| · | Earnings per common share of 39 cents. |
| · | Consolidated earnings of $71.3 million. |
| · | Increased 2006 earnings per share guidance to a range of $1.47 to $1.60, up from previous guidance of $1.43 to $1.57. |
Business Line | Earnings Second Quarter 2006 (In Millions) | Earnings Second Quarter 2005 (In Millions) | |||||
| Natural gas and oil production | $ | 31.0 | $ | 29.9 | |||
| Construction materials and mining | 25.3 | 18.4 | |||||
| Construction services* | 9.7 | 3.7 | |||||
| Pipeline and energy services | 5.6 | 8.7 | |||||
| Electric and natural gas distribution | (2.0 | ) | 0.5 | ||||
| Independent power production | 1.5 | 18.6 | |||||
| Other | 0.2 | 0.2 | |||||
Total | $ | 71.3 | $ | 80.0 | |||
| · | Earnings per common share for 2006, diluted, are projected in the range of $1.47 to $1.60, an increase from prior guidance of $1.43 to $1.57. |
| · | The company expects the percentage of 2006 earnings per common share, diluted, by quarter to be in the following approximate ranges: |
| o | Third quarter - 30 percent to 35 percent |
| o | Fourth quarter - 20 percent to 25 percent |
| · | The company’s long-term compound annual growth goal on earnings per share is in the range of 7 percent to 10 percent, although the company has exceeded this level in recent years. |
| · | The company anticipates investing approximately $590 million in capital expenditures during 2006. |
| · | The company’s long-term compound annual growth goal for production is in the range of 7 percent to 10 percent. In 2006, the company expects to exceed the upper end of this range. |
| · | The company is expecting to drill more than 325 wells in 2006. |
| · | Estimates of natural gas prices in the Rocky Mountain region for August through December 2006, reflected in the company’s 2006 earnings guidance, are in the range of $5.50 to $6.00 per thousand cubic feet. The company’s estimates for natural gas prices on the NYMEX for August through December, reflected in the company’s 2006 earnings guidance, are in the range of $6.75 to $7.25 per Mcf. During 2005, more than three-fourths of this segment’s natural gas production was priced using Rocky Mountain or other non-NYMEX prices. |
| · | Estimates of NYMEX crude oil prices for August through December, reflected in the company’s 2006 earnings guidance, are projected in the range of $60 to $65 per barrel. |
| · | The company has hedged approximately 30 percent to 35 percent of its estimated natural gas production and 15 percent to 20 percent of its estimated oil production for the last six months of 2006. For 2007, the company has hedged approximately 20 percent to 25 percent of its estimated natural gas production. The hedges that are in place as of July 27, 2006, are summarized in the following chart: |
Commodity | Index* | Period Outstanding | Forward Notional Volume (MMBtu)/(Bbl) | Price Swap or Costless Collar Floor-Ceiling (Per MMBtu/Bbl) |
| Natural Gas | Ventura | 7/06 - 12/06 | 920,000 | $6.00-$7.60 |
| Natural Gas | Ventura | 7/06 - 12/06 | 1,840,000 | $6.655 |
| Natural Gas | Ventura | 7/06 - 12/06 | 920,000 | $6.75-$7.71 |
| Natural Gas | Ventura | 7/06 - 12/06 | 920,000 | $6.75-$7.77 |
| Natural Gas | Ventura | 7/06 - 12/06 | 920,000 | $7.00-$8.85 |
| Natural Gas | NYMEX | 7/06 - 12/06 | 920,000 | $7.75-$8.50 |
| Natural Gas | Ventura | 7/06 - 12/06 | 920,000 | $7.76 |
| Natural Gas | CIG | 7/06 - 12/06 | 920,000 | $6.50-$6.98 |
| Natural Gas | CIG | 7/06 - 12/06 | 920,000 | $7.00-$8.87 |
| Natural Gas | Ventura | 7/06 - 12/06 | 460,000 | $8.50-$10.00 |
| Natural Gas | Ventura | 7/06 - 12/06 | 460,000 | $8.50-$10.15 |
| Natural Gas | Ventura | 7/06 - 10/06 | 615,000 | $9.25-$12.88 |
