UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________

Commission file number 1-03480

MDU RESOURCES GROUP INC

(Exact name of registrant as specified in its charter)


Delaware						30-1133956
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1200 West Century Avenue

P.O. Box 5650

Bismarck, North Dakota 58506-5650

(Address of principal executive offices)

(Zip Code)

(701) 530-1000

(Registrant's telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	MDU	New York Stock Exchange

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

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

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


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

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

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of ~~October~~April 28, ~~2021:~~2022: 203,350,740 shares.


Index
			Page
Definitions			3
Introduction			5
Part I -- Financial Information
Item 1. Financial Statements			6
Consolidated Statements of Income -- Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~			6
Consolidated Statements of Comprehensive Income -- Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~			7
Consolidated Balance Sheets -- ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020~~2021			8
Consolidated Statements of Equity -- ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~			9
Consolidated Statements of Cash Flows -- ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~			1110
Notes to Consolidated Financial Statements			1211
1. Basis of presentation			1211
2. New accounting standards			1211
3. Seasonality of operations			1311
4. Receivables and allowance for expected credit losses			1312
5. Inventories and natural gas in storage			1412
6. Earnings per share			1413
7. Equity			1413
8. Accumulated other comprehensive loss			1513
9. Revenue from contracts with customers			1615
10. Business combinations			1916
11. Leases			2017
12. Goodwill and other intangible assets			2017
13. Regulatory assets and liabilities			2119
14. Fair value measurements			2220
15. Debt			2422
16. Cash flow information			2523
17. Business segment data			2524
18. Employee benefit plans			2826
19. Regulatory matters			2826
20. Contingencies			2927

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3229
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5247
Item 4. Controls and Procedures			5248
Part II -- Other Information
Item 1. Legal Proceedings			5449
Item 1A. Risk Factors			5449
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5649
Item 4. Mine Safety Disclosures			5649
Item 5. Other Information			5649
Item 6. Exhibits			5649
Exhibits Index			5750
Signatures			5851

~~Inde~~xIndex

Definitions

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


Abbreviation or Acronym
~~2020~~2021 Annual Report			Company's Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021
AFUDC			Allowance for funds used during construction
ASC			FASB Accounting Standards Codification
ASU			FASB Accounting Standards Update
~~Big Stone Station~~			~~475-MW coal-fired electric generating facility near Big Stone City, South Dakota (22.7 percent ownership)~~
~~Brazilian Transmission Lines~~			~~Company's former investment in companies owning three electric transmission lines in Brazil~~
Cascade			Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital
Centennial			Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of the Company
Centennial Capital			Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial
~~Centennial Resources~~			~~Centennial Energy Resources LLC, a former direct wholly owned subsidiary of Centennial~~
Company			MDU Resources Group, Inc.
COVID-19			Coronavirus disease 2019. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency.
Coyote Creek			Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation
Coyote Station			427-MW coal-fired electric generating facility near Beulah, North Dakota (25 percent ownership)
dk			Decatherm
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act
EPA			United States Environmental Protection Agency
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
Fidelity			Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings (previously referred to as the Company's exploration and production segment)
GAAP			Accounting principles generally accepted in the United States of America
GHG			Greenhouse gas
Great Plains			Great Plains Natural Gas Co., a public utility division of Montana-Dakota
~~IBEW~~			~~International Brotherhood of Electrical Workers~~
Intermountain			Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital
~~IPUC~~IRS			~~Idaho Public Utilities Commission~~Internal Revenue Service
Knife River			Knife River Corporation, a direct wholly owned subsidiary of Centennial
kWh			Kilowatt-hour
LIBOR			London Inter-bank Offered Rate
MDU Construction Services			MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial
MDU Energy Capital			MDU Energy Capital, LLC, a direct wholly owned subsidiary of the Company
MISO			Midcontinent Independent System Operator, Inc., the organization that provides open-access transmission services and monitors the high-voltage transmission system in the Midwest United States and Manitoba, Canada and a southern United States region which includes much of Arkansas, Mississippi, and Louisiana.
MMcf			Million cubic feet
MMdk			Million dk
MNPUC			Minnesota Public Utilities Commission
Montana-Dakota			Montana-Dakota Utilities Co., a direct wholly owned subsidiary of MDU Energy Capital
MW			Megawatt

~~Inde~~x


NDDEQ			North Dakota Department of Environmental Quality
NDPSC			North Dakota Public Service Commission
~~NERC~~			~~North American Electricity Reliability Corporation~~
~~Non-GAAP~~			~~Not in accordance with GAAP~~
Oil			Includes crude oil and condensate
PHMSA			Pipeline and Hazardous Materials Safety Administration

Index


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

~~Inde~~xIndex

Introduction

The Company is a regulated energy delivery and construction materials and services business. The organizational entity was originally incorporated as Montana-Dakota under the state laws of Delaware in 1924. Pursuant to an internal holding company reorganization completed on January 1, 2019, the Company was incorporated under the state laws of Delaware. Its principal executive offices are located at 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701) 530-1000.

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

The Company's mission is to deliver superior value to stakeholders by providing essential infrastructure and services to America. The Company's strategy is to deliver superior value with a two-platform model of regulated energy delivery and construction materials and services, ~~businesses,~~ while pursuing organic growth opportunities and ~~using a disciplined approach to~~ strategic acquisitions of well-managed companies and properties.

~~The Company focuses on infrastructure and is Building a Strong America® by providing essential products and services through its regulated energy delivery and construction materials and services~~ Each of the Company's platforms ~~which~~ are ~~both~~ comprised of different operating segments. Most of these segments experience seasonality related to the industries in which they operate. The two-platform approach helps balance this seasonality and the ~~risk~~risks associated with each type of industry. Through its regulated energy delivery platform, the Company generates, transmits and distributes electricity and provides natural gas distribution, transportation and storage services. These businesses are regulated by state public service commissions and/or the FERC. The construction materials and services platform provides construction services to a variety of industries, including commercial, industrial and ~~governmental~~utility customers, and provides construction materials through aggregate mining and marketing of related products, such as ~~ready-mixed~~ready-mix concrete, asphalt and asphalt oil.

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

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

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

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

~~Inde~~xIndex

Part I -- Financial Information

Item 1. Financial Statements

																MDU Resources Group, Inc.
Consolidated Statements of Income	Consolidated Statements of Income									Consolidated Statements of Income
(Unaudited)	(Unaudited)									(Unaudited)
		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020				2022		2021
		(In thousands, except per share amounts)										(In thousands, except per share amounts)
Operating revenues:	Operating revenues:									Operating revenues:
Electric, natural gas distribution and regulated pipeline	Electric, natural gas distribution and regulated pipeline	$	237,065	$	210,115	$	940,017	$	870,151	Electric, natural gas distribution and regulated pipeline		$	553,456	$	442,381
Non-regulated pipeline, construction materials and contracting, construction services and other	Non-regulated pipeline, construction materials and contracting, construction services and other	1,348,948		1,377,174		3,297,591		3,277,440		Non-regulated pipeline, construction materials and contracting, construction services and other		863,103		785,557
Total operating revenues	Total operating revenues	1,586,013		1,587,289		4,237,608		4,147,591		Total operating revenues		1,416,559		1,227,938
Operating expenses:	Operating expenses:									Operating expenses:
Operation and maintenance:	Operation and maintenance:									Operation and maintenance:
Electric, natural gas distribution and regulated pipeline	Electric, natural gas distribution and regulated pipeline	90,058		89,080		273,796		259,791		Electric, natural gas distribution and regulated pipeline		97,665		94,333
Non-regulated pipeline, construction materials and contracting, construction services and other	Non-regulated pipeline, construction materials and contracting, construction services and other	1,122,840		1,124,939		2,828,557		2,804,398		Non-regulated pipeline, construction materials and contracting, construction services and other		810,232		717,326
Total operation and maintenance	Total operation and maintenance	1,212,898		1,214,019		3,102,353		3,064,189		Total operation and maintenance		907,897		811,659
Purchased natural gas sold	Purchased natural gas sold	41,135		31,524		280,584		253,780		Purchased natural gas sold		267,353		176,237
Depreciation, depletion and amortization	Depreciation, depletion and amortization	75,229		72,084		222,613		212,832		Depreciation, depletion and amortization		80,121		73,723
Taxes, other than income	Taxes, other than income	48,096		50,501		163,819		167,197		Taxes, other than income		67,484		62,534
Electric fuel and purchased power	Electric fuel and purchased power	19,486		15,450		56,216		50,557		Electric fuel and purchased power		26,361		18,621
Total operating expenses	Total operating expenses	1,396,844		1,383,578		3,825,585		3,748,555		Total operating expenses		1,349,216		1,142,774
Operating income	Operating income	189,169		203,711		412,023		399,036		Operating income		67,343		85,164
Other income		5,930		4,612		18,310		13,669
Other income (expense)										Other income (expense)		(2,400)		3,354
Interest expense	Interest expense	23,389		23,761		70,224		73,132		Interest expense		25,260		23,453
Income before income taxes	Income before income taxes	171,710		184,562		360,109		339,573		Income before income taxes		39,683		65,065
Income taxes	Income taxes	32,748		31,547		68,860		61,178		Income taxes		7,950		12,949
Income from continuing operations	Income from continuing operations	138,962		153,015		291,249		278,395		Income from continuing operations		31,733		52,116
Income (loss) from discontinued operations, net of tax		314		63		348		(484)
Income from discontinued operations, net of tax										Income from discontinued operations, net of tax		30		15
Net income	Net income	$	139,276	$	153,078	$	291,597	$	277,911	Net income		$	31,763	$	52,131
Earnings per share - basic:	Earnings per share - basic:									Earnings per share - basic:
Income from continuing operations	Income from continuing operations	$	.68	$	.76	$	1.44	$	1.39	Income from continuing operations		$	.16	$	.26
Discontinued operations, net of tax	Discontinued operations, net of tax	—		—		—		—		Discontinued operations, net of tax		—		—
Earnings per share - basic	Earnings per share - basic	$	.68	$	.76	$	1.44	$	1.39	Earnings per share - basic		$	.16	$	.26
Earnings per share - diluted:	Earnings per share - diluted:									Earnings per share - diluted:
Income from continuing operations	Income from continuing operations	$	.68	$	.76	$	1.44	$	1.39	Income from continuing operations		$	.16	$	.26
Discontinued operations, net of tax	Discontinued operations, net of tax	—		—		—		—		Discontinued operations, net of tax		—		—
Earnings per share - diluted	Earnings per share - diluted	$	.68	$	.76	$	1.44	$	1.39	Earnings per share - diluted		$	.16	$	.26
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	202,863		200,522		201,647		200,495		Weighted average common shares outstanding - basic		203,351		200,708
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	203,190		200,619		201,955		200,515		Weighted average common shares outstanding - diluted		203,391		200,952

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

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MDU Resources Group, Inc.	MDU Resources Group, Inc.									MDU Resources Group, Inc.
Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income									Consolidated Statements of Comprehensive Income
(Unaudited)	(Unaudited)									(Unaudited)
		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020				2022		2021
		(In thousands)										(In thousands)
Net income	Net income	$	139,276	$	153,078	$	291,597	$	277,911	Net income		$	31,763	$	52,131
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $36 and $37 for the three months ended and $109 and $109 for the nine months ended in 2021 and 2020, respectively		111		111		334		334
Amortization of postretirement liability losses included in net periodic benefit cost, net of tax of $151 and $152 for the three months ended and $462 and $456 for the nine months ended in 2021 and 2020, respectively		466		471		1,389		1,413
Net unrealized gain (loss) on available-for-sale investments:
Net unrealized gain (loss) on available-for-sale investments arising during the period, net of tax of $(15) and $(13) for the three months ended and $(40) and $19 for the nine months ended in 2021 and 2020, respectively		(54)		(50)		(150)		72
Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $6 and $7 for the three months ended and $21 and $9 for the nine months ended in 2021 and 2020, respectively		20		28		80		34
Net unrealized gain (loss) on available-for-sale investments		(34)		(22)		(70)		106
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $36 and $37 for the three months ended in 2022 and 2021, respectively										Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $36 and $37 for the three months ended in 2022 and 2021, respectively		112		111
Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $164 and $151 for the three months ended in 2022 and 2021, respectively										Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $164 and $151 for the three months ended in 2022 and 2021, respectively		445		466
Net unrealized loss on available-for-sale investments:										Net unrealized loss on available-for-sale investments:
Net unrealized loss on available-for-sale investments arising during the period, net of tax of $(85) and $(12) for the three months ended in 2022 and 2021, respectively										Net unrealized loss on available-for-sale investments arising during the period, net of tax of $(85) and $(12) for the three months ended in 2022 and 2021, respectively		(320)		(44)
Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $8 and $9 for the three months ended in 2022 and 2021, respectively										Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $8 and $9 for the three months ended in 2022 and 2021, respectively		32		35
Net unrealized loss on available-for-sale investments										Net unrealized loss on available-for-sale investments		(288)		(9)
Other comprehensive income	Other comprehensive income	543		560		1,653		1,853		Other comprehensive income		269		568
Comprehensive income attributable to common stockholders	Comprehensive income attributable to common stockholders	$	139,819	$	153,638	$	293,250	$	279,764	Comprehensive income attributable to common stockholders		$	32,032	$	52,699

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

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MDU Resources Group, Inc.	MDU Resources Group, Inc.							MDU Resources Group, Inc.
Consolidated Balance Sheets	Consolidated Balance Sheets							Consolidated Balance Sheets
(Unaudited)	(Unaudited)							(Unaudited)
		September 30, 2021		September 30, 2020		December 31, 2020			March 31, 2022		March 31, 2021		December 31, 2021
Assets	Assets	(In thousands, except shares and per share amounts)						Assets	(In thousands, except shares and per share amounts)
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	57,241	$	66,070	$	59,547	Cash and cash equivalents	$	64,904	$	55,094	$	54,161
Receivables, net	Receivables, net	979,862		1,009,433		873,986		Receivables, net	948,024		784,582		946,741
Inventories	Inventories	312,285		286,223		291,167		Inventories	380,316		316,737		335,609
Current regulatory assets	Current regulatory assets	133,135		79,125		68,527		Current regulatory assets	89,078		98,452		118,691
Prepayments and other current assets	Prepayments and other current assets	83,364		61,706		44,120		Prepayments and other current assets	89,586		68,409		95,741
Total current assets	Total current assets	1,565,887		1,502,557		1,337,347		Total current assets	1,571,908		1,323,274		1,550,943
Noncurrent assets:	Noncurrent assets:							Noncurrent assets:
Property, plant and equipment	Property, plant and equipment	8,634,737		8,203,751		8,300,770		Property, plant and equipment	8,958,600		8,288,879		8,972,849
Less accumulated depreciation, depletion and amortization	Less accumulated depreciation, depletion and amortization	3,175,756		3,115,805		3,133,831		Less accumulated depreciation, depletion and amortization	3,158,091		3,096,371		3,216,461
Net property, plant and equipment	Net property, plant and equipment	5,458,981		5,087,946		5,166,939		Net property, plant and equipment	5,800,509		5,192,508		5,756,388
Goodwill	Goodwill	717,646		712,677		714,963		Goodwill	763,262		714,963		765,386
Other intangible assets, net	Other intangible assets, net	22,241		26,376		25,496		Other intangible assets, net	21,389		23,961		22,578
Regulatory assets	Regulatory assets	379,245		369,764		379,381		Regulatory assets	359,228		379,917		357,851
Investments	Investments	171,859		158,440		165,022		Investments	174,555		167,741		175,476
Operating lease right-of-use assets	Operating lease right-of-use assets	109,439		120,534		120,113		Operating lease right-of-use assets	119,845		116,663		124,138
Other	Other	143,565		147,205		144,111		Other	160,019		150,248		157,675
Total noncurrent assets	Total noncurrent assets	7,002,976		6,622,942		6,716,025		Total noncurrent assets	7,398,807		6,746,001		7,359,492
Total assets	Total assets	$	8,568,863	$	8,125,499	$	8,053,372	Total assets	$	8,970,715	$	8,069,275	$	8,910,435
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:							Current liabilities:
Short-term borrowings	Short-term borrowings	$	50,000	$	75,000	$	50,000	Short-term borrowings	$	99,958	$	50,000	$	—
Long-term debt due within one year	Long-term debt due within one year	1,548		1,558		1,555		Long-term debt due within one year	147,953		1,552		148,053
Accounts payable	Accounts payable	525,704		436,718		426,264		Accounts payable	449,746		379,348		478,933
Taxes payable	Taxes payable	87,455		96,708		88,844		Taxes payable	90,572		88,711		80,372
Dividends payable	Dividends payable	43,212		41,608		42,611		Dividends payable	44,229		42,740		44,229
Accrued compensation	Accrued compensation	105,867		110,730		90,629		Accrued compensation	64,796		69,612		81,904
Operating lease liabilities due within one year	Operating lease liabilities due within one year	30,502		33,770		33,655		Operating lease liabilities due within one year	34,618		32,562		35,368
Regulatory liabilities due within one year	Regulatory liabilities due within one year	16,491		39,837		31,450		Regulatory liabilities due within one year	31,186		34,266		16,303
Other accrued liabilities	Other accrued liabilities	212,140		231,061		198,514		Other accrued liabilities	203,670		201,246		207,078
Total current liabilities	Total current liabilities	1,072,919		1,066,990		963,522		Total current liabilities	1,166,728		900,037		1,092,240
Noncurrent liabilities:	Noncurrent liabilities:							Noncurrent liabilities:
Long-term debt	Long-term debt	2,326,718		2,268,732		2,211,575		Long-term debt	2,599,810		2,251,722		2,593,847
Deferred income taxes	Deferred income taxes	557,582		533,524		516,098		Deferred income taxes	587,940		528,551		591,962
Asset retirement obligations	Asset retirement obligations	455,522		425,567		440,356		Asset retirement obligations	463,080		445,170		458,061
Regulatory liabilities	Regulatory liabilities	426,141		434,936		428,075		Regulatory liabilities	433,628		429,060		428,790
Operating lease liabilities	Operating lease liabilities	79,397		87,140		86,868		Operating lease liabilities	85,874		84,494		89,253
Other	Other	318,306		295,845		327,773		Other	272,937		329,935		273,408
Total noncurrent liabilities	Total noncurrent liabilities	4,163,666		4,045,744		4,010,745		Total noncurrent liabilities	4,443,269		4,068,932		4,435,321
Commitments and contingencies	Commitments and contingencies	0						Commitments and contingencies	0
Stockholders' equity:	Stockholders' equity:							Stockholders' equity:
Common stock Authorized - 500,000,000 shares, $1.00 par value Shares issued - 203,889,661 at September 30, 2021, 201,061,198 at September 30, 2020 and 201,061,198 at December 31, 2020		203,889		201,061		201,061
Common stock Authorized - 500,000,000 shares, $1.00 par value Shares issued - 203,889,661 at March 31, 2022, 201,733,458 at March 31, 2021 and 203,889,661 at December 31, 2021								Common stock Authorized - 500,000,000 shares, $1.00 par value Shares issued - 203,889,661 at March 31, 2022, 201,733,458 at March 31, 2021 and 203,889,661 at December 31, 2021	203,889		201,733		203,889
Other paid-in capital	Other paid-in capital	1,458,208		1,366,494		1,371,385		Other paid-in capital	1,451,464		1,382,158		1,461,205
Retained earnings	Retained earnings	1,720,232		1,489,085		1,558,363		Retained earnings	1,749,726		1,567,551		1,762,410
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(46,425)		(40,249)		(48,078)		Accumulated other comprehensive loss	(40,735)		(47,510)		(41,004)
Treasury stock at cost - 538,921 shares	Treasury stock at cost - 538,921 shares	(3,626)		(3,626)		(3,626)		Treasury stock at cost - 538,921 shares	(3,626)		(3,626)		(3,626)
Total stockholders' equity	Total stockholders' equity	3,332,278		3,012,765		3,079,105		Total stockholders' equity	3,360,718		3,100,306		3,382,874
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	8,568,863	$	8,125,499	$	8,053,372	Total liabilities and stockholders' equity	$	8,970,715	$	8,069,275	$	8,910,435

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

~~Inde~~xIndex


MDU Resources Group, Inc.	MDU Resources Group, Inc.															MDU Resources Group, Inc.
Consolidated Statements of Equity	Consolidated Statements of Equity															Consolidated Statements of Equity
(Unaudited)	(Unaudited)															(Unaudited)
					Other Paid-in Capital		Retained Earnings		Accumu-lated Other Compre-hensive Loss											Other Paid-in Capital		Retained Earnings		Accumu-lated Other Compre-hensive Loss
		Common Stock									Treasury Stock						Common Stock									Treasury Stock
		Shares	Amount								Shares	Amount		Total			Shares	Amount								Shares	Amount		Total
		(In thousands, except shares)															(In thousands, except shares)
At December 31, 2020		201,061,198	$	201,061	$	1,371,385	$	1,558,363	$	(48,078)	(538,921)	$	(3,626)	$	3,079,105
At December 31, 2021																At December 31, 2021	203,889,661	$	203,889	$	1,461,205	$	1,762,410	$	(41,004)	(538,921)	$	(3,626)	$	3,382,874
Net income	Net income	—	—		—		52,131		—		—	—		52,131		Net income	—	—		—		31,763		—		—	—		31,763
Other comprehensive income	Other comprehensive income	—	—		—		—		568		—	—		568		Other comprehensive income	—	—		—		—		269		—	—		269
Dividends declared on common stock	Dividends declared on common stock	—	—		—		(42,943)		—		—	—		(42,943)		Dividends declared on common stock	—	—		—		(44,447)		—		—	—		(44,447)
Stock-based compensation	Stock-based compensation	—	—		2,574		—		—		—	—		2,574		Stock-based compensation	—	—		2,689		—		—		—	—		2,689
Repurchase of common stock	Repurchase of common stock	—	—		—		—		—		(392,294)	(6,701)		(6,701)		Repurchase of common stock	—	—		—		—		—		(266,821)	(7,399)		(7,399)
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	—	—		(10,828)		—		—		392,294	6,701		(4,127)		Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	—	—		(12,303)		—		—		266,821	7,399		(4,904)
Issuance of common stock	Issuance of common stock	672,260	672		19,027		—		—		—	—		19,699		Issuance of common stock	—	—		(127)		—		—		—	—		(127)
At March 31, 2021		201,733,458	$	201,733	$	1,382,158	$	1,567,551	$	(47,510)	(538,921)	$	(3,626)	$	3,100,306
Net income		—	—		—		100,190		—		—	—		100,190
Other comprehensive income		—	—		—		—		542		—	—		542
Dividends declared on common stock		—	—		—		(43,336)		—		—	—		(43,336)
Stock-based compensation		—	—		6,150		—		—		—	—		6,150
Issuance of common stock		1,088,843	1,089		33,861		—		—		—	—		34,950
At June 30, 2021		202,822,301	$	202,822	$	1,422,169	$	1,624,405	$	(46,968)	(538,921)	$	(3,626)	$	3,198,802
Net income		—	—		—		139,276		—		—	—		139,276
Other comprehensive income		—	—		—		—		543		—	—		543
Dividends declared on common stock		—	—		—		(43,449)		—		—	—		(43,449)
Stock-based compensation		—	—		2,925		—		—		—	—		2,925
Issuance of common stock		1,067,360	1,067		33,114		—		—		—	—		34,181
At September 30, 2021		203,889,661	$	203,889	$	1,458,208	$	1,720,232	$	(46,425)	(538,921)	$	(3,626)	$	3,332,278
At March 31, 2022																At March 31, 2022	203,889,661	$	203,889	$	1,451,464	$	1,749,726	$	(40,735)	(538,921)	$	(3,626)	$	3,360,718





