UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____________ to ______________
Commission file number 1-3480
MDU Resources Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 41-0423660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Schuchart Building
918 East Divide Avenue
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(Address of principal executive offices)
(Zip Code)
(701) 222-7900
(Registrant's telephone number, including area code)
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
X. No.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 5, 2000: 61,148,770 shares.
INTRODUCTION
This Form 10-Q contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. Forward-
looking statements should be read with the cautionary statements and
important factors included in this Form 10-Q at Item 2 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -- Safe Harbor for Forward-looking Statements. 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.
MDU Resources Group, Inc. (company) is a diversified natural
resource company which was incorporated under the laws of the State of
Delaware in 1924. Its principal executive offices are at Schuchart
Building, 918 East Divide Avenue, P.O. Box 5650, Bismarck, North Dakota
58506-5650, telephone (701) 222-7900.
Montana-Dakota Utilities Co. (Montana-Dakota), the public utility
division of the company, through the electric and natural gas
distribution segments, generates, transmits and distributes electricity,
distributes natural gas and provides related value-added products and
services in the Northern Great Plains.
The company, through its wholly owned subsidiary, Centennial Energy
Holdings, Inc. (Centennial), owns WBI Holdings, Inc. (WBI Holdings),
Knife River Corporation (Knife River), and Utility Services, Inc.
(Utility Services).
WBI Holdings is comprised of the pipeline and energy services
and the oil and natural gas production segments. The pipeline
and energy services segment provides natural gas
transportation, underground storage and gathering services
through regulated and nonregulated pipeline systems and
provides energy marketing and management services throughout
the United States. The oil and natural gas production segment
is engaged in oil and natural gas acquisition, exploration and
production throughout the United States and in the Gulf of
Mexico.
Knife River mines and markets aggregates and related value-added
construction materials products and services in the western
United States, including Alaska and Hawaii, and also operates
lignite coal mines in Montana and North Dakota.
Utility Services is a full-service engineering, design and build
company operating in the western United States specializing in
construction and maintenance of power and natural gas
distribution and transmission systems as well as communication
and fiber optic facilities.
INDEX
Part I -- Financial Information
Consolidated Statements of Income --
Three Months Ended March 31, 2000 and 1999
Consolidated Balance Sheets --
March 31, 2000 and 1999, and December 31, 1999
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Part II -- Other Information
Signatures
Exhibit Index
Exhibits
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MDU RESOURCES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
2000 1999
(In thousands, except
per share amounts)
Operating revenues $371,989 $259,046
Operating expenses:
Fuel and purchased power 14,399 13,503
Purchased natural gas sold 171,770 90,705
Operation and maintenance 125,918 101,999
Depreciation, depletion and amortization 22,139 20,140
Taxes, other than income 8,333 7,238
342,559 233,585
Operating income 29,430 25,461
Other income -- net 2,368 3,768
Interest expense 10,281 8,806
Income before income taxes 21,517 20,423
Income taxes 8,153 7,702
Net income 13,364 12,721
Dividends on preferred stocks 192 193
Earnings on common stock $ 13,172 $ 12,528
Earnings per common share -- basic $ .23 $ .24
Earnings per common share -- diluted $ .23 $ .23
Dividends per common share $ .21 $ .20
Weighted average common shares outstanding -- basic 57,051 53,147
Weighted average common shares outstanding -- diluted 57,188 53,420
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, March 31, December 31,
2000 1999 1999
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 37,622 $ 36,930 $ 77,504
Receivables 179,585 123,639 169,560
Inventories 57,468 43,176 64,608
Deferred income taxes 16,564 20,974 15,600
Prepayments and other current assets 29,452 17,849 24,424
320,691 242,568 351,696
Investments 42,907 40,550 43,128
Property, plant and equipment 2,066,881 1,837,019 2,042,281
Less accumulated depreciation,
depletion and amortization 809,568 741,392 794,105
1,257,313 1,095,627 1,248,176
Deferred charges and other assets 122,959 95,289 123,303
$1,743,870 $1,474,034 $1,766,303
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ --- $ 122 $ 14,693
Long-term debt and preferred
stock due within one year 3,841 2,502 4,428
Accounts payable 98,245 61,326 81,262
Taxes payable 13,704 20,540 6,842
Dividends payable 12,174 10,824 12,171
Other accrued liabilities,
including reserved revenues 80,412 85,756 67,931
208,376 181,070 187,327
Long-term debt 518,164 417,778 563,545
Deferred credits and other liabilities:
Deferred income taxes 215,621 173,885 213,771
Other liabilities 114,117 128,777 115,627
329,738 302,662 329,398
Preferred stock subject to mandatory
redemption 1,500 1,600 1,500
Commitments and contingencies
Stockholders' equity:
Preferred stocks 15,000 15,000 15,000
Common stockholders' equity:
Common stock (Shares issued --
$1.00 par value, 57,296,167
at March 31, 2000, 57,277,915
at December 31, 1999; $3.33 par
value, 53,395,525 at March 31, 1999 57,296 177,807 57,278
Other paid-in capital 372,661 174,264 372,312
Retained earnings 244,761 207,479 243,569
Treasury stock at cost - 239,521
shares (3,626) (3,626) (3,626)
Total common stockholders' equity 671,092 555,924 669,533
Total stockholders' equity 686,092 570,924 684,533
$1,743,870 $1,474,034 $1,766,303
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2000 1999
(In thousands)
Operating activities:
Net income $ 13,364 $ 12,721
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization 22,139 20,140
Deferred income taxes and investment tax credit 969 (3,352)
Changes in current assets and liabilities:
Receivables (9,938) 475
Inventories 7,250 1,689
Other current assets (5,028) 1,687
Accounts payable 16,966 1,303
Other current liabilities 19,346 25,966
Other noncurrent changes 71 (46)
Net cash provided by operating activities 65,139 60,583
Financing activities:
Net change in short-term borrowings (14,693) (14,878)
Issuance of long-term debt 25,400 25,089
Repayment of long-term debt (71,368) (21,366)
Issuance of common stock --- 3,186
Retirement of natural gas repurchase commitment --- (1,288)
Dividends paid (12,172) (10,825)
Net cash used in financing activities (72,833) (20,082)
Investing activities:
Capital expenditures including acquisitions of businesses (32,628) (37,608)
Net proceeds from sale or disposition of property 1,219 7,130
Net capital expenditures (31,409) (30,478)
Sale of natural gas available under repurchase commitment --- 619
Investments 221 2,479
Additions to notes receivable (5,000) (15,407)
Proceeds from notes receivable 4,000 ---
Net cash used in investing activities (32,188) (42,787)
Decrease in cash and cash equivalents (39,882) (2,286)
Cash and cash equivalents -- beginning of year 77,504 39,216
Cash and cash equivalents -- end of period $ 37,622 $ 36,930
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
1. Basis of presentation
The accompanying consolidated interim financial
statements were prepared in conformity with the basis of
presentation reflected in the consolidated financial
statements included in the Annual Report to Stockholders for
the year ended December 31, 1999 (1999 Annual Report), and
the standards of accounting measurement set forth in
Accounting Principles Board Opinion No. 28 and any
amendments thereto adopted by the Financial Accounting
Standards Board. 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
company's 1999 Annual Report. The information is unaudited
but includes all adjustments which are, in the opinion of
management, necessary for a fair presentation of the
accompanying consolidated interim financial statements. For
the three months ended March 31, 2000 and 1999,
comprehensive income equaled net income as reported.
2. 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 may not be indicative of
results for the full fiscal year.
3. Cash flow information
Cash expenditures for interest and income taxes were as
follows:
Three Months Ended
March 31,
2000 1999
(In thousands)
Interest, net of amount capitalized $4,728 $3,131
Income taxes $ 600 $ 130
4. Reclassifications
Certain reclassifications have been made in the financial
statements for the prior period to conform to the current
presentation. Such reclassifications had no effect on net
income or common stockholders' equity as previously reported.
5. New accounting pronouncements
In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains
and losses to offset the related results on the hedged item
in the income statement, and requires that a company must
formally document, designate and assess the effectiveness of
transactions that receive hedge accounting treatment.
In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133," which delayed the
effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000. The company will adopt SFAS No. 133 on
January 1, 2001. The company continues to evaluate the
effect of adopting SFAS No. 133 but has not yet determined
what impact this adoption will have on the company's
financial position or results of operations.
In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101,
"Revenue Recognition" (SAB No. 101), which provides guidance
on the recognition, presentation and disclosure of revenue
in financial statements. On March 24, 2000, the Securities
and Exchange Commission delayed the adoption date of SAB No.
101. SAB No. 101 is effective no later than the second
fiscal quarter of the fiscal year beginning after December
15, 1999. SAB No. 101 is not expected to have a material
effect on the company's financial position or results of
operations.
6. Derivatives
From time to time, the company utilizes derivative
financial instruments, including price swap and collar
agreements and natural gas futures, to manage a portion of
the market risk associated with fluctuations in the price of
oil and natural gas. The company's policy prohibits the use
of derivative instruments for trading purposes and the
company has procedures in place to monitor compliance with
its policies. The company is exposed to credit-related
losses in relation to financial instruments in the event of
nonperformance by counterparties, but does not expect any
counterparties to fail to meet their obligations given their
existing credit ratings.
The swap and collar agreements call for the company to
receive monthly payments from or make payments to
counterparties based upon the difference between a fixed and
a variable price as specified by the agreements. The
variable price is either an oil price quoted on the New York
Mercantile Exchange (NYMEX) or a quoted natural gas price on
the NYMEX, Colorado Interstate Gas Index or other various
indexes. The company believes that there is a high degree
of correlation because the timing of purchases and
production and the swap and collar agreements are closely
matched, and hedge prices are established in the areas of
operations. Amounts payable or receivable on the swap and
collar agreements are matched and reported in operating
revenues on the Consolidated Statements of Income as a
component of the related commodity transaction at the time
of settlement with the counterparty. Gains or losses on
futures contracts are deferred until the underlying
commodity transaction occurs, at which point they are
reported in "Purchased natural gas sold" on the Consolidated
Statements of Income.
The following table summarizes hedge agreements entered
into by certain wholly owned subsidiaries of WBI Holdings as
of March 31, 2000. These agreements call for the
subsidiaries of WBI Holdings to receive fixed prices and pay
variable prices.
(Notional amount and fair value in thousands)
Weighted
Average Notional
Fixed Price Amount Fair
(Per barrel) (In barrels) Value
Oil swap agreements
maturing in 2000 $19.55 578 $(3,962)
Weighted
Average Notional
Fixed Price Amount Fair
(Per MMBtu) (In MMBtu's) Value
Natural gas swap
agreements maturing
in 2000 $ 2.32 5,790 $(2,663)
Weighted
Average
Floor/Ceiling Notional
Price Amount Fair
(Per barrel) (In barrels) Value
Oil collar agreement
maturing in 2000 $20.00/$22.33 138 $ (588)
Weighted
Average
Floor/Ceiling Notional
Price Amount Fair
(Per MMBtu) (In MMBtu's) Value
Natural gas collar
agreements maturing
in 2000 $2.34/$2.69 2,559 $(1,017)
The following table summarizes hedge agreements entered
into by certain wholly owned subsidiaries of WBI Holdings,
as of March 31, 1999. These agreements call for the
subsidiaries of WBI Holdings to receive fixed prices and pay
variable prices.
