through organic and strategic acquisition opportunities.

A key element of the Company's long-term strategy for this business is to further expand its market presence in the higher-margin materials business (rock, sand, gravel, asphalt oil, asphalt concrete, ready-mix concrete and related products), complementing and expanding on the segment's expertise. The Company's continued acquisition activity supports this strategy.

As one of the country's largest sand and gravel producers, the segment continues to strategically manage its aggregate reserves, as well as take further advantage of being vertically integrated. The segment's vertical integration allows it to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to permitted aggregate reserves being significant. The Company's aggregate reserves are naturally declining and, as a result, the Company seeks acquisition opportunities to replace the reserves.

The construction materials and contracting segment faces challenges that are not under the direct control of the business. The segment operates in geographically diverse and highly competitive markets. Competition can put negative pressure on the segment's operating margins. The segment is also subject to volatility, including recent inflationary pressures, in the cost of raw materials such as diesel fuel, gasoline, asphalt oil, cement and steel. Such volatility can have an impact on the segment's margins, including fixed-price construction contracts that are particularly vulnerable to the volatility of energy and material prices. The Company has increased product pricing where necessary to mitigate the effects of recent inflationary costs and will continue to evaluate future increases. The Company expects inflationary pressures to continue throughout the remainder of 2022. Other

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variables that can impact the segment's margins include adverse weather conditions, the timing of project starts or completion and declines or delays in new and existing projects due to the cyclical nature of the construction industry and governmental infrastructure spending. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.

The segment also faces challenges in the recruitment and retention of employees. Trends in the labor market include an aging workforce and availability issues. In 2021 and the first quarter of 2022, most of the markets the segment operates in saw an increase in labor shortages, largely truck drivers, causing increased labor-related costs and delays or inefficiencies on projects. The Company continues to monitor the labor markets and expects labor costs to continue to increase based on the increased demand for services and, to a lesser extent, the recent escalated inflationary environment in the United States. The increase in labor shortages also impacts the segment's ability to recruit and train a skilled workforce to meet the needs of increasing demand and seasonal work. In order to help attract new workers to the construction industry and enhance the skills of its current employees, the Company has completed a training facility in Oregon. The training facility offers hands-on training for heavy equipment operators and truck drivers, as well as leadership and safety training.

Earnings overview - The following information summarizes the performance of the construction materials and contracting segment.


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	310.0	$	265.7	17	%
Cost of sales:
Operation and maintenance	287.0		243.2		18	%
Depreciation, depletion and amortization	27.3		22.3		22	%
Taxes, other than income	10.9		9.8		11	%
Total cost of sales	325.2		275.3		18	%
Gross margin	(15.2)		(9.6)		(58)	%
Selling, general and administrative expense:
Operation and maintenance	25.3		21.7		17	%
Depreciation, depletion and amortization	1.1		1.1		—	%
Taxes, other than income	3.0		2.5		20	%
Total selling, general and administrative expense	29.4		25.3		16	%
Operating loss	(44.6)		(34.9)		28	%
Other expense	(2.0)		(.1)		NM
Interest expense	5.2		4.7		11	%
Loss before income taxes	(51.8)		(39.7)		30	%
Income tax benefit	(11.8)		(8.9)		33	%
Net loss	$	(40.0)	$	(30.8)	30	%

*NM - not meaningful


Operating statistics	Revenues					Gross margin
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2022		2021			2022		2021
	(In millions)
Aggregates	$	77.6	$	70.4		$	(2.8)	$	(2.7)
Asphalt	18.1		14.3			(6.1)		(4.8)
Ready-mix concrete	108.5		100.7			5.2		5.7
Other products*	37.5		31.0			(13.7)		(11.7)
Contracting services	114.3		96.0			2.2		3.9
Intracompany eliminations	(46.0)		(46.7)			—		—
	$	310.0	$	265.7		$	(15.2)	$	(9.6)

*Other products includes cement, asphalt oil, merchandise, fabric, spreading and other products that individually are not considered to be a major line of business for the segment.

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	Three Months Ended
	March 31,
	2022		2021
Sales (thousands):
Aggregates (tons)	4,970		4,808
Asphalt (tons)	316		294
Ready-mix concrete (cubic yards)	734		732
Average sales price:
Aggregates (per ton)	$	15.62	$	14.65
Asphalt (per ton)	$	57.21	$	48.45
Ready-mix concrete (per cubic yard)	$	147.89	$	137.57

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Construction materials and contracting's seasonal loss increased $9.2 million as a result of:

•Revenues increased $44.3 million.