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

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

~~Inde~~xIndex

MDU Resources Group, Inc.
Consolidated Statements of Equity
(Unaudited)
Other
Paid-in
Capital Retained Earnings Accumu-lated
Other
Compre-hensive
Loss
Common Stock Treasury Stock
Shares Amount Shares Amount Total
(In thousands, except shares)
At December 31, 2019 200,922,790 $ 200,923 $ 1,355,404 $ 1,336,647 $ (42,102) (538,921) $ (3,626) $ 2,847,246
Net income — — — 25,130 — — — 25,130
Other comprehensive income — — — — 707 — — 707
Dividends declared on common stock — — — (41,789) — — — (41,789)
Stock-based compensation — — 2,250 — — — — 2,250
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings 26,406 26 (388) — — — — (362)
Issuance of common stock 112,002 112 3,298 — — — — 3,410
At March 31, 2020 201,061,198 $ 201,061 $ 1,360,564 $ 1,319,988 $ (41,395) (538,921) $ (3,626) $ 2,836,592
Net income — — — 99,703 — — — 99,703
Other comprehensive income — — — — 586 — — 586
Dividends declared on common stock — — — (41,812) — — — (41,812)
Stock-based compensation — — 2,618 — — — — 2,618
At June 30, 2020 201,061,198 $ 201,061 $ 1,363,182 $ 1,377,879 $ (40,809) (538,921) $ (3,626) $ 2,897,687
Net Income — — — 153,078 — — — 153,078
Other Comprehensive Income — — — — 560 — — 560
Dividends declared on common stock — — — (41,872) — — — (41,872)
Stock-based compensation — — 3,312 — — — — 3,312
At September 30, 2020 201,061,198 $ 201,061 $ 1,366,494 $ 1,489,085 $ (40,249) (538,921) $ (3,626) $ 3,012,765


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

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

~~Inde~~x

MDU Resources Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2021 2020
(In thousands)
Operating activities:
Net income $ 291,597 $ 277,911
Income (loss) from discontinued operations, net of tax 348 (484)
Income from continuing operations 291,249 278,395
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 222,613 212,832
Deferred income taxes 30,353 16,409
Changes in current assets and liabilities, net of acquisitions:
Receivables (104,438) (100,141)
Inventories (21,402) (9,581)
Other current assets (74,413) 1,269
Accounts payable 33,173 19,125
Other current liabilities 14,175 74,286
Other noncurrent changes (25,425) (10,139)
Net cash provided by continuing operations 365,885 482,455
Net cash used in discontinued operations (75) (688)
Net cash provided by operating activities 365,810 481,767
Investing activities:
Capital expenditures (428,114) (413,842)
Acquisitions, net of cash acquired (13,721) (71,479)
Net proceeds from sale or disposition of property and other 12,954 23,463
Investments (3,777) 24
Net cash used in investing activities (432,658) (461,834)
Financing activities:
Issuance of short-term borrowings 50,000 75,000
Repayment of short-term borrowings (50,000) —
Issuance of long-term debt 178,517 100,125
Repayment of long-term debt (63,835) (73,699)
Proceeds from issuance of common stock 88,830 3,410
Dividends paid (128,142) (124,796)
Repurchase of common stock (6,701) —
Tax withholding on stock-based compensation (4,127) (362)
Net cash provided by (used in) financing activities 64,542 (20,322)
Decrease in cash and cash equivalents (2,306) (389)
Cash and cash equivalents -- beginning of year 59,547 66,459
Cash and cash equivalents -- end of period $ 57,241 $ 66,070

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

~~Inde~~xIndex

MDU Resources Group, Inc.

Notes to Consolidated

Financial Statements

~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Note 1 - Basis of presentation

The accompanying consolidated interim financial statements were prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Interim financial statements do not include all disclosures provided in annual financial statements and, accordingly, these financial statements should be read in conjunction with those appearing in the ~~2020~~2021 Annual Report. The information is unaudited but includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the accompanying consolidated interim financial statements and are of a normal recurring nature. Depreciation, depletion and amortization expense is reported separately on the Consolidated Statements of Income and therefore is excluded from the other line items within operating expenses.

Beginning in March 2020, governmental restrictions and guidelines implemented to control the spread of COVID-19 reduced commercial and interpersonal activity throughout the Company's areas of operation. Most of the Company's products and services are considered essential to the United States and its communities and, as a result, operations have generally continued throughout the COVID-19 pandemic and reopening of the country's economy. The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the nine months ended September 30, 2021 and 2020, and determined there were no material adverse impacts.

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

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

Management has also evaluated the impact of events occurring after ~~September 30, 2021,~~March 31, 2022, up to the date of the issuance of these consolidated interim financial statements on ~~November 4, 2021,~~May 5, 2022, that would require recognition or disclosure in the ~~financial statements.~~Consolidated Financial Statements.

Note 2 - New accounting standards

~~Recently adopted~~The following table provides a brief description of the accounting ~~standards~~

~~ASU 2018-14 - Changes~~pronouncements applicable to the ~~Disclosure Requirements for Defined Benefit Plans~~ In August 2018, the FASB issued guidance on modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans as part of the disclosure framework project. The guidance removed disclosures that are no longer considered cost beneficial, clarified the specific requirements of disclosures and added disclosure requirements identified as relevant. The guidance added, among other things, the requirement to include an explanation for significant gains and losses related to changes in benefit obligations for the period. The guidance removed, among other things, the disclosure requirement to disclose the amount of net periodic benefit costs to be amortized over the next fiscal year from accumulated other comprehensive income (loss)Company and the effect a one percentage point change in assumed health care cost trend rates would have on certain benefit components. The Company adopted the guidance on January 1, 2021, on a retrospective basis. The Company determined the new guidance will not materially impact its consolidated financial statement disclosures.

~~ASU 2019-12 - Simplifying the Accounting for Income Taxes~~ In December 2019, the FASB issued guidance on simplifying the accounting for income taxes by removing certain exceptions in ASC 740 and providing simplification amendments. The guidance removed exceptions on intraperiod tax allocations and reporting and provided simplification on accounting for franchise taxes, tax basis goodwill and tax law changes. The Company adopted the guidance on January 1, 2021, and determined it did not have a materialpotential impact on its ~~results of operations, financial position, cash flows~~ Consolidated Financial Statements and/or ~~disclosures.~~disclosures:

~~Recently issued accounting standards not yet adopted~~

~~ASU 2020-04 - Reference Rate Reform~~ In March 2020, the FASB issued optional guidance to ease the facilitation of the effects of reference rate reform on financial reporting. The guidance applied to certain contract modifications, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. LIBOR is expected to be retired with a full phase-out by the end of 2021 and replaced by a new reference rate, which includes SOFR. The guidance can be applied beginning in the interim period that includes March 12, 2020, and cannot be applied to contract modifications or hedging relationships entered into or evaluated after December 31, 2022. The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going. The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows or disclosures.


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

~~Inde~~x

Note 3 - Seasonality of operations

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

Index

Note 4 - Receivables and allowance for expected credit losses

Receivables consists primarily of trade receivables from the sale of goods and services, which are recorded at the invoiced amount, and contract assets, net of expected credit losses. For more information on contract assets, see Note 9. The Company's trade receivables are all due in 12 months or less. The total balance of receivables past due 90 days or more was ~~$37.9~~$50.7 million, ~~$48.9~~$33.9 million and ~~$43.9~~$44.8 million at ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020,~~2021, respectively.

The Company's expected credit losses are determined through a review using historical credit loss experience; changes in asset specific characteristics; current conditions; and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses at each of its reportable business segments. Risk characteristics used by the business segments may include customer mix, knowledge of customers and general economic conditions of the various local economies, ~~and impacts of COVID-19,~~ among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable.

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


		Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Total			Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Total
		(In thousands)													(In thousands)
At December 31, 2020		$	899	$	2,571	$	2	$	6,164	$	5,722	$	15,358
At December 31, 2021														At December 31, 2021	$	269	$	1,506	$	2	$	5,406	$	2,533	$	9,716
Current expected credit loss provision	Current expected credit loss provision	538		1,273		—		(1,049)		(1,079)		(317)		Current expected credit loss provision	565		1,369		—		(253)		54		1,735
Less write-offs charged against the allowance	Less write-offs charged against the allowance	888		1,107		—		273		401		2,669		Less write-offs charged against the allowance	597		932		—		27		71		1,627
Credit loss recoveries collected	Credit loss recoveries collected	129		213		—		—		—		342		Credit loss recoveries collected	124		180		—		—		28		332
At March 31, 2021		$	678	$	2,950	$	2	$	4,842	$	4,242	$	12,714
Current expected credit loss provision		(110)		(103)		—		11		(639)		(841)
Less write-offs charged against the allowance		341		787		—		232		64		1,424
Credit loss recoveries collected		100		199		—		—		—		299
At June 30, 2021		$	327	$	2,259	$	2	$	4,621	$	3,539	$	10,748
Current expected credit loss provision		388		411		—		233		(675)		357
Less write-offs charged against the allowance		525		1,178		—		184		265		2,152
Credit loss recoveries collected		92		168		—		—		93		353
At September 30, 2021		$	282	$	1,660	$	2	$	4,670	$	2,692	$	9,306
At March 31, 2022														At March 31, 2022	$	361	$	2,123	$	2	$	5,126	$	2,544	$	10,156

Electric Natural gas
distribution Pipeline Construction
materials and
contracting Construction
services Total
(In thousands)
At January 1, 2020 $ 328 $ 1,056 $ — $ 5,357 $ 1,756 $ 8,497
Current expected credit loss provision 555 1,156 — 694 1,150 3,555
Less write-offs charged against the allowance 500 624 — 68 73 1,265
Credit loss recoveries collected 109 229 — — — 338
At March 31, 2020 $ 492 $ 1,817 $ — $ 5,983 $ 2,833 $ 11,125
Current expected credit loss provision 303 190 — (314) 896 1,075
Less write-offs charged against the allowance 224 677 — 44 454 1,399
Credit loss recoveries collected 88 201 — — — 289
At June 30, 2020 $ 659 $ 1,531 $ — $ 5,625 $ 3,275 $ 11,090
Current expected credit loss provision 435 811 2 728 1,635 3,611
Less write-offs charged against the allowance 269 692 — 229 117 1,307
Credit loss recoveries collected 75 203 — — — 278
At September 30, 2020 $ 900 $ 1,853 $ 2 $ 6,124 $ 4,793 $ 13,672


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

~~Inde~~x

Note 5 - Inventories and natural gas in storage

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


		September 30, 2021		September 30, 2020		December 31, 2020			March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)							(In thousands)
Aggregates held for resale	Aggregates held for resale	$	183,693	$	168,132	$	175,782	Aggregates held for resale	$	195,489	$	180,450	$	184,363
Asphalt oil	Asphalt oil	32,964		27,587		28,238		Asphalt oil	93,816		59,853		57,002
Natural gas in storage (current)		28,683		27,135		21,919
Materials and supplies	Materials and supplies	27,253		26,609		25,142		Materials and supplies	35,967		26,481		30,629
Merchandise for resale	Merchandise for resale	26,639		21,525		21,087		Merchandise for resale	33,393		24,319		28,501
Natural gas in storage (current)								Natural gas in storage (current)	10,801		8,113		18,867
Other	Other	13,053		15,235		18,999		Other	10,850		17,521		16,247
Total	Total	$	312,285	$	286,223	$	291,167	Total	$	380,316	$	316,737	$	335,609

The remainder of natural gas in storage, which largely represents the cost of gas required to maintain pressure levels for normal operating purposes, was included in noncurrent assets - other and was $47.5 million at ~~September 30,~~March 31, 2022 and 2021, and December 31, ~~2020, and $48.3 million at September 30, 2020.~~2021.

Index

Note 6 - Earnings per share

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020			2022		2021
		(In thousands, except per share amounts)									(In thousands, except per share amounts)
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	202,863		200,522		201,647		200,495		Weighted average common shares outstanding - basic	203,351		200,708
Effect of dilutive performance share awards and restricted stock units	Effect of dilutive performance share awards and restricted stock units	327		97		308		20		Effect of dilutive performance share awards and restricted stock units	40		244
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	203,190		200,619		201,955		200,515		Weighted average common shares outstanding - diluted	203,391		200,952
Shares excluded from the calculation of diluted earnings per share	Shares excluded from the calculation of diluted earnings per share	—		87		—		139		Shares excluded from the calculation of diluted earnings per share	—		—
Dividends declared per common share	Dividends declared per common share	$	.2125	$	.2075	$	.6375	$	.6225	Dividends declared per common share	$	.2175	$	.2125

Note 7 - Equity

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

In August 2020, the Company amended the Distribution Agreement dated February 22, 2019, with J.P. Morgan Securities LLC and MUFG Securities Americas Inc., as sales agents. This agreement, as amended, allows the offering, issuance and sale of up to 6.4 million shares of the Company's common stock in connection with an "at-the-market" offering. The common stock may be offered for sale, from time to time, in accordance with the terms and conditions of this agreement. As of ~~September 30, 2021,~~March 31, 2022, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program.

~~Inde~~x

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020			2022		2021
		(In millions)									(In millions)
Shares issued	Shares issued	1.0		—		2.8		—		Shares issued	—		.7
Net proceeds *	Net proceeds *	$	34.2	$	—	$	88.8	$	—	Net proceeds *	$	(.1)	$	19.7	**
Issuance costs		$	.5	$	—	$	1.2	$	—

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

** Net proceeds were used for capital expenditures.

Note 8 - Accumulated other comprehensive loss

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

Net Unrealized
Gain (Loss) on
Derivative
Instruments
Qualifying as
Hedges Postretirement
Liability
Adjustment Net Unrealized
Gain (Loss) on
Available-for-sale
Investments Total
Accumulated
Other
Comprehensive
Loss
(In thousands)
At December 31, 2020 $ (984) $ (47,207) $ 113 $ (48,078)
Other comprehensive loss before reclassifications — — (44) (44)
Amounts reclassified from accumulated other comprehensive loss 111 466 35 612
Net current-period other comprehensive income (loss) 111 466 (9) 568
At March 31, 2021 $ (873) $ (46,741) $ 104 $ (47,510)
Other comprehensive loss before reclassifications — — (52) (52)
Amounts reclassified from accumulated other comprehensive loss 112 457 25 594
Net current-period other comprehensive income (loss) 112 457 (27) 542
At June 30, 2021 $ (761) $ (46,284) $ 77 $ (46,968)
Other comprehensive loss before reclassifications — — (54) (54)
Amounts reclassified from accumulated other comprehensive loss 111 466 20 597
Net current-period other comprehensive income (loss) 111 466 (34) 543
At September 30, 2021 $ (650) $ (45,818) $ 43 $ (46,425)

Net Unrealized
Gain (Loss) on
Derivative
Instruments
Qualifying as
Hedges Postretirement
Liability
Adjustment Net Unrealized
Gain (Loss) on
Available-for-sale
Investments Total
Accumulated
Other
Comprehensive
Loss
(In thousands)
At December 31, 2019 $ (1,430) $ (40,734) $ 62 $ (42,102)
Other comprehensive income before reclassifications — — 135 135
Amounts reclassified from (to) accumulated other comprehensive loss 111 462 (1) 572
Net current-period other comprehensive income 111 462 134 707
At March 31, 2020 $ (1,319) $ (40,272) $ 196 $ (41,395)
Other comprehensive loss before reclassifications — — (13) (13)
Amounts reclassified from accumulated other comprehensive loss 112 480 7 599
Net current-period other comprehensive income (loss) 112 480 (6) 586
At June 30, 2020 $ (1,207) $ (39,792) $ 190 $ (40,809)
Other comprehensive loss before reclassifications — — (50) (50)
Amounts reclassified from accumulated other comprehensive loss 111 471 28 610
Net current-period other comprehensive income (loss) 111 471 (22) 560
At September 30, 2020 $ (1,096) $ (39,321) $ 168 $ (40,249)


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

1513

~~Inde~~xIndex


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

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


		Three Months Ended				Nine Months Ended				Location on Consolidated Statements of Income		Three Months Ended				Location on Consolidated Statements of Income
		September 30,										March 31,
		2021		2020		2021		2020				2022		2021
		(In thousands)										(In thousands)
Reclassification adjustment for loss on derivative instruments included in net income	Reclassification adjustment for loss on derivative instruments included in net income	$	(147)	$	(148)	$	(443)	$	(443)	Interest expense	Reclassification adjustment for loss on derivative instruments included in net income	$	(148)	$	(148)		Interest expense
		36		37		109		109		Income taxes		36		37			Income taxes
		(111)		(111)		(334)		(334)				(112)		(111)
Amortization of postretirement liability losses included in net periodic benefit cost		(617)		(623)		(1,851)		(1,869)		Other income
Amortization of postretirement liability losses included in net periodic benefit credit											Amortization of postretirement liability losses included in net periodic benefit credit	(609)		(617)			Other income
		151		152		462		456		Income taxes		164		151			Income taxes
		(466)		(471)		(1,389)		(1,413)				(445)		(466)
Reclassification adjustment on available-for-sale investments included in net income	Reclassification adjustment on available-for-sale investments included in net income	(26)		(35)		(101)		(43)		Other income	Reclassification adjustment on available-for-sale investments included in net income	(40)		(44)			Other income
		6		7		21		9		Income taxes		8		9			Income taxes
		(20)		(28)		(80)		(34)				(32)		(35)
Total reclassifications	Total reclassifications	$	(597)	$	(610)	$	(1,803)	$	(1,781)		Total reclassifications	$	(589)	$	(612)

Index

Note 9 - Revenue from contracts with customers

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

Disaggregation

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


Three Months Ended September 30, 2021		Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
Three Months Ended March 31, 2022																Three Months Ended March 31, 2022	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
		(In thousands)															(In thousands)
Residential utility sales	Residential utility sales	$	36,412	$	55,284	$	—	$	—	$	—	$	—	$	91,696	Residential utility sales	$	37,304	$	258,816	$	—	$	—	$	—	$	—	$	296,120
Commercial utility sales	Commercial utility sales	39,033		35,338		—		—		—		—		74,371		Commercial utility sales	35,600		163,609		—		—		—		—		199,209
Industrial utility sales	Industrial utility sales	10,495		5,395		—		—		—		—		15,890		Industrial utility sales	10,306		13,024		—		—		—		—		23,330
Other utility sales	Other utility sales	1,993		—		—		—		—		—		1,993		Other utility sales	1,750		—		—		—		—		—		1,750
Natural gas transportation	Natural gas transportation	—		11,812		28,058		—		—		—		39,870		Natural gas transportation	—		12,381		31,574		—		—		—		43,955
Natural gas storage	Natural gas storage	—		—		3,483		—		—		—		3,483		Natural gas storage	—		—		3,719		—		—		—		3,719
Contracting services	Contracting services	—		—		—		415,106		—		—		415,106		Contracting services	—		—		—		114,267		—		—		114,267
Construction materials	Construction materials	—		—		—		617,823		—		—		617,823		Construction materials	—		—		—		241,732		—		—		241,732
Intrasegment eliminations	Intrasegment eliminations	—		—		—		(201,630)		—		—		(201,630)		Intrasegment eliminations	—		—		—		(46,033)		—		—		(46,033)
Inside specialty contracting		—		—		—		—		317,238		—		317,238
Outside specialty contracting		—		—		—		—		185,842		—		185,842
Electrical & mechanical specialty contracting																Electrical & mechanical specialty contracting	—		—		—		—		392,808		—		392,808
Transmission & distribution specialty contracting																Transmission & distribution specialty contracting	—		—		—		—		148,466		—		148,466
Other	Other	12,589		2,110		3,290		—		75		3,423		21,487		Other	12,753		2,609		1,709		—		48		4,341		21,460
Intersegment eliminations	Intersegment eliminations	(136)		(142)		(3,908)		(110)		(289)		(3,398)		(7,983)		Intersegment eliminations	(124)		(136)		(25,940)		(130)		(1,059)		(4,341)		(31,730)
Revenues from contracts with customers	Revenues from contracts with customers	100,386		109,797		30,923		831,189		502,866		25		1,575,186		Revenues from contracts with customers	97,589		450,303		11,062		309,836		540,263		—		1,409,053
Revenues out of scope	Revenues out of scope	(1,456)		581		45		—		11,657		—		10,827		Revenues out of scope	(3,995)		115		58		—		11,328		—		7,506
Total external operating revenues	Total external operating revenues	$	98,930	$	110,378	$	30,968	$	831,189	$	514,523	$	25	$	1,586,013	Total external operating revenues	$	93,594	$	450,418	$	11,120	$	309,836	$	551,591	$	—	$	1,416,559

~~Inde~~x


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

Three Months Ended September 30, 2020 Electric Natural gas
distribution Pipeline Construction
materials and
contracting Construction
services Other Total
(In thousands)
Residential utility sales $ 33,086 $ 48,399 $ — $ — $ — $ — $ 81,485
Commercial utility sales 35,688 28,731 — — — — 64,419
Industrial utility sales 8,428 4,454 — — — — 12,882
Other utility sales 1,779 — — — — — 1,779
Natural gas transportation — 11,159 27,583 — — — 38,742
Natural gas gathering — — 973 — — — 973
Natural gas storage — — 3,885 — — — 3,885
Contracting services — — — 448,569 — — 448,569
Construction materials — — — 608,673 — — 608,673
Intrasegment eliminations — — — (234,693) — — (234,693)
Inside specialty contracting — — — — 352,845 — 352,845
Outside specialty contracting — — — — 187,202 — 187,202
Other 7,663 2,590 3,203 — 486 3,030 16,972
Intersegment eliminations (195) (185) (3,622) (110) (425) (3,006) (7,543)
Revenues from contracts with customers 86,449 95,148 32,022 822,439 540,108 24 1,576,190
Revenues out of scope 998 (445) 46 — 10,500 — 11,099
Total external operating revenues $ 87,447 $ 94,703 $ 32,068 $ 822,439 $ 550,608 $ 24 $ 1,587,289