| Natural Gas | Ventura | 7/06 - 10/06 | 615,000 | $9.25-$12.80 |
| Natural Gas | CIG | 11/06 - 12/06 | 305,000 | $7.00-$8.65 |
| Natural Gas | Ventura | 1/07 - 12/07 | 1,825,000 | $8.00-$11.91 |
| Natural Gas | Ventura | 1/07 - 12/07 | 912,500 | $8.00-$11.80 |
| Natural Gas | Ventura | 1/07 - 12/07 | 912,500 | $8.00-$11.75 |
| Natural Gas | Ventura | 1/07 - 12/07 | 1,825,000 | $7.50-$10.55 |
| Natural Gas | CIG | 1/07 - 12/07 | 1,825,000 | $7.40 |
| Natural Gas | CIG | 1/07 - 12/07 | 1,825,000 | $7.405 |
| Natural Gas | Ventura | 1/07 - 12/07 | 1,460,000 | $8.25-$10.80 |
| Natural Gas | CIG | 1/07 - 12/07 | 912,500 | $7.50-$9.12 |
| Natural Gas | Ventura | 1/07 - 12/07 | 1,825,000 | $8.29 |
| Natural Gas | Ventura | 11/06 - 3/07 | 755,000 | $8.00-$9.80 |
| Natural Gas | Ventura | 1/07 - 12/07 | 1,825,000 | $7.85-$9.70 |
| Crude Oil | NYMEX | 7/06 - 12/06 | 92,000 | $43.00-$54.15 |
| Crude Oil | NYMEX | 7/06 - 12/06 | 73,600 | $60.00-$69.20 |
| Crude Oil | NYMEX | 7/06 - 12/06 | 46,000 | $60.00-$76.80 |
| · | Ready-mixed concrete and aggregate volumes for 2006 are expected to be higher than the record levels achieved in 2005. Asphalt volumes are expected to be slightly lower than 2005 record volumes. |
| · | Work backlog as of June 30 was approximately $763 million, including acquisitions, compared to $740 million at June 30, 2005. |
| · | A key element of the company’s long-term strategy for this business is to further expand its presence in the higher-margin materials business (rock, sand, gravel and related products), complementing the company’s ongoing efforts to increase margin by building a more profitable backlog of business and carefully managing costs. |
| · | Strong market and product demand, cost containment initiatives and continued operational improvement in Texas are expected to result in improved margins over 2005. |
| · | Revenues in 2006 are expected to be significantly higher than 2005 record levels. |
| · | The company anticipates margins to strengthen in 2006 as compared to 2005 levels. |
| · | Work backlog as of June 30 was approximately $523 million, including acquisitions, compared to $358 million at June 30, 2005. |
| · | Firm capacity for the Grasslands Pipeline is 90,000 Mcf per day with possible expansion to 200,000 Mcf per day. Based on anticipated demand, incremental expansions are forecasted over the next few years beginning as early as 2008. |
| · | In 2006, total gathering and transportation throughput is expected to increase approximately 5 percent to 10 percent over 2005 levels. |
| · | The company is analyzing potential projects for accommodating load growth and replacing an expiring purchased power contract with company-owned generation. This will add to the company’s base-load capacity and rate base. New generation is projected to be on line by 2011. A decision on the project to be built is anticipated by early 2007. |
| · | As described earlier, the corporation has entered into a definitive merger agreement to acquire Cascade Natural Gas Corp. When the acquisition is completed, it is expected to significantly enhance regulated earnings and cash flows. Regulatory approvals are anticipated to be obtained by mid-year 2007. |
| · | In September 2004, a natural gas rate case was filed with the Minnesota Public Utilities Commission requesting a revenue increase of $1.4 million annually, or approximately 4 percent. An interim increase of $1.4 million annually was effective Jan. 10, 2005, subject to refund. The final order in the amount of $481,000 annually, or 1.3 percent, was issued in May. A compliance filing will be submitted in August for Commission approval. The company has adequately reserved for the revenue subject to refund. |
