MDU - Earnings call transcript Q2 2018 | MDU Resources Group, Inc.

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Operator

Hello. My name is Shelby, and I’ll be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2018 Second Quarter Conference Call. [Operator Instructions] This call will be available for replay beginning at 5:00 pm Eastern Time today through 11:59 pm Eastern Time on August 15. The conference ID number for the replay is 2767248; again the conference ID number for the replay is 2767248. for is dial or to number the XXXX-XXX-XXXX replay XXX-XXX-XXXX. The MDU the now Financial to of like would call Officer Group. to Treasurer Chief I President, turn over Vice Jason and Resources Vollmer, Thank you. Mr. begin may conference. Vollmer, you your

Jason Vollmer

Thank you, our XXXX to is release remarks. earnings will the call everyone public call. conference Internet, broadcast second accompany and This slides quarter conference being and Shelby, welcome to live over the our

follow like would website view the link go call. please conference our and to slides, at to www.mdu.com If the the to you

Our earnings release is on our also website. available

make course forward-looking Section the of and During this the presentation, of within of Exchange we will meaning of XXXX. certain the Act Securities statements XXE

differ company and its expectations believes on beliefs the reasonable that results materially. based Although may are assumptions, actual

that actual please cause discussion For recent results Risk in factors a to refer XX-K. our of differ, Form Factors, most XA, Item to may

Dave and for of the For the After presentation our highlights formal line his we’ll financial call Dave’s to from President key remarks. today, remarks, will open turn then Resources, discuss for Goodin, the and questions. quarter I over MDU CEO

earnings a in per share or to share operations and XX.X earnings to per Chief share or Dave Thiede, addition in Gas, million and second President Yesterday, Knife MDU or $X.XX XX.X and Plains myself, Accounting million members announced are Controller will basis, be Utilities; continuing Natural Officer Great Nicole per CEO of for $X.XX compared XXXX. Energy; CEO of quarter WBI Resources. of Hastings, Montana-Dakota and In Gas Construction President Trevor Jeff and we Natural Kivisto, available and to $X.XX XX.X Stephanie Group; President On to were CEO River Cascade and questions Services share Vice today management Corporation; team million of XX.X answer per Gas, MDU and of our our consolidated CEO Dave who $X.XX Barney, of Intermountain million or XXXX. compared President, Barth, President from

selling, of earnings compared million income quarter million gross second expense primarily expense, contracting revenues workloads, by the gross Tax XXXX, customer Our Higher Offsetting increased increase in in with which sales primarily million specialty for administrative inside Cuts rentals, workloads. million. higher quarter a lower XXX.X XX.X due increase XXXX XXX.X to result contracting result demand payroll lower XX.X outside operating the the to and margins compared were was related earnings of to in from offset in partially the outside general construction reported of tax enactment the and by services second revenues of costs, income. Jobs equipment specialty This business was margins and driven of decreased Act. of resulted

our the construction of operating million quarter XXX.X quarter. from million, Jobs partially business of result prior reported Our by compared the Cuts increase with in overall period material impacted in XXXX to margins, which for earnings Act. enactment up The second due the product earnings Lower expense income, XXX.X Tax of higher the XX.X construction the lower materials was tax and margins. same negatively to income were million offset XX.X revenues of in

depletion as expense. the classes. costs from as compared for increase Partially higher higher and This offsetting electric and sales increase all maintenance adjusted electric utility to the the The earned X.X XXXX. from million combined amortization largely second retail related XXXX. reported contract in our to in of gross in higher earnings depreciation, reflects major higher million X.X margins, For business to services quarter, quarter resulting earnings the of expense, compared utility million operation million quarter customer segment X and well X% was increased X.X volumes payroll

Utilities income of a in included reported tax XXXX. the our growth million and second by offset increased and the increase which this remarks. than Also amortization loss Commission’s segment costs to same main decrease former call due in related additions. Washington seasonal The revenues. for contributing X.X Tax over in for period earnings to non-regulated adjustments Transportation in operational of from enactment decrease a million driver Our business, general reflects and depletion higher Dave from depletion to projects were well depreciation, storage and expense. rate the increase costs. X.X offsetting the X.X and lower taxes the certain reflects one-time volumes organic expense, to compared Act was as amortization pipeline project natural Cuts higher to were projects. Increased earnings case higher expense, the recent revenues our reform to in to XXXX. for related new higher from quarter midstream his the increased related was on earnings decision, million more federal expense Also This quarter of payroll and loss Dave? utility higher plant compared maintenance operation in largely transportation was million X.X like And now, and the the decreased which I'd as turn depreciation, effects At maintenance behind earnings of and the non-regulated gas Jobs increased