Nine Months Ended September 30, 2021 Electric Natural gas
distribution Pipeline Construction
materials and
contracting Construction
services Other Total
(In thousands)
Residential utility sales $ 99,106 $ 341,901 $ — $ — $ — $ — $ 441,007
Commercial utility sales 105,795 203,002 — — — — 308,797
Industrial utility sales 30,878 20,387 — — — — 51,265
Other utility sales 5,384 — — — — — 5,384
Natural gas transportation — 35,715 85,160 — — — 120,875
Natural gas storage — — 10,606 — — — 10,606
Contracting services — — — 791,964 — — 791,964
Construction materials — — — 1,332,997 — — 1,332,997
Intrasegment eliminations — — — (394,126) — — (394,126)
Inside specialty contracting — — — — 1,020,130 — 1,020,130
Outside specialty contracting — — — — 502,328 — 502,328
Other 31,827 7,913 10,760 — 168 10,152 60,820
Intersegment eliminations (407) (425) (38,000) (314) (2,128) (10,082) (51,356)
Revenues from contracts with customers 272,583 608,493 68,526 1,730,521 1,520,498 70 4,200,691
Revenues out of scope (5,329) 5,880 127 — 36,239 — 36,917
Total external operating revenues $ 267,254 $ 614,373 $ 68,653 $ 1,730,521 $ 1,556,737 $ 70 $ 4,237,608

~~Inde~~x

Nine Months Ended September 30, 2020 Electric Natural gas
distribution Pipeline Construction
materials and
contracting Construction
services Other Total
(In thousands)
Residential utility sales $ 93,389 $ 313,753 $ — $ — $ — $ — $ 407,142
Commercial utility sales 99,152 184,754 — — — — 283,906
Industrial utility sales 26,867 18,633 — — — — 45,500
Other utility sales 5,018 — — — — — 5,018
Natural gas transportation — 33,307 82,980 — — — 116,287
Natural gas gathering — — 4,244 — — — 4,244
Natural gas storage — — 10,035 — — — 10,035
Contracting services — — — 850,326 — — 850,326
Construction materials — — — 1,299,081 — — 1,299,081
Intrasegment eliminations — — — (443,516) — — (443,516)
Inside specialty contracting — — — — 1,049,975 — 1,049,975
Outside specialty contracting — — — — 478,047 — 478,047
Other 23,830 7,800 9,807 — 1,249 8,882 51,568
Intersegment eliminations (586) (555) (36,820) (262) (3,674) (8,952) (50,849)
Revenues from contracts with customers 247,670 557,692 70,246 1,705,629 1,525,597 (70) 4,106,764
Revenues out of scope 2,123 4,949 135 — 33,620 — 40,827
Total external operating revenues $ 249,793 $ 562,641 $ 70,381 $ 1,705,629 $ 1,559,217 $ (70) $ 4,147,591

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

Index

Contract balances

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

The changes in contract assets and liabilities were as follows:


		September 30, 2021		December 31, 2020		Change		Location on Consolidated Balance Sheets		March 31, 2022		December 31, 2021		Change		Location on Consolidated Balance Sheets
		(In thousands)								(In thousands)
Contract assets	Contract assets	$	185,086	$	104,345	$	80,741	Receivables, net	Contract assets	$	164,622	$	125,742	$	38,880	Receivables, net
Contract liabilities - current	Contract liabilities - current	(153,408)		(158,603)		5,195		Accounts payable	Contract liabilities - current	(154,136)		(179,140)		25,004		Accounts payable
Contract liabilities - noncurrent	Contract liabilities - noncurrent	(157)		(52)		(105)		Noncurrent liabilities - other	Contract liabilities - noncurrent	(40)		(118)		78		Noncurrent liabilities - other
Net contract assets (liabilities)	Net contract assets (liabilities)	$	31,521	$	(54,310)	$	85,831		Net contract assets (liabilities)	$	10,446	$	(53,516)	$	63,962

The Company recognized ~~$7.1 million and $152.4~~$121.8 million in revenue for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, which was previously included in contract liabilities at December 31, ~~2020.~~2021. The Company recognized ~~$15.6 million and $137.3~~$123.4 million in revenue for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, which was previously included in contract liabilities at December 31, ~~2019.~~2020.

The Company recognized a net increase in revenues of ~~$19.2~~$23.5 million and ~~$63.3~~$34.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, respectively, from performance obligations satisfied in prior periods. The Company recognized a net increase in revenues of $34.7 million and $58.8 million for the three and nine months ended September 30, 2020, respectively, from performance obligations satisfied in prior periods.

~~Inde~~x

Remaining performance obligations

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

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

At ~~September 30, 2021,~~March 31, 2022, the Company's remaining performance obligations were ~~$2.4~~$3.1 billion. The Company expects to recognize the following revenue amounts in future periods related to these remaining performance obligations: ~~$1.6~~$2.4 billion within the next 12 months or less; ~~$300.0~~$311.1 million within the next 13 to 24 months; and ~~$478.7~~$407.2 million in 25 months or more.

Note 10 - Business combinations

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

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

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

Index

In 2021, ~~and 2020,~~ the construction materials and contracting segment's acquisitions included:

•~~Mt. Hood~~Baker Rock aResources and Oregon Mainline Paving, two premier construction ~~aggregates business in~~materials companies located around the Portland, Oregon metro area, acquired in ~~April~~November 2021. At ~~September 30, 2021,~~March 31, 2022, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

•~~The assets of McMurry Ready-Mix Co., an~~Mt. Hood Rock, a construction aggregates ~~and concrete supplier~~business in ~~Wyoming,~~Oregon, acquired in ~~December 2020. In the third quarter of 2021, the Company finalized the provisional accounting and recorded an immaterial measurement period adjustment.~~

•~~The assets of Oldcastle Infrastructure Spokane, a prestressed-concrete business in Washington, acquired in February 2020.~~April 2021. As of ~~December~~March 31, ~~2020,~~2022, the purchase price ~~adjustments had been~~allocation was settled with no material adjustments to the provisional accounting.

In February 2020, the construction services segment acquired PerLectric, Inc., an electrical construction company in Virginia. As of March 31, 2021, the purchase price adjustments had been settled with no material adjustments to the provisional accounting.

In 2021, the total purchase price for acquisitions was ~~$13.8~~$236.1 million, subject to certain adjustments, with cash acquired totaling ~~$100,000.~~$900,000. The purchase price includes consideration paid of ~~$13.7~~$235.2 million. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2021 were as follows: ~~$700,000~~$17.0 million to current assets; ~~$13.0~~$179.8 million to property, plant and equipment; ~~$2.9~~$50.6 million to goodwill; ~~$600,000~~$2.2 million to other intangible assets; ~~$200,000~~$8.7 million to current liabilities; ~~$100,000~~$2.5 million to noncurrent liabilities - ~~other~~other; and $3.2 million to deferred tax liabilities. ~~The Company issued debt~~During the first quarter of 2022, measurement period adjustments were made to ~~finance the acquisitions.~~

In 2020, the total purchase price for acquisitions was $110.2 million, subject to certain adjustments, with cash acquired totaling $1.7 million. The purchase price includes consideration paid of $106.0 millionpreviously reported provisional amounts, which decreased goodwill and $2.5 million of indemnity holdback liabilities. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2020 were as follows: $54.8 million to current assets; $27.1 million toincreased property, plant and equipment; $33.6 million to goodwill; $19.0 million to other intangible assets; $22.6 million to current liabilities; $300,000 to noncurrent liabilities - other and $1.4 million to asset retirement obligations.equipment by $2.1 million. The Company issued debt to finance the acquisitions.

Costs incurred for acquisitions are included in operation and maintenance expense on the Consolidated Statements of Income and were not material for the three ~~or nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~Inde~~x

Note 11 - Leases

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

The Company recognized revenue from operating leases of ~~$11.8~~$11.4 million and ~~$36.6~~$12.0 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, respectively. ~~The Company recognized revenue from operating leases of $10.7 million and $34.0 million for the three and nine months ended September 30, 2020, respectively.~~ At ~~September 30, 2021,~~March 31, 2022, the Company had ~~$8.3~~$8.4 million of lease receivables with a majority due within 12 months.

Note 12 - Goodwill and other intangible assets

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


		Balance at January 1, 2021		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at September 30, 2021			Balance at January 1, 2022		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at March 31, 2022
		(In thousands)									(In thousands)
Natural gas distribution	Natural gas distribution	$	345,736	$	—	$	—	$	345,736	Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	Construction materials and contracting	226,003		2,900		(217)		228,686		Construction materials and contracting	276,426		—		(2,124)		274,302
Construction services	Construction services	143,224		—		—		143,224		Construction services	143,224		—		—		143,224
Total	Total	$	714,963	$	2,900	$	(217)	$	717,646	Total	$	765,386	$	—	$	(2,124)	$	763,262


		Balance at January 1, 2020		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at September 30, 2020			Balance at January 1, 2021		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at March 31, 2021
		(In thousands)									(In thousands)
Natural gas distribution	Natural gas distribution	$	345,736	$	—	$	—	$	345,736	Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	Construction materials and contracting	217,234		6,483		—		223,717		Construction materials and contracting	226,003		—		—		226,003
Construction services	Construction services	118,388		24,436		400		143,224		Construction services	143,224		—		—		143,224
Total	Total	$	681,358	$	30,919	$	400	$	712,677	Total	$	714,963	$	—	$	—	$	714,963


		Balance at January 1, 2020		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at December 31, 2020			Balance at January 1, 2021		Goodwill Acquired During the Year		Measurement Period Adjustments		Balance at December 31, 2021
		(In thousands)									(In thousands)
Natural gas distribution	Natural gas distribution	$	345,736	$	—	$	—	$	345,736	Natural gas distribution	$	345,736	$	—	$	—	$	345,736
Construction materials and contracting	Construction materials and contracting	217,234		8,778		(9)		226,003		Construction materials and contracting	226,003		50,640		(217)		276,426
Construction services	Construction services	118,388		24,436		400		143,224		Construction services	143,224		—		—		143,224
Total	Total	$	681,358	$	33,214	$	391	$	714,963	Total	$	714,963	$	50,640	$	(217)	$	765,386

Index

Other amortizable intangible assets were as follows:


		September 30, 2021		September 30, 2020		December 31, 2020			March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)							(In thousands)
Customer relationships	Customer relationships	$	29,423	$	27,551	$	28,836	Customer relationships	$	28,990	$	28,836	$	29,740
Less accumulated amortization	Less accumulated amortization	9,705		5,958		6,887		Less accumulated amortization	10,846		7,792		10,650
		19,718		21,593		21,949			18,144		21,044		19,090
Noncompete agreements	Noncompete agreements	3,991		3,941		3,941		Noncompete agreements	4,591		3,941		4,591
Less accumulated amortization	Less accumulated amortization	2,710		2,176		2,309		Less accumulated amortization	3,016		2,441		2,856
		1,281		1,765		1,632			1,575		1,500		1,735
Other	Other	11,957		12,853		12,927		Other	6,969		11,957		12,601
Less accumulated amortization	Less accumulated amortization	10,715		9,835		11,012		Less accumulated amortization	5,299		10,540		10,848
		1,242		3,018		1,915			1,670		1,417		1,753
Total	Total	$	22,241	$	26,376	$	25,496	Total	$	21,389	$	23,961	$	22,578

The previous tables include goodwill and intangible assets associated with the business combinations completed during ~~2021 and 2020.~~2021. For more information related to these business combinations, see Note 10.

~~Inde~~x

Amortization expense for amortizable intangible assets for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, was $1.2 million and ~~$3.9 million, respectively. Amortization expense for amortizable intangible assets for the three and nine months ended September 30, 2020, was $2.1 million and $6.8~~$1.5 million, respectively. Estimated amortization expense for identifiable intangible assets as of ~~September 30, 2021,~~March 31, 2022, was:

Remainder of 2021 2022 2023 2024 2025 Thereafter
(In thousands)
Amortization expense $ 1,220 $ 4,678 $ 4,329 $ 3,957 $ 2,060 $ 5,997


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

Index

Note 13 - Regulatory assets and liabilities

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


		Estimated Recovery or Refund Period as of September 30, 2021	*	September 30, 2021		September 30, 2020		December 31, 2020			Estimated Recovery or Refund Period as of March 31, 2022	*	March 31, 2022		March 31, 2021		December 31, 2021
				(In thousands)									(In thousands)
Regulatory assets:	Regulatory assets:									Regulatory assets:
Current:	Current:									Current:
Natural gas costs recoverable through rate adjustments	Natural gas costs recoverable through rate adjustments	Up to 1 year		$	98,211	$	48,478	$	42,481	Natural gas costs recoverable through rate adjustments	Up to 1 year		$	66,132	$	76,782	$	86,371
Decoupling										Decoupling	Up to 1 year		7,609		4,180		9,131
Conservation programs	Conservation programs	Up to 1 year		8,495		7,857		7,117		Conservation programs	Up to 1 year		7,567		6,679		8,225
Cost recovery mechanisms	Cost recovery mechanisms	Up to 1 year		4,693		8,177		10,645		Cost recovery mechanisms	Up to 1 year		3,432		7,130		4,536
Other	Other	Up to 1 year		21,736		14,613		8,284		Other	Up to 1 year		4,338		3,681		10,428
				133,135		79,125		68,527					89,078		98,452		118,691
Noncurrent:	Noncurrent:									Noncurrent:
Pension and postretirement benefits	Pension and postretirement benefits	**		155,888		157,015		155,942		Pension and postretirement benefits	**		142,681		155,924		142,681
Cost recovery mechanisms										Cost recovery mechanisms	Up to 10 years		67,989		15,508		44,870
Plant costs/asset retirement obligations	Plant costs/asset retirement obligations	Over plant lives		73,528		68,815		71,740		Plant costs/asset retirement obligations	Over plant lives		63,325		72,250		63,116
Plant retirement		-		48,544		57,499		65,919
Cost recovery mechanisms		Up to 10 years		43,955		14,281		16,245
Plant to be retired										Plant to be retired	-		29,452		73,498		50,070
Manufactured gas plant site remediation	Manufactured gas plant site remediation	-		26,000		25,964		26,429		Manufactured gas plant site remediation	-		26,089		26,002		26,053
Taxes recoverable from customers	Taxes recoverable from customers	Over plant lives		11,438		10,847		10,785		Taxes recoverable from customers	Over plant lives		12,492		10,800		12,339
Long-term debt refinancing costs										Long-term debt refinancing costs	Up to 38 years		3,636		4,268		3,794
Natural gas costs recoverable through rate adjustments	Natural gas costs recoverable through rate adjustments	Up to 3 years		6,084		24,677		21,539		Natural gas costs recoverable through rate adjustments	Up to 2 years		3,246		15,158		5,186
Long-term debt refinancing costs		Up to 39 years		3,952		3,826		4,426
Other	Other	Up to 18 years		9,856		6,840		6,356		Other	Up to 17 years		10,318		6,509		9,742
				379,245		369,764		379,381					359,228		379,917		357,851
Total regulatory assets	Total regulatory assets			$	512,380	$	448,889	$	447,908	Total regulatory assets			$	448,306	$	478,369	$	476,542
Regulatory liabilities:	Regulatory liabilities:									Regulatory liabilities:
Current:	Current:									Current:
Natural gas costs refundable through rate adjustments										Natural gas costs refundable through rate adjustments	Up to 1 year		$	13,107	$	16,344	$	6,700
Taxes refundable to customers	Taxes refundable to customers	Up to 1 year		$	3,867	$	4,223	$	3,557	Taxes refundable to customers	Up to 1 year		3,470		3,092		3,841
Electric fuel and purchased power deferral	Electric fuel and purchased power deferral	Up to 1 year		3,205		6,171		3,667		Electric fuel and purchased power deferral	Up to 1 year		—		2,001		—
Natural gas costs refundable through rate adjustments		-		—		20,556		18,565
Other	Other	Up to 1 year		9,419		8,887		5,661		Other	Up to 1 year		14,609		12,829		5,762
				16,491		39,837		31,450					31,186		34,266		16,303
Noncurrent:	Noncurrent:									Noncurrent:
Taxes refundable to customers	Taxes refundable to customers	Over plant lives		218,566		232,186		227,850		Taxes refundable to customers	Over plant lives		212,472		224,795		215,421
Plant removal and decommissioning costs	Plant removal and decommissioning costs	Over plant lives		172,683		173,367		167,171		Plant removal and decommissioning costs	Over plant lives		171,485		169,430		168,152
Pension and postretirement benefits	Pension and postretirement benefits	**		16,915		17,991		16,989		Pension and postretirement benefits	**		20,434		16,965		20,434
Accumulated deferred investment tax credit										Accumulated deferred investment tax credit	Up to 20 years		13,352		11,428		12,696
Other	Other	Up to 21 years		17,977		11,392		16,065		Other	Up to 20 years		15,885		6,442		12,087
				426,141		434,936		428,075					433,628		429,060		428,790
Total regulatory liabilities	Total regulatory liabilities			$	442,632	$	474,773	$	459,525	Total regulatory liabilities			$	464,814	$	463,326	$	445,093
Net regulatory position	Net regulatory position			$	69,748	$	(25,884)	$	(11,617)	Net regulatory position			$	(16,508)	$	15,043	$	31,449

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

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

Regulatory assets not earning a rate of return were approximately ~~$318.2~~$268.1 million and $361.4 million at ~~September 30,~~March 31, 2022 and 2021, respectively, and ~~2020, and $332.5~~$296.6 million at December 31, ~~2020;~~2021; however, these regulatory assets are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and postretirement benefits, asset retirement obligations, accelerated depreciation on plant retirement and the estimated future cost of manufactured gas plant site remediation.

~~Inde~~x

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

Index

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

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

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units. The Company accelerated the depreciation related to these facilities in property, plant and equipment and recorded the difference between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets. ~~The first unit ceased operations on March 31, 2021, and in the second quarter of 2021, the Company began amortizing plant retirement and closure costs related to this facility.~~ Requests ~~have been~~were filed with the NDPSC and SDPUC, and subsequently approved, to offset the savings associated with the cessation of operations of ~~this unit~~these units with the amortization of the deferred regulatory assets. ~~In the second quarter~~The Company ceased operations of Lewis & Clark Station in March 2021 ~~the~~and Units 1 and 2 at Heskett Station in February 2022. The Company subsequently moved the costs being recovered for ~~this facility~~these facilities from plant retirement to cost recovery mechanisms in the previous ~~table. The remaining two units are expected to be retired~~table and began amortizing the associated plant retirement and closure costs in ~~early 2022.~~the jurisdictions where requests were filed, as previously discussed. The Company expects to recover the regulatory assets related to the plant retirements in future rates.

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

Note 14 - Fair value measurements

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

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations under its unfunded, nonqualified defined benefit and defined contribution plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled ~~$106.4~~$105.4 million, ~~$95.7~~$101.6 million and ~~$100.1~~$109.6 million, at ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020,~~2021, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized ~~gains~~loss on these investments ~~were $373,000 and $4.2~~was $5.8 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. The net unrealized ~~gains~~gain on these investments ~~were $3.3 million and $8.7 million~~was $127,000 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021. The change in fair value, which is considered part of the cost of the plan, is classified in other income on the Consolidated Statements of Income.

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


September 30, 2021		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022										March 31, 2022	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(In thousands)									(In thousands)
Mortgage-backed securities	Mortgage-backed securities	$	8,597	$	93	$	11	$	8,679	Mortgage-backed securities	$	8,778	$	3	$	310	$	8,471
U.S. Treasury securities	U.S. Treasury securities	2,681		—		28		2,653		U.S. Treasury securities	2,688		—		63		2,625
Total	Total	$	11,278	$	93	$	39	$	11,332	Total	$	11,466	$	3	$	373	$	11,096


September 30, 2020		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2021										March 31, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(In thousands)									(In thousands)
Mortgage-backed securities	Mortgage-backed securities	$	9,813	$	213	$	4	$	10,022	Mortgage-backed securities	$	8,709	$	155	$	10	$	8,854
U.S. Treasury securities	U.S. Treasury securities	1,166		3		—		1,169		U.S. Treasury securities	2,636		—		14		2,622
Total	Total	$	10,979	$	216	$	4	$	11,191	Total	$	11,345	$	155	$	24	$	11,476

2220

~~Inde~~xIndex


December 31, 2020		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2021										December 31, 2021	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(In thousands)									(In thousands)
Mortgage-backed securities	Mortgage-backed securities	$	9,799	$	156	$	9	$	9,946	Mortgage-backed securities	$	8,702	$	51	$	47	$	8,706
U.S. Treasury securities	U.S. Treasury securities	1,386		—		5		1,381		U.S. Treasury securities	2,407		—		11		2,396
Total	Total	$	11,185	$	156	$	14	$	11,327	Total	$	11,109	$	51	$	58	$	11,102

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


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

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

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


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

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

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

Index


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

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

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

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

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

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

Fair Value Measurements at September 30, 2021, Using
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Balance at September 30, 2021
(In thousands)
Assets:
Money market funds $ — $ 9,907 $ — $ 9,907
Insurance contracts* — 106,371 — 106,371
Available-for-sale securities:
Mortgage-backed securities — 8,679 — 8,679
U.S. Treasury securities — 2,653 — 2,653
Total assets measured at fair value $ — $ 127,610 $ — $ 127,610

* The insurance contracts invest approximately 63 percent in fixed-income investments, 16 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 7 percent in common stock of small-cap companies, 5 percent in target date investments and 1 percent in cash equivalents.

Fair Value Measurements at September 30, 2020, Using
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Balance at September 30, 2020
(In thousands)
Assets:
Money market funds $ — $ 8,478 $ — $ 8,478
Insurance contract* — 95,687 — 95,687
Available-for-sale securities:
Mortgage-backed securities — 10,022 — 10,022
U.S. Treasury securities — 1,169 — 1,169
Total assets measured at fair value $ — $ 115,356 $ — $ 115,356

* The insurance contract invests approximately 68 percent in fixed-income investments, 15 percent in common stock of large-cap companies, 6 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 4 percent in target date investments and 1 percent in cash equivalents.

~~Inde~~x

Fair Value Measurements at December 31, 2020, Using
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Balance at December 31, 2020
(In thousands)
Assets:
Money market funds $ — $ 8,917 $ — $ 8,917
Insurance contract* — 100,104 — 100,104
Available-for-sale securities:
Mortgage-backed securities — 9,946 — 9,946
U.S. Treasury securities — 1,381 — 1,381
Total assets measured at fair value $ — $ 120,348 $ — $ 120,348

* The insurance contract invests approximately 57 percent in fixed-income investments, 18 percent in common stock of large-cap companies, 9 percent in common stock of mid-cap companies, 9 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

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

The Company performed fair value assessments of the assets acquired and liabilities assumed in the business combinations that occurred during ~~2021 and 2020.~~2021. The fair value of these assets and liabilities were determined based on Level 2 and Level 3 inputs.