◦Primarily the result of:

•Higher average sale prices across all product lines.

•Increased contracting revenues of $18.3 million due to favorable weather, timing of work and strong demand in some regions and revenue from companies acquired since the comparable period last year.

•Higher ready-mix concrete revenues of $7.8 million due to higher average sale prices, as previously mentioned, in all regions along with higher ready-mix volumes in Texas.

•Higher aggregate sales volumes due to recent acquisitions and average sale prices, as previously mentioned, contributed $5.9 million in Oregon. Also contributing were increased volumes associated with the startup of the Honey Creek quarry in Texas. These increases were partially offset by the absence of a large project in South Dakota.

•Gross margin decreased $5.6 million.

◦Primarily due to:

•Higher operating costs across all product lines, including fuel costs of $5.0 million, repair and maintenance expenses, and labor-related costs.

•Lower margins in other product lines, primarily due to higher fuel and repair and maintenance costs, as previously discussed.

•Lower contracting services margins resulting from mix of work performed. These decreases were partially offset by favorable job performance in northern California.

•Lower asphalt margins due to higher materials, repair and maintenance and productions costs, as previously mentioned, of $1.3 million, as well as lower ready-mix concrete margins due to less bad debt recovery.

◦Selling, general and administrative expense increased $4.1 million.

◦Largely due to:

•Increased payroll-related costs of $1.7 million.

•Increased office expenses of $1.0 million.

•Higher professional fees of $900,000.

•Less recovery of bad debt expense.

•Other expense increased $1.9 million, primarily due to lower returns on the Company's benefit plan investments.

•Interest expense increased $500,000, largely the result of higher debt balances due to recent acquisitions.

•Income tax benefits increased $2.9 million, largely due to the higher loss before income taxes.

Outlook The American Rescue Plan Act approved by the United States Congress and signed into law by the President of the United States in the first quarter of 2021 provides $1.9 trillion in COVID-19 relief funding for states, schools and local governments. States are beginning to move forward with allocating these funds based on federal criteria and state needs, and in some cases, funding of infrastructure projects could positively impact the segment. Additionally, the bipartisan infrastructure proposal, known as the Infrastructure Investment and Jobs Act, was approved by the United States Congress and signed into law by the President of the United States in the fourth quarter of 2021. This initiative is providing long-term opportunities by designating $119 billion for the repair and rebuilding of roads and bridges across the Company's footprint. The Company continues to monitor the implementation of these legislative items.

Index

The segment's vertically integrated aggregate-based business model provides the Company with the ability to capture margin throughout the sales delivery process. The aggregate products are sold internally and externally for use in other products such as ready-mix concrete, asphaltic concrete and public and private construction markets. The contracting services and construction materials are sold in connection with street, highway and other public infrastructure projects, as well as private commercial, industrial and residential development projects. The public infrastructure projects have traditionally been more stable markets as public funding is more secure during periods of economic decline. The public projects are, however, dependent on federal and state funding such as appropriations to the Federal Highway Administration. Spending on private development is highly dependent on both local and national economic cycles, providing additional sales during times of strong economic cycles.

During 2021, the Company made strategic purchases and completed acquisitions that support the Company's long-term strategy to expand its market presence. The Company continues to evaluate additional acquisition opportunities. For more information on the Company's business combinations, see Note 10.

The construction materials and contracting segment's backlog remained strong at March 31, 2022, at $940.1 million, as compared to backlog of $818.8 million at March 31, 2021. A significant portion of the Company's backlog relates to street and highway construction. Period over period increases or decreases in backlog cannot be used as an indicator of future revenues or net income. The Company expects to complete an estimated $886.5 million of backlog at March 31, 2022, during the next 12 months. Factors noted in Part I, Item 1A. Risk Factors in the 2021 Annual Report can cause revenues to be realized in periods and at levels that are different from originally projected.

Construction Services

Strategy and challenges The construction services segment provides electrical and mechanical and transmission and distribution specialty contracting services, as discussed in Note 17. The construction services segment focuses on safely executing projects; providing a superior return on investment by building new and strengthening existing customer relationships; ensuring quality service; effectively controlling costs; retaining, developing and recruiting talented employees; growing through organic and strategic acquisition opportunities; and focusing efforts on projects that will permit higher margins while properly managing risk. The growth experienced by the segment in recent years is due in part to its ability to support national customers in most of the regions in which it operates.