Dave Goodin

for market taking your Well, for Jason We released and you results. Thank to MDU time interest today after everyone. quarter the Resources our yesterday. in second earnings you, our good discuss to thank stock quarter the closed second join and afternoon, us

All build quarter on second pleased and specialty substation businesses along to the strong and work to XX% performance I'd in XXX high solid XX% progress for of a our of our in with Construction million, distribution a our addition This continued At perform exceptional this the higher during construction companies date is group, projects. execution the this we've continue like see year sales. continued construction earnings am start they education made deliver than platform. and momentum to outside work, up services equipment quarter reporting we services is with who saw just continues of rentals the business to to I higher manufacturing high-tech growth year. year for last growth, with our and multiple business at healthcare volumes than nearly transmission, record year customers. to to which provide particularly level from contracting and engineering and tools at its ago. Backlog electrical higher first

million work large seeing the of As southwest from to also we streams, compared its construction of materials million XXX our in services projects a revenue construction northwest, noticeable territories, solid across business, our the continues with pickup most and we markets. in service reported to the Midwest backlog At excel are all increase backlog materials a materials enhance our backlog ago. million. with announced from Earlier of of XXX and this our of third construction This market. one purchase up the year Molalla we construction acquisition year and the expand the our acquisition was metro Redi-Mix Portland will strong position Rock March This month, XX in Products. XXX

business opportunities pursue the with development along sectors. Our acquisitions materials to the service for continue teams construction construction in

ended construction a billion X.X of XXXX to backlog projected be in saw margins billion billion. higher our to record quarter companies are is We’re range our saw for in slightly be of be which time. anticipating businesses than XXXX. was forward. about the going comparable businesses in we billion the our to range for to are revenues with more opportunities XXXX, and than than range billion we forecasting construction a X.X Combined, X.X to higher we of This the for revenues materials at that Both X.XX that Revenues of X.XX construction in the X.XX are billion. to these services record a excited

to sales as good our overall in volumes turning as and well combined energy X.X% our customer had terms we growth. gas Now quarter higher companies, of platform, natural electric regulated at utility a

five to to base grow next the our its Over expects invest approximately X across utility billion plans million X-state its X% service X.X X% annually years, by territory. to customer and

We expect focus result reliability, the utility enhance to five The this natural of safety compounded projects rate that in along gas over continues pipeline system years. on deliverability. base with next annually X% growth to will

be several work are Thunder line wind first the month. and just unit site fact, major very installed project of was continues projects, to to components all materials, utility sight expansion on wind this Nearly last electric farm Our track in completed including much Spirit is turbine on on the fall.

line In continue they addition, construction also at progressing in Ellendale transmission nicely, to very is business, quite XXXX. with well. the completion anticipated kV Big XXX Stone pipeline South our to At perform

completed than with expected system, the in and capacity For is expansion XX capacity the section line volumes the particularly bringing due of we gas X.X feet on time on projects which fourth budget natural and that mile transported increased XXXX. cubic per on XXXX Bcf projects two project XXX are million mile These to projects expansion of capacity. in day. XX Construction that XX be are its that will through commitments our more add system completing in sufficient pipeline total valley capacity, for gas day transportation to significant be the two currently per expansion project. to consecutive quarter, have underway along this natural to service Those company record will

County currently to finalizing XX-mile that and pursue Lake gas year this projects sufficient fall the this service projects North XX customer the the Dakota growth a this Demicks also record business Montana begin to line to both addition Bakken, for have by Construction and next being additional XXXX. in is construction a In projects two construction, section With pipeline early Billings, production of is actively at the pipeline McKenzie of demand. to expected in in project expected growth support in the additional commitments. levels expansion increasing continues be business are under organic to XX-inch received on plans project, natural

current compounded long After of growth individual X%. to at are look that overall completes X% track share on reaffirming to per range earnings quarter second results, expectations. annual our we and this would the the discussion $X.XX of we a I While and with to as our rate your corporation, per we our share term reiterate business $X.XX are unit looking

value execute that. doing produce we has plans, Our focus significant at growth Resources business and projects we as targeted our just been are acquisitions MDU organic to and long-term

while XX and We consecutive we good liquidity have continue past a ratings, dividend shareholders, years. it with to for our for maintain a strong years, the sheet for solid balance position XX credit competitive increasing provided a

with strong safety, on continue always, Operator? operating ask act appreciate building questions. open committed to your Resources a on our now and to as commitment value As while MDU both in MDU line a of tag shareholder the and integrity I creating Resources line we and to superior that America. is to we focus interest