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


		September 30, 2021		September 30, 2020		December 31, 2020			March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)							(In thousands)
Carrying amount	Carrying amount	$	2,328,266	$	2,270,290	$	2,213,130	Carrying amount	$	2,747,763	$	2,253,274	$	2,741,900
Fair value	Fair value	$	2,599,907	$	2,593,743	$	2,537,289	Fair value	$	2,755,041	$	2,473,806	$	2,984,866

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

Note 15 - Debt

Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the debt agreements, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at ~~September 30, 2021.~~March 31, 2022. In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.

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

2422

~~Inde~~xIndex

Short-term debt

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

Long-term debt

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


		Weighted Average Interest Rate at September 30, 2021		September 30, 2021		September 30, 2020		December 31, 2020			Weighted Average Interest Rate at March 31, 2022		March 31, 2022		March 31, 2021		December 31, 2021
				(In thousands)									(In thousands)
Senior Notes due on dates ranging from October 22, 2022 to September 15, 2061	Senior Notes due on dates ranging from October 22, 2022 to September 15, 2061	4.36	%	$	2,025,000	$	1,900,000	$	1,950,000	Senior Notes due on dates ranging from October 22, 2022 to September 15, 2061	4.28	%	$	2,275,000	$	1,950,000	$	2,125,000
Commercial paper supported by revolving credit agreements	Commercial paper supported by revolving credit agreements	.35	%	168,800		214,150		125,600		Commercial paper supported by revolving credit agreements	.90	%	348,500		218,900		450,300
Credit agreements due on June 7, 2024	Credit agreements due on June 7, 2024	2.54	%	94,300		91,000		95,900		Credit agreements due on June 7, 2024	3.25	%	85,800		43,350		127,500
Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029	Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029	7.32	%	35,000		35,000		35,000		Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029	7.32	%	35,000		35,000		35,000
Term Loan Agreement due on September 3, 2032	Term Loan Agreement due on September 3, 2032	2.00	%	7,700		8,400		8,400		Term Loan Agreement due on September 3, 2032	2.00	%	7,700		8,400		7,700
Other notes due on dates ranging from January 2, 2022 to January 1, 2061		.83	%	3,198		28,284		4,034
Other notes due on dates ranging from January 1, 2024 to January 1, 2061										Other notes due on dates ranging from January 1, 2024 to January 1, 2061	.95	%	2,445		3,282		2,564
Less unamortized debt issuance costs	Less unamortized debt issuance costs			5,709		6,526		5,803		Less unamortized debt issuance costs			6,605		5,655		6,090
Less discount	Less discount			23		18		1		Less discount			77		3		74
Total long-term debt	Total long-term debt			2,328,266		2,270,290		2,213,130		Total long-term debt			2,747,763		2,253,274		2,741,900
Less current maturities	Less current maturities			1,548		1,558		1,555		Less current maturities			147,953		1,552		148,053
Net long-term debt	Net long-term debt			$	2,326,718	$	2,268,732	$	2,211,575	Net long-term debt			$	2,599,810	$	2,251,722	$	2,593,847

Schedule of Debt Maturities Long-term debt maturities, which excludes unamortized debt issuance costs and discount, at ~~September 30, 2021,~~March 31, 2022, were as follows:

Remainder of
2021
2022 2023 2024 2025 Thereafter
(In thousands)
Long-term debt maturities $ 77 $ 148,021 $ 77,921 $ 324,521 $ 177,802 $ 1,605,656


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

Note 16 - Cash flow information

Cash expenditures for interest and income taxes were as follows:


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021
		(In thousands)					(In thousands)
Interest, net*	Interest, net*	$	59,876	$	63,086	Interest, net*	$	15,657	$	14,303
Income taxes paid, net		$	61,250	$	43,448
Income taxes paid (refunded), net						Income taxes paid (refunded), net	$	(363)	$	13,880

* AFUDC - borrowed was ~~$1.6 million~~$586,000 and ~~$2.0 million~~$348,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Noncash investing and financing transactions were as follows:


		September 30, 2021		September 30, 2020		December 31, 2020			March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)							(In thousands)
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	26,120	$	41,315	$	54,356	Right-of-use assets obtained in exchange for new operating lease liabilities	$	10,175	$	9,236	$	55,987
Property, plant and equipment additions in accounts payable	Property, plant and equipment additions in accounts payable	$	88,355	$	33,240	$	26,082	Property, plant and equipment additions in accounts payable	$	25,730	$	20,594	$	57,605
Accrual for holdback payment related to a business combination		$	—	$	5,000	$	2,500
Debt assumed in connection with a business combination								Debt assumed in connection with a business combination	$	—	$	—	$	10

Index

Note 17 - Business segment data

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

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

~~Inde~~x

The pipeline segment provides natural gas transportation and underground storage services through a regulated pipeline system primarily in the Rocky Mountain and northern Great Plains regions of the United States. This segment also provides non-regulated cathodic protection and other energy-related services. ~~In 2020, the pipeline segment divested its regulated and non-regulated natural gas gathering assets. With the completion of these sales, the segment exited the natural gas gathering business.~~

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

The construction services segment provides ~~inside~~a full spectrum of construction services through its electrical and ~~outside~~mechanical and transmission and distribution specialty contracting services ~~in 43 states plus Washington D.C.~~across the country. These specialty contracting services are provided to utilities and manufacturing, transportation, commercial, industrial, institutional, renewable and governmental customers. Its ~~inside~~electrical and mechanical contracting services include ~~design,~~ construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical piping and services. Its ~~outside~~transmission and distribution contracting services include ~~design,~~ construction and maintenance of overhead and underground electrical, ~~distribution~~gas and ~~transmission lines, substations, external lighting, traffic signalization, and gas pipelines,~~communication infrastructure, as well as ~~utility excavation and the manufacture~~manufacturing and distribution of transmission line construction ~~equipment. This segment also constructs~~equipment and ~~maintains renewable energy projects. These specialty contracting services are provided to utilities and large manufacturing, commercial, industrial, institutional and governmental customers.~~tools.

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

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

The information below follows the same accounting policies as described in Note 2 of the Notes to Consolidated Financial Statements in the ~~2020~~2021 Annual Report. Information on the Company's segments was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020				2022		2021
		(In thousands)										(In thousands)
External operating revenues:	External operating revenues:									External operating revenues:
Regulated operations:	Regulated operations:									Regulated operations:
Electric	Electric	$	98,930	$	87,447	$	267,254	$	249,793	Electric		$	93,594	$	84,673
Natural gas distribution	Natural gas distribution	110,378		94,703		614,373		562,641		Natural gas distribution		450,418		350,206
Pipeline	Pipeline	27,757		27,965		58,390		57,717		Pipeline		9,444		7,502
		237,065		210,115		940,017		870,151				553,456		442,381
Non-regulated operations:	Non-regulated operations:									Non-regulated operations:
Pipeline	Pipeline	3,211		4,103		10,263		12,664		Pipeline		1,676		2,411
Construction materials and contracting	Construction materials and contracting	831,189		822,439		1,730,521		1,705,629		Construction materials and contracting		309,836		265,659
Construction services	Construction services	514,523		550,608		1,556,737		1,559,217		Construction services		551,591		517,470
Other	Other	25		24		70		(70)		Other		—		17
		1,348,948		1,377,174		3,297,591		3,277,440				863,103		785,557
Total external operating revenues	Total external operating revenues	$	1,586,013	$	1,587,289	$	4,237,608	$	4,147,591	Total external operating revenues		$	1,416,559	$	1,227,938

2624

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		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020				2022		2021
		(In thousands)										(In thousands)
Intersegment operating revenues:	Intersegment operating revenues:									Intersegment operating revenues:
Regulated operations:	Regulated operations:									Regulated operations:
Electric	Electric	$	136	$	195	$	407	$	586	Electric		$	124	$	136
Natural gas distribution	Natural gas distribution	142		185		425		555		Natural gas distribution		136		142
Pipeline	Pipeline	3,845		3,543		37,530		36,583		Pipeline		25,933		25,990
		4,123		3,923		38,362		37,724				26,193		26,268
Non-regulated operations:	Non-regulated operations:									Non-regulated operations:
Pipeline	Pipeline	63		79		470		237		Pipeline		7		239
Construction materials and contracting	Construction materials and contracting	110		110		314		262		Construction materials and contracting		130		62
Construction services	Construction services	289		425		2,128		3,674		Construction services		1,059		1,042
Other	Other	3,398		3,006		10,082		8,952		Other		4,341		3,324
		3,860		3,620		12,994		13,125				5,537		4,667
Intersegment eliminations	Intersegment eliminations	(7,983)		(7,543)		(51,356)		(50,849)		Intersegment eliminations		(31,730)		(30,935)
Total intersegment operating revenues	Total intersegment operating revenues	$	—	$	—	$	—	$	—	Total intersegment operating revenues		$	—	$	—

Operating income (loss):	Operating income (loss):									Operating income (loss):
Electric	Electric	$	27,310	$	21,159	$	53,982	$	48,827	Electric		$	15,044	$	13,865
Natural gas distribution	Natural gas distribution	(14,249)		(18,393)		42,925		32,285		Natural gas distribution		56,256		53,573
Pipeline	Pipeline	12,284		11,762		35,896		35,406		Pipeline		11,882		12,536
Construction materials and contracting	Construction materials and contracting	133,712		148,522		171,274		179,994		Construction materials and contracting		(44,605)		(34,889)
Construction services	Construction services	30,120		40,507		108,172		102,185		Construction services		29,498		40,277
Other	Other	(8)		154		(226)		339		Other		(732)		(198)
Total operating income	Total operating income	$	189,169	$	203,711	$	412,023	$	399,036	Total operating income		$	67,343	$	85,164

Net income (loss):	Net income (loss):									Net income (loss):
Regulated operations:	Regulated operations:									Regulated operations:
Electric	Electric	$	20,564	$	16,787	$	41,618	$	40,314	Electric		$	11,278	$	10,749
Natural gas distribution	Natural gas distribution	(15,390)		(17,614)		20,081		13,795		Natural gas distribution		36,315		36,178
Pipeline	Pipeline	10,225		7,812		27,508		23,882		Pipeline		7,956		9,194
		15,399		6,985		89,207		77,991				55,549		56,121
Non-regulated operations:	Non-regulated operations:									Non-regulated operations:
Pipeline	Pipeline	356		189		1,166		444		Pipeline		(619)		(296)
Construction materials and contracting	Construction materials and contracting	96,282		107,307		116,865		122,113		Construction materials and contracting		(40,010)		(30,813)
Construction services	Construction services	23,130		29,789		81,839		74,544		Construction services		21,324		29,825
Other	Other	3,795		8,745		2,172		3,303		Other		(4,511)		(2,721)
		123,563		146,030		202,042		200,404				(23,816)		(4,005)
Income from continuing operations	Income from continuing operations	138,962		153,015		291,249		278,395		Income from continuing operations		31,733		52,116
Income (loss) from discontinued operations, net of tax		314		63		348		(484)
Income from discontinued operations, net of tax										Income from discontinued operations, net of tax		30		15
Net income	Net income	$	139,276	$	153,078	$	291,597	$	277,911	Net income		$	31,763	$	52,131

2725

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Note 18 - Employee benefit plans

Pension and other postretirement plans

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

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


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

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

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

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


		Pension Benefits				Other Postretirement Benefits					Three Months Ended
Three Months Ended September 30,		2021		2020		2021		2020
											March 31,
											2022		2021
		(In thousands)									(In thousands)
Components of net periodic benefit credit:	Components of net periodic benefit credit:									Components of net periodic benefit credit:
Service cost	Service cost	$	—	$	—	$	400	$	383	Service cost	$	354	$	400
Interest cost	Interest cost	2,455		3,023		466		609		Interest cost	474		466
Expected return on assets	Expected return on assets	(4,894)		(4,987)		(1,275)		(1,115)		Expected return on assets	(1,322)		(1,275)
Amortization of prior service credit	Amortization of prior service credit	—		—		(349)		(349)		Amortization of prior service credit	(350)		(349)
Amortization of net actuarial loss		2,004		1,793		6		71
Amortization of net actuarial (gain) loss										Amortization of net actuarial (gain) loss	(54)		6
Net periodic benefit credit, including amount capitalized	Net periodic benefit credit, including amount capitalized	(435)		(171)		(752)		(401)		Net periodic benefit credit, including amount capitalized	(898)		(752)
Less amount capitalized	Less amount capitalized	—		—		46		39		Less amount capitalized	31		39
Net periodic benefit credit	Net periodic benefit credit	$	(435)	$	(171)	$	(798)	$	(440)	Net periodic benefit credit	$	(929)	$	(791)

Pension Benefits Other
Postretirement Benefits
Nine Months Ended September 30, 2021 2020 2021 2020
(In thousands)
Components of net periodic benefit credit:
Service cost $ — $ — $ 1,200 $ 1,149
Interest cost 7,365 9,070 1,398 1,827
Expected return on assets (14,682) (14,962) (3,825) (3,764)
Amortization of prior service credit — — (1,047) (1,048)
Amortization of net actuarial loss 6,012 5,379 18 215
Net periodic benefit credit, including amount capitalized (1,305) (513) (2,256) (1,621)
Less amount capitalized — — 129 106
Net periodic benefit credit $ (1,305) $ (513) $ (2,385) $ (1,727)

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

Nonqualified defined benefit plans

In addition to the qualified defined benefit pension plans reflected in the table at the beginning of this note, the Company also has unfunded, nonqualified defined benefit plans for executive officers and certain key management employees. The Company's net periodic benefit cost for these plans was ~~$769,000~~$773,000 and ~~$2.3 million~~$769,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively. The Company's net periodic benefit cost for these plans for the three and nine months ended September 30, 2020, was $1.0 million and $2.9 million,~~ respectively. The components of net periodic benefit cost for these plans are included in other income on the Consolidated Statements of Income.

Note 19 - Regulatory matters

The Company regularly reviews the need for electric and natural gas rate changes in each of the jurisdictions in which service is provided. The Company files for rate adjustments to seek recovery of operating costs and capital investments, as well as reasonable returns as allowed by regulators. Certain regulatory proceedings and cases may also contain recurring mechanisms that can have an annual true-up. Examples of these recurring mechanisms include: infrastructure riders, transmission trackers, renewable resource cost adjustment riders, as well as weather normalization and decoupling mechanisms. The following paragraphs summarize the Company's significant open regulatory proceedings and cases by jurisdiction including updates to those reported in the ~~2020~~2021 Annual Report. The Company is unable to predict the ultimate outcome of these matters, the timing of final decisions of the various regulators and courts, or the effect on the Company's results of operations, financial position or cash flows.

~~IPUC~~

On January 12, 2021, Intermountain filed an application with the IPUC for a decrease in its depreciation and amortization rates of approximately $2.9 million annually or a decrease from a combined rate of 3.0 percent to 2.6 percent. On June 3, 2021, Intermountain filed a joint settlement agreement with the IPUC Staff reflecting a revised annual decrease of approximately $3.8 million or approximately 2.4 percent. On August 18, 2021, the settlement agreement was approved with rates retroactive to January 1, 2021.

2826

~~Inde~~xIndex

MNPUC

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

~~NDPSC~~SDPUC

Montana-Dakota has a transmission cost recovery rider that allows annual updates to rates for actual costs associated with transmission-related projects and services. On ~~July 15, 2021,~~March 1, 2022, Montana-Dakota filed an annual update to its transmission cost recovery rider to recover a revenue requirement of approximately $2.5 million annually, which reflects a true-up of the prior period adjustment, resulting in an increase in current rates of approximately $1.5 million. This matter is pending before the SDPUC.

Montana-Dakota has an infrastructure rider ~~with~~rate tariff that allows for annual adjustments for recent projected capital costs and related expenses for projects determined to be recoverable under the ~~NDPSC~~electric tariff. On March 1, 2022, Montana-Dakota filed an annual update to its infrastructure rider requesting to recover ~~revenues~~a revenue requirement of approximately ~~$14.5 million,~~$940,000 annually, which ~~includes~~reflects a true-up of the prior period adjustment, resulting in a decrease in current rates of approximately ~~$1.1 million from current rates. This filing includes approximately $5.1 million related to transmission capital projects.~~$88,000. On ~~September 22, 2021, the NDPSC approved the decrease with rates effective November 1, 2021.~~

~~SDPUC~~

~~On August 19, 2020,~~April 28, 2022, the SDPUC approved the ~~use~~rates as requested with an effective date of deferred accounting by Montana-Dakota to track expenses and revenues related to the COVID-19 pandemic. Montana-Dakota has determined the deferred accounting order was not necessary as no costs were recorded as regulatory assets. The filing was withdrawn by Montana-Dakota on July 30, 2021.

~~On March 11, 2021, Montana-Dakota filed an informational update to the infrastructure rider rate tariff with the SDPUC related to the retirement of Unit~~May 1, at Lewis & Clark Station. The filing includes the annual revenue requirement offset by the related amortization of the accelerated depreciation on the plant, net of excess deferred income taxes, and the decommissioning costs projected to be incurred in 2021 resulting in no impact to customers. This matter is pending before the SDPUC.2022.

WUTC

On June 1, 2021, Cascade filed its annual pipeline cost recovery mechanism requesting an increase in annual revenue of approximately $2.1 million or approximately 0.8 percent. On October 15, 2021, Cascade filed an update reflecting a revised increase in annual revenue of approximately $1.7 million, or approximately 0.6 percent, which includes actual costs as of September 30, 2021. On October 28, 2021, the filing was approved with rates effective November 1, 2021.

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

~~FERC~~

On ~~September 1, 2021, Montana-Dakota~~March 24, 2022, Cascade filed a request for a tariff revision with the WUTC to rectify an ~~update~~inadvertent IRS normalization violation resulting from its tariff established in 2018 that passes back to customers the reversal of plant-related excess deferred income taxes through an annual rate adjustment. This request was made in response to the issuance of an IRS private letter ruling to another Washington utility with the same annual rate adjustment tariff, which addressed its ~~transmission formula~~normalization violation. The private letter ruling concluded the tariff to refund excess deferred income taxes without corresponding adjustments for other components of rate base or changes in depreciation or income tax expense, is an impermissible methodology under the ~~MISO~~IRS normalization and consistency rules. Cascade's request proposes a similar remedy through the tariff ~~for~~to recover the excess amounts refunded to customers while this tariff has been in place, and revises the method going forward to reflect excess deferred income taxes in rates in the same manner as other components of rate base from its ~~multi-value project for $13.4~~most recent general rate case. Cascade has requested recovery of the excess refunded to customers of approximately $3.3 million ~~which~~and elimination of the currently deferred, but not yet refunded balance. This matter is ~~effective January 1, 2022.~~pending before the WUTC.

Note 20 - Contingencies

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

At ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020,~~2021, the Company accrued liabilities, which have not been discounted, ~~including liabilities held for sale,~~ of ~~$34.7~~$30.0 million, ~~$72.7~~$55.0 million and ~~$41.5~~$37.0 million, respectively. At ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020,~~2021, the Company also recorded corresponding insurance receivables of ~~$11.7~~$7.1 million, ~~$49.1~~$31.6 million and ~~$17.5~~$14.1 million, respectively, and regulatory assets of ~~$21.1~~$20.8 million, $20.9 million and ~~$21.3~~$21.2 million, respectively, related to the accrued liabilities. The accruals are for contingencies resulting from litigation, production taxes, royalty claims and environmental matters. This includes amounts that have been accrued for matters discussed in Environmental matters within this note. The Company will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to probable and reasonably possible losses in excess of the amounts accrued, net of insurance

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recoveries, while uncertain, either cannot be estimated or will not have a material effect

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upon the Company's financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal costs are expensed as they are incurred.

Environmental matters

The Company is a party to claims for the cleanup of environmental contamination at certain manufactured gas plant sites, as well as a superfund site. There were no material changes to the Company's environmental matters that were previously reported in the ~~2020~~2021 Annual Report.

Guarantees

In 2009, multiple sale agreements were signed to sell the Company's ownership interests in the Brazilian Transmission Lines. In connection with the sale, Centennial agreed to guarantee payment of any indemnity obligations of certain of the Company's indirect wholly owned subsidiaries. The remaining guarantee is expected to expire in 2021. The guarantees were required by the buyers as a condition to the sale of the Brazilian Transmission Lines.

Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the Company. These guarantees are related to construction contracts, insurance deductibles and loss limits, and certain other guarantees. At ~~September 30, 2021,~~March 31, 2022, the fixed maximum amounts guaranteed under these agreements aggregate ~~$147.6~~$147.9 million. Certain of the guarantees also have no fixed maximum amounts specified. At ~~September 30, 2021,~~March 31, 2022, the amounts of scheduled expiration of the maximum amounts guaranteed under these agreements aggregate to ~~$900,000 in 2021; $39.3~~$48.5 million in 2022; ~~$50.3~~$44.3 million in 2023; ~~$46.6~~$44.3 million in 2024; ~~$600,000~~$800,000 in 2025; ~~$900,000~~$800,000 in 2026; $200,000 thereafter; and $9.0 million, which has no scheduled maturity date. There were no amounts outstanding under the previously mentioned guarantees at ~~September 30, 2021.~~March 31, 2022. In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee.

Certain subsidiaries have outstanding letters of credit to third parties related to insurance policies and other agreements, some of which are guaranteed by other subsidiaries of the Company. At ~~September 30, 2021,~~March 31, 2022, the fixed maximum amounts guaranteed under these letters of credit aggregated ~~$25.5~~$29.2 million. At ~~September 30, 2021,~~March 31, 2022, the amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to ~~$21.2~~$28.6 million in ~~2021~~2022 and ~~$4.3 million~~$600,000 in ~~2022.~~2023. There were no amounts outstanding under the previously mentioned letters of credit at ~~September 30, 2021.~~March 31, 2022. In the event of default under these letter of credit obligations, the subsidiary guaranteeing the letter of credit would be obligated for reimbursement of payments made under the letter of credit.

In addition, Centennial, Knife River and MDU Construction Services have issued guarantees to third parties related to the routine purchase of maintenance items, materials and lease obligations for which no fixed maximum amounts have been specified. These guarantees have no scheduled maturity date. In the event a subsidiary of the Company defaults under these obligations, Centennial, Knife River or MDU Construction Services would be required to make payments under these guarantees. Any amounts outstanding by subsidiaries of the Company were reflected on the Consolidated Balance Sheet at ~~September 30, 2021.~~March 31, 2022.

In the normal course of business, Centennial has surety bonds related to construction contracts and reclamation obligations of its subsidiaries. In the event a subsidiary of Centennial does not fulfill a bonded obligation, Centennial would be responsible to the surety bond company for completion of the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, Centennial will likely continue to enter into surety bonds for its subsidiaries in the future. At ~~September 30, 2021,~~March 31, 2022, approximately ~~$897.2 million~~$1.1 billion of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

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Variable interest entities

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

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

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

At ~~September 30, 2021,~~March 31, 2022, the Company's exposure to loss as a result of the Company's involvement with the VIE, based on the Company's ownership percentage, was ~~$32.1~~$31.0 million.