The construction services segment faces challenges, which are not under direct control of the business, in the highly competitive markets in which it operates. Competitive pricing environments, project delays, changes in management's estimates of variable consideration and the effects from restrictive regulatory requirements have negatively impacted revenues and margins in the past and could affect revenues and margins in the future. Additionally, margins may be negatively impacted on a quarterly basis due to adverse weather conditions, as well as timing of project starts or completions; disruptions to the supply chain; declines or delays in new projects due to the cyclical nature of the construction industry; inflationary pressures; and other factors. The segment is currently experiencing increased fuel and material costs as well as impacts from delays in the national supply chain. The inflationary costs and national supply chain challenges experienced by the segment have not had significant impacts to the procurement of project materials or project margins. However, the Company expects these inflationary pressures and national supply chain challenges to continue throughout the remainder of 2022. The Company is actively monitoring these situations and working with its manufacturers, suppliers and customers to help mitigate these risks. These challenges may also impact the risk of loss on certain projects. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.

The need to ensure available specialized labor resources for projects also drives strategic relationships with customers and project margins. These trends include an aging workforce and labor availability issues, as well as increasing duration and complexity of customer capital programs. In 2021 and the first quarter of 2022, the markets the segment operates in saw an increase in labor shortages which caused increased labor-related costs. The Company continues to monitor the labor markets and expects labor costs to continue to increase based on the increased demand for services and, to a lesser extent, the recent escalated inflationary environment in the United States. Due to these and other factors, the Company believes overall customer and competitor demand for labor resources will continue to increase, possibly surpassing the supply of industry resources.

Index

Earnings overview - The following information summarizes the performance of the construction services segment.


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	552.6	$	518.5	7	%
Cost of sales:
Operation and maintenance	471.1		427.2		10	%
Depreciation, depletion and amortization	4.1		4.0		3	%
Taxes, other than income	19.0		19.4		(2)	%
Total cost of sales	494.2		450.6		10	%
Gross margin	58.4		67.9		(14)	%
Selling, general and administrative expense:
Operation and maintenance	26.0		24.6		6	%
Depreciation, depletion and amortization	1.1		1.3		(15)	%
Taxes, other than income	1.8		1.7		6	%
Total selling, general and administrative expense	28.9		27.6		5	%
Operating income	29.5		40.3		(27)	%
Other income	.1		.2		(50)	%
Interest expense	.9		.9		—	%
Income before income taxes	28.7		39.6		(28)	%
Income tax expense	7.4		9.8		(24)	%
Net income	$	21.3	$	29.8	(29)	%


Operating Statistics	Revenues					Gross margin
	Three Months Ended					Three Months Ended
	March 31,				March 31,
Business Line	2022		2021			2022		2021
	(In millions)
Electrical & mechanical
Commercial	$	188.1	$	166.1		$	20.3	$	17.5
Industrial	95.0		126.4			9.8		17.2
Institutional	40.7		32.1			.6		2.2
Renewables	24.9		.6			1.0		.3
Service & other	46.5		31.2			5.7		5.0
	395.2		356.4			37.4		42.2
Transmission & distribution
Utility	143.0		141.3			19.9		23.8
Transportation	17.9		24.1			1.1		1.9
	160.9		165.4			21.0		25.7
Intrasegment eliminations	(3.5)		(3.3)			—		—
	$	552.6	$	518.5		$	58.4	$	67.9

Index

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Construction services earnings decreased $8.5 million as a result of:

•Revenues increased $34.1 million.

◦Largely due to:

•Higher commercial workloads of $29.0 million, partially offset by a decrease in the hospitality sector from the timing of project completions.

•Higher renewable workloads, largely from commercial customers, of $24.3 million due to new projects.

•Higher utility workloads, primarily in the distribution and electrical sectors of $16.0 million.

•Increased service work for the repair and maintenance of electric systems and higher institutional project demand in the education and government sectors from the mix of project work.

◦Partially offset by:

•Decreased industrial workloads, primarily in the high-tech sector of $37.5 million resulting from the absence of a significant project completed in the prior year.

•Decreased storm-repair and fire-hardening power line work of $15.0 million.