(Notional amount and fair value in thousands)
Weighted
Average
Floor/Ceiling Notional
Price Amount Fair
(Per MMBtu) (In MMBtu's) Value
Natural gas collar
agreements maturing
in 1999 $2.10/$2.51 2,200 $ 322
Weighted
Average Notional
Fixed Price Amount Fair
(Per MMBtu) (In MMBtu's) Value
Natural gas futures
contracts maturing
in 2000 $2.38 1,000 $ 135
The fair value of these derivative financial
instruments reflects the estimated amounts that the company
would receive or pay to terminate the contracts at the
reporting date, thereby taking into account the current
favorable or unfavorable position on open contracts. The
favorable or unfavorable position is currently not recorded
on the company's financial statements. Favorable and
unfavorable positions related to commodity hedge agreements
are expected to be generally offset by corresponding
increases and decreases in the value of the underlying
commodity transactions.
In the event a derivative financial instrument does not
qualify for hedge accounting or when the underlying
commodity transaction matures, is sold, is extinguished, or
is terminated, the current favorable or unfavorable position
on the open contract would be included in results of
operations. The company's policy requires approval to
terminate a hedge agreement prior to its original maturity.
In the event a hedge agreement is terminated, the realized
gain or loss at the time of termination would be deferred
until the underlying commodity transaction is sold or
matures and is expected to generally offset the
corresponding increases or decreases in the value of the
underlying commodity transaction.
7. Common stock
At the Annual Meeting of Stockholders held on April 27,
1999, the company's common stockholders approved an
amendment to the Certificate of Incorporation increasing the
authorized number of common shares from 75 million shares to
150 million shares and reducing the par value of the common
stock from $3.33 per share to $1.00 per share.
8. 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. Prior to
the fourth quarter of 1999, the company reported five
operating segments consisting of electric, natural gas
distribution, natural gas transmission, construction
materials and mining, and oil and natural gas production.
During the fourth quarter of 1999, the company revised the
components of the segments reported based on organizational
changes and the significance of current segments. As a
result, a utility services segment was separated from the
electric segment; gas production activities previously
included in the natural gas transmission segment are now
reflected in the oil and natural gas production segment; and
the remaining operations of the natural gas transmission
business were renamed pipeline and energy services.
The company's operations are now conducted through six
business segments and all prior period information has been
restated to reflect this change. As of March 31, 2000, all
of the company's operations are located within the United
States. The electric business generates, transmits and
distributes electricity and the natural gas distribution
business distributes natural gas, and these operations also
supply related value-added products and services in the
Northern Great Plains. The utility services business is a
full-service engineering, design and build company operating
in the western United States specializing in construction
and maintenance of power and natural gas distribution and
transmission systems as well as communication and fiber
optic facilities. The pipeline and energy services business
provides natural gas transportation, underground storage and
gathering services through regulated and nonregulated
pipeline systems and provides energy marketing and
management services throughout the United States. The oil
and natural gas production business is engaged in oil and
natural gas acquisition, exploration and production
throughout the United States and in the Gulf of Mexico. The
construction materials and mining business mines and markets
aggregates and related value-added construction materials
products and services in the western United States,
including Alaska and Hawaii. It also operates lignite coal
mines in Montana and North Dakota.
Segment information follows the same accounting policies
as described in Note 1 of the company's 1999 Annual Report.
Segment information included in the accompanying
Consolidated Statements of Income is as follows:
Operating
Operating Revenues Earnings
Revenues Inter- on Common
External segment Stock
Three Months (In thousands)
Ended March 31, 2000
Electric $ 40,320 $ --- $ 3,223
Natural gas distribution 62,417 --- 2,580
Utility services 22,836 --- 453
Pipeline and energy
services 147,738 20,497 2,729
Oil and natural gas
production 23,043 4,190 6,409
Construction materials
and mining 72,050 3,585* (2,222)
Intersegment eliminations --- (24,687) ---
Total $ 368,404 $ 3,585* $13,172
Three Months
Ended March 31, 1999
Electric $ 40,232 $ --- $ 4,266
Natural gas distribution 61,126 --- 2,878
Utility services 18,742 --- 897
Pipeline and energy
services 66,635 20,721 4,264
Oil and natural gas
production 12,273 2,711 1,596
Construction materials
and mining 55,976 4,062* (1,373)
Intersegment eliminations --- (23,432) ---
Total $ 254,984 $ 4,062* $12,528
* In accordance with the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for
the Effects of Regulation" (SFAS No. 71), intercompany
coal sales are not eliminated.
9. Regulatory matters and revenues subject to refund
In June 1995, Williston Basin Interstate Pipeline
Company (Williston Basin), an indirect wholly owned
subsidiary of the company, filed a general rate increase
application with the Federal Energy Regulatory Commission
(FERC). As a result of FERC orders issued after Williston
Basin's application was filed, Williston Basin filed revised
base rates in December 1995 with the FERC. Williston Basin
began collecting such increase effective January 1, 1996,
subject to refund. In July 1998, the FERC issued an order
which addressed various issues including storage cost
allocations, return on equity and throughput. In August
1998, Williston Basin requested rehearing of such order. In
June 1999, the FERC issued an order approving and denying
various issues addressed in Williston Basin's rehearing
request, and also remanding the return on equity issue to an
Administrative Law Judge for further proceedings. In July
1999, Williston Basin requested rehearing of certain issues
which were contained in the June 1999 FERC order. In
September 1999, the FERC granted Williston Basin's request
for rehearing with respect to the return on equity issue but
also ordered Williston Basin to issue interim refunds prior
to the final determination in this proceeding. As a result,
in October 1999, Williston Basin issued refunds to its
customers totaling $11.3 million, all from amounts which had
previously been reserved. In December 1999, a hearing was
held before the FERC regarding the return on equity issue.
In April 2000, the Administrative Law Judge issued an
Initial Decision regarding the remanded return on equity
issue and Williston Basin is currently evaluating its
options regarding this decision. In addition, in July 1999,
Williston Basin appealed to the United States Court of
Appeals for the D.C. Circuit (D.C. Circuit Court) certain
issues concerning storage cost allocations as decided by the
FERC in its June 1999 order. In October 1999, the D.C.
Circuit Court issued an order which dismissed Williston
Basin's appeal but permitted Williston Basin to again appeal
such previously contested issues upon final determination of
all issues by the FERC in this proceeding.
In December 1999, Williston Basin filed a general
natural gas rate change application with the FERC.
Williston Basin will begin collecting such rates effective
June 1, 2000, subject to refund.
Reserves have been provided for a portion of the
revenues that have been collected subject to refund with
respect to pending regulatory proceedings and to reflect
future resolution of certain issues with the FERC.
Williston Basin believes that such reserves are adequate
based on its assessment of the ultimate outcome of the
various proceedings.
10. Litigation
In March 1997, 11 natural gas producers filed suit in
North Dakota Northwest Judicial District Court (North Dakota
District Court) against Williston Basin and the company.
The natural gas producers had processing agreements with
Koch Hydrocarbon Company (Koch). Williston Basin and the
company had natural gas purchase contracts with Koch. The
natural gas producers allege they are entitled to damages
for the breach of Williston Basin's and the company's
contracts with Koch although no specific damages have been
stated. A similar suit was filed by Apache Corporation
(Apache) and Snyder Oil Corporation (Snyder) in North Dakota
District Court in December 1993. The North Dakota Supreme
Court in December 1999 affirmed the North Dakota District
Court decision dismissing Apache's and Snyder's claims
against Williston Basin and the company. Based in part upon
the decision of the North Dakota Supreme Court affirming the
dismissal of the claims brought by Apache and Snyder,
Williston Basin and the company have filed motions for
summary judgment to dismiss the claims of the 11 natural gas
producers. Oral argument on those motions was held May 8,
2000. Williston Basin and the company are awaiting a
decision from the North Dakota District Court. A trial on
the claims of the natural gas producers has been set to
commence on October 23, 2000.
In Williston Basin's opinion, the claims of the 11
natural gas producers are without merit. If any amounts are
ultimately found to be due, Williston Basin plans to file
with the FERC for recovery from customers. However, the
amount of costs that can ultimately be recovered is subject
to approval by the FERC and market conditions.
In June 1999, several oil and gas royalty interest
owners filed suit in Colorado State District Court, in the
City and County of Denver, against WBI Production, Inc. (WBI
Production), an indirect wholly owned subsidiary of the
company, and several former producers of natural gas with
respect to certain gas production properties in the state of
Colorado. The complaint arose as a result of the purchase
by WBI Production, effective January 1, 1999, of certain
natural gas producing leaseholds from the former producers.
Prior to February 1, 1999, the natural gas produced from the
leaseholds was sold at above market prices pursuant to a
natural gas contract. Pursuant to the contract, the royalty
interest owners were paid royalties based upon the above
market prices. The royalty interest owners have alleged that
WBI Production took assignment of the rights to the natural
gas contract from the former owner of the contract and, with
respect to natural gas produced from such leases and sold at
market prices thereafter, wrongly ceased paying the higher
royalties on such gas.
In their complaint, the royalty interest owners have
alleged, in part, breach of oil and gas lease obligations
and unjust enrichment on the part of WBI Production and the
other former producers with respect to the amount of
royalties being paid to the royalty interest owners. The
royalty interest owners have requested damages under
alternate theories of up to approximately $11.6 million for
additional royalties, excluding interest. Motions for
summary judgment are pending. Trial before the Colorado
State District Court had been scheduled to be held during
the week of April 24, 2000, but was rescheduled for the week
of October 2, 2000. WBI Production is vigorously contesting
the suit.
In July 1996, Jack J. Grynberg (Grynberg) filed suit in
United States District Court for the District of Columbia
(U.S. District Court) against Williston Basin and over 70
other natural gas pipeline companies. Grynberg, acting on
behalf of the United States under the Federal False Claims
Act, alleged improper measurement of the heating content or
volume of natural gas purchased by the defendants resulting
in the underpayment of royalties to the United States. In
March 1997, the U.S. District Court dismissed the suit
without prejudice and the dismissal was affirmed by the D.C.
Circuit Court in October 1998. In June 1997, Grynberg filed
a similar Federal False Claims Act suit against Williston
Basin and Montana-Dakota and filed over 70 other separate
similar suits against natural gas transmission companies and
producers, gatherers, and processors of natural gas. In
April 1999, the United States Department of Justice decided
not to intervene in these cases. In response to a motion
filed by Grynberg, the Judicial Panel on Multidistrict
Litigation consolidated all of these cases in the Federal
District Court of Wyoming (Federal District Court). Oral
argument on motions to dismiss was held before the Federal
District Court on March 17, 2000. Williston Basin and
Montana-Dakota are awaiting a decision from the Federal
District Court.
The Quinque Operating Company (Quinque), on behalf of
itself and subclasses of gas producers, royalty owners and
state taxing authorities, instituted a legal proceeding in
State District Court for Stevens County, Kansas, against
over 200 natural gas transmission companies and producers,
gatherers, and processors of natural gas, including
Williston Basin and Montana-Dakota. The complaint, which
was served on Williston Basin and Montana-Dakota in
September 1999, contains allegations of improper measurement
of the heating content and volume of all natural gas
measured by the defendants other than natural gas produced
from federal lands. In response to a motion filed by the
defendants in this suit, the Judicial Panel on Multidistrict
Litigation transferred the suit to the Federal District
Court for inclusion in the pretrial proceedings of the
Grynberg suit.