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

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

The Company's two-platform business model, regulated energy delivery and construction materials and services, are each comprised of different operating segments. Most of these segments experience seasonality related to the industries in which they operate. The two-platform approach helps balance this seasonality and the risks associated with each type of industry. The Company is authorized to conduct business in ~~46 states~~nearly every state and during peak construction season has employed over ~~15,600~~16,000 employees. The Company's organic investments are strong drivers of high-quality earnings and continue to be an important part of the Company's growth. Management believes the Company is well positioned in the industries and markets in which it operates.

The Company continues to effectively execute its strategy ~~while managing~~and is continually adjusting its businesses in response to the ongoing effects of the COVID-19 pandemic. In early 2020, the Company implemented its business continuity plans as well as a task force to monitor developments related to the pandemic allowing the Company to continue to provide safe and reliable services. Most of the Company's products and services are considered essential to ~~our country~~America and its communities and, as a result, operations have generally ~~continued throughout the pandemic and reopening of the economy.~~

~~In March 2020, the Company took measures to mitigate the risk of COVID-19 transmission by requiring employees that had the capacity to do so to work from home.~~continued. The Company also enacted additional physical and cybersecurity measures to safeguard systems for remote work locations. As of July 2021, many of these employees returned to their office; however, some employees have transitioned to a permanent remote work environment.

Certain of the Company's supply vendors are facing production and staffing challenges as they work to achieve production capacity and lead times consistent with pre-pandemic levels. Coupled with other challenges of the pandemic, these vendors are also experiencing strong demand from the residential construction market, some industrial segments and some utility infrastructure investments. In addition, freight markets continue to have challenges with driver shortages; strong demand for consumer goods; extended lead times; and costs for vehicles, driver retention and recruitment. The Company has implemented measures to proactively order supplies and work with additional suppliers to ensure work continues without delays; however, the Company has experienced some price increases, disruptions and delays on delivery of certain materials.

Despite the current economic recovery, the situation surrounding COVID-19 remains fluid. This recovery could be slowed or reversed by a number of factors, including a widespread resurgence in COVID-19 infections, whether due to the spread of variants of the virus or otherwise; the rate of vaccinations; vaccine mandates; labor constraints; the strength of the global supply chain; and the rate in which governments are re-opening businesses or, in certain jurisdictions, reversing re-opening decisions. Due to the uncertainty of the economic outlook resulting from the COVID-19 pandemic, the Company continues to monitor the situation ~~closely. Although~~and there have been ~~logistical and other challenges as a result of COVID-19, there were~~ no material adverse impacts from COVID-19 on the Company's results of operations for the nine months ended September 30, 2021 or 2020. The Company will continue to adjust its business in response to the pandemic while positioning for potential opportunities to enhance its competitive position. For more information specific to each of the Company's business segments, see the following discussions in each business segment's Outlook section.operations. For more information on ~~the~~ possible impacts to the Company's businesses, see Part ~~II,~~I, Item 1A. Risk Factors in ~~this~~the 2021 Form ~~10-Q.~~10-K.

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Forward-Looking Statements

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

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, ~~the impact of COVID-19 on the Company's business,~~ management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may not be achieved or accomplished and changes in such assumptions and factors could cause actual future results to differ materially.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements reported in Part ~~II, Item 1A. Risk Factors in this Form 10-Q, Part~~ I, Item 1A. Risk Factors in the ~~2020~~2021 Annual Report and subsequent filings with the SEC.

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Consolidated Earnings Overview

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020			2022		2021
		(In millions, except per share amounts)									(In millions, except per share amounts)
Electric	Electric	$	20.6	$	16.8	$	41.6	$	40.3	Electric	$	11.3	$	10.7
Natural gas distribution	Natural gas distribution	(15.4)		(17.6)		20.1		13.8		Natural gas distribution	36.3		36.2
Pipeline	Pipeline	10.6		8.0		28.7		24.3		Pipeline	7.3		8.9
Construction materials and contracting	Construction materials and contracting	96.3		107.3		116.9		122.1		Construction materials and contracting	(40.0)		(30.8)
Construction services	Construction services	23.1		29.8		81.8		74.5		Construction services	21.3		29.8
Other	Other	3.8		8.7		2.2		3.4		Other	(4.5)		(2.7)
Income from continuing operations	Income from continuing operations	139.0		153.0		291.3		278.4		Income from continuing operations	31.7		52.1
Income (loss) from discontinued operations, net of tax		.3		.1		.3		(.5)
Discontinued operations, net of tax										Discontinued operations, net of tax	—		—
Net income	Net income	$	139.3	$	153.1	$	291.6	$	277.9	Net income	$	31.7	$	52.1
Earnings per share - basic:	Earnings per share - basic:									Earnings per share - basic:
Income from continuing operations	Income from continuing operations	$	.68	$	.76	$	1.44	$	1.39	Income from continuing operations	$	.16	$	.26
Discontinued operations, net of tax	Discontinued operations, net of tax	—		—		—		—		Discontinued operations, net of tax	—		—
Earnings per share - basic	Earnings per share - basic	$	.68	$	.76	$	1.44	$	1.39	Earnings per share - basic	$	.16	$	.26
Earnings per share - diluted:	Earnings per share - diluted:									Earnings per share - diluted:
Income from continuing operations	Income from continuing operations	$	.68	$	.76	$	1.44	$	1.39	Income from continuing operations	$	.16	$	.26
Discontinued operations, net of tax	Discontinued operations, net of tax	—		—		—		—		Discontinued operations, net of tax	—		—
Earnings per share - diluted	Earnings per share - diluted	$	.68	$	.76	$	1.44	$	1.39	Earnings per share - diluted	$	.16	$	.26

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 The Company's consolidated earnings decreased ~~$13.8~~$20.4 million.

The ~~Company's earnings were negatively impacted by lower asphalt product and contracting margins resulting from less available paving work in the public sector and higher asphalt oil and fuel costs at the~~ construction materials and contracting ~~business.~~business experienced lower margins from higher fuel, repair and maintenance and labor-related costs, partially offset by increased average product pricing. The construction services business ~~also~~ experienced decreased gross margin largely attributable to ~~changes~~lower industrial margins due to the timing of projects and less storm-repair and fire-hardening power line work that is typically higher-margin work, offset in ~~estimates on a construction contract, higher employee costs as a result of labor shortages and~~part by increased commercial margins. The pipeline business experienced decreased natural ~~disaster recovery work. In addition, unfavorable income tax adjustments related to~~gas storage-related revenue and higher operating expenses, partially offset by increased demand revenues associated with the North Bakken Expansion project. The Company's earnings were further impacted by $6.2 million in lower returns on certain of the Company's ~~consolidated annualized estimated tax rate included in Other negatively impacted the Company's earnings.~~benefit plan investments. Partially offsetting these decreases were higher residential retail sales volumes at the electric business and higher ~~AFUDC associated with the North Bakken Expansion project at the pipeline business and~~retail sales volumes across all customer classes, as well as approved rate relief in certain jurisdictions, at the natural gas distribution business.

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~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~The Company's consolidated earnings increased $13.7 million.~~

The Company's earnings were positively impacted by increased earnings across most of the Company's businesses. The construction services business was positively impacted by lower bad debt expense due to revised estimates on expected credit losses, as well as an increase in gross margin as a result of the diversification of workloads. The natural gas distribution business benefited from approved rate relief in certain jurisdictions and increased retail sales volumes. The pipeline business's earnings increased largely due to higher AFUDC associated with the North Bakken Expansion project and the electric business was favorably impacted by higher retail sales margins. Partially offsetting these increases were decreased earnings at the construction materials and contracting business, largely due to decreased gross margin related to asphalt products and contracting work.

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

Business Segment Financial and Operating Data

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

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

Electric and Natural Gas Distribution

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

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

The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment, as well as certain operational, environmental and system integrity regulations. To date, many states have enacted, and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable energy generation. Federal legislation for clean energy standards and GHG emissions has been considered and may be implemented in the near future. The current presidential administration has also made climate change a focus during 2021. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns and changing customer conservation patterns. These initiatives could result in increased costs to produce electricity and procure natural gas. To date, the impact of these initiatives on the Company is unknown. The Company will continue to monitor the progress of these initiatives and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.

investment. The Company is focused on modernizing utility infrastructure to meet the varied energy needs of both its customers and communities while ensuring the delivery of safe, environmentally responsible, reliable and affordable energy. The segments continue to invest in facility upgrades to be in compliance with existing and known future regulations. To assist in the reduction of regulatory lag in obtaining revenue increases to align with increased investments, tracking mechanisms have been implemented in certain ~~jurisdictions,~~jurisdictions. The Company also seeks rate adjustments for operating costs and capital investments, as ~~further discussed in~~well as reasonable returns on investments, not covered by tracking mechanisms. For more information on the Company's tracking mechanisms and recent cases, see Note 19 and the ~~2020~~2021 Annual Report.

~~In September 2019, the PHMSA issued a rule for additional regulations to strengthen the safety of natural gas transmission and storage facilities and hazardous liquid pipelines.~~ The ~~natural gas segment has implemented procedure changes for both the initial requirements and the additional requirements effective July 1, 2021. The natural gas segment is~~segments are also subject to extensive regulation ~~including~~related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. ~~The Company continues~~Both segments are faced with the ongoing need to actively evaluate cybersecurity processes and procedures ~~including changes in the industry's cybersecurity regulations,~~related to its transmission and distribution systems for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing.

~~State implementation~~To date, many states have enacted and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of ~~pollution control plans~~renewable and/or carbon-free energy supply. The current presidential administration has made climate change a focus, as further discussed in the Outlook section. Over the long-term, the Company expects overall electric demand to ~~improve visibility at Class I areas, such~~be positively impacted by increased electrification trends, including electric vehicle adoption, as ~~national parks, under~~a means to address economy-wide carbon emission concerns and changing customer conservation patterns. These initiatives could result in increased costs to produce electricity and procure natural gas. The impact of these initiatives on the ~~EPA's Regional Haze Rule could require~~Company is unknown. The Company will continue to monitor the ~~owners~~progress of ~~Coyote Station to incur significant new costs. If~~these initiatives and assess the ~~owners decide to incur such costs, the costs could, dependent~~potential impacts they may have on ~~determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's~~its stakeholders, business processes, results of operations, ~~financial position~~cash flows and ~~cash flows. The NDDEQ submitted a draft~~

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state implementation plan to federal land managers of the National Park Service, the United States Fish and Wildlife Service and the United States Forest Service for consultation from September 20, 2021 through November 19, 2021. North Dakota determined it is not reasonable to require controls during this planning period. The emissions modeling conducted for the combined western state agencies affected by the Regional Haze Rule was delayed and has subsequently delayed the NDDEQ state implementation plan process. Therefore, the NDDEQ's state implementation plan, which was due to the EPA by July 2021, is anticipated to be submitted to EPA early in 2022. Additionally, the Company is one of four owners of Coyote Station and cannot make a unilateral decision on the plant's future. The Company could be negatively impacted by the decisions of the other owners. In September 2021, Otter Tail Power Company filed its 2022 Integrated Resource Plan in Minnesota and North Dakota which included its intent to start the process of withdrawal from its 35 percent ownership interest in Coyote Station with an anticipated exit from the plant by December 31, 2028. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and each company's employees, customers and communities served.disclosures.

Revenues are impacted by both customer growth and usage, the latter of which is primarily impacted by weather, as well as impacts associated with commercial and industrial slow-downs, including economic recessions, and energy efficiencies. During 2020, the Company experienced higher usage from residential customers and lower usage from commercial customers as a result of the COVID-19 pandemic. Customer usage has started to shift back to pre-pandemic levels in 2021. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among residential and commercial customers. Average consumption among both electric and natural gas customers has tended to decline as more efficient appliances and furnaces are installed, and as the Company has implemented conservation programs. Natural gas weather normalization and decoupling mechanisms in certain jurisdictions have been implemented to largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns on the Company's distribution margins.

In February 2021, a prolonged period of unseasonably cold temperatures in the central United States significantly increased the demand for electric and natural gas services and contributed to increased market prices. The Company's transmission settlement process with SPP helped offset the increased energy costs to electric customers during the cold-weather event. Further, in some jurisdictions the Company utilized natural gas in storage to lessen the impact of high natural gas costs. Overall, Montana-Dakota and Great Plains incurred approximately $44.0 million in increased natural gas costs in order to maintain services for its customers. These extraordinary natural gas costs were recorded as regulatory assets as they are expected to be recovered from customers. Montana-Dakota and Great Plains have received approval for the recovery of purchased gas adjustments related to the cold-weather event in all jurisdictions impacted, including out-of-cycle purchased gas adjustment requests in most jurisdictions. For a discussion of the Company's most recent cases by jurisdiction, see Note 19.

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

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

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	99.1	$	87.6	13	%	$	267.7	$	250.4	7	%	Operating revenues	$	93.7	$	84.8	10	%
Operating expenses:														Operating expenses:
Electric fuel and purchased power	Electric fuel and purchased power	19.5		15.5		26	%	56.2		50.6		11	%	Electric fuel and purchased power	26.3		18.6		41	%
Taxes, other than income		.2		.1		100	%	.6		.5		20	%
Adjusted gross margin		79.4		72.0		10	%	210.9		199.3		6	%
Operating expenses:
Operation and maintenance	Operation and maintenance	31.2		30.7		2	%	93.8		90.5		4	%	Operation and maintenance	30.8		31.3		(2)	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	17.0		15.8		8	%	50.0		47.0		6	%	Depreciation, depletion and amortization	16.9		16.1		5	%
Taxes, other than income	Taxes, other than income	3.9		4.4		(11)	%	13.1		13.0		1	%	Taxes, other than income	4.6		4.9		(6)	%
Total operating expenses	Total operating expenses	52.1		50.9		2	%	156.9		150.5		4	%	Total operating expenses	78.6		70.9		11	%
Operating income	Operating income	27.3		21.1		29	%	54.0		48.8		11	%	Operating income	15.1		13.9		9	%
Other income		1.2		1.2		—	%	3.4		3.3		3	%
Other income (expense)														Other income (expense)	(.3)		.5		(160)	%
Interest expense	Interest expense	6.6		6.4		3	%	19.8		20.1		(1)	%	Interest expense	7.1		6.5		9	%
Income before income taxes	Income before income taxes	21.9		15.9		38	%	37.6		32.0		18	%	Income before income taxes	7.7		7.9		(3)	%
Income tax (benefit) expense		1.3		(.9)		244	%	(4.0)		(8.3)		52	%
Income tax benefit														Income tax benefit	(3.6)		(2.8)		29	%
Net income	Net income	$	20.6	$	16.8	22	%	$	41.6	$	40.3	3	%	Net income	$	11.3	$	10.7	6	%

Operating statistics Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Retail sales (million kWh):
Residential 317.3 296.1 906.3 884.4
Commercial 393.0 356.7 1,101.9 1,056.2
Industrial 145.1 117.1 433.7 386.0
Other 23.8 21.3 65.1 62.1
879.2 791.2 2,507.0 2,388.7
Average cost of electric fuel and purchased power per kWh $ .020 $ .018 $ .020 $ .019

Adjusted gross margin is a non-GAAP financial measure. For additional information and reconciliation of the non-GAAP adjusted gross margin attributable to the electric segment, see the Non-GAAP Financial Measures section later in this Item.


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

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 Electric earnings increased ~~$3.8 million~~$600,000 as a result of:

~~Adjusted gross margin:~~• ~~Increase of $7.4 million, partially~~Revenue increased $8.9 million.

◦Largely due ~~to higher~~to:

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

•Higher retail sales volumes of ~~11.1~~2.5 percent, ~~across all customer classes, largely due to warmer weather and the impacts~~primarily residential retail sales as a result of ~~the COVID-19 pandemic beginning to reverse and businesses reopening,~~colder weather.

•Higher transmission revenues, primarily from higher net transmission of $700,000 and higher ~~MISO revenues~~transmission interconnect upgrades of ~~$1.6 million. Also positively impacting adjusted gross margin was higher~~$600,000.

◦Partially offset by lower per unit average rates of ~~$700,000,~~$900,000.

•Electric fuel and purchased power increased $7.7 million.

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

•Partially offset by decreased fuel costs associated with ~~transmission interconnect upgrades of $700,000. Higher transmission revenues of $900,000 were offset in operation~~the Lewis & Clark Station and Heskett Station plant closures.

•Operation and maintenance ~~expense, as discussed later.~~decreased $500,000.

~~Operation and maintenance:~~◦ ~~Increase of $500,000, largely~~Largely resulting from ~~higher transmission expense of $900,000, offset in revenue, and higher maintenance outage costs at Big Stone Station of $600,000. Partially offsetting these increases were~~ decreased payroll-related costs of $1.0 million, largely due to ~~lower incentive accruals.~~plant closures, as previously discussed.

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

Index

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

◦~~Increase of $1.2 million due in part to the~~Increased amortization of plant retirement and closure costs ~~of $800,000 recovered in operating revenues, as discussed in Note 13, and increased property, plant and equipment balances as a result of transmission projects placed in service.~~

~~Taxes, other than income:~~ ~~Decrease of $500,000, largely the result of decreased coal conversion taxes and property taxes in certain jurisdictions.~~

~~Other income:~~ ~~Comparable to the same period in the prior year.~~

~~Interest expense:~~ ~~Comparable to the same period in the prior year.~~

~~Income tax (benefit) expense:~~ ~~Increased expense of $2.2 million, largely due to higher income before income taxes, lower permanent tax adjustments and excess deferred tax amortization.~~

~~Inde~~x

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~Electric earnings increased $1.3 million as a result of:~~

~~Adjusted gross margin:~~ Increase of $11.6 million driven by increased retail sales volumes of 5.0 percent across all customer classes, largely due to warmer weather and the impacts of the COVID-19 pandemic beginning to reverse and businesses reopening; increased transmission interconnect upgrades of $2.2 million; higher transmission revenues of $2.1 million; higher demand revenues of $1.1 million; and higher MISO revenue of $1.1 million.

~~Operation and maintenance:~~ Increase of $3.3 million resulting from increased payroll-related costs of $900,000, largely stock-based compensation expense and health care costs; higher maintenance outage costs at Big Stone Station of $800,000; higher wind farm maintenance fees of $600,000; and other miscellaneous expenses.

~~Depreciation, depletion and amortization:~~Increase of $3.0 million, largely resulting from increased property, plant and equipment balances primarily related to transmission projects placed in service and the amortization of plant retirement and closure costs of $1.3 million recovered in operating revenues, as discussed in Note 13.

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

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

•Other ~~income:~~ ~~Comparable to the same period in the prior year.~~income (expense) decreased $800,000.

~~Interest expense:~~◦ ~~Comparable to~~Largely lower returns on certain of the ~~same period in the prior year.~~Company's benefit plan investments of $1.2 million.

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

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

•Income tax ~~benefit:~~benefit increased $800,000.

◦ ~~Decrease of $4.3 million, primarily lower~~Largely due to higher production tax credits of ~~$1.9~~$1.1 million ~~related to the expiration of the 10-year credit-qualifying period on certain facilities~~driven by higher wind production.

◦Partially offset by lower permanent tax adjustments and ~~less wind generation; and higher income before income taxes.~~excess deferred tax amortization.

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	110.5	$	94.9	16	%	$	614.8	$	563.2	9	%	Operating revenues	$	450.6	$	350.4	29	%
Operating expenses:														Operating expenses:
Purchased natural gas sold	Purchased natural gas sold	44.9		35.0		28	%	318.0		290.3		10	%	Purchased natural gas sold	293.3		202.2		45	%
Taxes, other than income		3.8		3.8		—	%	24.1		23.1		4	%
Adjusted gross margin		61.8		56.1		10	%	272.7		249.8		9	%
Operating expenses:
Operation and maintenance	Operation and maintenance	47.7		46.9		2	%	145.0		135.9		7	%	Operation and maintenance	54.1		51.2		6	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	21.5		21.3		1	%	64.2		63.1		2	%	Depreciation, depletion and amortization	22.2		22.5		(1)	%
Taxes, other than income	Taxes, other than income	6.8		6.3		8	%	20.6		18.5		11	%	Taxes, other than income	24.7		20.9		18	%
Total operating expenses	Total operating expenses	76.0		74.5		2	%	229.8		217.5		6	%	Total operating expenses	394.3		296.8		33	%
Operating income (loss)		(14.2)		(18.4)		23	%	42.9		32.3		33	%
Other income		1.3		2.2		(41)	%	5.4		6.6		(18)	%
Operating income														Operating income	56.3		53.6		5	%
Other income (expense)														Other income (expense)	(.4)		1.7		(124)	%
Interest expense	Interest expense	9.3		9.3		—	%	27.6		27.5		—	%	Interest expense	9.5		9.2		3	%
Income (loss) before income taxes		(22.2)		(25.5)		13	%	20.7		11.4		82	%
Income tax (benefit) expense		(6.8)		(7.9)		14	%	.6		(2.4)		125	%
Net income (loss)		$	(15.4)	$	(17.6)	13	%	$	20.1	$	13.8	46	%
Income before income taxes														Income before income taxes	46.4		46.1		1	%
Income tax expense														Income tax expense	10.1		9.9		2	%
Net income														Net income	$	36.3	$	36.2	—	%


Operating statistics	Operating statistics	Three Months Ended				Nine Months Ended				Operating statistics	Three Months Ended
		September 30,									March 31,
											2022		2021
Revenues (millions)										Revenues (millions)
Retail sales:										Retail sales:
Residential										Residential	$	258.6	$	203.9
Commercial										Commercial	162.7		120.6
Industrial										Industrial	13.0		8.9
											434.3		333.4
Transportation and other										Transportation and other	16.3		17.0
		2021		2020		2021		2020			$	450.6	$	350.4
Volumes (MMdk)	Volumes (MMdk)									Volumes (MMdk)
Retail sales:	Retail sales:									Retail sales:
Residential	Residential	4.5		4.4		42.3		41.8		Residential	31.0		28.8
Commercial	Commercial	4.2		4.0		29.3		29.1		Commercial	20.5		18.6
Industrial	Industrial	.9		.9		3.5		3.4		Industrial	1.8		1.5
		9.6		9.3		75.1		74.3			53.3		48.9
Transportation sales:	Transportation sales:									Transportation sales:
Commercial	Commercial	.2		.3		1.3		1.4		Commercial	.7		.7
Industrial	Industrial	44.7		39.6		127.5		115.4		Industrial	41.0		43.9
		44.9		39.9		128.8		116.8			41.7		44.6
Total throughput	Total throughput	54.5		49.2		203.9		191.1		Total throughput	95.0		93.5
Average cost of natural gas per dk	Average cost of natural gas per dk	$	4.72	$	3.75	$	4.24	$	3.90	Average cost of natural gas per dk	$	5.50	$	4.13

3733

~~Inde~~xIndex

Adjusted gross margin is a non-GAAP financial measure. For additional information and reconciliation of the non-GAAP adjusted gross margin attributable to the natural gas distribution segment, see the Non-GAAP Financial Measures section later in this Item.