•Lower electric transportation workloads, mostly traffic signalization and street lighting projects and work for governmental customers, as a result of reduced demand for services and prior year weather events.

•Gross margin decreased $9.5 million.

◦Largely due to:

•The absence of higher margin work due to the timing of project completions and project starts mainly contributed to lower industrial and institutional margins of $9.0 million.

•Lower utility margins from the absence in 2022 of storm-repair and fire-hardening power line work of $3.9 million, which largely resulted from the mix of customer projects.

•Decreased transportation margins primarily on street lighting and traffic signalization projects.

◦Partially offset by increased commercial, renewable and service margins of $4.2 million due substantially to the different project mix.

•Selling, general and administrative expense increased $1.3 million.

◦Primarily due to:

•Increased reserve for uncollectible accounts of $1.1 million.

•Increased office expenses of $1.1 million.

◦Partially offset by decreased payroll-related costs of $600,000 and lower professional fees.

•Other income was comparable to the same period in the prior year.

•Interest expense was comparable to the same period in the prior year.

•Income tax expense decreased $2.4 million directly resulting from a decrease in income before income taxes.

Outlook The American Rescue Plan act approved by the United States Congress and signed into law by the President of the United States in the first quarter of 2021 provides $1.9 trillion in COVID-19 relief funding for states, schools and local government including broadband infrastructure. States are beginning to move forward with allocating these funds based on federal criteria and state needs, and in some cases, funding of infrastructure projects could positively impact the segment. Additionally, the bipartisan infrastructure proposal, known as the Infrastructure Investment and Jobs Act, was approved by the United States Congress and signed into law by the President of the United States in the fourth quarter of 2021. These include investments for upgrades to electric and grid infrastructure, transportation systems, airports and electric vehicle infrastructure, all industries this segment supports. The Company will continue to monitor the implementation of these legislative items.

The Company continues to have bidding opportunities in both specialty contracting markets in 2022 as evidenced by the segment's backlog. Although bidding remains highly competitive in all areas, the Company expects the segment's relationship with existing customers, skilled workforce, quality of service and effective cost management will continue to provide a benefit in securing and executing profitable projects in the future. The Company has also seen rapidly growing needs for services across the electric vehicle charging, wind generation and energy storage markets that complement existing renewable projects performed by the Company.

The construction services segment's backlog at March 31, was as follows:


	2022		2021
	(In millions)
Electrical & mechanical	$	1,388	$	1,009
Transmission & distribution	280		264
	$	1,668	$	1,273

Index

The 31 percent increase in backlog at March 31, 2022, as compared to backlog at March 31, 2021, was largely attributable to the new project opportunities that the Company continues to be awarded across its diverse operations, particularly within the commercial, institutional, renewable and power utility markets. These increases were partially offset by decreases in the industrial and transportation markets due to the timing of project completions. Period over period increases or decreases in backlog cannot be used as an indicator of future revenues or net income. The Company expects to complete an estimated $1.4 billion of backlog at March 31, 2022, during the next 12 months. Additionally, the Company continues to further evaluate potential acquisition opportunities that would be accretive to earnings of the Company and continue to grow the segment's backlog. Factors noted in Part I, Item 1A. Risk Factors in the 2021 Annual Report can cause revenues to be realized in periods and at levels that are different from originally projected.

The labor contract that the construction services segment was negotiating at December 31, 2021, as reported in Items 1 and 2 - Business Properties - General in the 2021 Annual Report, has been ratified.

Other


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Operating revenues	$	4.3	$	3.3	30	%
Operating expenses:
Operation and maintenance	4.0		2.3		74	%
Depreciation, depletion and amortization	1.1		1.2		(8)	%

Total operating expenses	5.1		3.5		46	%
Operating loss	(.8)		(.2)		NM
Other income	.1		.1		—	%
Interest expense	.1		.1		—	%
Loss before income taxes	(.8)		(.2)		NM
Income tax expense	3.7		2.5		48	%
Net loss	$	(4.5)	$	(2.7)	67	%

*NM - not meaningful

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021

Other experienced higher operation and maintenance expense in 2022 related to a loss on the disposal of assets. Premiums for the captive insurer were higher in 2022 compared to 2021, which impacts both operation and maintenance expense and operating revenues. The net loss for Other also reflects income tax adjustments related to the consolidated company's annualized estimated tax rate. 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 are also included in Other.

