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2005 MDU Resources Group, Inc. Annual Report

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2005 MDU Resources Group, Inc. Annual Report MDU Resources Group, Inc. Building a Strong America / A Legacy of Leadership 2005 Annual Report MDU Resources Group, Inc. MDU Resources Group, Inc., a member of the S&P MidCap 400 index, provides value-added natural resource products and related services that are essential to energy and transportation infrastructure. MDU Resources includes natural gas and oil production, construction materials and mining, domestic and international independent power production, natural gas pipelines and energy services, electric and natural gas utilities, and construction services. Forward-looking statements This Annual Report 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 Part I, Item 1A – Risk Factors of the company’s 2005 Form 10-K. 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. Building a Strong America / A Legacy of Leadership On the cover Contents Employees are MDU Resources’ legacy Gatefold Behind Cover 16 Independent Power Production of leadership for the future. Representing Seeking more opportunities. 1 Highlights all business lines are, from left, 18 Pipeline and Energy Services Ray O’Donnell, Anna Marie Preston, Report to Stockholders 2 Maximizing vertical integration. Rick Wilmont, Mike Crone, David Barney 6 Corporate Governance and Gary Arneson. 20 Electric and Natural Gas 8 Board of Directors Distribution Supplying reliable energy. 9 Corporate Management 22 Construction Services 10 Community Leadership Meeting complex challenges. Employees lead the way. 24 Our Companies 12 Natural Gas and Oil Production Providing substantial returns. 25 Form 10-K 14 Construction Materials 120 Glossary and Mining Inside Back Cover: Growing market share. Stockholder Information Our Operations Our Vision With integrity, create superior shareholder value by expanding upon our expertise to be the supplier of choice in all of our markets while being a safe and great place to work. Our Mission Provide value-added natural resource products and related services that exceed customer expectations. Our Guiding Principles To achieve our mission, we will be guided by commitments to: Customers Provide high-quality, Natural Gas & Oil Production Construction Materials & Mining cost-effective products and services. Revenues (millions) $439.4 Revenues (millions) $1,604.6 Stockholders Produce a superior Earnings (millions) $141.6 Earnings (millions) $55.1 total return. Production Sales (millions) Natural gas (Bcf) 59.4 Aggregates (tons) 47.2 Community Recognize our responsibility Oil (million barrels) 1.7 Asphalt (tons) 9.1 Proved reserves Ready-mixed concrete to be an effective corporate citizen. Natural gas (Bcf) 489.1 (cubic yards) 4.4 Oil (million barrels) 21.2 Recoverable aggregate Environment Minimize waste and Corporate earnings contribution 52% reserves (billion tons) 1.3 maximize resources. Corporate earnings contribution 20% Ethics Conduct business with integrity and with respect for all. 2005 Key Statistics Employees Develop individual potential and teamwork to maintain employees as • Energy marketers • Federal, state and local • End-use customers governments our ongoing source of competitive advantage. • Natural gas utilities • General and commercial contractors • Residential and commercial Safety Perform all tasks with health developers and safety first. • Home builders • General public Major Customers Independent natural gas and oil Other construction materials companies such as Comstock Resources, companies such as Ashland, Cemex, EnCana, Encore Acquisition, Meridian, CRH (Oldcastle), Eagle Materials, St. Mary Land and Exploration, Stone Florida Rock Industries, Hanson Energy, Swift Energy, Unit Corporation, Building Materials, Holcim, LaFarge Whiting Petroleum and XTO Energy North America, Martin Marietta Materials, Rinker Group, TXI, Trinity Industries, U.S. Concrete and Vulcan Materials Competition/Peers * Excludes equity method investments. NOTE: The corporation also had revenues from other miscellaneous operations totaling $6.0 million and earnings of $700,000. Consolidated revenues reflect intersegment eliminations of $375.9 million. Independent Power Production Pipeline & Energy Services Electric & Natural Gas Distribution Construction Services Revenues (millions) $48.5 Revenues (millions) $480.3 Revenues (millions) Revenues (millions) $687.1 Earnings (millions) $22.9 Earnings (millions) $22.1 Electric $181.2 Earnings (millions) $14.6 Electricity produced Pipeline (MMdk) Natural gas distribution $384.2 Corporate earnings contribution 6% and sold* (million kWh) 254.6 