Operator

from question Instructions] comes Ellinghaus [Operator first Chris Williams Capital. Your of

Chris Ellinghaus

be it little infer fair to market a and backlog With I assume a disappointed the so fourth strong there's the strong, earnings is the question, third guidance that and today. with guidance in pretty would or being your imply construction for First from quarters? particularly your outlook

Dave Goodin

this Chris, Dave. Yeah. is

for that our us quarter some tier given strong know is followed exposure quarter especially. business particularly you’ve third the a our and So in for northern time us, construction

backlog on of yes, companies. two you're that. with so, record good combined correct, And certainly billion between X.X feel about the the absolutely spot We construction

We we Act also be be income expect margins might any to them Jobs comparable on statement. sought the and Tax -- to that the note construction notwithstanding company’s year-over-year benefit that increasing, Cuts slightly

a it's in valid a again. year lot this so raise, clearly see far, is So I remaining we of that’s point work as there think you

up. think tier you’ve strong I historically has and a really quarter northern companies for quarter our Third exposed been it so very framed construction

Chris Ellinghaus

In Okay. or gas have negative second were any quarter, gas on impact side, that positive the the up you did the but weather said volumes utilities? on

Dave Goodin

Chris, over. the Nicole I'll that. is can address She that in room. turn

Nicole Kivisto

Yeah.

just where our fact all the quarter but the and So weather quarter, slightly, almost up types have considering side. an significant we de-coupling have Montana we're in to really or the for on not states, we does material Chris, volumes those have do factor essentially second of not weather weather impact, so were normalization down our for the gas was mechanisms Idaho a that and of don't

Chris Ellinghaus

the that are sure successes a strip. Jeff, there's for or sure ongoing, stadium of just not Vegas, couple projects and you for be like about the are could whether at lot moment in projects this a in the the on having, particularly works of I’m talk might should Dave be significant you there on what

Dave Goodin

one. we Jeff companies. CSG will take have presence That's Thank that with the where the you, Chris.

Jeff Thiede

Chris. question, the for Thanks

years early picked we've and Our gaming up momentum building see project we're large believe and underway. pursue, fit, that timing in referred for two on protection significant well. on contract stadium are there we've We're We and project pre-construction security, turn our for a a for projects also seen the on take projects are get Las additional that to. Vegas focused backlog been timing construction fire is you whether resources, we pleased our more we We've significant that depending the hospitality large is mechanical and capture we'll evaluating will workloads. those market that it or increase into upon to work the involved we electrical work a for will in to stages not as of and opportunities of

labor We’re concerned about strong businesses teams our availability, safety are we've growing and but Las Vegas. and in got

Chris Ellinghaus

I assume that’s you currently talked construction? that project one the about the second under is

Jeff Thiede

And correct. Bombard Electric have Bombard Mechanical work. we contracted and that That's for

Operator

Wells from Akers Your Fargo. Sarah comes of next question

Sarah Akers

Can one-time Washington you to the quantify that adjustment readout? related

Dave Goodin

that. on touch will Nicole

Nicole Kivisto

the Sarah for Thanks, question. Yes.

If related to related reform. terms order. Washington I to we of the quarter, on assumption a our the to of case in -- that had and over of $X half pieces tax were reduction During million quantify earnings was federal settlement the rate out period about

So the to our January return. and we could benefit in fact when are that X our X earnings the had August assumed our original implemented interim we in due filing, would keep below be between rates

reflecting return of impact date customers, to to reserve we did With the the in benefit year the quarter. order that

million So -- settlement expensing the certain to remaining relates the the was with reflecting significant a that expense deferred. $X that piece of the adjustment. we one-time The O&M previously had items amount of

about in the million that for quarter. impact So was total $X a

Sarah Akers

year, up going are utility sticking level the this over the we looks and then about And the think O&M half of it O&M first growth trend expecting then of with like just you that how should in cost X% utility, is combined forward?