Intersegment Transactions

Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's elimination of intersegment transactions. The amounts related to these items were as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In millions)
Intersegment transactions:
Operating revenues	$	31.7	$	30.9
Operation and maintenance	5.8		4.9
Purchased natural gas sold	25.9		26.0

For more information on intersegment eliminations, see Note 17.

Liquidity and Capital Commitments

At March 31, 2022, the Company had cash and cash equivalents of $64.9 million and available borrowing capacity of $523.5 million under the outstanding credit facilities of the Company's subsidiaries. The Company expects to meet its obligations for debt maturing within one year and its other operating and capital requirements from various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as described in Capital resources; and issuance of debt and equity securities if necessary.

Index

Cash flows


	Three Months Ended
	March 31,
	2022		2021
	(In millions)
Net cash provided by (used in):
Operating activities	$	112.4	$	95.6
Investing activities	(150.7)		(106.3)
Financing activities	49.0		6.2
Increase (decrease) in cash and cash equivalents	10.7		(4.5)
Cash and cash equivalents -- beginning of year	54.2		59.6
Cash and cash equivalents -- end of period	$	64.9	$	55.1

Operating activities


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Components of net cash provided by operating activities:
Income from continuing operations	$	31.7	$	52.1	$	(20.4)
Adjustments to reconcile net income to net cash provided by operating activities	78.9		82.5		(3.6)
Receivables	(5.7)		89.7		(95.4)
Inventories	(44.1)		(25.6)		(18.5)
Other current assets	34.5		(46.8)		81.3
Accounts payable	3.0		(42.0)		45.0
Other current liabilities	13.1		(14.0)		27.1
Pension & postretirement benefit plan contributions	(.1)		(.1)		—
Other noncurrent changes	1.1		(.2)		1.3

Net cash provided by operating activities	$	112.4	$	95.6	$	16.8

The changes in cash flows from operating activities generally follow the results of operations, as discussed in Business Segment Financial and Operating Data, and are affected by changes in working capital. The increase in cash flows provided by operating activities in the previous table was largely driven by the recovery of purchased gas adjustment balances and the absence of higher natural gas purchases in February 2021, as discussed in Note 13, partially offset by the associated deferred taxes. Partially offsetting the net increase in cash flows provided by operating activities was higher working capital needs at the construction services business due to fluctuations in job activity resulting in higher receivables in the period, as well as lower collections of accounts receivable compared to first quarter 2021, offset in part by increased accounts payable. In addition, the construction materials and contracting business experienced an increase in asphalt oil inventory balances as a result of higher prices.

Investing activities


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Components of net cash used in investing activities:
Capital expenditures	$	(150.3)	$	(111.1)	$	(39.2)
Acquisitions, net of cash acquired	(.5)		(1.0)		.5
Net proceeds from sale or disposition of property and other	4.5		9.0		(4.5)
Investments	(4.4)		(3.2)		(1.2)
Net cash used in investing activities	$	(150.7)	$	(106.3)	$	(44.4)

The increase in cash used in investing activities in the previous table was primarily due to increased capital expenditures in 2022 at the electric and natural gas distribution businesses related to increased electric production and distribution projects and higher natural gas distribution projects including natural gas meters and mains. The pipeline business also experienced increased capital expenditures, primarily related to the North Bakken Expansion project.

Index

Financing activities


	Three Months Ended
	March 31,
	2022		2021		Variance
	(In millions)
Components of net cash provided by financing activities:
Issuance of short-term borrowings	$	100.0	$	50.0	$	50.0
Repayment of short-term borrowings	—		(50.0)		50.0
Issuance of long-term debt	150.0		93.3		56.7
Repayment of long-term debt	(143.6)		(53.3)		(90.3)
Debt issuance costs	(.7)		—		(.7)
Net proceeds from issuance of common stock	(.1)		19.7		(19.8)
Dividends paid	(44.2)		(42.6)		(1.6)
Repurchase of common stock	(7.4)		(6.7)		(.7)
Tax withholding on stock-based compensation	(5.0)		(4.2)		(.8)
Net cash provided by financing activities	$	49.0	$	6.2	$	42.8

The increase in cash provided by financing activities in the previous table was largely the result of increased issuance of short-term and long-term debt at the construction materials and contracting business to finance acquisitions and higher working capital needs, partially offset by the repayment of commercial paper borrowings that were replaced by short-term debt and private placement borrowings. In addition, the pipeline and construction services businesses experienced increased commercial paper borrowings to finance increased capital expenditures and higher working capital needs, respectively. Partially offsetting the increase in cash provided by financing activities was the absence of the issuance of common stock under the Company's "at-the-market" offering during 2022, as discussed in Note 7.