Williston Basin and Montana-Dakota believe the claims
of Grynberg and Quinque are without merit and intend to
vigorously contest these suits.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Prior to the fourth quarter of 1999, the company reported
five operating segments consisting of electric, natural gas
distribution, natural gas transmission, construction materials
and mining, and oil and natural gas production. During the
fourth quarter of 1999, the company revised the components of the
segments reported based on organizational changes and the
significance of current segments. As a result, a utility
services segment was separated from the electric segment; gas
production activities previously included in the natural gas
transmission segment are now reflected in the oil and natural gas
production segment; and the remaining operations of the natural
gas transmission business were renamed pipeline and energy
services.
The company's operations are now conducted through six
business segments and all prior period information has been
restated to reflect this change. For purposes of segment
financial reporting and discussion of results of operations,
electric and natural gas distribution include the electric and
natural gas distribution operations of Montana-Dakota. Utility
services includes all the operations of Utility Services, Inc.
Pipeline and energy services includes WBI Holdings'
transportation, storage, gathering and energy marketing and
management services. Oil and natural gas production includes the
oil and natural gas acquisition, exploration, development and
production operations of WBI Holdings, while construction
materials and mining includes the results of Knife River's
operations.
Overview
The following table (dollars in millions, where
applicable) summarizes the contribution to consolidated
earnings by each of the company's business segments.
Three Months
Ended
March 31,
2000 1999
Electric $ 3.2 $ 4.3
Natural gas distribution 2.6 2.9
Utility services .5 .9
Pipeline and energy services 2.7 4.2
Oil and natural gas production 6.4 1.6
Construction materials and mining (2.2) (1.4)
Earnings on common stock $ 13.2 $ 12.5
Earnings per common share - basic $ .23 $ .24
Earnings per common share - diluted $ .23 $ .23
Return on average common equity
for the 12 months ended 13.4% 5.1%*
________________________________
* Reflects $39.9 million in noncash after-tax write-downs of oil
and natural gas properties in 1998.
Three Months Ended March 31, 2000 and 1999
Consolidated earnings for the quarter ended March 31, 2000,
increased $700,000 from the comparable period a year ago due
to higher earnings at the oil and natural gas production
business, largely offset by lower earnings at all other
business segments.
________________________________
Reference should be made to Notes to Consolidated Financial
Statements for information pertinent to various commitments
and contingencies.
Financial and operating data
The following tables (dollars in millions, where applicable)
are key financial and operating statistics for each of the
company's business segments.
Electric
Three Months
Ended
March 31,
2000 1999
Operating revenues:
Retail sales $ 34.0 $ 34.0
Sales for resale and other 6.3 6.2
40.3 40.2
Operating expenses:
Fuel and purchased power 14.4 13.5
Operation and maintenance 11.3 10.7
Depreciation, depletion and amortization 4.7 4.5
Taxes, other than income 2.1 1.9
32.5 30.6
Operating income $ 7.8 $ 9.6
Retail sales (million kWh) 546.5 536.1
Sales for resale (million kWh) 256.8 268.6
Average cost of fuel and purchased
power per kWh $ .017 $ .016
Natural Gas Distribution
Three Months
Ended
March 31,
2000 1999
Operating revenues:
Sales $ 61.4 $ 60.1
Transportation and other 1.0 1.0
62.4 61.1
Operating expenses:
Purchased natural gas sold 45.8 44.9
Operation and maintenance 8.5 7.8
Depreciation, depletion and amortization 1.9 1.8
Taxes, other than income 1.3 1.1
57.5 55.6
Operating income $ 4.9 $ 5.5
Volumes (MMdk):
Sales 13.3 13.2
Transportation 3.4 3.1
Total throughput 16.7 16.3
Degree days (% of normal) 87% 87%
Average cost of natural gas, including
transportation thereon, per dk $ 3.45 $ 3.40
Utility Services
Three Months
Ended
March 31,
2000 1999
Operating revenues $ 22.8 $ 18.8
Operating expenses:
Operation and maintenance 20.0 15.9
Depreciation, depletion and amortization .9 .6
Taxes, other than income .8 .7
21.7 17.2
Operating income $ 1.1 $ 1.6
Pipeline and Energy Services
Three Months
Ended
March 31,
2000 1999
Operating revenues:
Pipeline $ 15.1 $ 15.2
Energy services 153.2 72.1
168.3 87.3
Operating expenses:
Purchased natural gas sold 149.1 69.1
Operation and maintenance 8.9 7.3
Depreciation, depletion and amortization 2.2 1.9
Taxes, other than income 1.4 1.2
161.6 79.5
Operating income $ 6.7 $ 7.8
Transportation volumes (MMdk):
Montana-Dakota 8.7 8.3
Other 11.3 8.8
20.0 17.1
Oil and Natural Gas Production
Three Months
Ended
March 31,
2000 1999
Operating revenues:
Oil $ 10.4 $ 5.0
Natural gas 14.0 9.8
Other 2.8 .2
27.2 15.0
Operating expenses:
Purchased natural gas sold 1.3 ---
Operation and maintenance 6.9 5.7
Depreciation, depletion and amortization 5.6 5.7
Taxes, other than income 2.0 1.4
15.8 12.8
Operating income $ 11.4 $ 2.2
Production:
Oil (000's of barrels) 471 481
Natural gas (MMcf) 6,466 6,238
Average prices:
Oil (per barrel) $ 21.97 $ 10.35
Natural gas (per Mcf) 2.17 1.57
Construction Materials and Mining
Three Months
Ended
March 31,
2000 1999
Operating revenues:
Construction materials $ 68.4 $ 50.1
Coal 7.2 10.0
75.6 60.1
Operating expenses:
Operation and maintenance 70.5 54.7
Depreciation, depletion and amortization 6.8 5.7
Taxes, other than income .8 .9
78.1 61.3
Operating loss $ (2.5)$ (1.2)
Sales (000's):
Aggregates (tons) 2,126 1,538
Asphalt (tons) 93 104
Ready-mixed concrete (cubic yards) 288 217
Coal (tons) 678 879
Amounts presented in the preceding tables for operating
revenues, purchased natural gas sold and operation and
maintenance expenses will not agree with the Consolidated
Statements of Income due to the elimination of intercompany
transactions between the pipeline and energy services segment
and the natural gas distribution and oil and natural gas
production segments. The amounts relating to the elimination of
intercompany transactions for operating revenues, purchased
natural gas sold and operation and maintenance expenses are as
follows: $24.6 million, $24.4 million and $.2 million for the
three months ended March 31, 2000; and $23.4 million, $23.3
million and $.1 million for the three months ended March 31,
1999, respectively.
Three Months Ended March 31, 2000 and 1999
Electric
Electric earnings decreased due to higher retail fuel and
purchased power costs largely due to increased generation at
higher cost versus lower cost generating stations and increased
purchases from outside suppliers, both resulting from outages at
a large electric generating station. Also contributing to the
earnings decline were higher operation and maintenance expenses
resulting from increased payroll expense, and higher maintenance
costs at a large electric generating station, partially offset by
lower employee benefit-related costs. Higher average realized
rates on sales for resale slightly offset the earnings decline.
Natural Gas Distribution
Earnings decreased at the natural gas distribution
business due to increased operation and maintenance expenses,
primarily higher payroll expense and increased subcontractor
costs partially offset by lower employee benefit-related
costs. The natural gas distribution business continued to
experience lower than normal volumes resulting from weather
that was 13 percent warmer than normal. Higher service and
repair income partially offset the earnings decrease.
Utility Services
Utility services earnings declined due to decreased workload
at some of the existing operations that have been affected by
utility merger activity in the Pacific Northwest, partially
offset by earnings from companies acquired since the comparable
period last year.
Pipeline and Energy Services
Earnings at the pipeline and energy services business
decreased due to the recognition in 1999 of $1.7 million
resulting from a favorable order received from the D.C. Circuit
Court relating to a 1992 general rate proceeding. Increased
operating costs, primarily higher payroll expense, depreciation
expense and other taxes also added to the earnings decrease.
Increased transportation to off-system and on-system markets
partially offset by decreased transportation to storage, and
earnings from acquisitions since the comparable period last year
partially offset the earnings decrease. The increase in energy
services revenue and the related increase in purchased natural
gas sold resulted from increased energy marketing volumes.
Oil and Natural Gas Production
Earnings for the oil and natural gas production business
increased primarily as a result of increased operating
revenues resulting from realized oil and natural gas prices
which were 112 percent and 38 percent higher than last year,
respectively. Higher natural gas production due to both a new
acquisition and ongoing development of existing properties
also added to the earnings increase. Partially offsetting
the earnings improvement were higher production taxes,
largely the result of higher commodity prices.
Construction Materials and Mining
Construction materials and mining earnings decreased due to
normal seasonal losses realized in the first quarter of 2000 by
construction materials businesses acquired since the comparable
period last year, partially offset by increased construction
activity at existing construction materials operations. Higher
aggregate, ready-mixed concrete and construction volumes, were
partially offset by higher selling, general and administrative
costs at the existing construction materials operations.
Decreased coal volumes sold resulting from outages at a large
electric generating station also added to the earnings decline.
Safe Harbor for Forward-looking Statements
The company is including the following cautionary statement
in this Form 10-Q to make applicable and to take advantage of the
safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or
on behalf of, the company. Forward-looking statements include
statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions (many of
which are based, in turn, upon further assumptions) and other
statements which 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. All such
subsequent forward-looking statements, whether written or oral
and whether made by or on behalf of the company, are also
expressly qualified by these cautionary statements.
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, but there can be no assurance that the company's
expectations, beliefs or projections will be achieved or
accomplished. Furthermore, any forward-looking statement speaks
only as of the date on which such 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 such 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 of such factors, nor can it assess the effect of
each such factor on the company's business or the extent to which
any such factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-
looking statement.
In addition to other factors and matters discussed elsewhere
herein, some important factors that could cause actual results or
outcomes for the company to differ materially from those
discussed in forward-looking statements include prevailing
governmental policies and regulatory actions with respect to
allowed rates of return, financings, or industry and rate
structures, acquisition and disposal of assets or facilities,
operation and construction of plant facilities, recovery of
purchased power and purchased gas costs, present or prospective
generation and availability of economic supplies of natural gas.
Other important factors include the level of governmental
expenditures on public projects and project schedules, changes in
anticipated tourism levels, the effects of competition (including
but not limited to electric retail wheeling and transmission
costs and prices of alternate fuels and system deliverability
costs), oil and natural gas commodity prices, drilling successes
in oil and natural gas operations, ability to acquire oil and
natural gas properties, and the availability of economic
expansion or development opportunities.
The business and profitability of the company are also
influenced by economic and geographic factors, including
political and economic risks, changes in and compliance with
environmental and safety laws and policies, weather conditions,
population growth rates and demographic patterns, market demand
for energy from plants or facilities, changes in tax rates or
policies, unanticipated project delays or changes in project
costs, unanticipated changes in operating expenses or capital
expenditures, labor negotiations or disputes, changes in credit
ratings or capital market conditions, inflation rates, inability
of the various counterparties to meet their obligations with
respect to the company's financial instruments, changes in
accounting principles and/or the application of such principles
to the company, changes in technology and legal proceedings, and
the ability to effectively integrate the operations of acquired
companies.