Transportation 104.9 Earnings (millions) Corporate earnings contribution 8% Gathering 82.1 Electric $13.9 Corporate earnings contribution 8% Natural gas distribution $3.5 Electric sales (million kWh) Retail 2,413.7 Sales for resale 615.2 Natural gas distribution (MMdk) Sales 36.2 Transportation 14.6 Corporate earnings contribution Electric 5% Natural gas distribution 1% • Nonaffiliated electric utility • Natural gas utilities • Electric customers • Electric utilities and other energy companies, • Industrial gas users Residential 97,786 • Natural gas utilities including California Department • Commercial gas users Commercial 18,605 • Telecommunications companies of Water Resources, Oglethorpe • Municipal gas systems Industrial and other 1,976 • Municipalities Power, Powerex, Public Service Natural gas marketers Industrial and commercial • Natural gas customers • Company of Colorado and • electrical contractors Residential 222,379 Trinidad and Tobago Electricity General contractors Commercial 28,423 • Commission Industrial 127 Other independent power producers Other natural gas pipeline and Other energy providers, including Other construction services contractors that operate power plants under gathering companies such as propane and fuel oil dealers, electric such as Dycom Industries, EMCO, contract to nonaffiliated utilities, Bear Paw Energy, Colorado Interstate utilities, rural electric cooperatives Exelon, InfraSource, Integrated Electric including American Electric Power, Gas, Kinder Morgan, National Fuel Gas, and other electric and natural gas Services, MasTec, MYR Group, Quanta Calpine, CMS Energy, Dominion, Northern Border Partners, ONEOK, utilities such as Allete, Alliant Energy, Services and other industrial and Duke Energy and PPL Questar, Thunder Creek Gas Services Aquila, Black Hills Corporation, commercial electrical contractors and Western Gas Resources CenterPoint Energy, IDACORP, NorthWestern Energy, Otter Tail Power and Xcel Energy Highlights Increase/Decrease Years Ended December 31, 2005 2004 Amount Percent (In millions, where applicable) Operating revenues $3,455.4 $2,719.3 $736.1 27 Operating income $ 448.0 $ 320.7 $127.3 40 Earnings on common stock $ 274.4 $ 206.4 $ 68.0 33 Earnings per common share – basic $ 2.31 $ 1.77 $ .54 31 Earnings per common share – diluted $ 2.29 $ 1.76 $ .53 30 Dividends per common share $ .74 $ .70 $ .04 6 Weighted average common shares outstanding – diluted 119.7 117.4 2.3 2 Total assets $4,423.6 $3,733.5 $690.1 18 Total equity $1,891.6 $1,681.0 $210.6 13 Long-term debt (net of current maturities) $1,104.8 $ 873.4 $231.4 26 Capitalization ratios: Common equity 63% 65% Preferred stocks – 1 Long-term debt (net of current maturities) 37 34 100% 100% Return on average common equity 15.7% 13.2% Price/earnings ratio 14.3x 15.2x Book value per common share $ 15.65 $ 14.09 Market value as a percent of book value 209.2% 189.4% Full-time employees 10,030 8,058 Achieved record earnings of $274.4 million. Increased earnings per common share by 30 percent. Grew revenues by 27 percent. Increased dividends for 15th consecutive year. Named to Forbes Platinum 400 list for 6th year. MDU Resources Group, Inc. 1 Report to Stockholders At MDU Resources, strong leadership is a deep-seated legacy. It is the theme that runs through our history, connecting past with present. With integrity as their guide, our people have used their expertise to build this company from a small utility on the prairies in 1924 to today’s $3.5 billion diversified international enterprise. Each person plays an important role in providing the goods and services that help keep America’s infrastructure strong. On the following pages, you will meet some of our employees who are leaders in our workplaces, our industries and our communities. Annual Stockholder Return Thanks to our employees, MDU Resources achieved record financial results last year. (Percent) Revenues for 2005 totaled $3.5 billion, up 27 percent from $2.7 billion in 2004. We also 26 12 18 14 achieved our highest earnings, $274.4 million, up 33 percent from $206.4 million in 2004. Earnings per common share, diluted, totaled $2.29, up 30 percent from $1.76 in 2004. The growth in earnings continued to be driven by our strategically diverse business model. Our natural gas and oil production business benefited from prices that were much higher than in the prior year, and our other business units also performed well. This strong performance resulted in an outstanding one-year total return of 26 percent for our shareholders. For the five-year period ending with 2005, our total average 1 5 10 20 annual return was 12 percent, while our peer group average return
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