Defined benefit pension plans

There were no material changes to the Company's qualified noncontributory defined benefit pension plans from those reported in the 2021 Annual Report. For more information, see Note 18 and Part II, Item 7 in the 2021 Annual Report.

Capital expenditures

Capital expenditures for the first three months of 2022 and 2021 were $119.8 million and $107.2 million, respectively. Capital expenditures allocated to the Company's business segments are estimated to be approximately $769.9 million for 2022. Capital expenditures have been updated from what was previously reported in the 2021 Annual Report to accommodate project timeline and scope changes made throughout the first quarter of 2022.

The Company has included in the estimated capital expenditures for 2022 the Wahpeton Expansion and additional growth projects at the pipeline segment and construction of Heskett Unit 4 at the natural gas distribution segment, as previously discussed in Business Segment Financial and Operating Data, as well as system upgrades; routine replacements; service extensions; routine equipment maintenance and replacements; buildings, land and building improvements; pipeline and natural gas storage projects; power generation and transmission opportunities, environmental upgrades; and other growth opportunities.

The Company continues to evaluate potential future acquisitions and other growth opportunities that would be incremental to the outlined capital program; however, they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimate previously discussed. The Company continuously monitors its capital expenditures for project delays and changes in economic viability and adjusts as necessary. It is anticipated that all of the funds required for capital expenditures for 2022 will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as described later; and issuance of debt and equity securities if necessary.

Index

Capital resources

The Company requires significant cash to support and grow its businesses. The primary sources of cash other than cash generated from operating activities are cash from revolving credit facilities, cash from the issuance of long-term debt and cash from the sale of equity securities.

Debt resources

Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the respective debt instruments, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at March 31, 2022. In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. For more information on the covenants, certain other conditions and cross-default provisions, see Part II, Item 8 in the 2021 Annual Report.

The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at March 31, 2022:


Company	Facility		Facility Limit			Amount Outstanding		Letters of Credit			Expiration Date
			(In millions)
Montana-Dakota Utilities Co.	Commercial paper/Revolving credit agreement	(a)	$	175.0		$	29.4	$	—		12/19/24
Cascade Natural Gas Corporation	Revolving credit agreement		$	100.0	(b)	$	49.9	$	2.2	(c)	6/7/24
Intermountain Gas Company	Revolving credit agreement		$	85.0	(d)	$	35.9	$	—		6/7/24
Centennial Energy Holdings, Inc.	Commercial paper/Revolving credit agreement	(e)	$	600.0		$	319.1	$	—		12/19/24

(a)The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $225.0 million). At March 31, 2022, there were no amounts outstanding under the revolving credit agreement.

(b)Certain provisions allow for increased borrowings, up to a maximum of $125.0 million.

(c)Outstanding letter(s) of credit reduce the amount available under the credit agreement.

(d)Certain provisions allow for increased borrowings, up to a maximum of $110.0 million.

(e)The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Centennial on stated conditions, up to a maximum of $700.0 million). At March 31, 2022, there were no amounts outstanding under the revolving credit agreement.

The respective commercial paper programs are supported by revolving credit agreements. While the amount of commercial paper outstanding does not reduce available capacity under the respective revolving credit agreements, Montana-Dakota and Centennial do not issue commercial paper in an aggregate amount exceeding the available capacity under the credit agreements. The commercial paper borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of the Company's subsidiaries.

Total equity as a percent of total capitalization was 54 percent, 57 percent and 55 percent at March 31, 2022 and 2021, and December 31, 2021, respectively. This ratio is calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, including short-term borrowings and long-term debt due within one year, plus total equity. This ratio is an indicator of how a company is financing its operations, as well as its financial strength.

On March 23, 2022, Centennial issued $150.0 million of senior notes under a note purchase agreement with maturity dates ranging from March 23, 2032 to March 23, 2034, at a weighted average interest rate of 3.71 percent. The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of total debt to total capitalization to be greater than 60 percent.