Nicole Kivisto

Yeah. items. a utility hitting what factors for of our in that are our outside rate couple would run There's are that O&M of year-over-year consider really I total normal

expense what to would our referenced costs, of had O&M and take to where previously we So, them that one-time would I one be we just were on be a deferring.

a are that conservation offsetting was of due addition we're to change in and we type In accounting previously where treatment, then revenue, treatment in that, to expenses expensing different. some that the

last year's included So results that. not would have

when So not accounting in of change look really it's a comparison a at comparable the because the you treatment. fair period,

payroll at two take more normal year-over-year. increases were you O&M, a if would total items items those normal So you of to as run out, for in our looking rate including be such

and includes referencing out is really would comparable. of, just the So one a out one be would what you're not I X% two call, of period

anticipate would rate a we run more So, O&M. in of normal

Sarah Akers

what's And the Great. in just then can lower driving construction, margins lastly you the on product give more details quarter? on material

Dave Goodin

Thanks for Sarah. turn over this I’ll to Dave Barney. the question,

Dave Barney

earlier not We're maintenance of most and product margins really are and the pricing higher date, Year losing material due power. markets. mix down to season in different our to costs any

the expect So margin we're margins, fact, really losing we throughout not increase to year. in

Operator

Your next Ridzon of question comes from KeyBanc. Paul

Paul Ridzon

quarter particularly with the materials? How was businesses, second weather in the regards construction to

Dave Goodin

We'll with Jeff to and Paul. move question, Barney the for Thanks start on then Thiede. we'll Dave

Dave Barney

better was did some the Midwest have last market. issues in Californian Idaho, year, Oregon, our work in than we Construction but

down. second did some rain. the days construction had year. built our of got of two Minnesota good at markets you markets. companies. some that it asphalt with That had half have us expect slowed in the we Montana for a and look We rain there, affected when the a Our it affected And XX companies quarters up of lot next our We've melt, and work our then record the of Iowa snowfall

Paul Ridzon

did weather from How standpoint? treat you July a

Dave Barney

tell out got going can’t we're good. I you the to we're was there, be July, you, busy. we’re tell July field, on, so haven’t I numbers we’re but on I can busy,

Paul Ridzon

to to always looking have update, this lower your ask of benefit And an started for back the try question, customers taxes? then I claw just just,

Dave Barney

Not at all.

that our We haven't side. seen in even private anywhere,

Dave Goodin

question customers use let’s Paul, to over to at and transfer Yeah. looking their Jeff that same phrase. to Thiede back as your claw

Jeff Thiede

any in by and We more Rocky work the those good backs weather by customers Mountains some record we significant California. to haven't the were cooperating, the impacted the the in claw Back that from well and in is seen weather, snow work got levels and in as of mild pushed got Northern Midwest, impacted but pack areas. some some now we've some our out not impacts

Paul Ridzon

Sorry, missed What that. I happened in California?

Jeff Thiede

year. in that ready we part we’re the contractors, well and of the positioned, we’ve but of work is released we've resources large were for wasn’t utility quarter, quarter, and the got the Work higher be anticipating one next this fourth our we're the in than experienced it will in volumes first much

Operator

next Your [indiscernible]. comes from question

Unidentified Analyst

on focus $X.X the program of, just I'll billion. in capital here, terms under

just and looks of cash is or operating consolidated forecast. just I'm Just equity looking zero plans to terms flows program the through here you have and in obviously are very basic the debt like is like operating which capitalized. wondering sheet, internally incremental it to that, you at that well drip balance even and anything some funded cash other the

Jason Vollmer

I Jason. is question. This Yeah. take can that

on think what may the at in release, release there I quarter higher as year. flows you're our a are operating what disclosed had operating flows, cash cash here bit originally the for expecting versus forecast from quarter we we see right than second little we the first look we you

certainly that. So that helps with

understand, note some for here, CapEx an acquisition in you that. seen which here followed typically incremental which to if as build our be in we CapEx saw release would those in activity have We well, we you in our acquisitions as, do a the while, uptick forecast, not you’d us to

our course any we given acquisition That by are and we activity. XXXX, of equity equity. issue XXXX, would haven't could as guidance driven expectations far but be additional for As beyond not

do could we had So to some where sense it we some that. acquisitions equity, issue if made

an second Knife in in XX-Q consideration. of small out, that acquisition quarter, to a the equity here issued piece comes our a quarter at equity amount see River you'll in looking we matter a Form As the to second seller the of due when related as case of for the fact,

Unidentified Analyst

at the utility program it's fairly pipeline midstream and CapEx a When the robust. you take this period, look over

So regulated now in how program utility at to properties, about over in you you. I'm history wondering how looking be midstream, the that gas to terms relation consider think you of front opportunity think do pipeline of or your corporate various you in relationship fleet, about capital acquisitions in of or have it that electric

Dave Goodin

Yes. Great question.