Prospective Information
Montana-Dakota has obtained and holds valid and existing
franchises authorizing it to conduct its electric operations in
all of the municipalities it serves where such franchises are
required. As franchises expire, Montana-Dakota may face
increasing competition in its service areas, particularly its
service to smaller towns, from rural electric cooperatives.
Montana-Dakota intends to protect its service area and seek
renewal of all expiring franchises and will continue to take
steps to effectively operate in an increasingly competitive
environment.
In January 2000, the company announced an agreement to
acquire Great Plains Natural Gas Company (Great Plains). Great
Plains is a natural gas distribution company serving 19
communities in western Minnesota and southeastern North Dakota.
The North Dakota Public Service Commission has approved the
acquisition and approval is currently pending with the Minnesota
Public Utilities Commission.
Also in January 2000, the company announced that the Board
of Directors had approved the acquisition of Connolly-Pacific
Co., a southern California aggregate mining and marine
construction company. Thomas Everist, a member of the company's
Board of Directors, has an interest in L.G. Everist,
Incorporated, which has owned Connolly-Pacific Co. since 1977.
At the company's Annual Meeting of Stockholders held on April 25,
2000, in accordance with New York Stock Exchange rules, the
acquisition was approved by the stockholders of the company.
In addition, in April 2000, the company acquired ready-mixed
concrete companies in Montana and a pipeline and cable locating
technology company based in Texas. Substantially all of the
assets of a natural gas exploration and production company
headquartered in Colorado, specializing in the development of
coal bed methane reserves on over 187,000 net acres under lease
in the Powder River Basin of Wyoming and Montana were also
acquired. None of the above acquisitions were individually
material.
Liquidity and Capital Commitments
Net capital expenditures for the year 2000 are estimated at
$355.3 million, including those for acquisitions to date, system
upgrades, routine replacements, service extensions, routine
equipment maintenance and replacements, pipeline expansion
projects, the building of construction materials handling and
transportation facilities, and the further enhancement of oil and
natural gas production and reserve growth. It is anticipated that
all of the funds required for capital expenditures will be met
from various sources. These sources include internally generated
funds, the company's $40 million revolving credit and term loan
agreement, existing lines of credit aggregating $7.2 million, a
commercial paper credit facility at Centennial, as described
below, and through the issuance of long-term debt and the
company's equity securities. At March 31, 2000, $24 million
under the revolving credit and term loan agreement and $6.3
million under the lines of credit were outstanding.
Centennial, a direct wholly owned subsidiary of the company,
has a revolving credit agreement with various banks on behalf of
its subsidiaries that supports the $250 million Centennial
commercial paper program. Under the commercial paper program,
$172.3 million was outstanding at March 31, 2000. The commercial
paper borrowings are classified as long term as the company
intends to refinance these borrowings on a long term basis
through continued commercial paper borrowings supported by the
revolving credit agreement due September 1, 2002. The company
intends to renew this existing credit agreement on an annual
basis.
Centennial entered into an uncommitted long-term master
shelf agreement on behalf of its subsidiaries that allows for
borrowings of up to $200 million. Under the master shelf
agreement, $25 million was outstanding at March 31, 2000.
The estimated 2000 capital expenditures set forth above for
electric, natural gas distribution, utility services, pipeline
and energy services and construction materials and mining
operations do not include potential future acquisitions. The
company continues to seek additional growth opportunities,
including investing in the development of related lines of
business. To the extent that acquisitions occur, the company
anticipates that such acquisitions would be financed with
existing credit facilities and the issuance of long-term debt and
the company's equity securities.
In January 2000, the company announced that its Board of
Directors approved a stock repurchase program, authorizing the
purchase of up to 1 million shares of the company's outstanding
common stock. The amount and timing of purchases will depend on
market conditions. It is anticipated that the funds required for
this program will be met from internally generated funds, the
issuance of long-term or short-term debt or other sources that
become available from time to time. Unless extended, the stock
repurchase program will be terminated on or prior to December 31,
2001. As of March 31, 2000, no shares have been repurchased
under the program.
The company's issuance of first mortgage debt is subject to
certain restrictions imposed under the terms and conditions of
its Indenture of Mortgage. Generally, those restrictions require
the company to pledge $1.43 of unfunded property to the Trustee
for each dollar of indebtedness incurred under the Indenture and
that annual earnings (pretax and before interest charges), as
defined in the Indenture, equal at least two times its annualized
first mortgage bond interest costs. Under the more restrictive
of the two tests, as of March 31, 2000, the company could have
issued approximately $285 million of additional first mortgage
bonds.
The company's coverage of fixed charges including preferred
dividends was 4.2 times and 4.3 times for the twelve months ended
March 31, 2000, and December 31, 1999, respectively.
Additionally, the company's first mortgage bond interest coverage
was 6.9 times and 7.1 times for the twelve months ended March 31,
2000, and December 31, 1999, respectively. Common stockholders'
equity as a percent of total capitalization was 56 percent and 54
percent at March 31, 2000, and December 31, 1999, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes in market risk faced by the
company from those reported in the company's Annual Report on
Form 10-K for the year ended December 31, 1999. For more
information on market risk, see Part II, Item 7A in the company's
Annual Report on Form 10-K for the year ended December 31, 1999,
and Notes to Consolidated Financial Statements in this Form 10-Q.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Oral argument on motions for summary judgment to dismiss the
claims of the 11 natural gas producers before the North Dakota
District Court was held May 8, 2000. Williston Basin and the
company are awaiting a decision from the North Dakota District
Court. Trial has been set to commence on October 23, 2000.
Trial before the Colorado State District Court had been
scheduled to be held during the week of April 24, 2000, but was
rescheduled for the week of October 2, 2000 in the oil and gas
royalty interest owners legal proceeding.
Oral argument on motions to dismiss was held before the
Federal District Court on March 17, 2000 in the Grynberg legal
proceeding. Williston Basin and Montana-Dakota are awaiting a
decision from the Federal District Court.
In response to a motion filed by the defendants in the
Quinque legal proceeding, the Judicial Panel on Multidistrict
Litigation transferred the Quinque suit to the Federal District
Court for inclusion in the pretrial proceedings of the Grynberg
suit.
For more information on the above legal actions see Note 10
of Notes to Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 28, 2000, the company issued 18,252 shares of
Common Stock, $1.00 par value, as part of a final adjustment with
respect to an acquisition of a business in a prior period. The
Common Stock issued by the company in this transaction was issued
in a private sale exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933. The former owners of
the business acquired, and now shareholders of the company, are
accredited investors and have acknowledged that they would hold
the company's Common Stock as an investment and not with a view
to distribution.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The company's Annual Meeting of Stockholders was held on
April 25, 2000. Four proposals were submitted to stockholders as
described in the company's Proxy Statement dated March 10, 2000,
and were voted upon and approved by stockholders at the meeting.
The table below briefly describes the proposals and the results
of the stockholder votes.
Shares
Shares Against or Broker
For Withheld Abstentions Non-Votes
Proposal to approve the
acquisition of Connolly-
Pacific Co. and the issuance
of common stock in connection
therewith 37,353,207 1,296,776 667,489 5,017,756
Proposal to amend the 1992 Key
Employee Stock Option Plan 40,264,025 2,716,449 1,354,754 ---
Proposal to amend the 1997
Executive Long-Term Incentive
Plan 39,547,863 3,310,752 1,476,613 ---
Proposal to elect four directors:
For terms expiring in 2003 --
San W. Orr, Jr. 43,353,150 982,078 --- ---
Harry J. Pearce 42,546,679 1,788,549 --- ---
Homer A. Scott, Jr. 43,411,731 923,497 --- ---
Sister Thomas Welder, O.S.B. 43,291,355 1,043,873 --- ---
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10(a) 1992 Key Employee Stock Option Plan, as amended to date
10(b) 1997 Executive Long-Term Incentive Plan, as amended to
date
12 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, 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 11, 2000 BY /s/ Warren L. Robinson
Warren L. Robinson
Executive Vice President,
Treasurer and Chief
Financial Officer
BY /s/ Vernon A. Raile
Vernon A. Raile
Vice President, Controller and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit No.
10(a) 1992 Key Employee Stock Option Plan, as amended to date
10(b) 1997 Executive Long-Term Incentive Plan, as amended to date
12 Computation of Ratio of Earnings to Fixed Charges
and Combined Fixed Charges and Preferred Stock
Dividends
27 Financial Data Schedule
MDU RESOURCES GROUP, INC
1992 KEY EMPLOYEE STOCK OPTION PLAN
(KESOP)
I. Purpose
The purpose of the MDU Resources Group, Inc. 1992 Key Employee
Stock Option Plan (the "Plan") is to motivate key employees of
MDU Resources Group, Inc. and its business units to achieve
specified long-term performance goals of MDU Resources Group,
Inc. or its business units and to encourage ownership by them of
the Common Stock of MDU Resources Group, Inc. The Plan
accomplishes these objectives through the grant of performance
accelerated Stock Options and the opportunity to earn dividend
equivalents.
II. Definitions
The following definitions shall be used for purposes of
administering the Plan:
"Agreement" means a written agreement evidencing each award
of Options, which shall contain such terms and be in such
form as the Compensation Committee may determine.
"Board" means the Board of Directors of the Company.
"Cause" means the (1) continued failure by a Participant to
perform his/her duties (except as a direct result of the
Participant's Disability) after receiving notification by
the Chief Executive Officer of the Company or an individual
designated by the Chief Executive Officer (or the Board of
Directors of the Company in the case of the Chief Executive
Officer) identifying the manner in which the Participant has
failed to perform his/her duties, (2) engaging in conduct,
which, in the opinion of a majority of the Board of
Directors of the Company or a business unit, is materially
injurious to the Company, or (3) conviction of any felony.
"Change of Control" means the earliest of the following to
occur: (a) the public announcement by the Company or by any
person (which shall not include the Company, any subsidiary
of the Company, or any employee benefit plan of the Company
or of any subsidiary of the Company) ("Person") that such
Person, who or which, together with all Affiliates and
Associates (within the meanings ascribed to such terms in
the Rule 12b-2 of the General Rules and Regulations under
the Exchange Act) of such Person, shall be the beneficial
owner of twenty percent (20%) or more of the voting stock of
the Company outstanding; (b) the commencement of, or after
the first public announcement of any Person to commence, a
tender or exchange offer the consummation of which would
result in any Person becoming the beneficial owner of voting
stock aggregating thirty percent (30%) or more of the then
outstanding voting stock of the Company; (c) the
announcement of any transaction relating to the Company
required to be described pursuant to the requirements of
Item 6(e) of Schedule 14A of Regulation 14A under the
Exchange Act; (d) a proposed change in constituency of the
Board such that, during any period of two (2) consecutive
years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at
least a majority thereof, unless the election or nomination
for election by the stockholders of the Company of each new
Director was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who were members of
the Board at the beginning of the period; or (e) any other
event which shall be deemed by a majority of the
Compensation Committee to constitute a "change in control."
"Common Stock" means the Common Stock, $1.00 par value, of
the Company.
"Company" shall refer to MDU Resources Group, Inc.
"Companies" shall refer to MDU Resources Group, Inc. and its
business units.
"Compensation Committee" or "Committee" shall be the
Compensation Committee of the Board of Directors of the
Company or any Committee of the Board performing similar
functions as appointed from time to time by the Board.
"Covered Employee" means any Participant who would be
considered a "Covered Employee" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as
amended.
"Disability" means the inability of a Participant to perform
each and every duty pertaining to the Participant's regular
occupation by reason of any medically determinable physical
or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a
continuous period of not less than twelve months.