| · | These businesses continue to pursue non-regulated growth by continuing to expand energy-related services. |
| · | Earnings at this segment are expected to be minimal in 2006, reflecting primarily the sale of the company’s Brazilian electric generating facility in June 2005, significantly higher interest expense related to the construction of the Hardin Generating Facility and lower revenues because of the bridge contract renewal at the Brush Generating Facility. The bridge contract will be replaced by a more favorably priced 10-year contract in April 2007. |
| · | This segment is focused on redeploying the funds from the June 2005 sale of the Brazilian facility and continues to explore for investment opportunities both domestically and internationally, using the corporation’s disciplined approach for acquisitions. |
| · | The company’s natural gas and oil production and pipeline and energy services businesses are dependent on factors, including commodity prices and commodity price basis differentials that cannot be predicted or controlled. |
| · | The construction, startup and operation of power generation facilities may involve unanticipated changes or delays that could negatively impact the company’s business and its results of operations. |
| · | Economic volatility affects the company’s operations, as well as the demand for its products and services and, as a result, may have a negative impact on the company’s future revenues. |
| · | The company relies on financing sources and capital markets. If the company is unable to obtain economic financing in the future, the company’s ability to execute its business plans, make capital expenditures or pursue acquisitions that the company may otherwise rely on for future growth could be impaired. |
| · | Some of the company’s operations are subject to extensive environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose the company to environmental liabilities. |
| · | One of the company’s subsidiaries is subject to ongoing litigation and administrative proceedings in connection with its coalbed natural gas development activities. These proceedings have caused delays in coalbed natural gas drilling activity, and the ultimate outcome of the actions could have a material effect on existing coalbed natural gas operations and/or the future development of its coalbed natural gas properties. |
| · | The company is subject to extensive government regulations that may delay and/or have a negative impact on its business and its results of operations. |
| · | The value of the company’s investments in foreign operations may diminish because of political, regulatory and economic conditions and changes in currency exchange rates in countries where the company does business. |
| · | The company’s pending acquisition of Cascade may be delayed or may not occur if certain conditions are not satisfied. Upon completion of the acquisition, the company may not be able to integrate Cascade’s operations effectively. |
| · | One of the company’s subsidiaries has filed suit against a non-affiliated natural gas producer which has been conducting drilling and production operations which the subsidiary believes is causing diversion and loss of storage gas from one of its storage reservoirs. If the subsidiary is not able to obtain relief through the courts or regulatory process, its storage operations could be adversely affected. |
| · | Weather conditions can adversely affect the company’s operations and revenues, as evidenced by hurricanes in the Gulf Coast region in 2005 causing some reduction in natural gas and oil production. |