XXX of both million so pipeline external the billion in and your spot to outlined see related within So, program acquisition businesses. as I we've earmarked five is the about businesses and regulated our likely two of on. that about towards is our our that that think platform, dollars capital do as utility not or geared year think roughly and year to I so to world, XX% we've any regulated to the forecast regulated put is would What this it about that we construction question to started see we X.X

CapEx primarily how the we've we've that the we those early regulated platform activity see so continuing related incremental and year yet grown any would to this envision, construction -- again XXs, that looking program materials five be have So within the that's taking organic three about construction acquisitive platform the started and the those capital acquisitions opportunities companies will growth businesses acquisitive at that at our to been year. XXX the as we XXX two we've since to current different at done utilities since early envision

Unidentified Analyst

horizon, opposed within and in of be more large capital business today? and seem terms and would terms as is would likely that pipeline of in terms both have external to to within to it So, the acquisitions of pipeline seems, utilities well organic the increases right you be in utility program as the the over it's construction any that a and regulated, the space base having now the midstream foundation focus like where as there growth midstream the

Dave Goodin

a while that would organic the Yeah. forecast and of I activity again five regulated on basis of year XX% those see chance much the things the or both the on greater than probability happening. acquisitive sight we wouldn't we pipeline are take very as an at table. our I it's platform sector. put off line though utility And in say CapEx

In fact, higher oftentimes, that. of probability quite

believe sight and the we So line two like to businesses. of in it's quite regulated related to as particular,

Unidentified Analyst

looking the terms those interest pipeline acquisition within have, you utility the the given doing what potentially two to be of area, you construction within midstream organic both or and And opposed business? you would external for or in would businesses an foundation entice what the as you

Dave Goodin

Yeah.

means think utility certainly could from I base and sense, make we shareholders in create the have track a broader value of shareholder space space a it to both in assets, markets pipeline would certainly which we be a the on deal perspective. there

the looked certainly, to number we’ve last low of years, As at have rates that we've with interest experienced, price the continued over multiples climb. those those

that challenging can make particularly the quite And what utilities deal be sense. the three in some multiples so acquisitive back I we the in in recent have are think some however, see challenging the that to the we've of utility shareholder and we've of -- been value do timeframe, climbed deals, to levels seen that space, XXXX-XXXX

Operator

Paul Ridzon KeyBanc another question. has of

Paul Ridzon

just I -- wanted in revenues. just a for has higher follow-up accounting that I that the impact it's on changes because heard? Is offset what clarification I earnings, Nicole. no a had

Nicole Kivisto

correct. is That

increase to me O&M related Let clarify, conservation. the

conservation, would the absolutely order right. make run the costs a on factors deferred. one was clarifying neutral it two our offset I hit there, that of would the took quarter, explaining had was in a than Washington be earnings certain conservation. you're the second delta we caused but normal the We little were time revenue That in that that expensing see that we there rate. year-over-year on So One different bit

Operator

[Operator Instructions] Carl And do a Utility from you Financial. have of Seligson question

Carl Seligson

you that what’s current going interest, will platform looking at, bit you that acquisition from going a are talk like the about platform, you do what’s within shareholder little saying I where if are more your and of be it’s wonder harder to it's the lot generality was regional, your expand or what stay more a in to to here? them specifically getting and expensive the I your you on interested comments could got

Dave Goodin

What years, I appreciate grown over the for X% million a we growing been question. utility X.X the investment, appreciate see about acquisitive acquisitive that's utility next our about I Certainly, to Carl, past, today that activity. Yeah. When think states. annual some our instance X think it's through and customers is compounded utility is rate rate. the on growth through I especially our organic five base over

I that line the over years, think quite of loaded fact, as we're like investments front at the about So the next making the sight in five we that's end utility.

I think as your shareholder question forward we could for which us is that maybe a something little a we well. a speculative to would so ways obviously be might far in find be be way as value fit what looking exactly would create that was

specific And I'm going to nature. again it's I because here my somewhat be speculative so not think in responses in

Operator

further are to over conference closing question. remarks. back would to there turn time, I for now management this At like any no the

Dave Goodin

you, Thank Shelby today. participating on and everybody call here again appreciate the

of XXXX, along number earlier, half of noted first on solidly having have projects underway. with executed a we the As growth we

on optimistic with our thank the We the the are in I’ll committed to Thank We your back America call Resources. With year it along your beyond. a opportunities today building that, we’ll call participation MDU of continued and appreciate you. strong being for and about and you rest close the interest hand operator. the for to

Operator

Thank call. you Resources MDU today’s conference Group your participation. concludes for This

You may disconnect. now

MDU Resources (MDU) 1 Aug 182018 Q2 Earnings call transcript