"Dividend Account" is defined in Section IV.D 6.
"Effective Date" means the date as of which the Plan is
approved by the stockholders of MDU Resources Group, Inc.
"Eligible Employee" means any key employee of any of the
Companies who, in the opinion of the Compensation Committee,
has significant responsibility for the continued growth,
development and financial success of the Company or any
business unit thereof.
"Exchange" means the New York Stock Exchange.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means the average of the high and low
prices for shares of Common Stock traded on the Exchange on
the date of the grant of such Option or if no shares are
traded on that day, on the next preceding day on which
Common Stock was traded on the Exchange.
"Goals" means the performance goals established by the
Committee, which shall be based on one or more of the
following measures: sales or revenues, earnings per share,
shareholder return and/or value, funds from operations,
operating income, gross income, net income, cash flow,
return on equity, return on capital, earnings before
interest, operating ratios, stock price, customer
satisfaction, accomplishment of mergers, acquisitions,
dispositions or similar extraordinary business transactions,
profit returns and margins, financial return ratios and/or
market performance. Performance goals may be measured
solely on a corporate, subsidiary or business unit basis, or
a combination thereof. Performance goals may reflect
absolute entity performance or a relative comparison of
entity performance to the performance of a peer group of
entities or other external measure.
"Option" or "Stock Option" means an option to purchase
Common Stock granted pursuant to the Plan. Options may not
be "incentive stock options" as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as
amended.
"Participants" means those Eligible Employees selected by
the Committee for participation in the Plan and includes
their beneficiaries as applicable.
"Performance Cycle" means a time frame established by the
Committee pursuant to Section IV.D 4 for the measurement of
Goals.
"Plan" means this MDU Resources Group, Inc. 1992 Key
Employee Stock Option Plan, adopted by the Board on February
13, 1992, and approved by the stockholders on April 28,
1992, and as amended from time to time.
"Termination of Service" means leaving the employ of the
Companies for any reason. Transfer between Companies is not
a Termination of Service.
"Trustee" means a trustee chosen by the Committee or any
successor trustee selected by the Committee.
III. Administration
Subject to and not inconsistent with the express provisions of
the Plan the Committee has the sole and complete discretion to
administer and interpret the Plan, including, but not limited to:
(a) designating the Participants to whom Options are
granted under the Plan;
(b) authorizing the Trustee to grant Options, determining
the time(s) when Options are granted and fixing the number
of shares of Common Stock underlying each Option granted
hereunder;
(c) determining the terms and conditions of an Option
granted (including, but not limited to, the exercise price,
any restriction or limitation, the vesting provisions,
acceleration of vesting or forfeiture waiver applicable to
any Option) and the terms of the related Agreement;
(d) determining the conditions of the awarding of Dividend
Equivalents;
(e) establishing Goals and fixing and adjusting the Goals;
(f) interpreting the terms and provisions of the Plan;
(g) adopting, amending, and rescinding rules and
regulations relating to the Plan; and
(h) making all determinations necessary or advisable for
the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the
Companies, the Trustee, and the Plan's Participants.
The Committee may also revise or adjust the vesting provisions
(except that the Committee may not extend vesting beyond nine
years), Goals and their levels applicable to a Performance Cycle,
at any time to take into account, among other things, new
Participants, promotions, transfers, terminations, changes in law
and accounting and tax rules and to make such adjustments as the
Committee deems necessary or appropriate to reflect the
Companies' performances or the impact of extraordinary or unusual
items, events, or circumstances or in order to avoid windfalls or
hardships.
The Company and/or the Committee may consult with legal counsel,
who may be counsel for the Company or other counsel, with respect
to its obligations and duties hereunder or with respect to any
claim, action, or proceeding or any other matter.
No member or agent of the Committee shall be personally liable
for any action, determination, or interpretation made in good
faith with respect to the Plan or grants made hereunder, and all
members and agents of the Committee shall be fully protected by
the Company in respect of any such action, determination, or
interpretation.
The Committee's determination under the Plan, including without
limitation, determinations as to the Participants to receive
grants, the terms and provisions of such grants and the
Agreement(s) evidencing the same, need not be uniform and may be
made by it selectively among the Eligible Employees who receive
or are eligible to receive grants under the Plan, whether or not
such Eligible Employees are similarly situated.
IV. General Plan Description
A. Overview
The Plan provides for each Participant to (a) receive
grant(s) of Stock Options, (b) have the opportunity to earn
dividend equivalents, and (c) have the opportunity to
achieve accelerated vesting of Stock Options and receive
additional grants of Stock Options based upon the
achievement of Goals established by the Committee over a
designated Performance Cycle.
B. Eligibility
On or after the Effective Date, subject to the provisions of
the Plan, the Committee shall, from time to time, select
from eligible employees Participants to whom options are to
be granted. At the time of selection, the Committee shall
specify the terms and conditions of the Participant's grant
of Options.
C. Authorization
The total number of shares of Common Stock as to which
Options may be granted may not exceed 800,000 shares; if any
unexercised options lapse or terminate for any reason, the
shares underlying the Options may be made subject to Options
granted to other Participants. In the event of the
declaration of a Common Stock dividend and/or Common Stock
split, reclassification or analogous change in the
capitalization or any distributions (other than regular cash
dividends) to holders of record of Common Stock, an
appropriate adjustment shall be made to the total number of
shares as to which Options may be granted under the Plan to
any Participant, to the number of shares subject to Options,
and to the exercise price.
Shares of Common Stock delivered under this Plan may be
authorized but unissued shares of Common Stock, treasury
stock, shares of Common Stock purchased on the open market
and held by the Trustee, or shares of Common Stock from the
1983 Key Employees' Stock Option Plan.
D. Individual Limitations
Subject to adjustment as provided in Section IV(C), the
total number of shares of Common Stock with respect to which
Options may be granted in any calendar year to any Covered
Employee shall not exceed 150,000 shares, and the aggregate
number of dividend equivalents that a Covered Employee may
receive in any calendar year shall not exceed $1,500,000.
E. Stock Options and Dividend Equivalents
(1) Grants
Each Participant shall receive a grant of Options
on the date she or he becomes a Participant. The
Committee shall determine the size of the grant to each
Participant. Participants may receive subsequent
grants of Options when and as directed by the
Committee.
(2) Exercise Price and Term
The exercise price for an Option granted under the
Plan is the Fair Market Value of the Company's Common
Stock on the date of the Option grant. An Option
granted shall generally have a term of ten years
commencing from the date of grant, subject to the
provisions of Sections V and VI and to the general
discretion of the Committee set forth in Section III.
(3) Vesting and Accelerated Vesting Provisions
No Option may be exercised before it has vested.
Generally Option grants have a vesting period (before
accelerated vesting) of nine years subject to the
provisions of Section VI and to the general discretion
of the Committee set forth in Section III. The vesting
period for all or a portion of Options granted to a
Participant may be accelerated by the Committee subject
to the achievement of Goals for a Performance Cycle.
(4) Performance Cycle and Goals
The Committee shall fix the starting and ending
dates of each Performance Cycle. The minimum term
shall be six months; the maximum term shall be nine
years. A Performance Cycle will be the time period
used in assessing the performance of each of the
Companies in comparison to the separate Goals
established by the Committee for each of the Companies.
Performance Cycles and Goals may vary for each of the
Companies.
(5) Subsequent Grants; Accelerated Vesting
Additional grants of Options may be made to
Participants at any time.
In particular, but not by way of limitation,
additional grants of Options may be made to
Participants at the beginning of a new Performance
Cycle based upon the appropriate Companies' achievement
of Goals and the results of accelerated vesting of all
or a portion of previous grants. The Committee will
have the authority to determine the size and terms of
any new Option grant for each Participant.
(6) Dividend Equivalents
At the beginning of each Performance Cycle, a
Dividend Account (the "Dividend Account") shall be
established for each Participant. If a dividend is
declared by the Board on the Common Stock of the
Company an equivalent amount shall be accrued in the
Dividend Account of each Participant for each share of
Common Stock underlying all unvested Options held by
the Participant. At the end of each Performance Cycle
the Committee in its sole discretion may award an
amount between 0% and 150% of a Participant's Dividend
Account based on whether the Goals established for that
Performance Cycle were achieved. Any earned portion of
a Participant's Dividend Account is paid in cash to
that Participant at the end of each Performance Cycle
at a date and time determined by the Committee. Any
portion of a Participant's Dividend Account not awarded
to the Participant by the Committee is forfeited.
However, shares of Common Stock underlying unvested
Options retain a dividend equivalent and a Participant
can earn the value of these dividend equivalents in
subsequent Performance Cycles.
(7) Exercise of Options
As provided in paragraph (3) of this section,
generally all Options granted to a Participant under
the Plan shall vest on the ninth anniversary of the
date of grant; provided, however, that if and to the
extent the vesting of an Option is accelerated at the
end of a Performance Cycle, the Option may thereafter
be exercised to the extent that the Option has vested.
Any vested Option may be exercised from time to time in
part or as a whole, at the discretion of the
Participant, from the date of vesting until termination
of the Option; no Option shall be exercisable after its
expiration date; subject in either case to the
provisions set forth in Section V and to the general
discretion of the Committee set forth in Section III.
Options may be exercised by giving written notice
of exercise as directed by the Company specifying the
number of shares to be purchased. The notice shall be
accompanied by provision for payment of the exercise
price. Payment may be made in part or in full in cash
or by tendering shares of Common Stock already owned by
the Participant, based upon the Fair Market Value of
the Common Stock on the date the Option is exercised,
or through share withholding. Participants may also
simultaneously exercise Options and sell the shares of
Common Stock thereby acquired and use the proceeds from
the sale as payment for the purchase price of the
shares.
(8) Nonassignability of Options
Options granted may not be assigned, transferred,
or pledged by the Participant other than by will or the
laws of descent and distribution or pursuant to a
domestic relations order.
V. Termination of Service
A. Upon any Termination of Service, unvested Options and
any amounts accrued in a Participant's Dividend Account
shall be forfeited unless the Committee decides otherwise
pursuant to Section III.
B. Death
If the Participant dies while still employed, then any
vested Options, to the extent that they are then
exercisable, may be fully exercised at any time within one
(1) year (even if this extends the term of the Options)
after the date of the Participant's death by the person
designated in the Participant's last will and testament or
by the personal representative of the Participant's estate.
C. Disability
If the Participant suffers Disability, then any vested
Options, to the extent that they are then exercisable, may
be fully exercised at any time within one (1) year (even if
this extends the terms of the Options) after the date of
Disability by the Participant or by a person qualified or
authorized to act on behalf of the Participant.
D. Cause
If a Participant's Termination of Service is for Cause, the
right to exercise any vested Option shall terminate with
such termination of employment. For this purpose, the
determination of the Committee as to whether employment was
terminated for Cause shall be final.
E. Other Termination of Service
In the event of the Participant's Termination of Service for
reasons other than Death, Disability, or Cause, to the
extent that any vested Options are then exercisable, the
Participant shall be entitled to exercise the Options for
the three (3) month period following such Termination of
Service (even if this extends the term of the Options).
VI. Change of Control
Upon a Change of Control of the Company, all Options previously
granted under the Plan shall become immediately vested and
available for exercise. The value of the amounts accrued in the
Participant's Dividend Account shall be paid in full at 100% of
the amount thereof to the Participant in cash upon the Change of
Control.