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 Natural gas distribution's ~~seasonal loss decreased $2.2 million~~earnings increased $100,000 as a result of:

~~Adjusted gross margin:~~• ~~Increase of $5.7~~Operating revenues increased $100.2 million, largely resulting from:

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

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

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

◦Approved rate relief in certain jurisdictions of ~~$2.5 million;~~$1.2 million, as well as higher ~~per unit average rates~~cost recovery and tracker mechanisms of $1.0 ~~million; higher retail sales volumes of approximately 2.0 percent across all customer classes; and increased transportation revenues of $600,000 due to higher volumes to electric generation customers.~~million.

~~Operation and maintenance:~~• ~~Increase of $800,000,~~Purchased natural gas sold increased $91.1 million, primarily due ~~to decreased credits for~~to:

◦Higher natural gas costs ~~associated with the installation of meters partially from delaying meter replacements for safety measures implemented~~ as a result of higher market prices.

◦Higher recovery of purchased gas adjustments of $30.0 million related to the ~~COVID-19 pandemic~~February 2021 cold weather event and the 2018 Enbridge pipeline rupture.

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

◦Increased contract services of ~~$800,000 and~~$1.3 million, primarily higher subcontractor costs.

◦Higher payroll-related costs of ~~$500,000,~~$1.0 million, largely ~~health care costs and~~higher straight-time ~~payroll offset in part by lower incentive accruals. Partially offsetting the increases was the absence of the write-off of an abandoned project during the third quarter of 2020.~~payroll.

◦Higher software costs.

•Depreciation, depletion and ~~amortization:~~ ~~Comparable~~amortization was comparable to the same period in the prior year. ~~Higher depreciation~~

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

•Other income (expense) decreased $2.1 million as a result of ~~increased property, plant and equipment balances from growth and replacement projects placed in service was mostly offset by decreased depreciation rates in certain jurisdictions.~~

~~Taxes, other than income:~~ ~~Increase of $500,000 driven by higher property taxes in certain jurisdictions.~~

~~Other income:~~ ~~Decrease of $900,000 resulting from~~ lower returns on certain of the Company's benefit plan investments.

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

•Income tax ~~benefit:~~ ~~Decrease of $1.1 million due to a decrease in the seasonal loss before income taxes and lower permanent tax adjustments.~~

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~Natural gas distribution earnings increased $6.3 million as a result of:~~

~~Adjusted gross margin:~~ Increase of $22.9 million, largely as a result of approved rate relief in certain jurisdictions of $11.5 million and increased retail sales volumes of approximately 1.0 percent across all customer classes, including the benefit of weather normalization and decoupling mechanisms in certain jurisdictions. Also positively impacting adjusted gross marginexpense was increased transportation revenues of $2.2 million due to higher volumes to electric generation customers; increased per unit average rates of $1.1 million; increased basic services charges due to customer growth of $1.0 million; and higher non-regulated revenues.

~~Operation and maintenance:~~ Increase of $9.1 million, primarily due to higher payroll-related costs of $5.9 million, largely stock-based compensation expense, straight-time payroll expenses and health care costs; decreased credits of $2.2 million for costs associated with the installation of meters partially from delaying meter replacements for safety measures implemented as a result of the COVID-19 pandemic; and higher expenses for new software of $1.2 million. Partially offsetting these increases was the absence of the write-off of an abandoned project during the third quarter of 2020.

~~Depreciation, depletion and amortization:~~ Increase of $1.1 million, largely from increased property, plant and equipment balances from growth and replacement projects placed in service offset in part by decreased depreciation rates in certain jurisdictions of $3.0 million.

~~Taxes, other than income:~~ ~~Increase of $2.1 million due in part to higher property taxes in certain jurisdictions of $1.4 million and higher payroll taxes driven by increased payroll-related costs.~~

~~Other income:~~ ~~Decrease of $1.2 million driven largely by decreased interest income related to the recovery of purchased gas adjustment balances.~~

~~Interest expense:~~ ~~Comparable~~comparable to the same period in the prior year.

~~Income tax (benefit) expense:~~ ~~Increased expense of $3.0 million, primarily due to higher income before income taxes and lower permanent tax adjustments.~~

Outlook The Company continues to assess the impacts of the COVID-19 pandemic on its operations and is committed to providing safe and reliable service while ensuring the health and safety of its employees, customers and the communities in which it operates. In 2020, the Company instituted certain measures to help protect its employees from exposure to COVID-19 and to curb potential spread of the virus in customer homes and facilities, including suspension of disconnects due to nonpayment of bills, and continues to adjust and reduce these measures in 2021. In April 2020, the Company waived late payment fees to help customers experiencing financial hardships. As of January 1, 2021, the Company reinstated disconnects and late payment fees to certain customer classes in seven of its eight states of operation. As of October 2021, the disconnect process for the remaining customers has resumed. As a consequence of the suspended disconnects and waived late fees, the Company's cash flows and collection of

~~Inde~~x

receivables have been affected but impacts have not been material. The Company experienced some impacts to its commercial and industrial electric and natural gas loads associated with reduced economic activity due to the COVID-19 pandemic and oil price impacts, as further discussed below, which has begun to transition back to historic levels. The Company filed requests for the use of deferred accounting for costs related to the COVID-19 pandemic in all of the jurisdictions in which it operates and has since withdrawn its applications in three of those jurisdictions. The Company has deferred an immaterial amount of costs related to the pandemic to date.

The Company expects these segments will grow rate base by approximately 5 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In ~~2020,~~2021, these segments experienced retail customer growth of approximately ~~1.8~~1.7 percent, and the Company expects customer growth to continue to average 1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new and replacement electric and natural gas systems. On July 1, 2021, the Company filed in North Dakota, and provided a courtesy copy to South Dakota, an integrated resource plan for the electric segment, which included the Company's plans for future resources to meet customer demand. This integrated resource plan was filed in Montana on September 15, 2021.

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

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units, resulting from the Company's analysis showing that the plants are no longer expected to be cost competitive for customers. The Company ceased operations ~~on March 31, 2021,~~ of Unit 1 at Lewis & Clark Station in Sidney, ~~Montana. The Company commenced decommissioning of Unit 1 at Lewis & Clark~~Montana, in ~~July 2021. The retirement of~~March 2021 and Units 1 and 2 at Heskett Station near Mandan, North Dakota, ~~is expected~~ in ~~early~~February 2022. In addition, the Company ~~intends to~~will begin construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota, in ~~early~~the second quarter of 2022 with an expected in service date in the first half of 2023.

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

Index

implementation plan, which was due to the EPA by July 2021, is anticipated to be submitted to the EPA in the summer of 2022. ~~Heskett Unit 4 production~~Additionally, in September 2021, Otter Tail Power Company filed its 2022 Integrated Resource Plan in Minnesota and North Dakota which included its intent to start the process of withdrawal from its 35 percent ownership interest in Coyote Station with an anticipated exit from the plant by December 31, 2028. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and its employees as well as each company's customers and communities served.

On April 22, 2022 through April 24, 2022, a major snow and ice storm in northwest North Dakota caused widespread power outages and significant damage to the Company's electric transmission and distribution system. The Company is working on repairing the damages. Although total storm costs ~~coupled with~~are not yet finalized, anticipated impacts to the ~~MISO market purchases~~financial statements are not expected to be ~~about half the total cost of continuing to run the coal-fired electric generating units at Heskett~~material.

Legislation and ~~Lewis & Clark stations.~~

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

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

•In Oregon, ~~an executive order issued~~the Climate Protection Program Rule was approved in ~~March 2020~~December 2021, which requires ~~the state~~natural gas companies to reduce GHG emissions 4550 percent below ~~1990 levels~~the baseline by 2035 and 8090 percent below ~~1990 levels~~the baseline by ~~2050. State agencies impacted by~~2050, which may be achieved through surrendering emissions allowances, investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and purchasing low carbon fuels such as renewable natural gas. The Company expects the ~~order will continue~~compliance costs for these regulations to ~~work~~be recovered through customer rates. The Company, along with the ~~end~~other two local distribution companies in Oregon, filed a lawsuit on March 18, 2022, challenging the Climate Protection Program Rule. The lawsuit was filed on behalf of ~~2021 on the rule-making necessary for compliance. Until the rule-making is completed, compliance impacts to~~customers as the Company ~~remain uncertain.~~ does not believe the rule accomplishes environmental stewardship in the most effective and affordable way possible.

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

•On April 22, 2022, the Washington State Building Code Council approved revisions to the state's commercial energy code that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings. The ~~labor contract at Montana-Dakota with~~Company is currently assessing the ~~IBEW has been ratified and is effective through April 30, 2024.~~impact of these revisions.

Pipeline

Strategy and challenges The pipeline segment provides natural gas transportation, underground storage and energy-related services, as discussed in Note 17. The segment focuses on utilizing its extensive expertise in the design, construction and operation of energy infrastructure and related services to increase market share and profitability through optimization of existing operations, organic growth and investments in energy-related assets within or in close proximity to its current operating areas. The segment focuses on the continual safety and reliability of its systems, which entails building, operating and maintaining safe natural gas pipelines and facilities. The segment continues to evaluate growth opportunities including the expansion of natural gas facilities; incremental pipeline projects; and expansion of energy-related services leveraging on its core competencies. In support of this strategy, the ~~Company completed the following organic growth projects in 2020:~~

•~~In September 2020, Phase II of the Line Section 22~~North Bakken Expansion project in ~~the Billings, Montana, area was placed in service. The completion of Phase I and II increased capacity by 22.5 MMcf per day.~~

•~~In February 2020, the Demicks Lake Expansion project in McKenzie County,~~western North Dakota was placed in service in February of 2022. The project has capacity to transport 250 MMcf of natural gas per day and can be increased ~~capacity by 175~~to 625 MMcf per ~~day.~~day with additional compression.

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

~~Inde~~x

February 2021, the FERC issued a revised notice of inquiry seeking new information and stakeholder perspectives regarding the certification of new interstate natural gas facilities. The FERC issued the original notice of inquiry seeking stakeholder perspectives on this topic in April 2018. The FERC also took a step toward reforming the way in which it analyzes GHG emissions for purposes of natural gas pipeline certificates by including a quantitative analysis of the GHG emissions associated with a pipeline replacement project. At this time, no accepted methodology for a GHG significance calculation has been established. The Company is monitoring the progress of these initiatives, which include a technical conference led by FERC Staff discussing methods natural gas companies may use to mitigate the effects of direct and indirect GHG emissions to be held on November 19, 2021. The Company continues to assess the potential impacts these initiatives may have on its business processes, current and future projects, results of operations and disclosures.

The pipeline segment is ~~also~~ subject to extensive regulation ~~including~~related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. The Company continues to actively evaluate cybersecurity processes and procedures, including changes in the industry's cybersecurity regulations, for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing. In September 2019, the PHMSA issued a rule for additional regulations to strengthen the safety of natural gas transmission and storage facilities and hazardous liquid pipelines. The segment has implemented procedure changes and physical modifications to existing facilities necessary for new requirements including those that became effective July 1, 2021. The segment reviews and secures existing permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing basis. Groups opposing natural gas pipelines could also cause negative impacts on the segment with increased costs, potential delays to project completion or cancellation of prospective projects.

In April 2020 and November 2020, the Company completed the sales of its regulated and non-regulated natural gas gathering assets, respectively. With the completion of these sales, the Company has exited the natural gas gathering business.

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

Index

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

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

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	34.9	$	35.7	(2)	%	$	106.7	$	107.2	—	%	Operating revenues	$	37.1	$	36.1	3	%
Operating expenses:	Operating expenses:													Operating expenses:
Operation and maintenance	Operation and maintenance	14.2		15.4		(8)	%	45.5		45.4		—	%	Operation and maintenance	15.4		15.1		2	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	5.2		5.2		—	%	15.5		16.5		(6)	%	Depreciation, depletion and amortization	6.3		5.2		21	%
Taxes, other than income	Taxes, other than income	3.2		3.3		(3)	%	9.8		9.9		(1)	%	Taxes, other than income	3.5		3.3		6	%
Total operating expenses	Total operating expenses	22.6		23.9		(5)	%	70.8		71.8		(1)	%	Total operating expenses	25.2		23.6		7	%
Operating income	Operating income	12.3		11.8		4	%	35.9		35.4		1	%	Operating income	11.9		12.5		(5)	%
Other income	Other income	2.8		.2		NM		5.6		1.2		NM		Other income	.1		.9		(89)	%
Interest expense	Interest expense	1.7		1.9		(11)	%	5.6		5.7		(2)	%	Interest expense	2.5		2.0		25	%
Income before income taxes	Income before income taxes	13.4		10.1		33	%	35.9		30.9		16	%	Income before income taxes	9.5		11.4		(17)	%
Income tax expense	Income tax expense	2.8		2.1		33	%	7.2		6.6		9	%	Income tax expense	2.2		2.5		(12)	%
Net income	Net income	$	10.6	$	8.0	32	%	$	28.7	$	24.3	18	%	Net income	$	7.3	$	8.9	(18)	%

*~~NM - not meaningful~~

~~Inde~~x


Operating statistics	Operating statistics	Three Months Ended		Nine Months Ended		Operating statistics	Three Months Ended
		September 30,					March 31,
		2021	2020	2021	2020		2022	2021
Transportation volumes (MMdk)	Transportation volumes (MMdk)	122.0	108.9	351.5	316.2	Transportation volumes (MMdk)	110.5	110.8
Natural gas gathering volumes (MMdk)		—	2.0	—	7.4
Customer natural gas storage balance (MMdk):	Customer natural gas storage balance (MMdk):					Customer natural gas storage balance (MMdk):
Beginning of period	Beginning of period	16.0	19.1	25.5	16.2	Beginning of period	23.0	25.5
Net injections		12.8	14.0	3.3	16.9
Net withdrawal						Net withdrawal	(20.2)	(20.3)
End of period	End of period	28.8	33.1	28.8	33.1	End of period	2.8	5.2

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 Pipeline earnings ~~increased $2.6~~decreased $1.6 million as a result of:

~~Revenues:~~• ~~Decrease of $800,000 driven~~Revenues increased $1.0 million.

◦Driven by ~~decreased gathering~~increased transportation revenues of ~~$1.0~~$2.7 million, largely due to the demand associated with the North Bakken Expansion project placed in service in February 2022.

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

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

•Depreciation, depletion and amortization increased $1.1 million due to increased property, plant and equipment balances, largely related to the sales of the Company's natural gas gathering assets in 2020 and decreased storage-related revenues of $400,000. These decreases were partially offset by higher transportation revenues resulting from higher interruptible transportation volumes.North Bakken Expansion project.

~~Operation and maintenance:~~• Decrease of $1.2 million, primarily due to lower payroll-related costs of $800,000, largely the result of lower incentive accruals, lower materials and tools of $400,000 and lower non-regulated project costs. These decreasesTaxes, other than income were ~~partially offset by higher contract services.~~

~~Depreciation, depletion and amortization:~~ ~~Comparable~~comparable to the same period in the prior year.

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

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

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

~~Other income:~~ ~~Increase of $2.6 million, primarily the result of higher AFUDC for the construction of the North Bakken Expansion project.~~

~~Interest expense:~~ ~~Comparable to the same period in the prior year. Higher AFUDC for the construction of the North Bakken Expansion project was mostly offset by higher debt balances.~~

~~Income tax expense:~~ ~~Increase of $700,000, largely resulting from higher income before income taxes.~~

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~Pipeline earnings increased $4.4 million as a result of:~~

~~Revenues:~~ Decrease of $500,000, primarily due to lower gathering revenues of $4.2 million due to the sales of the Company's natural gas gathering assets in 2020. Partially offsetting the decrease was higher storage-related revenues of $1.5 million, higher transportation revenues of $1.3 million resulting from higher interruptible transportation volumes and higher non-regulated project revenues.

~~Operation and maintenance:~~ ~~Comparable to the same period in the prior year.~~

~~Depreciation, depletion and amortization:~~ Decrease of $1.0 million, largely resulting from the absence of natural gas gathering assets, as previously discussed, offset in part by higher property, plant and equipment balances related to organic growth projects.

~~Taxes, other than income:~~ ~~Comparable to the same period in the prior year.~~

~~Other income:~~ ~~Increase of $4.4 million, primarily the result of higher AFUDC for the construction of the North Bakken Expansion project.~~

~~Interest expense:~~ ~~Comparable to the same period in the prior year. Higher AFUDC for the construction of the North Bakken Expansion project was mostly offset by higher debt balances.~~

~~Income taxes:~~ ~~Increase of $600,000 due higher income before income taxes partially offset by an energy efficiency tax benefit.~~

4136

~~Inde~~xIndex

Outlook On February 18, 2022, the FERC issued two policy statements regarding the certification of new interstate natural gas facilities. The two policy statements were subsequently converted to draft policy statements by the FERC on March 24, 2022. The first draft policy statement, the Updated Certificate Policy Statement, describes how the FERC will determine whether a new interstate natural gas transportation project is required by public convenience and necessity. It includes increased focus on a project's purpose and need and the environmental impacts; as well as impacts on landowners and environmental justice communities. The FERC also clarified the updated policy statement will not apply to projects that have been filed with the FERC prior to the policy statement being finalized. The second draft policy statement, the Interim GHG Policy Statement, explains how the FERC will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the National Environmental Policy Act and Natural Gas Act. The FERC invited public comment on the draft policy statements which were due April 25, 2022. The Company continues to ~~manage~~monitor and assess these initiatives and the potential impacts ~~of the COVID-19 pandemic~~they may have on its business processes, current and future projects, results of operations and is committed to providing safe, reliable and compliant service while ensuring the health and safety of its employees, customers and the communities in which it operates. Overall, the pipeline business has had some impacts due to COVID-19 and does not expect significant delays to its regulatory filings or projects due to the pandemic.disclosures.

The Company has continued to experience the effect of associated natural gas production in the Bakken, which has provided opportunities for organic growth projects and increased demand. The completion of organic growth projects has contributed to ~~the~~higher volumes of natural gas the Company transports through its system. ~~Although low~~Increased oil prices ~~slowed 2020 drilling activities and led to the shut-in of certain wells, the recovery of oil prices has~~have allowed producers to bring wells back online and support new drilling. ~~Associated~~As a result, associated natural gas production in the Bakken has returned to near pre-pandemic levels and is expected to continue to grow due to new oil wells and increasing gas to oil ratios.

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

The Company continues to focus on growth and improving existing operations through organic projects in all areas in which it operates. The national record levels of natural gas supply over the last few years has moderated the pressure on natural gas prices and continues to minimize price volatility. While the Company believes there will continue to be varying pressures on natural gas production levels and prices due to these circumstances, low natural gas prices provide growth opportunity for industrial supply related projects and seasonal pricing differentials provide opportunities for storage services.

~~In January 2019, the Company announced the North Bakken Expansion project,~~operates, which includes ~~construction~~additional organic growth projects with local distribution companies and industrial customers in various stages of a new pipeline, compression and ancillary facilities to transport natural gas from core Bakken production areas near Tioga, North Dakota, to a new connection with Northern Border Pipeline in McKenzie County, North Dakota. Long-term take or pay customer contracts support the project at an amended design capacity of 250 MMcf per day, which can be readily expanded to meet forecasted natural gas growth levels and customer needs. In February 2020, the Company filed with the FERC its application for this project. In June 2021, the Company received a FERC order issuing a certificate of public convenience and necessity for the project and in July 2021, the FERC granted the Company a notice to proceed with construction. Construction began in July 2021 and is expected to be completed in early 2022 assuming favorable weather conditions.development.

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

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

Construction Materials and Contracting

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

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

As one of the country's largest sand and gravel producers, the segment continues to strategically manage its ~~approximately 1.1 billion tons of~~ aggregate reserves, ~~in all its markets,~~ as well as take further advantage of being vertically integrated. The segment's vertical integration allows it to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to permitted aggregate reserves being significant. The Company's aggregate reserves are naturally declining and, as a result, the Company seeks acquisition opportunities to replace the reserves. During 2020, the Company made strategic asset purchases that contributed approximately 115 million tons of aggregate reserves. In the first quarter of 2021, the Company received the necessary permitting to expand its operation capabilities at its Honey Creek quarry near Austin, Texas. Honey Creek contains an estimated 40-year supply of aggregates.

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

Index

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

~~Inde~~x

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

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	831.3	$	822.5	1	%	$	1,730.8	$	1,705.9	1	%	Operating revenues	$	310.0	$	265.7	17	%
Cost of sales:	Cost of sales:													Cost of sales:
Operation and maintenance	Operation and maintenance	636.3		612.4		4	%	1,376.5		1,351.2		2	%	Operation and maintenance	287.0		243.2		18	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	24.5		22.2		10	%	71.1		63.0		13	%	Depreciation, depletion and amortization	27.3		22.3		22	%
Taxes, other than income	Taxes, other than income	13.9		13.6		2	%	37.6		36.6		3	%	Taxes, other than income	10.9		9.8		11	%
Total cost of sales	Total cost of sales	674.7		648.2		4	%	1,485.2		1,450.8		2	%	Total cost of sales	325.2		275.3		18	%
Gross margin	Gross margin	156.6		174.3		(10)	%	245.6		255.1		(4)	%	Gross margin	(15.2)		(9.6)		(58)	%
Selling, general and administrative expense:	Selling, general and administrative expense:													Selling, general and administrative expense:
Operation and maintenance	Operation and maintenance	20.9		23.7		(12)	%	66.8		67.5		(1)	%	Operation and maintenance	25.3		21.7		17	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1.0		1.3		(23)	%	3.1		3.6		(14)	%	Depreciation, depletion and amortization	1.1		1.1		—	%
Taxes, other than income	Taxes, other than income	1.0		.8		25	%	4.4		4.0		10	%	Taxes, other than income	3.0		2.5		20	%
Total selling, general and administrative expense	Total selling, general and administrative expense	22.9		25.8		(11)	%	74.3		75.1		(1)	%	Total selling, general and administrative expense	29.4		25.3		16	%
Operating income		133.7		148.5		(10)	%	171.3		180.0		(5)	%
Other income (expense)		(.3)		.3		(200)	%	.8		1.0		(20)	%
Operating loss														Operating loss	(44.6)		(34.9)		28	%
Other expense														Other expense	(2.0)		(.1)		NM
Interest expense	Interest expense	4.8		5.0		(4)	%	14.4		15.9		(9)	%	Interest expense	5.2		4.7		11	%
Income before income taxes		128.6		143.8		(11)	%	157.7		165.1		(4)	%
Income tax expense		32.3		36.5		(12)	%	40.8		43.0		(5)	%
Net income		$	96.3	$	107.3	(10)	%	$	116.9	$	122.1	(4)	%
Loss before income taxes														Loss before income taxes	(51.8)		(39.7)		30	%
Income tax benefit														Income tax benefit	(11.8)		(8.9)		33	%
Net loss														Net loss	$	(40.0)	$	(30.8)	30	%

Operating statistics Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands)
Sales:
Aggregates (tons) 11,346 10,722 25,687 23,678
Asphalt (tons) 3,290 3,542 5,675 5,935
Ready-mixed concrete (cubic yards) 1,350 1,266 3,283 3,089
*NM - not meaningful


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

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

Index


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

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 Construction materials and contracting's ~~earnings decreased $11.0~~seasonal loss increased $9.2 million as a result of:

~~Revenues:~~ •~~Increase of $8.8 million, primarily~~Revenuesincreased $44.3 million.