Equity Resources

Index

offered for sale, from time to time, in accordance with the terms and conditions of this agreement. As of March 31, 2022, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program. Proceeds from the sale of shares of common stock under this agreement have been and are expected to be used for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment and the financing of acquisitions.

Details of the Company's "at-the-market" offering activity was as follows:


	Three Months Ended
	March 31,
	2022		2021
	(In millions)
Shares issued	—		.7
Net proceeds *	$	(.1)	$	19.7	**

* Net proceeds include issuance costs of $127,000 and $300,000 for the three months ended March 31, 2022 and 2021, respectively

** Net proceeds were used for capital expenditures.

Material cash requirements

For more information on the Company's contractual obligations on long-term debt, operating leases and purchase commitments, see Part II, Item 7 in the 2021 Annual Report. There were no material changes in the Company's contractual obligations related to estimated interest payments, purchase commitments, asset retirement obligations, uncertain tax positions and minimum funding requirements for its defined benefit plans for 2022 from those reported in the 2021 Annual Report.

Material short-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations.

Material long-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations.

New Accounting Standards

For information regarding new accounting standards, see Note 2, which is incorporated by reference.

Critical Accounting Estimates

The Company's critical accounting estimates include impairment testing of goodwill; fair values of acquired assets and liabilities under the acquisition method of accounting; regulatory assets expected to be recovered in rates charged to customers; revenue recognized using the cost-to-cost measure of progress for contracts; actuarially determined benefit costs; and tax provisions. There were no material changes in the Company's critical accounting estimates from those reported in the 2021 Annual Report. For more information on critical accounting estimates, see Part II, Item 7 in the 2021 Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the impact of market fluctuations associated with interest rates and commodity prices. The Company has policies and procedures to assist in controlling these market risks and from time to time has utilized derivatives to manage a portion of its risk.

Interest rate risk

There were no material changes to interest rate risk faced by the Company from those reported in the 2021 Annual Report.

At March 31, 2022, the Company had no outstanding interest rate hedges.

Commodity price risk

There were no material changes to commodity price risk faced by the Company from those reported in the 2021 Annual Report.

Index

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to management, including the Company's chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. The Company's management, with the participation of the Company's chief executive officer and chief financial officer, has evaluated the effectiveness of the Company's disclosure controls and other procedures as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and the chief financial officer have concluded that, as of the end of the period covered by this report, such controls and procedures were effective at a reasonable assurance level.

Changes in internal controls

No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Index

Part II -- Other Information

Item 1. Legal Proceedings

There were no material changes to the Company's legal proceedings in Part 1, Item 3 - Legal Proceedings in the 2021 Annual Report.

Item 1A. Risk Factors

Please refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in the 2021 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur. At March 31, 2022, there were no material changes to the Company's risk factors provided in Part I, Item 1A. Risk Factors in the 2021 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table includes information with respect to the Company's purchase of equity securities:


ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
January 1 through January 31, 2022	—	$	—	—	—
February 1 through February 28, 2022	266,821	$	27.73	—	—
March 1 through March 31, 2022	—	$	—	—	—
Total	266,821	$	27.73	—	—

(1) Represents shares of common stock purchased on the open market in connection with the vesting of shares granted pursuant to the Long-Term Performance-Based Incentive Plan.

(2) Not applicable. The Company does not currently have in place any publicly announced plans or programs to purchase equity securities.

Item 4. Mine Safety Disclosures

For information regarding mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, see Exhibit 95 to this Form 10-Q, which is incorporated herein by reference.

Item 5. Other Information

None.

Item 6. Exhibits

See the index to exhibits immediately preceding the signature page to this report.

Index

Exhibits Index

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed
Herewith

Form

Period
Ended

Exhibit

Filing
Date

File Number

3(a)

Amended and Restated Certificate of Incorporation of MDU Resources Group, Inc.

8-K

3.2

5/8/19

1-03480

3(b)

Amended and Restated Bylaws of MDU Resources Group, Inc.

8-K

3.1

2/15/19

1-03480

31(a)

Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31(b)

Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Mine Safety Disclosures

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Index

Signatures

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		MDU RESOURCES GROUP, INC.

DATE:	May 5, 2022	BY:	/s/ Jason L. Vollmer
			Jason L. Vollmer
			Vice President and Chief Financial Officer


		BY:	/s/ Stephanie A. Barth
			Stephanie A. Barth
			Vice President, Chief Accounting Officer and Controller