VII. Miscellaneous Provisions
A. Unsecured General Creditor
Participants and their beneficiaries, heirs,
successors, and assigns shall have no legal or
equitable rights, interests, or other claims in any
property or assets of the Company, nor shall they be
beneficiaries of, or have any rights, claims, or
interests in any specified assets of the Company. Any
and all of the Company's assets shall be and remain
general, unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be that
of an unfunded and unsecured promise of the Company to
cause shares of Common Stock to be available or to pay
benefits in the future.
B. No Contract of Employment
Nothing contained in this Plan nor any related
Agreement nor any action taken in the administration of
the Plan shall be construed as a contract of employment
or as giving a Participant any right to be retained in
the service of the Company.
C. Withholding Taxes
No later than the date on which a Participant receives
Common Stock with respect to any Option exercised or
cash with respect to Dividend Equivalents awarded under
the Plan, the Participant shall pay in cash to the
Company or its delegate or make arrangements
satisfactory to the Company regarding the payment of
any federal, state, or local taxes required by law to
be withheld with respect to any such amounts. The
Participant may also make payment (i) by tendering
shares of the Common Stock already owned by the
Participant, based on the fair market value of the
Common Stock on the date the tax is owed or (ii) by
having such amounts withheld from the shares of the
Common Stock otherwise distributable to him/her upon
exercise of his/her Options. The obligations of the
Company under the Plan shall be conditioned on such
payment or arrangements. The Company or its delegate
may deduct any taxes from any payment due to the
Participant from the Company to the extent allowed by
law.
D. Ten Percent Limitation
No Option shall be granted under this Plan to a
Participant if at the time the Option is granted the
Participant shall own stock representing more than 10%
of the combined voting power of all classes of voting
stock of the Company.
E. Severability
In the event that any provision of the Plan or any
related Agreement is held invalid, void or
unenforceable, the same shall not affect, in any
respect whatsoever, the validity of any other provision
of the Plan or any related Agreement.
F. Inurement of Rights and Obligations
The rights and obligations under the Plan shall inure
to the benefit of, and shall be binding upon the
Company, its successors and assigns, and the
Participants and their beneficiaries consistent with
the terms of the Plan.
G. Amendments
The Board may at any time amend, suspend, or terminate
the Plan including, without limitation, modifications
to take into account and comply with any changes in
applicable securities or federal income tax laws and
regulations, or other applicable laws and regulations;
provided, that no modification to the Plan shall
increase the number of shares available under the Plan
by more than 10 percent without approval of the holders
of the Common Stock, except as otherwise permitted
under Section IV.C; and provided further, that any such
amendment, suspension, or termination must be
prospective in that it may not deprive Participants of
any Options or rights previously granted under the Plan
whether vested or not, without consent of the
Participant, except if required by statute or rules or
regulations promulgated thereunder.
H. Restrictions
Shares of Common Stock acquired by Participants
pursuant to the exercise of Options granted under the
Plan shall be subject to such restrictions on
transferability and disposition as are required by
federal and state security laws and such Participants
shall not sell or transfer any shares acquired except
in accordance with such laws.
I. Legal and Other Requirements
The obligation of the Company to cause Common Stock to
be available under the Plan shall be subject to all
applicable laws, regulations, rules and approvals,
including, but not limited to the receipt of any
necessary approvals by state or federal regulatory
bodies, and the effectiveness of a registration
statement under the Securities Act of 1933 if deemed
necessary or appropriate by the Company. Certificates
for shares of Common Stock issued hereunder may be
legended as the Committee shall deem appropriate.
J. Agreements
Each grant of Options shall be evidenced by an
Agreement which shall contain such restrictions, terms
and conditions as the Committee may require.
Notwithstanding anything to the contrary contained in
the Plan, the Company shall not be under any obligation
to honor any grants under the Plan to any Participant
hereunder unless such Participant shall execute all
appropriate Agreements with respect to such Options in
such form as the Committee may determine from time to
time.
K. Applicable Law
The Plan and any related Agreements shall be governed
in accordance with the laws of the State of North
Dakota.
VIII. Establishment of Trust
The Company may establish with the Trustee a trust consisting of
such sums of money or other property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee, all
investments made therewith and proceeds thereof and all earnings
and profits thereon. The Trustee shall invest funds, if any,
advanced by the Company in shares of Common Stock. Upon the
exercise of an Option by a Participant, the Trustee shall take
Common Stock from the trust or shall purchase Common Stock on the
open market or from the Company and deliver certificates for such
shares to the Participant.
The Company shall have the right at any time to terminate the
trust but such termination shall not affect the rights of any
Participant to whom an Option has been granted under the Plan.
After effecting all purchases and transfers of Common Stock as
are required by the Plan pursuant to the exercise of Options by
Participants, the Trustee shall be relieved of all further
liability. Termination of the trust shall take effect as of the
date the last such transfer is made. Upon such termination any
assets remaining in the trust shall be returned to the Company
unless other directions are given to the Trustee by the Company.
MDU RESOURCES GROUP, INC
1997 EXECUTIVE LONG-TERM INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. MDU Resources Group, Inc.,
a Delaware corporation (hereinafter referred to as the
"Company"), hereby establishes an incentive compensation plan to
be known as the "MDU Resources Group, Inc. 1997 Executive Long-
Term Incentive Plan" (hereinafter referred to as the "Plan"), as
set forth in this document. The Plan permits the grant of
Nonqualified Stock Options (NQSO), Incentive Stock Options (ISO),
Stock Appreciation Rights (SAR), Restricted Stock, Performance
Units, Performance Shares and other awards.
The Plan shall become effective when approved by the
stockholders at the annual meeting on April 22, 1997 (the
"Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success and enhance the value of the Company by
linking the personal interests of Participants to those of
Company stockholders and customers.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract and retain the
services of Participants upon whose judgment, interest and
special effort the successful conduct of its operations is
largely dependent.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall
remain in effect, subject to the right of the Board of Directors
to terminate the Plan at any time pursuant to Article 15 herein,
until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no
event may an Award be made under the Plan on or after the day
immediately preceding the tenth anniversary of the Effective
Date.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when such meaning is intended,
the initial letter of the word is capitalized:
2.1 "Award" means, individually or collectively, a grant
under the Plan of NQSOs, ISOs, SARs, Restricted Stock,
Performance Units, Performance Shares or any other type of award
permitted under Article 10 of the Plan.
2.2 "Award Agreement" means an agreement entered into by
each Participant and the Company, setting forth the terms and
provisions applicable to an Award granted to a Participant under
the Plan.
2.3 "Base Value" of an SAR shall have the meaning set forth
in Section 7.1 herein.
2.4 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.5 "Change in Control" means the earliest of the following
to occur: (a) the public announcement by the Company or by any
person (which shall not include the Company, any subsidiary of
the Company, or any employee benefit plan of the Company or of
any subsidiary of the Company) ("Person") that such Person, who
or which, together with all Affiliates and Associates (within the
meanings ascribed to such terms in the Rule 12b-2 of the General
Rules and Regulations under the Exchange Act) of such Person,
shall be the beneficial owner of twenty percent (20%) or more of
the voting stock of the Company outstanding; (b) the commencement
of, or after the first public announcement of any Person to
commence, a tender or exchange offer the consummation of which
would result in any Person becoming the beneficial owner of
voting stock aggregating thirty percent (30%) or more of the then
outstanding voting stock of the Company; (c) the announcement of
any transaction relating to the Company required to be described
pursuant to the requirements of Item 6(e) of Schedule 14A of
Regulation 14A under the Exchange Act; (d) a proposed change in
constituency of the Board such that, during any period of two (2)
consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at
least a majority thereof, unless the election or nomination for
election by the stockholders of the Company of each new Director
was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were members of the Board at
the beginning of the period; (e) the sale or other disposition of
all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a subsidiary of the Company; or (f)
any other event which shall be deemed by a majority of the
Compensation Committee to constitute a "change in control".
2.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.7 "Committee" means the Committee, as specified in
Article 3, appointed by the Board to administer the Plan with
respect to Awards.
2.8 "Company" means MDU Resources Group, Inc., a Delaware
corporation, or any successor thereto as provided in Article 17
herein.
2.9 "Covered Employee" means any Participant who would be
considered a "Covered Employee" for purposes of Section 162(m) of
the Code.
2.10 "Director" means any individual who is a member of the
Board of Directors of the Company.
2.11 "Disability" means "permanent and total disability" as
defined under Section 22(e)(3)of the Code.
2.12 "Dividend Equivalent" means, with respect to Shares
subject to an Award, a right to be paid an amount equal to
dividends declared on an equal number of outstanding Shares.
2.13 "Eligible Employee" means an Employee who is eligible
to participate in the Plan, as set forth in Section 5.1 herein.
2.14 "Employee" means any full-time or regularly-scheduled
part-time employee of the Company or of the Company's
Subsidiaries, who is not covered by any collective bargaining
agreement to which the Company or any of its Subsidiaries is a
party. Directors who are not otherwise employed by the Company
shall not be considered Employees for purposes of the Plan. For
purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
2.15 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act thereto.
2.16 "Exercise Period" means the period during which an SAR
or Option is exercisable, as set forth in the related Award
Agreement.
2.17 "Fair Market Value" shall mean the average of the high
and low sale prices as reported in the consolidated transaction
reporting system or, if there is no such sale on the relevant
date, then on the last previous day on which a sale was reported.
2.18 "Freestanding SAR" means an SAR that is granted
independently of any Option.
2.19 "Incentive Stock Option" or "ISO" means an option to
purchase Shares, granted under Article 6 herein, which is
designated as an Incentive Stock Option and satisfies the
requirements of Section 422 of the Code.
2.20 "Nonqualified Stock Option" or "NQSO" means an option
to purchase Shares, granted under Article 6 herein, which is not
intended to be an Incentive Stock Option under Section 422 of the
Code.
2.21 "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
2.22 "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined
by the Committee and set forth in the Option Award Agreement.
2.23 "Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
2.24 "Performance Goals" means the performance goals
established by the Committee, which shall be based on one or more
of the following measures: sales or revenues, earnings per
share, shareholder return and/or value, funds from operations,
operating income, gross income, net income, cash flow, return on
equity, return on capital, earnings before interest, operating
ratios, stock price, customer satisfaction, accomplishment of
mergers, acquisitions, dispositions or similar extraordinary
business transactions, profit returns and margins, financial
return ratios and/or market performance. Performance goals may
be measured solely on a corporate subsidiary or business unit
basis, or a combination thereof. Performance goals may reflect
absolute entity performance or a relative comparison of entity
performance to the performance of a peer group of entities or
other external measure.
2.25 "Performance Unit" means an Award granted to an
Employee, as described in Article 9 herein.
2.26 "Performance Share" means an Award granted to an
Employee, as described in Article 9 herein.
2.27 "Period of Restriction" means the period during which
the transfer of Restricted Stock is limited in some way, as
provided in Article 8 herein.
2.28 "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act, as used in Sections 13(d)
and 14(d) thereof, including usage in the definition of a "group"
in Section 13(d) thereof.
2.29 "Qualified Restricted Stock" means an Award of
Restricted Stock designated as Qualified Restricted Stock by the
Committee at the time of grant and intended to qualify for the
exemption from the limitation on deductibility imposed by
Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C).
2.30 "Restricted Stock" means an Award of Shares granted to
a Participant pursuant to Article 8 herein.