◦Primarily the result of:

•Higher average sale prices across all product lines.

•Increased contracting revenues of ~~higher material revenues for aggregates and ready-mixed concrete~~$18.3 million due to favorable weather, timing of work and strong demand ~~large projects~~ in ~~certain~~some regions and ~~a positive impact~~revenue from companies acquired since the comparable period last year.

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

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

•Gross margin decreased ~~asphalt~~$5.6 million.

◦Primarily due to:

•Higher operating costs across all product ~~sales~~lines, including fuel costs of $5.0 million, repair and ~~$33.5 million lower~~maintenance expenses, and labor-related costs.

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

•Lower contracting services ~~revenue, largely resulting from less available highway paving work in the public sector in certain regions.~~

~~Gross margin:~~ ~~Decrease of $17.7 million, largely related to lower asphalt product and contracting~~ margins resulting from mix of work performed. These decreases were partially offset by favorable job performance in northern California.

•Lower asphalt margins due to higher ~~realized material~~materials, repair and maintenance and productions costs, ~~driven by an increase in asphalt oil and fuel costs,~~as previously mentioned, of $1.3 million, as well as ~~decreased revenues, as previously discussed. Partially offsetting these decreases were higher realized materials~~lower ready-mix concrete margins ~~for both aggregates and ready-mixed concrete.~~due to less bad debt recovery.

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

◦ ~~Decrease of $2.9 million, largely~~Largely due ~~to lower~~to:

•Increased payroll-related costs ~~primarily related to lower incentive accruals and benefit-related costs.~~of $1.7 million.

•Increased office expenses of $1.0 million.

•Higher professional fees of $900,000.

•Less recovery of bad debt expense.

•Other ~~income (expense):~~ ~~Increased~~ expense ~~of $600,000,~~increased $1.9 million, primarily due to lower returns on the Company's benefit plan investments.

•Interest ~~expense:~~ ~~Comparable~~expense increased $500,000, largely the result of higher debt balances due to ~~the same period in the prior year.~~recent acquisitions.

•Income tax ~~expense:~~ ~~Decrease of $4.2~~benefits increased $2.9 million, largely due to ~~lower income before income taxes.~~

~~Inde~~x

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~Construction materials and contracting's earnings decreased $5.2 million as a result of:~~

~~Revenues:~~ ~~Increase of $24.9 million, driven by~~the higher material revenues for aggregates and ready-mixed concrete due to strong demand, large projects and higher realized prices in certain regions. The increase was partially offset by decreased asphalt product sales and $58.4 million lower contracting services revenue. These decreases mainly resulted from less available highway paving work in the public sector in certain regions.

~~Gross margin:~~ Decrease of $9.5 million, largely due to lower asphalt product and contracting margins driven by an increase in asphalt oil and fuel costs, as well as decreased revenues, as previously discussed. Partially offsetting these decreases were higher realized materials margins for both aggregates and ready-mixed concrete.

~~Selling, general and administrative expense:~~ Decrease of $800,000, primarily due to the recovery of prior bad debt expense of $1.5 million and lower professional services. Partially offsetting the decrease were higher payroll-related costs of $1.8 million, largely stock-based compensation expense and health care costs.

~~Other income:~~ ~~Comparable to the same period in the prior year.~~

~~Interest expense:~~ ~~Decrease of $1.5 million, mainly due to lower average interest rates.~~

~~Income tax expense:~~ ~~Decrease of $2.2 million, largely due to lower income~~loss before income taxes.

Outlook The Company continues to assess the impacts of the COVID-19 pandemic on its operations and is committed to the health and safety of its employees, customers and the communities in which it operates. In 2021, the Company has continued to implement safety measures developed in 2020 for its employees that were not able to work from home and has experienced some inefficiencies and additional costs in relation to these measures, including delays in the ability to obtain permits from government agencies and, for the most part, has been able to continue business processes with minimal interruptions. The Company also continues to monitor job progress and service work and at this time has not experienced significant delays, cancellations or disruptions due to the pandemic. The American Rescue Plan Act approved by the United States Congress and signed into law by the President of the United States in the first quarter of 2021 provides $1.9 trillion in COVID-19 relief funding for states, schools and local governments. States are beginning to move forward with allocating these funds based on federal criteria and state needs, and in some cases, funding of infrastructure projects could positively impact the segment. Additionally, the ~~current presidential administration~~bipartisan infrastructure proposal, known as the Infrastructure Investment and Jobs Act, was approved by the United States Congress ~~continue working toward an agreement on a comprehensive infrastructure proposal that, if adopted, could positively impact~~and signed into law by the ~~segment.~~President of the United States in the fourth quarter of 2021. This initiative is providing long-term opportunities by designating $119 billion for the repair and rebuilding of roads and bridges across the Company's footprint. The Company continues to monitor the ~~progress~~implementation of these legislative items.

Index

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

During 2021, ~~and 2020,~~ the Company made strategic purchases and completed acquisitions that support the Company's long-term strategy to expand its market presence. ~~In April 2021, the Company acquired Mt. Hood Rock, a construction aggregates business located in Portland, Oregon.~~ The Company continues to evaluate additional acquisition ~~opportunities that would be accretive to earnings of the Company.~~opportunities. For more information on the Company's business combinations, see Note 10.

The construction materials and contracting segment's backlog remained strong at ~~September 30, 2021, was $651.7~~March 31, 2022, at $940.1 million, ~~which is up 14 percent from~~as compared to backlog of ~~$571.3~~$818.8 million at ~~September 30, 2020. The segment has seen~~March 31, 2021. A significant portion of the Company's backlog relates to street and highway construction. Period over period increases or decreases in backlog cannot be used as an ~~increase in bidding opportunities in certain regions due to the strong economic conditions in those markets.~~indicator of future revenues or net income. The Company expects to complete ~~a significant amount~~an estimated $886.5 million of ~~the~~ backlog at ~~September 30, 2021,~~March 31, 2022, during the next 12 months.

~~One of the labor contracts that the construction materials and contracting segment was negotiating at December 31, 2020, as reported~~ Factors noted in ~~Items 1 and 2 - Business Properties - General~~Part I, Item 1A. Risk Factors in the ~~2020~~2021 Annual Report ~~has been ratified.~~can cause revenues to be realized in periods and at levels that are different from originally projected.

Construction Services

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

The construction services segment faces challenges, which are not under direct control of the business, in the highly competitive markets in which it operates. Competitive pricing environments, project delays, changes in management's estimates of variable

~~Inde~~x

consideration and the effects from restrictive regulatory requirements have negatively impacted revenues and margins in the past and could affect revenues and margins in the future. Additionally, margins may be negatively impacted on a quarterly basis due to adverse weather conditions, as well as timing of project starts or completions; disruptions to the supply ~~chain due to transportation delays, raw material cost increases and shortages, and closures of businesses or facilities;~~chain; declines or delays in new projects due to the cyclical nature of the construction industry; inflationary pressures; and other factors. The segment is currently experiencing increased fuel and material costs as well as impacts from delays in the national supply chain. The inflationary costs and national supply chain challenges experienced by the segment have not had significant impacts to the procurement of project materials or project margins. However, the Company expects these inflationary pressures and national supply chain challenges to continue throughout the remainder of 2022. The Company is actively monitoring these situations and working with its manufacturers, suppliers and customers to help mitigate these risks. These challenges may also impact the risk of loss on certain projects. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.

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

Index

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


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	514.8	$	551.0	(7)	%	$	1,558.9	$	1,562.9	—	%	Operating revenues	$	552.6	$	518.5	7	%
Cost of sales:	Cost of sales:													Cost of sales:
Operation and maintenance	Operation and maintenance	441.5		461.7		(4)	%	1,310.7		1,309.0		—	%	Operation and maintenance	471.1		427.2		10	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	3.9		3.9		—	%	11.8		11.8		—	%	Depreciation, depletion and amortization	4.1		4.0		3	%
Taxes, other than income	Taxes, other than income	14.2		17.2		(17)	%	49.9		57.8		(14)	%	Taxes, other than income	19.0		19.4		(2)	%
Total cost of sales	Total cost of sales	459.6		482.8		(5)	%	1,372.4		1,378.6		—	%	Total cost of sales	494.2		450.6		10	%
Gross margin	Gross margin	55.2		68.2		(19)	%	186.5		184.3		1	%	Gross margin	58.4		67.9		(14)	%
Selling, general and administrative expense:	Selling, general and administrative expense:													Selling, general and administrative expense:
Operation and maintenance	Operation and maintenance	23.0		24.9		(8)	%	71.2		72.4		(2)	%	Operation and maintenance	26.0		24.6		6	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1.0		1.8		(44)	%	3.4		5.9		(42)	%	Depreciation, depletion and amortization	1.1		1.3		(15)	%
Taxes, other than income	Taxes, other than income	1.1		1.0		10	%	3.7		3.8		(3)	%	Taxes, other than income	1.8		1.7		6	%
Total selling, general and administrative expense	Total selling, general and administrative expense	25.1		27.7		(9)	%	78.3		82.1		(5)	%	Total selling, general and administrative expense	28.9		27.6		5	%
Operating income	Operating income	30.1		40.5		(26)	%	108.2		102.2		6	%	Operating income	29.5		40.3		(27)	%
Other income	Other income	.9		.6		50	%	2.6		1.3		100	%	Other income	.1		.2		(50)	%
Interest expense	Interest expense	.9		1.0		(10)	%	2.6		3.3		(21)	%	Interest expense	.9		.9		—	%
Income before income taxes	Income before income taxes	30.1		40.1		(25)	%	108.2		100.2		8	%	Income before income taxes	28.7		39.6		(28)	%
Income tax expense	Income tax expense	7.0		10.3		(32)	%	26.4		25.7		3	%	Income tax expense	7.4		9.8		(24)	%
Net income	Net income	$	23.1	$	29.8	(22)	%	$	81.8	$	74.5	10	%	Net income	$	21.3	$	29.8	(29)	%


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

Index

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 Construction services earnings decreased ~~$6.7~~$8.5 million as a result of:

~~Revenues:~~ •~~Decrease~~Revenues increased $34.1 million.

◦Largely due to:

•Higher commercial workloads of ~~$36.2~~$29.0 million, partially offset by a decrease in the hospitality sector from the timing of project completions.

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

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

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

◦Partially offset by:

•Decreased industrial workloads, primarily in the high-tech sector of $37.5 million resulting from ~~lower inside specialty contracting workloads~~the absence of ~~$34.3 million, or 9.7 percent less compared to the same period~~a significant project completed in the prior ~~year,~~year.

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

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

•Gross margin decreased ~~hospitality demand. Outside specialty contracting workloads were comparable~~$9.5 million.

◦Largely due to:

•The absence of higher margin work due to the ~~prior year with decreased natural disaster recovery~~timing of project completions and project starts mainly contributed to lower industrial and institutional margins of $9.0 million.

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

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

◦Partially offset ~~in part~~ by increased ~~general utility work.~~commercial, renewable and service margins of $4.2 million due substantially to the different project mix.

~~Gross margin:~~• Decrease of $13.0 million, mainly resulting from lower outside specialty contracting margins due to a decrease of $7.2 million from changes in estimates on a construction contract, higher employee costs in certain regions associated with a shortage of available labor and decreased natural disaster recovery work during the quarter, partially offset by an increase in general utility work. These decreases were partially offset by an increase in margins related to the equipment sales and leasing of transmission line equipment the Company manufactures.

Selling, general and administrative ~~expense:~~expense increased $1.3 million.

◦ ~~Decrease~~Primarily due to:

•Increased reserve for uncollectible accounts of ~~$2.6 million, resulting from lower bad debt expense~~$1.1 million.

•Increased office expenses of ~~$2.3 million, largely due to revised estimates on expected credit losses,~~$1.1 million.

◦Partially offset by decreased payroll-related costs of $600,000 and lower ~~amortization expense of $700,000, offset in part by higher office-related costs.~~professional fees.

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

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

•Income tax ~~expense:~~ ~~Decrease of $3.3~~expense decreased $2.4 million directly resulting from a decrease in income before income taxes.

~~Inde~~x

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ ~~Construction services earnings increased $7.3 million as a result of:~~

~~Revenues:~~ Decrease of $4.0 million, resulting from lower inside specialty contracting workloads of $26.9 million, or 2.6 percent less compared to the same period in the prior year, as a result of decreased demand for hospitality projects and data center demand. Outside specialty contracting workloads contributed 5.2 percent more compared to the same period in the prior year as a result of strong demand for utility projects. An increase in equipment sales and leasing of the transmission line equipment the Company manufactures also had a positive impact of $2.6 million in 2021.

~~Gross margin:~~ ~~Increase of $2.2 million, primarily due to the consistent volume of work across the business.~~

~~Selling, general and administrative expense:~~ Decrease of $3.8 million due in part to lower bad debt expense of $6.0 million, largely due to revised estimates on expected credit losses, and lower amortization expense of $2.4 million, offset in part by higher payroll-related costs and office-related costs.

~~Other income:~~ ~~Increase of $1.3 million, largely related to increased earnings on investments.~~

~~Interest expense:~~ ~~Decrease of $700,000, driven by lower debt balances as a result of collections on customer accounts during the construction season.~~

~~Income taxes:~~ ~~Increase of $700,000, directly resulting from higher income before income taxes.~~

Outlook The Company continues to assess the impacts of the COVID-19 pandemic on its operations and is committed to the health and safety of its employees, customers and the communities in which it operates. In 2021, the Company has continued to implement safety measures developed in 2020 for its employees that were not able to work from home and has experienced some inefficiencies in relation to these measures but, for the most part, has been able to continue pre-pandemic business processes. The Company continues to monitor job progress and service work for delays, cancellations and disruptions due to the pandemic but expects minimal disruptions the remainder of 2021. Despite the challenges presented by the COVID-19 pandemic, the Company believes there are long-term growth opportunities and demand for construction services. The American Rescue Plan ~~Act~~act approved by the United States Congress and signed into law by the President of the United States in the first quarter of 2021 provides $1.9 trillion in COVID-19 relief funding for states, schools and local government including broadband infrastructure. States are beginning to move forward with allocating these funds based on federal criteria and state needs, and in some cases, funding of infrastructure projects could positively impact the segment. Additionally, the ~~current presidential administration~~bipartisan infrastructure proposal, known as the Infrastructure Investment and Jobs Act, was approved by the United States Congress ~~continue working toward an agreement on a comprehensive~~and signed into law by the President of the United States in the fourth quarter of 2021. These include investments for upgrades to electric and grid infrastructure, ~~proposal that, if adopted, could positively impact the segment.~~transportation systems, airports and electric vehicle infrastructure, all industries this segment supports. The Company will continue to monitor the ~~progress~~implementation of these legislative items.

The Company continues to have bidding opportunities ~~for~~in both ~~inside and outside~~ specialty contracting ~~work~~markets in ~~2021~~2022 as evidenced by the segment's backlog. Although bidding remains highly competitive in all areas, the Company expects the segment's relationship with existing customers, skilled workforce, quality of service and effective cost management will continue to provide a benefit in securing and executing profitable ~~projects.~~projects in the future. The Company has also seen rapidly growing needs for services across the electric vehicle charging, wind generation and energy storage markets that complement existing renewable projects performed by the Company.

The construction services segment's backlog at ~~September 30,~~March 31, was as follows:

2021 2020
(In millions)
Inside specialty contracting $ 1,041 $ 1,074
Outside specialty contracting 232 211
$ 1,273 $ 1,285


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

~~Backlog~~

Index

The 31 percent increase in backlog at ~~September 30,~~March 31, 2022, as compared to backlog at March 31, 2021, was ~~comparable~~largely attributable to the ~~backlog at September 30, 2020. The~~new project opportunities that the Company continues to be awarded ~~new project opportunities~~ across its diverse operations, particularly ~~outside specialty contracting from increased~~within the commercial, institutional, renewable and power utility ~~demand. The Company continues~~markets. These increases were partially offset by decreases in the industrial and transportation markets due to ~~have strong inside specialty contracting~~the timing of project completions. Period over period increases or decreases in backlog ~~related to commercial industries and public projects.~~cannot be used as an indicator of future revenues or net income. The Company expects to complete ~~a significant amount~~an estimated $1.4 billion of ~~the~~ backlog at ~~September 30, 2021,~~March 31, 2022, during the next 12 months. Additionally, the Company continues to further evaluate potential acquisition opportunities that would be accretive to earnings of the Company and continue to grow the segment's backlog. Factors noted in Part I, Item 1A. Risk Factors in the 2021 Annual Report can cause revenues to be realized in periods and at levels that are different from originally projected.

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

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Other


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Variance		2021		2020		Variance			2022		2021		Variance
		(In millions)													(In millions)
Operating revenues	Operating revenues	$	3.4	$	3.1	10	%	$	10.1	$	8.9	13	%	Operating revenues	$	4.3	$	3.3	30	%
Operating expenses:	Operating expenses:													Operating expenses:
Operation and maintenance	Operation and maintenance	2.3		2.3		—	%	6.9		6.7		3	%	Operation and maintenance	4.0		2.3		74	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1.1		.6		83	%	3.5		1.9		84	%	Depreciation, depletion and amortization	1.1		1.2		(8)	%

Total operating expenses	Total operating expenses	3.4		2.9		17	%	10.4		8.6		21	%	Total operating expenses	5.1		3.5		46	%
Operating income (loss)		—		.2		NM		(.3)		.3		NM
Operating loss														Operating loss	(.8)		(.2)		NM
Other income	Other income	—		.1		NM		.5		.4		25	%	Other income	.1		.1		—	%
Interest expense	Interest expense	.1		.1		—	%	.2		.7		(71)	%	Interest expense	.1		.1		—	%
Income (loss) before income taxes		(.1)		.2		NM		—		—		—	%
Income tax benefit		(3.9)		(8.5)		54	%	(2.2)		(3.4)		35	%
Net income		$	3.8	$	8.7	(57)	%	$	2.2	$	3.4	(34)	%
Loss before income taxes														Loss before income taxes	(.8)		(.2)		NM
Income tax expense														Income tax expense	3.7		2.5		48	%
Net loss														Net loss	$	(4.5)	$	(2.7)	67	%

*NM - not meaningful

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~ March 31, 2021

Other ~~was impacted~~experienced higher operation and maintenance expense in 2022 related to a loss on the ~~third quarter~~disposal of assets. Premiums for the captive insurer were higher in 2022 compared to 2021, ~~by lower~~which impacts both operation and maintenance expense and operating revenues. The net loss for Other also reflects income tax adjustments related to the ~~Company's~~ consolidated company's annualized estimated tax ~~rate and higher depreciation, depletion and amortization expense for software placed in service.~~rate. General and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that do not meet the criteria for income (loss) from discontinued operations are also included in Other.

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~ During the first nine months of 2021, Other was impacted by higher depreciation, depletion and amortization expense for software placed in service and lower income tax adjustments related to the Company's consolidated annualized estimated tax rate.General and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that do not meet the criteria for income (loss) from discontinued operations are also included in Other.

Intersegment Transactions

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020			2022		2021
		(In millions)									(In millions)
Intersegment transactions:	Intersegment transactions:									Intersegment transactions:
Operating revenues	Operating revenues	$	8.0	$	7.5	$	51.4	$	50.9	Operating revenues	$	31.7	$	30.9
Operation and maintenance	Operation and maintenance	4.2		4.0		14.0		14.4		Operation and maintenance	5.8		4.9
Purchased natural gas sold	Purchased natural gas sold	3.8		3.5		37.4		36.5		Purchased natural gas sold	25.9		26.0

For more information on intersegment eliminations, see Note 17.

Liquidity and Capital Commitments

At ~~September 30, 2021,~~March 31, 2022, the Company had cash and cash equivalents of ~~$57.3~~$64.9 million and available borrowing capacity of ~~$694.7~~$523.5 million under the outstanding credit facilities of the Company's subsidiaries. The Company expects to meet its obligations for debt maturing within one year and its other operating and capital requirements from various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as described in Capital resources; and issuance of debt and equity ~~securities.~~securities if necessary.