| · | Competition is increasing in all of the company’s businesses. |
| · | Other factors that could cause actual results or outcomes for the company to differ materially from those discussed in forward-looking statements include: |
| § | Acquisition, disposal and impairments of assets or facilities. |
| § | Changes in operation, performance and construction of plant facilities or other assets. |
| § | Changes in present or prospective generation. |
| § | The availability of economic expansion or development opportunities. |
| § | Population growth rates and demographic patterns. |
| § | Market demand for, and/or available supplies of, energy- and construction-related products and services. |
| § | Cyclical nature of large construction projects at certain operations. |
| § | Changes in tax rates or policies. |
| § | Unanticipated project delays or changes in project costs, including related energy costs. |
| § | Unanticipated changes in operating expenses or capital expenditures. |
| § | Labor negotiations or disputes. |
| § | Inability of the various contract counterparties to meet their contractual obligations. |
| § | Changes in accounting principles and/or the application of such principles to the company. |
| § | Changes in technology. |
| § | Changes in legal or regulatory proceedings. |
| § | The ability to effectively integrate the operations and the internal controls of acquired companies. |
| § | The ability to attract and retain skilled labor and key personnel. |
| § | Increases in employee and retiree benefit costs. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2006 | 2005 | 2006 | 2005 | |||||
(In millions, where applicable) (Unaudited) | ||||||||
Consolidated Statements of Income | |||||||||||||
| Operating revenues: | |||||||||||||
Electric | $ | 40.9 | $ | 41.1 | $ | 85.9 | $ | 85.4 | |||||
Natural gas distribution | 45.8 | 54.7 | 198.1 | 199.7 | |||||||||
Construction services | 243.2 | 136.9 | 467.0 | 250.8 | |||||||||
Pipeline and energy services | 103.1 | 101.4 | 230.1 | 194.2 | |||||||||
Natural gas and oil production | 114.1 | 97.7 | 242.5 | 184.8 | |||||||||
Construction materials and mining | 484.9 | 394.0 | 718.6 | 581.1 | |||||||||
Independent power production | 11.7 | 13.7 | 23.0 | 23.5 | |||||||||
Other | 2.3 | 1.4 | 4.1 | 2.7 | |||||||||
Intersegment eliminations | (72.2 | ) | (70.7 | ) | (180.2 | ) | (147.7 | ) | |||||
973.8 | 770.2 | 1,789.1 | 1,374.5 | ||||||||||
| Operating expenses: | |||||||||||||
Fuel and purchased power | 16.9 | 14.5 | 33.2 | 30.7 | |||||||||
Purchased natural gas sold | 39.4 | 46.7 | 166.3 | 160.2 | |||||||||
Operation and maintenance | 690.9 | 515.3 | 1,175.4 | 845.3 | |||||||||
Depreciation, depletion and amortization | 69.1 | 51.6 | 132.5 | 104.5 | |||||||||
Taxes, other than income | 33.1 | 28.6 | 66.2 | 55.2 | |||||||||
849.4 | 656.7 | 1,573.6 | 1,195.9 | ||||||||||
| Operating income: | |||||||||||||
Electric | 1.9 | 4.4 | 9.3 | 11.3 | |||||||||
Natural gas distribution | (4.5 | ) | (1.9 | ) | 3.7 | 6.6 | |||||||
Construction services | 17.3 | 6.9 | 27.4 | 11.1 | |||||||||
Pipeline and energy services | 11.1 | 16.2 | 20.3 | 23.5 | |||||||||
Natural gas and oil production | 51.8 | 49.8 | 119.6 | 97.3 | |||||||||
Construction materials and mining | 46.4 | 34.5 | 35.9 | 25.0 | |||||||||
Independent power production | .2 | 3.5 | (1.2 | ) | 3.7 | ||||||||
Other | .2 | .1 | .5 | .1 | |||||||||
124.4 | 113.5 | 215.5 | 178.6 | ||||||||||
| Earnings from equity method investments | 2.9 | 15.4 | 6.1 | 16.7 | |||||||||
| Other income | 2.9 | 1.5 | 5.3 | 2.7 | |||||||||
| Interest expense | 19.1 | 13.3 | 33.2 | 26.4 | |||||||||