2.31 "Shares" means the shares of common stock of the
Company.
2.32 "Stock Appreciation Right" or "SAR" means a right,
granted alone or in connection with a related Option, designated
as an SAR, to receive a payment on the day the right is
exercised, pursuant to the terms of Article 7 herein. Each SAR
shall be denominated in terms of one Share.
2.33 "Subsidiary" means any corporation that is a
"subsidiary corporation" of the Company as that term is defined
in Section 424(f) of the Code.
2.34 "Tandem SAR" means an SAR that is granted in connection
with a related Option, the exercise of which shall require
forfeiture of the right to purchase a Share under the related
Option (and when a Share is purchased under the Option, the
Tandem SAR shall be similarly canceled).
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation Committee of the Board, or by any other Committee
appointed by the Board. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion
of, the Board of Directors.
3.2 Authority of the Committee. The Committee shall have
full power except as limited by law, the Articles of
Incorporation and the Bylaws of the Company, subject to such
other restricting limitations or directions as may be imposed by
the Board and subject to the provisions herein, to determine the
size and types of Awards; to determine the terms and conditions
of such Awards in a manner consistent with the Plan; to construe
and interpret the Plan and any agreement or instrument entered
into under the Plan; to establish, amend or waive rules and
regulations for the Plan's administration; and (subject to the
provisions of Article 15 herein) to amend the terms and
conditions of any outstanding Award. Further, the Committee
shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by
law, the Committee may delegate its authorities as identified
hereunder.
3.3 Restrictions on Share Transferability. The Committee
may impose such restrictions on any Shares acquired pursuant to
Awards under the Plan as it may deem advisable, including,
without limitation, restrictions to comply with applicable
Federal securities laws, with the requirements of any stock
exchange or market upon which such Shares are then listed and/or
traded and with any blue sky or state securities laws applicable
to such Shares.
3.4 Approval. The Board or the Committee shall approve all
Awards made under the Plan and all elections made by
Participants, prior to their effective date, to the extent
necessary to comply with Rule 16b-3 under the Exchange Act.
3.5 Decisions Binding. All determinations and decisions
made by the Committee pursuant to the provisions of the Plan and
all related orders or resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its
stockholders, Employees, Participants and their estates and
beneficiaries.
3.6 Costs. The Company shall pay all costs of
administration of the Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to Section 4.2 herein, the
maximum number of Shares available for grant under the Plan shall
be 1,800,000. Shares underlying lapsed or forfeited Awards, or
Awards that are not paid in Shares, may be reused for other
Awards. Shares granted pursuant to the Plan may be (i)
authorized but unissued Shares of Common Stock, (ii) treasury
shares, or (iii) shares purchased on the open market.
4.2 Adjustments in Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock split, stock dividend, split-up,
share combination or other change in the corporate structure of
the Company affecting the Shares, such adjustment shall be made
in the number and class of Shares which may be delivered under
the Plan, and in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the
Code and (ii) in no event shall any adjustment be made which
would render any Incentive Stock Option granted hereunder to be
other than an incentive stock option for purposes of Section 422
of the Code.
4.3 Individual Limitations. Subject to Section 4.2 herein,
(i) the total number of Shares with respect to which Options or
SARs may be granted in any calendar year to any Covered Employee
shall not exceed 200,000 Shares; (ii) the total number of shares
of Qualified Restricted Stock that may be granted in any calendar
year to any Covered Employee shall not exceed 200,000 Shares;
(iii) the total number of Performance Shares or Performance Units
that may be granted in any calendar year to any Covered Employee
shall not exceed 200,000 Shares or Units, as the case may be;
(iv) the total number of Shares that are intended to qualify for
deduction under Section 162(m) of the Code granted pursuant to
Article 10 herein in any calendar year to any Covered Employee
shall not exceed 200,000 Shares; (v) the total cash Award that is
intended to qualify for deduction under Section 162(m) of the
Code that may be paid pursuant to Article 10 herein in any
calendar year to any Covered Employee shall not exceed
$1,500,000; and (vi) the aggregate number of Dividend Equivalents
that are intended to qualify for deduction under Section 162(m)
of the Code that a Covered Employee may receive in any calendar
year shall not exceed $1,500,000.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the
Plan include all officers and key employees of the Company and
its Subsidiaries, as determined by the Committee, including
Employees who are members of the Board, but excluding Directors
who are not Employees.
5.2 Actual Participation. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all
eligible Employees those to whom Awards shall be granted and
shall determine the nature and amount of each Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and conditions
of the Plan, Options may be granted to an Eligible Employee at
any time and from time to time, as shall be determined by the
Committee.
The Committee shall have complete discretion in determining
the number of Shares subject to Options granted to each
Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and
conditions pertaining to such Options. The Committee may grant
ISOs, NQSOs, or a combination thereof.
6.2 Option Award Agreement. Each Option grant shall be
evidenced by an Option Award Agreement that shall specify the
Option Price, the term of the Option, the number of Shares to
which the Option pertains, the Exercise Period and such other
provisions as the Committee shall determine, including but not
limited to any rights to Dividend Equivalents. The Option Award
Agreement shall also specify whether the Option is intended to be
an ISO or an NQSO.
The Option Price for each Share purchasable under any
Incentive Stock Option granted hereunder shall be not less than
one hundred percent (100%) of the Fair Market Value per Share at
the date the Option is granted; and provided, further, that in
the case of an Incentive Stock Option granted to a person who, at
the time such Incentive Stock Option is granted, owns shares of
stock of the Company or of any Subsidiary which possess more than
ten percent (10%) of the total combined voting power of all
classes of shares of stock of the Company or of any Subsidiary,
the Option Price for each Share shall be not less than one
hundred ten percent (110%) of the Fair Market Value per Share at
the date the Option is granted. The Option Price will be subject
to adjustment in accordance with the provisions of Section 4.2 of
the Plan.
No Incentive Stock Option by its terms shall be exercisable
after the expiration of ten (10) years from the date of grant of
the Option; provided, however, in the case of an Incentive Stock
Option granted to a person who, at the time such Option is
granted, owns shares of stock of the Company or of any Subsidiary
possessing more than ten percent (10%) of the total combined
voting power of all classes of shares of stock of the Company or
of any Subsidiary, such Option shall not be exercisable after the
expiration of five (5) years from the date such Option is
granted.
6.3 Exercise of and Payment for Options. Options granted
under the Plan shall be exercisable at such times and be subject
to such restrictions and conditions as the Committee shall in
each instance approve.
A Participant may exercise an Option at any time during the
Exercise Period. Options shall be exercised by the delivery of a
written notice of exercise to the Company or its designee,
setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by provisions for full
payment for the Shares.
The Option Price upon exercise of any Option shall be
payable either: (a) in cash or its equivalent, (b) by tendering
previously acquired Shares having an aggregate Fair Market Value
at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to
satisfy the Option Price), (c) by share withholding, (d) by
cashless exercise or (e) by a combination of (a),(b),(c), and/or
(d).
As soon as practicable after receipt of a written
notification of exercise of an Option and provisions for full
payment therefor, there shall be delivered to the Participant, in
the Participant's name, Share certificates in an appropriate
amount based upon the number of Shares purchased under the
Option(s).
6.4 Termination of Employment. Each Option Award Agreement
shall set forth the extent to which the Participant shall have
the right to exercise the Option following termination of the
Participant's employment with the Company and its Subsidiaries.
Such provisions shall be determined in the sole discretion of the
Committee (subject to applicable law), shall be included in the
Option Award Agreement entered into with Participants, need not
be uniform among all Options granted pursuant to the Plan or
among Participants and may reflect distinctions based on the
reasons for termination of employment. If the employment of a
Participant by the Company or by any Subsidiary is terminated for
any reason other than death, any Incentive Stock Option granted
to such Participant may not be exercised later than three (3)
months (one (1) year in the case of termination due to
Disability) after the date of such termination of employment.
6.5 Transferability of Options. Except as otherwise
determined by the Committee and set forth in the Option Award
Agreement, no Option granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution, and all Incentive Stock Options granted to a
Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of
the Plan, an SAR may be granted to an Eligible Employee at any
time and from time to time as shall be determined by the
Committee. The Committee may grant Freestanding SARs, Tandem
SARs or any combination of these forms of SAR.
The Committee shall have complete discretion in determining
the number of SARs granted to each Participant (subject to
Article 4 herein) and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to such
SARs.
The Base Value of a Freestanding SAR shall equal the Fair
Market Value of a Share on the date of grant of the SAR. The
Base Value of Tandem SARs shall equal the Option Price of the
related Option.
7.2 SAR Award Agreement. Each SAR grant shall be evidenced
by an SAR Award Agreement that shall specify the number of SARs
granted, the Base Value, the term of the SAR, the Exercise Period
and such other provisions as the Committee shall determine.
7.3 Exercise and Payment of SARs. Tandem SARs may be
exercised for all or part of the Shares subject to the related
Option upon the surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR may be exercised
only with respect to the Shares for which its related Option is
then exercisable.
Notwithstanding any other provision of the Plan to the
contrary, with respect to a Tandem SAR granted in connection with
an ISO: (i) the Tandem SAR will expire no later than the
expiration of the underlying ISO; (ii) the value of the payout
with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price
of the underlying ISO and the Fair Market Value of the Shares
subject to the underlying ISO at the time the Tandem SAR is
exercised; and (iii) the Tandem SAR may be exercised only when
the Fair Market Value of the Shares subject to the ISO exceeds
the Option Price of the ISO.
Freestanding SARs may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes upon
them.
A Participant may exercise an SAR at any time during the
Exercise Period. SARs shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the
number of SARs being exercised. Upon exercise of an SAR, a
Participant shall be entitled to receive payment from the Company
in an amount equal to the product of:
(a) the excess of (i) the Fair Market Value of a Share
on the date of exercise over (ii) the Base Value
multiplied by
(b) the number of Shares with respect to which the SAR
is exercised.
At the sole discretion of the Committee, the payment to the
Participant upon SAR exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.
7.4 Termination of Employment. Each SAR Award Agreement
shall set forth the extent to which the Participant shall have
the right to exercise the SAR following termination of the
Participant's employment with the Company and its Subsidiaries.
Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the SAR Award Agreement entered
into with Participants, need not be uniform among all SARs
granted pursuant to the Plan or among Participants and may
reflect distinctions based on the reasons for termination of
employment.
7.5 Transferability of SARs. Except as otherwise
determined by the Committee and set forth in the SAR Award
Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution, and all SARs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant or his or her legal representative.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and
conditions of the Plan, Restricted Stock may be granted to
Eligible Employees at any time and from time to time, as shall be
determined by the Committee.
The Committee shall have complete discretion in determining
the number of shares of Restricted Stock granted to each
Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and
conditions pertaining to such Restricted Stock.
In addition, the Committee may, prior to or at the time of
grant, designate an Award of Restricted Stock as Qualified
Restricted Stock, in which event it will condition the grant or
vesting, as applicable, of such Qualified Restricted Stock upon
the attainment of the Performance Goals selected by the
Committee.
8.2 Restricted Stock Award Agreement. Each Restricted
Stock grant shall be evidenced by a Restricted Stock Award
Agreement that shall specify the Period or Periods of
Restriction, the number of Restricted Stock Shares granted and
such other provisions as the Committee shall determine.
8.3 Transferability. Restricted Stock granted hereunder
may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period
of Restriction established by the Committee and specified in the
Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be
available during his or her lifetime only to such Participant or
his or her legal representative.
8.4 Certificate Legend. Each certificate representing
Restricted Stock granted pursuant to the Plan may bear a legend
substantially as follows:
"The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary,
involuntary or by operation of law, is subject to
certain restrictions on transfer as set forth in MDU
Resources Group, Inc. 1997 Executive Long-Term
Incentive Plan, and in a Restricted Stock Award
Agreement. A copy of such Plan and such Agreement may
be obtained from MDU Resources Group, Inc."
The Company shall have the right to retain the certificates
representing Restricted Stock in the Company's possession until
such time as all restrictions applicable to such Shares have been
satisfied.
8.5 Removal of Restrictions. Restricted Stock shall become
freely transferable by the Participant after the last day of the
Period of Restriction applicable thereto. Once Restricted Stock
is released from the restrictions, the Participant shall be
entitled to have the legend referred to in Section 8.4 removed
from his or her stock certificate.
8.6 Voting Rights. During the Period of Restriction,
Participants holding Restricted Stock may exercise full voting
rights with respect to those Shares.
8.7 Dividends and Other Distributions. Subject to the
Committee's right to determine otherwise at the time of grant,
during the Period of Restriction, Participants holding Restricted
Stock shall receive all regular cash dividends paid with respect
to all Shares while they are so held. All other distributions
paid with respect to such Restricted Stock shall be credited to
Participants subject to the same restrictions on transferability
and forfeitability as the Restricted Stock with respect to which
they were paid and shall be paid to the Participant within forty-
five (45) days following the full vesting of the Restricted Stock
with respect to which such distributions were made.
8.8 Termination of Employment. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant
shall have the right to receive unvested Restricted Stock
following termination of the Participant's employment with the
Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Restricted Stock Award Agreement entered into
with Participants, need not be uniform among all grants of
Restricted Stock or among Participants and may reflect
distinctions based on the reasons for termination of employment.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares.
Subject to the terms and conditions of the Plan, Performance
Units and/or Performance Shares may be granted to an Eligible
Employee at any time and from time to time, as shall be
determined by the Committee.
The Committee shall have complete discretion in determining
the number of Performance Units and/or Performance Shares granted
to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and
conditions pertaining to such Awards.
9.2 Performance Unit/Performance Share Award Agreement.
Each grant of Performance Units and/or Performance Shares shall
be evidenced by a Performance Unit and/or Performance Share Award
Agreement that shall specify the number of Performance Units
and/or Performance Shares granted, the initial value (if
applicable), the Performance Period, the Performance Goals and
such other provisions as the Committee shall determine, including
but not limited to any rights to Dividend Equivalents.
9.3 Value of Performance Units/Performance Shares. Each
Performance Unit shall have an initial value that is established
by the Committee at the time of grant. The value of a
Performance Share shall be equal to the Fair Market Value of a
Share. The Committee shall set Performance Goals in its
discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance
Units/Performance Shares that will be paid out to the
Participants. The time period during which the Performance Goals
must be met shall be called a "Performance Period."
9.4 Earning of Performance Units/Performance Shares. After
the applicable Performance Period has ended, the holder of
Performance Units/Performance Shares shall be entitled to receive
a payout with respect to the Performance Units/Performance Shares
earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding
Performance Goals have been achieved.
9.5 Form and Timing of Payment of Performance
Units/Performance Shares. Payment of earned Performance
Units/Performance Shares shall be made following the close of the
applicable Performance Period. The Committee, in its sole
discretion, may pay earned Performance Units/Performance Shares
in cash or in Shares (or in a combination thereof), which have an
aggregate Fair Market Value equal to the value of the earned
Performance Units/Performance Shares at the close of the
applicable Performance Period. Such Shares may be granted
subject to any restrictions deemed appropriate by the Committee.
9.6 Termination of Employment. Each Performance
Unit/Performance Share Award Agreement shall set forth the extent
to which the Participant shall have the right to receive a
Performance Unit/Performance Share payment following termination
of the Participant's employment with the Company and its
Subsidiaries during a Performance Period. Such provisions shall
be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with Participants,
need not be uniform among all grants of Performance
Units/Performance Shares or among Participants and may reflect
distinctions based on reasons for termination of employment.
9.7 Transferability. Except as otherwise determined by the
Committee and set forth in the Performance Unit/Performance Share
Award Agreement, Performance Units/Performance Shares may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution, and a Participant's rights with respect to
Performance Units/Performance Shares granted under the Plan shall
be available during the Participant's lifetime only to such
Participant or the Participant's legal representative.
Article 10. Other Awards
The Committee shall have the right to grant other Awards
which may include, without limitation, the grant of Shares based
on attainment of Performance Goals established by the Committee,
the payment of Shares in lieu of cash, or cash based on
attainment of Performance Goals established by the Committee, and
the payment of Shares in lieu of cash under other Company
incentive or bonus programs. Payment under or settlement of any
such Awards shall be made in such manner and at such times as the
Committee may determine.
Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under the Plan is to be paid
in case of his or her death before he or she receives any or all
of such benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed
by the Participant in writing with the Company during the
Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be
paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall join in any designation of
beneficiary or beneficiaries other than the spouse.
Article 12. Deferrals
The Committee may permit a Participant to defer the
Participant's receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under the
Plan. If any such deferral election is permitted, the Committee
shall, in its sole discretion, establish rules and procedures for
such payment deferrals.
Article 13. Rights of Employees
13.1 Employment. Nothing in the Plan shall interfere with
or limit in any way the right of the Company to terminate any
Participant's employment at any time, for any reason or no reason
in the Company's sole discretion, nor confer upon any Participant
any right to continue in the employ of the Company.
13.2 Participation. No Employee shall have the right to be
selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.
Article 14. Change in Control
The terms of this Article 14 shall immediately become
operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall
supersede and take control over any other provisions of this
Plan.
Upon a Change in Control
(a) Any and all Options and SARs granted hereunder
shall become immediately exercisable;
(b) Any restriction periods and restrictions imposed
on Restricted Shares and Qualified Restricted Shares
shall be deemed to have expired and such Restricted
Shares and Qualified Restricted Shares shall become
immediately vested in full; and
(c) The target payout opportunity attainable under all
outstanding Awards of Performance Units, Performance
Shares and other Awards shall be deemed to have been
fully earned for the entire Performance Period(s) as of
the effective date of the Change in Control. The
vesting of all Awards denominated in Shares shall be
accelerated as of the effective date of the Change in
Control, and there shall be paid out in cash to
Participants immediately following the effective date
of the Change in Control the full amount of the
targeted cash payout opportunities associated with
outstanding cash-based Awards.
Article 15. Amendment, Modification and Termination
15.1 Amendment, Modification and Termination. The Board
may, at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part, provided that no
amendment shall be made which shall increase the total number of
Shares which may be issued and sold pursuant to Incentive Stock
Options, reduce the minimum exercise price in the case of an
Incentive Stock Option or modify the provisions of the Plan
relating to eligibility with respect to Incentive Stock Options
unless such amendment is made by or with the approval of the
stockholders within 12 months of the effective date of such
amendment, but only if such approval is required by any
applicable provision of law. The Board of Directors of the
Company is also authorized to amend the Plan and the Options
granted hereunder to maintain qualification as "incentive stock
options" within the meaning of Section 422 of the Code, if
applicable.
15.2 Awards Previously Granted. No termination, amendment
or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without
the written consent of the Participant holding such Award, unless
such termination, modification or amendment is required by
applicable law and except as otherwise provided herein.
Article 16. Withholding
16.1 Tax Withholding. The Company shall have the power and
the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy Federal,
state and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to an
Award made under the Plan.
16.2 Share Withholding. With respect to withholding
required upon the exercise of Options or SARs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable event
arising out of or as a result of Awards granted hereunder,
Participants may elect to satisfy the withholding requirement, in
whole or in part, by tendering previously-owned Shares or by
having the Company withhold Shares having a Fair Market Value on
the date the tax is to be determined equal to the statutory total
tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing and signed by the
Participant.
Article 17. Successors
All obligations of the Company under the Plan, with respect
to Awards granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the business and/or
assets of the Company.
Article 18. Legal Construction
18.1 Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular and the singular
shall include the plural.
18.2 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
18.3 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all
applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may
be required.
18.4 Governing Law. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed
in accordance with, and governed by, the laws of the State of
Delaware.
MDU RESOURCES GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Twelve Months Year
Ended Ended
March 31, 2000 December 31, 1999
(In thousands of dollars)
Earnings Available for
Fixed Charges:
Net Income per Consolidated
Statements of Income $ 84,723 $ 84,080
Income Taxes 49,762 49,310
134,485 133,390
Rents (a) 2,225 2,018
Interest (b) 37,781 36,539
Total Earnings Available
for Fixed Charges $174,491 $ 171,947
Preferred Dividend Requirements $ 771 $ 772
Ratio of Income Before Income
Taxes to Net Income 159% 159%
Preferred Dividend Factor on
Pretax Basis 1,226 1,227
Fixed Charges (c) 40,006 38,557
Combined Fixed Charges and
Preferred Stock Dividends $ 41,232 $ 39,784
Ratio of Earnings to Fixed
Charges 4.4x 4.5x
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock Dividends 4.2x 4.3x
(a) Represents portion (33 1/3%) of rents which is estimated to
approximately constitute the return to the lessors on their
investment in leased premises.
(b) Represents interest and amortization of debt discount and
expense on all indebtedness and excludes amortization of gains
or losses on reacquired debt which, under the Uniform System of
Accounts, is classified as a reduction of, or increase in,
interest expense in the Consolidated Statements of Income.
Also includes carrying costs associated with natural gas
available under a repurchase agreement with Frontier Gas
Storage Company. In May 1999, the Company purchased the
remaining natural gas subject to the repurchase commitment
thereby extinguishing the repurchase commitment.
(c) Represents rents and interest, both as defined above.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000067716
<NAME> MDU RESOURCES GROUP, INC.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 516,238
<OTHER-PROPERTY-AND-INVEST> 783,982
<TOTAL-CURRENT-ASSETS> 320,691
<TOTAL-DEFERRED-CHARGES> 122,959
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,743,870
<COMMON> 57,056
<CAPITAL-SURPLUS-PAID-IN> 369,275
<RETAINED-EARNINGS> 244,761
<TOTAL-COMMON-STOCKHOLDERS-EQ> 671,092
1,500
15,000
<LONG-TERM-DEBT-NET> 518,164
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,741
100
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 534,273
<TOT-CAPITALIZATION-AND-LIAB> 1,743,870
<GROSS-OPERATING-REVENUE> 371,989
<INCOME-TAX-EXPENSE> 8,153
<OTHER-OPERATING-EXPENSES> 342,559
<TOTAL-OPERATING-EXPENSES> 350,712
<OPERATING-INCOME-LOSS> 21,277
<OTHER-INCOME-NET> 2,368
<INCOME-BEFORE-INTEREST-EXPEN> 23,645
<TOTAL-INTEREST-EXPENSE> 10,281
<NET-INCOME> 13,364
192
<EARNINGS-AVAILABLE-FOR-COMM> 13,172
<COMMON-STOCK-DIVIDENDS> 11,980
<TOTAL-INTEREST-ON-BONDS> 2,433
<CASH-FLOW-OPERATIONS> 65,139
<EPS-BASIC> .23
<EPS-DILUTED> .23
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