| Income before income taxes | 111.1 | 117.1 | 193.7 | 171.6 | |||||||||
| Income taxes | 39.6 | 36.9 | 69.0 | 57.0 | |||||||||
| Net income | 71.5 | 80.2 | 124.7 | 114.6 | |||||||||
| Dividends on preferred stocks | .2 | .2 | .4 | .3 | |||||||||
| Earnings on common stock: | |||||||||||||
Electric | .5 | 1.8 | 4.3 | 4.9 | |||||||||
Natural gas distribution | (2.5 | ) | (1.3 | ) | 2.8 | 3.5 | |||||||
Construction services | 9.7 | 3.7 | 15.1 | 5.6 | |||||||||
Pipeline and energy services | 5.6 | 8.7 | 10.2 | 12.0 | |||||||||
Natural gas and oil production | 31.0 | 29.9 | 72.2 | 58.8 | |||||||||
Construction materials and mining | 25.3 | 18.4 | 16.4 | 9.9 | |||||||||
Independent power production | 1.5 | 18.6 | 2.8 | 19.3 | |||||||||
Other | .2 | .2 | .5 | .3 | |||||||||
$ | 71.3 | $ | 80.0 | $ | 124.3 | $ | 114.3 | ||||||
| Earnings per common share: | |||||||||||||
Basic | $ | .40 | $ | .45 | $ | .69 | $ | .65 | |||||
Diluted | $ | .39 | $ | .45 | $ | .69 | $ | .64 | |||||
| Dividends per common share | $ | .1267 | $ | .1200 | $ | .2534 | $ | .2400 | |||||
| Weighted average common shares | |||||||||||||
outstanding: | |||||||||||||
Basic | 179.9 | 177.5 | 179.9 | 177.1 | |||||||||
Diluted | 181.1 | 178.6 | 181.0 | 178.1 | |||||||||
Operating Statistics | |||||||||||||
| Electric (thousand kWh): | |||||||||||||
Retail sales | 563,038 | 554,679 | 1,175,913 | 1,159,175 | |||||||||
Sales for resale | 85,235 | 115,346 | 251,644 | 313,346 | |||||||||
| Natural gas distribution (Mdk): | |||||||||||||
Sales | 4,587 | 5,320 | 18,840 | 21,157 | |||||||||
Transportation | 2,813 | 2,972 | 7,175 | 6,938 | |||||||||
| Pipeline and energy services (Mdk): | |||||||||||||
Transportation | 35,129 | 27,297 | 61,257 | 48,851 | |||||||||
Gathering | 21,194 | 19,692 | 42,926 | 39,666 | |||||||||
| Natural gas and oil production: | |||||||||||||
Natural gas (MMcf) | 15,242 | 14,627 | 30,604 | 29,054 | |||||||||
Oil (MBbls) | 471 | 406 | 921 | 773 | |||||||||
Average realized natural gas price | $ | 5.72 | $ | 5.49 | $ | 6.29 | $ | 5.26 | |||||
Average realized oil price | $ | 54.00 | $ | 42.60 | $ | 50.43 | $ | 41.21 | |||||
| Construction materials and mining (000’s): | |||||||||||||
Aggregates (tons sold) | 13,341 | 11,023 | 19,425 | 16,929 | |||||||||
Asphalt (tons sold) | 2,356 | 2,139 | 2,689 | 2,500 | |||||||||
Ready-mixed concrete (cubic yards sold) | 1,260 | 1,224 | 1,971 | 1,884 | |||||||||
| Independent power production:* | |||||||||||||
Net generation capacity (kW) | 437,600 | 279,600 | 437,600 | 279,600 | |||||||||
Electricity produced and sold (thousand kWh) | 202,778 | 90,762 | 291,275 | 128,012 | |||||||||
Other Financial Data** | |||||||||||||
| Book value per common share | $ | 11.09 | $ | 9.80 | |||||||||
| Dividend yield (indicated annual rate) | 2.1 | % | 2.6 | % | |||||||||
| Price/earnings ratio*** | 15.5x | 13.9x | |||||||||||
| Market value as a percent of book value | 220.1 | % | 191.6 | % | |||||||||
| Return on average common equity*** | 15.1 | % | 14.4 | % | |||||||||
Fixed charges coverage, including preferred dividends*** | 6.1x | 5.4x | |||||||||||
| Total assets | $ | 4,829.4 | $ | 4,095.7 | |||||||||
| Total equity | $ | 2,010.5 | $ | 1,774.4 | |||||||||
| Long-term debt (net of current maturities) | $ | 1,299.2 | $ | 1,119.7 | |||||||||
| Capitalization ratios: | |||||||||||||
Common equity | 60 | % | 61 | % | |||||||||
Preferred stocks | 1 | --- | |||||||||||
Long-term debt (net of current maturities) | 39 | 39 | |||||||||||
100 | % | 100 | % | ||||||||||
| * Excludes equity method investments |
| ** Reported on a year-to-date basis only |
| *** Represents 12 months ended |