4743

~~Inde~~xIndex

Cash flows


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	365.8	$	481.7	Operating activities	$	112.4	$	95.6
Investing activities	Investing activities	(432.6)		(461.8)		Investing activities	(150.7)		(106.3)
Financing activities	Financing activities	64.5		(20.3)		Financing activities	49.0		6.2
Decrease in cash and cash equivalents		(2.3)		(.4)
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	10.7		(4.5)
Cash and cash equivalents -- beginning of year	Cash and cash equivalents -- beginning of year	59.6		66.5		Cash and cash equivalents -- beginning of year	54.2		59.6
Cash and cash equivalents -- end of period	Cash and cash equivalents -- end of period	$	57.3	$	66.1	Cash and cash equivalents -- end of period	$	64.9	$	55.1

Operating activities


									Three Months Ended
		Nine Months Ended							March 31,
		September 30,							2022		2021		Variance
		2021		2020		Variance			(In millions)
Components of net cash provided by operating activities:	Components of net cash provided by operating activities:	(In millions)						Components of net cash provided by operating activities:
Income from continuing operations	Income from continuing operations	$	291.3	$	278.4	$	12.9	Income from continuing operations	$	31.7	$	52.1	$	(20.4)
Depreciation, depletion and amortization		222.6		212.8		9.8
Deferred income taxes		30.4		16.4		14.0
Adjustments to reconcile net income to net cash provided by operating activities								Adjustments to reconcile net income to net cash provided by operating activities	78.9		82.5		(3.6)
Receivables	Receivables	(104.4)		(100.1)		(4.3)		Receivables	(5.7)		89.7		(95.4)
Inventories	Inventories	(21.4)		(9.6)		(11.8)		Inventories	(44.1)		(25.6)		(18.5)
Other current assets	Other current assets	(74.4)		1.3		(75.7)		Other current assets	34.5		(46.8)		81.3
Accounts payable	Accounts payable	33.1		19.1		14.0		Accounts payable	3.0		(42.0)		45.0
Other current liabilities	Other current liabilities	14.2		74.3		(60.1)		Other current liabilities	13.1		(14.0)		27.1
Pension & postretirement benefit plan contributions								Pension & postretirement benefit plan contributions	(.1)		(.1)		—
Other noncurrent changes	Other noncurrent changes	(25.5)		(10.2)		(15.3)		Other noncurrent changes	1.1		(.2)		1.3
Net cash used in discontinued operations		(.1)		(.7)		.6

Net cash provided by operating activities	Net cash provided by operating activities	$	365.8	$	481.7	$	(115.9)	Net cash provided by operating activities	$	112.4	$	95.6	$	16.8

The changes in cash flows from operating activities generally follow the results of operations, as discussed in Business Segment Financial and Operating Data, and are affected by changes in working capital. The ~~decrease~~increase in cash flows provided by operating activities in the previous table was largely driven by ~~an increase in~~the recovery of purchased gas adjustment balances and the absence of higher natural gas purchases in February 2021, as discussed in Note 13, partially offset by the associated deferred taxes. Also contributing to the decrease was higher working capital requirements at the construction services business, primarily the deferral of payroll taxes as a result of the COVID-19 pandemic during 2020; decreases in contract retention balances; increased accounts payable due to fluctuations in job activity; and increased inventory balances related to sales and leased equipment. The construction materials and contracting business also experienced an increase in aggregate inventory balances as a result of aggregate production at the businesses acquired and a higher average cost per ton. Partially offsetting the net ~~decrease~~increase in cash flows provided by operating activities was ~~increased tax deferrals~~higher working capital needs at the ~~pipeline~~construction services business ~~primarily~~due to fluctuations in job activity resulting ~~from~~in higher ~~capital expenditures on organic growth projects during~~receivables in the period, as well as lower collections of accounts receivable compared to first quarter 2021, offset in part by increased accounts payable. In addition, the ~~sale~~construction materials and contracting business experienced an increase in asphalt oil inventory balances as a result of ~~the business's gathering assets in 2020, and~~ higher ~~earnings at most of the businesses during the first nine months of 2021.~~prices.

Investing activities


									Three Months Ended
		Nine Months Ended							March 31,
		September 30,							2022		2021		Variance
		2021		2020		Variance			(In millions)
Components of net cash used in investing activities:	Components of net cash used in investing activities:	(In millions)						Components of net cash used in investing activities:
Capital expenditures	Capital expenditures	$	(428.1)	$	(413.8)	$	(14.3)	Capital expenditures	$	(150.3)	$	(111.1)	$	(39.2)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(13.7)		(71.5)		57.8		Acquisitions, net of cash acquired	(.5)		(1.0)		.5
Net proceeds from sale or disposition of property and other	Net proceeds from sale or disposition of property and other	13.0		23.5		(10.5)		Net proceeds from sale or disposition of property and other	4.5		9.0		(4.5)
Investments	Investments	(3.8)		—		(3.8)		Investments	(4.4)		(3.2)		(1.2)
Net cash used in investing activities	Net cash used in investing activities	$	(432.6)	$	(461.8)	$	29.2	Net cash used in investing activities	$	(150.7)	$	(106.3)	$	(44.4)

The ~~decrease~~increase in cash used in investing activities in the previous table was primarily due to lower cash used in acquisition activity in 2021 compared to 2020 at the construction services and construction materials and contracting businesses. Partially offsetting the decrease in cash used in investing activities were increased capital expenditures in ~~2021 at the pipeline business, largely related to the North Bakken Expansion project, and construction materials and contracting business, partially offset by lower capital expenditures~~2022 at the electric and natural gas distribution businesses related to ~~reduced~~increased electric ~~transmission~~production and distribution projects and ~~reduced~~higher natural gas distribution projects including natural gas meters and mains. The pipeline business also experienced ~~lower proceeds from asset sales as a result of~~increased capital expenditures, primarily related to the ~~sale of its natural gathering assets during 2020.~~North Bakken Expansion project.

4844

~~Inde~~xIndex

Financing activities


		Nine Months Ended							Three Months Ended
		September 30,							March 31,
		2021		2020		Variance			2022		2021		Variance
Components of net cash provided by (used in) financing activities:		(In millions)
									(In millions)
Components of net cash provided by financing activities:								Components of net cash provided by financing activities:
Issuance of short-term borrowings	Issuance of short-term borrowings	$	50.0	$	75.0	$	(25.0)	Issuance of short-term borrowings	$	100.0	$	50.0	$	50.0
Repayment of short-term borrowings	Repayment of short-term borrowings	(50.0)		—		(50.0)		Repayment of short-term borrowings	—		(50.0)		50.0
Issuance of long-term debt	Issuance of long-term debt	178.5		100.2		78.3		Issuance of long-term debt	150.0		93.3		56.7
Repayment of long-term debt	Repayment of long-term debt	(63.8)		(73.7)		9.9		Repayment of long-term debt	(143.6)		(53.3)		(90.3)
Proceeds from issuance of common stock		88.8		3.4		85.4
Debt issuance costs								Debt issuance costs	(.7)		—		(.7)
Net proceeds from issuance of common stock								Net proceeds from issuance of common stock	(.1)		19.7		(19.8)
Dividends paid	Dividends paid	(128.1)		(124.8)		(3.3)		Dividends paid	(44.2)		(42.6)		(1.6)
Repurchase of common stock	Repurchase of common stock	(6.7)		—		(6.7)		Repurchase of common stock	(7.4)		(6.7)		(.7)
Tax withholding on stock-based compensation	Tax withholding on stock-based compensation	(4.2)		(.4)		(3.8)		Tax withholding on stock-based compensation	(5.0)		(4.2)		(.8)
Net cash provided by (used in) financing activities		$	64.5	$	(20.3)	$	84.8
Net cash provided by financing activities								Net cash provided by financing activities	$	49.0	$	6.2	$	42.8

The increase in cash provided by financing activities in the previous table was largely the result of increased ~~net proceeds~~issuance of ~~$85.4 million from~~short-term and long-term debt at the construction materials and contracting business to finance acquisitions and higher working capital needs, partially offset by the repayment of commercial paper borrowings that were replaced by short-term debt and private placement borrowings. In addition, the pipeline and construction services businesses experienced increased commercial paper borrowings to finance increased capital expenditures and higher working capital needs, respectively. Partially offsetting the increase in cash provided by financing activities was the absence of the issuance of common stock under the Company's "at-the-market" offering during ~~2021,~~2022, as discussed in Note 7. In 2021, the construction materials and contracting business experienced increased long-term borrowings for acquisitions and the pipeline, electric and natural gas distribution businesses experienced increased long-term borrowings for capital expenditures. Partially offsetting the increase in cash provided by financing activities were decreased short-term borrowings during 2021 at the natural gas distribution business. Montana-Dakota issued and repaid $50 million in short term borrowings during the first quarter of 2021. The issuance was related to financing the higher natural gas purchases, as previously discussed, and the repayment was related to short-term borrowings completed during 2020.

Defined benefit pension plans

There were no material changes to the Company's qualified noncontributory defined benefit pension plans from those reported in the ~~2020~~2021 Annual Report. For more information, see Note 18 and Part II, Item 7 in the ~~2020~~2021 Annual Report.

Capital expenditures

Capital expenditures for the first ~~nine~~three months of 2022 and 2021 were ~~$507.9~~$119.8 million ~~which includes a completed business combination at the construction materials~~ and ~~contracting business. Capital expenditures for the first nine months of 2020 were $473.7~~$107.2 million, ~~which includes the completed business combinations at the construction materials and contracting and construction services businesses.~~respectively. Capital expenditures allocated to the Company's business segments are estimated to be approximately ~~$774.5~~$769.9 million for ~~2021.~~2022. Capital expenditures have been updated from what was previously reported in the ~~2020~~2021 Annual Report to accommodate project timeline and scope changes made throughout ~~2021 and permitting delays. The Company will continue to monitor capital expenditures for project delays and changes in economic viability related to COVID-19.~~the first quarter of 2022.

The Company has included in the estimated capital expenditures for ~~2021~~2022 the ~~completed business combination~~Wahpeton Expansion and additional growth projects at the pipeline segment and construction of ~~a construction aggregates business and~~Heskett Unit 4 at the ~~North Bakken Expansion project,~~natural gas distribution segment, as previously discussed in Business Segment Financial and Operating Data, as well as system upgrades; routine replacements; service extensions; routine equipment maintenance and replacements; buildings, land and building improvements; pipeline and natural gas storage projects; power generation and transmission opportunities, ~~including certain costs for additional electric generating capacity;~~ environmental upgrades; and other growth opportunities.

The Company continues to evaluate potential future acquisitions and other growth opportunities that would be incremental to the outlined capital program; however, ~~such growth is~~they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimate previously discussed. The Company continuously monitors its capital expenditures for project delays and changes in economic viability and adjusts as necessary. It is anticipated that all of the funds required for capital expenditures for ~~2021~~2022 will be ~~met from~~funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as described later; and issuance of debt and equity securities if necessary.

Index

Capital resources

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

~~Capital~~Debt resources

Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the respective debt instruments, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at ~~September 30, 2021.~~March 31, 2022. In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. For more information on the covenants, certain other conditions and cross-default provisions, see Part II, Item 8 in the ~~2020~~2021 Annual Report.

~~Inde~~x

The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at ~~September 30, 2021:~~March 31, 2022:


Company	Company	Facility		Facility Limit			Amount Outstanding		Letters of Credit			Expiration Date	Company	Facility		Facility Limit			Amount Outstanding		Letters of Credit			Expiration Date
				(In millions)												(In millions)
Montana-Dakota Utilities Co.	Montana-Dakota Utilities Co.	Commercial paper/Revolving credit agreement	(a)	$	175.0		$	29.8	$	—		12/19/24	Montana-Dakota Utilities Co.	Commercial paper/Revolving credit agreement	(a)	$	175.0		$	29.4	$	—		12/19/24
Cascade Natural Gas Corporation	Cascade Natural Gas Corporation	Revolving credit agreement		$	100.0	(b)	$	49.6	$	2.2	(c)	6/7/24	Cascade Natural Gas Corporation	Revolving credit agreement		$	100.0	(b)	$	49.9	$	2.2	(c)	6/7/24
Intermountain Gas Company	Intermountain Gas Company	Revolving credit agreement		$	85.0	(d)	$	44.7	$	—		6/7/24	Intermountain Gas Company	Revolving credit agreement		$	85.0	(d)	$	35.9	$	—		6/7/24
Centennial Energy Holdings, Inc.	Centennial Energy Holdings, Inc.	Commercial paper/Revolving credit agreement	(e)	$	600.0		$	139.0	$	—		12/19/24	Centennial Energy Holdings, Inc.	Commercial paper/Revolving credit agreement	(e)	$	600.0		$	319.1	$	—		12/19/24

(a)The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $225.0 million). At ~~September 30, 2021,~~March 31, 2022, there were no amounts outstanding under the revolving credit agreement.

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

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

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

(e)The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Centennial on stated conditions, up to a maximum of $700.0 million). At ~~September 30, 2021,~~March 31, 2022, there were no amounts outstanding under the revolving credit agreement.

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

Total equity as a percent of total capitalization was 5854 percent, 5657 percent and 5855 percent at ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and December 31, ~~2020,~~2021, respectively. This ratio is calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, including short-term borrowings and long-term debt due within one year, plus total equity. This ratio is an indicator of how a company is financing its operations, as well as its financial strength.

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

Equity Resources

Index

offered for sale, from time to time, in accordance with the terms and conditions of this agreement. As of ~~September 30, 2021,~~March 31, 2022, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program. Proceeds from the sale of shares of common stock under this agreement have been and are expected to be used for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment and the financing of acquisitions.

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,									March 31,
		2021		2020		2021		2020			2022		2021
		(In millions)									(In millions)
Shares issued	Shares issued	1.0		—		2.8		—		Shares issued	—		.7
Net proceeds *	Net proceeds *	$	34.2	$	—	$	88.8	$	—	Net proceeds *	$	(.1)	$	19.7	**
Issuance costs		$	.5	$	—	$	1.2	$	—

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

** Net proceeds were used for capital expenditures.

~~Montana-Dakota~~ On March 8, 2021, Montana-Dakota entered into a $50.0 million term loan agreement with a LIBOR-based variable interest rate and a maturity date of March 7, 2022. The agreement contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions

Material cash requirements

For more information on the ~~sale of certain assets, loans~~Company's contractual obligations on long-term debt, operating leases and ~~investments.~~

~~Inde~~x

~~On September 15,~~purchase commitments, see Part II, Item 7 in the 2021 Montana-Dakota entered into a $125.0 million note purchase agreement with maturity dates ranging from September 15, 2051 to September 15, 2061, at a weighted average interest rate of 3.23 percent. On September 15, 2021, Montana-Dakota issued $75.0 million in senior notes under the note purchase agreement with the remaining $50.0 million scheduled to be issued on December 15, 2021. The agreement contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

~~Off balance sheet arrangements~~

~~At September 30, 2021, the Company had no material off balance sheet arrangements.~~

~~Contractual obligations and commercial commitments~~

Annual Report. There were no material changes in the Company's contractual obligations ~~relating~~related to estimated interest payments, purchase commitments, asset retirement obligations, uncertain tax positions and minimum funding requirements for its defined benefit plans for ~~2021~~2022 from those reported in the ~~2020~~2021 Annual Report.

~~The~~Material short-term cash requirements of the Company ~~has entered into various~~include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments ~~largely consisting~~and asset retirement obligations.

Material long-term cash requirements of ~~contracts for natural gas~~the Company include repayment of outstanding borrowings and ~~coal supply; purchased power; natural gas transportation~~interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and storage; royalties; information technology; and construction materials. Certain of these contracts are subject to variability in volume and price. The commitments under these contracts as of September 30, 2021, were:

Less than 1 year 1-3 years 3-5 years More than 5 years Total
(In millions)
Purchase commitments $ 594.4 $ 373.9 $ 200.3 $ 786.3 $ 1,954.9

~~For more information on contractual obligations and commercial commitments, see Part II, Item 7 in the 2020 Annual Report.~~asset retirement obligations.

New Accounting Standards

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

Critical Accounting Estimates

The Company's critical accounting estimates include impairment testing of goodwill; fair values of acquired assets and liabilities under the acquisition method of accounting; regulatory assets expected to be recovered in rates charged to customers; revenue recognized using the cost-to-cost measure of progress for contracts; actuarially determined benefit costs; and tax provisions. There were no material changes in the Company's critical accounting estimates from those reported in the ~~2020~~2021 Annual Report. For more information on critical accounting estimates, see Part II, Item 7 in the ~~2020~~2021 Annual Report.

~~Non-GAAP Financial Measures~~

The Business Segment Financial and Operating Data includes financial information prepared in accordance with GAAP, as well as another financial measure, adjusted gross margin, that is considered a non-GAAP financial measure as it relates to the Company's electric and natural gas distribution segments. The presentation of adjusted gross margin is intended to be a useful supplemental financial measure for investors’ understanding of the segments' operating performance. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, GAAP financial measures such as operating income (loss) or net income (loss). The Company's non-GAAP financial measure, adjusted gross margin, is not standardized; therefore, it may not be possible to compare this financial measure with other companies’ gross margin measures having the same or similar names.

In addition to operating revenues and operating expenses, management also uses the non-GAAP financial measure of adjusted gross margin when evaluating the results of operations for the electric and natural gas distribution segments. Adjusted gross margin for the electric and natural gas distribution segments is calculated by adding back adjustments to operating income (loss). These add-back adjustments include: operation and maintenance expense; depreciation, depletion and amortization expense; and certain taxes, other than income.

Adjusted gross margin includes operating revenues less the cost of electric fuel and purchased power, purchased natural gas sold and certain taxes, other than income. These taxes, other than income, included as a reduction to adjusted gross margin relate to revenue taxes. These segments pass on to their customers the increases and decreases in the wholesale cost of power purchases, natural gas and other fuel supply costs in accordance with regulatory requirements. As such, the segments' revenues are directly impacted by the fluctuations in such commodities. Revenue taxes, which are passed back to customers, fluctuate with revenues as they are calculated as a percentage of revenues. For these reasons, period over period, the segments' operating income (loss) is generally not impacted. The Company's management believes the adjusted gross margin is a useful supplemental financial measure as these items are included in both operating revenues and operating expenses. The Company's management also believes that adjusted gross margin and the remaining operating expenses that calculate operating income (loss) are useful in assessing the Company's utility performance as management has the ability to influence control over the remaining operating expenses.

~~Inde~~x

~~The following information reconciles operating income to adjusted gross margin for the electric segment.~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In millions)
Operating income $ 27.3 $ 21.1 $ 54.0 $ 48.8
Adjustments:
Operating expenses:
Operation and maintenance 31.2 30.7 93.8 90.5
Depreciation, depletion and amortization 17.0 15.8 50.0 47.0
Taxes, other than income 3.9 4.4 13.1 13.0
Total adjustments 52.1 50.9 156.9 150.5
Adjusted gross margin $ 79.4 $ 72.0 $ 210.9 $ 199.3

~~The following information reconciles operating income to adjusted gross margin for the natural gas distribution segment.~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In millions)
Operating income (loss) $ (14.2) $ (18.4) $ 42.9 $ 32.3
Adjustments:
Operating expenses:
Operation and maintenance 47.7 46.9 145.0 135.9
Depreciation, depletion and amortization 21.5 21.3 64.2 63.1
Taxes, other than income 6.8 6.3 20.6 18.5
Total adjustments 76.0 74.5 229.8 217.5
Adjusted gross margin $ 61.8 $ 56.1 $ 272.7 $ 249.8

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest rate risk

There were no material changes to interest rate risk faced by the Company from those reported in the ~~2020~~2021 Annual Report.

At ~~September 30, 2021,~~March 31, 2022, the Company had no outstanding interest rate hedges.

Commodity price risk

There were no material changes to commodity price risk faced by the Company from those reported in the ~~2020~~2021 Annual Report.

Index

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

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

~~Inde~~x

Changes in internal controls

No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended ~~September 30, 2021,~~March 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

5348

~~Inde~~xIndex

Part II -- Other Information

Item 1. Legal Proceedings

There were no material changes to the Company's legal proceedings in Part 1, Item 3 - Legal Proceedings in the ~~2020~~2021 Annual Report.

Item 1A. Risk Factors

Please refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in the ~~2020~~2021 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur. At ~~September 30, 2021,~~March 31, 2022, there were no material changes to the Company's risk factors provided in Part I, Item 1A. Risk Factors in the ~~2020~~2021 Annual ~~Report other than as set forth below.~~

~~Technology disruptions or cyberattacks could adversely impact the Company's operations.~~

The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology and operation technology systems, including disaster recovery and backup systems and network infrastructure. While the Company has policies, procedures and processes in place designed to strengthen and protect these systems, they may be vulnerable to physical and cybersecurity failures or unauthorized access, due to:

•~~hacking,~~

•~~human error,~~

•~~theft,~~

•~~sabotage,~~

•~~malicious software,~~

•~~ransomware,~~

•~~third-party compromise,~~

•~~acts of terrorism,~~

•~~acts of war,~~

•~~acts of nature or~~

•~~other causes.~~

Although there are manual processes in place, should a compromise or system failure occur, interdependencies to technology may disrupt the Company's ability to fulfill critical business functions. This may include interruption of electric generation, transmission and distribution facilities, natural gas storage and pipeline facilities and facilities for delivery of construction materials or other products and services, any of which could adversely affect the Company's reputation, business, cash flows and results of operations or subject the Company to legal or regulatory liabilities and increased costs. Additionally, the Company's electric generation and transmission systems and natural gas pipelines are part of interconnected systems with other operators’ facilities; therefore, a cyber-related disruption in another operator’s system could negatively impact the Company's business.

The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted. If the Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect the Company's results of operations and cash flows.

The Company is subject to cybersecurity and privacy laws and regulations of many government agencies, including TSA, FERC and NERC. NERC issues comprehensive regulations and standards surrounding the security of bulk power systems and continually updates these requirements, as well as establishing new requirements with which the utility industry must comply. As these regulations evolve, the Company may experience increased compliance costs and may be at higher risk for violating these standards. Experiencing a cybersecurity incident could cause the Company to be non-compliant with applicable laws and regulations, causing the Company to incur costs related to legal claims, proceedings and regulatory fines or penalties.

The Company, through the ordinary course of business, requires access to sensitive customer, supplier, employee and Company data. While the Company has implemented extensive security measures, including limiting the amount of sensitive information retained, a breach of its systems could compromise sensitive data and could go unnoticed for some time. Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on the Company's financial results. Third-party service providers that perform critical business functions for the Company or have access to sensitive information within the Company also may be vulnerable to security breaches and information technology risks that could adversely affect the Company.

The Company’s information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses. Although the incidents the Company has experienced to date have not had a material effect on its business, financial condition or results of operations, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact

~~Inde~~x

operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company.

~~The Company's participation in joint venture contracts may have a negative impact on its reputation, business operations, revenues, results of operations, liquidity and cash flows.~~

The Company enters into certain joint venture arrangements typically to bid and execute particular projects. Generally, these agreements are directly with a third-party client; however, services may be performed by the venture, the joint venture partners or a combination thereof. Engaging in joint venture contracts exposes the Company to risks and uncertainties, some of which are outside the Company's control.

The Company is reliant on joint venture partners to satisfy their contractual obligations, including obligations to commit working capital and equity, and to perform the work as outlined in the agreement. Failure to do so could result in the Company providing additional investments or services to address such performance issues. If the Company is unable to satisfactorily resolve any partner performance issues, the customer could terminate the contract opening the Company to legal liability which could negatively impact the Company's reputation, revenues, results of operations, liquidity and cash flows.

~~COVID-19 may have a negative impact on the Company's business operations, revenues, results of operations, liquidity and cash flows.~~

The ongoing COVID-19 pandemic has disrupted national, state and local economies. To the extent the COVID-19 pandemic adversely impacts the Company's businesses, operations, revenues, liquidity or cash flows, it could also have a heightening effect on other risks described in the 2020 Annual Report. The degree to which COVID-19 will impact the Company depends on future developments, including the resurgence and/or variants of the virus, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and returns to relatively normal operating conditions.

The Company’s businesses have generally been deemed essential service providers and have experienced some inefficiencies and interruptions on its businesses from the pandemic. The Company could be materially affected if its services were deemed no longer essential or if conditions worsen and new restrictions are imposed by national, state or local governmental authorities.

The Company's operations have experienced minor disruptions due to shortages of employees or third-party contractors and altered work operations. Government and customer vaccine mandates could leave the Company with a shortage of vaccinated employees or reduce workforce capacity to bid on new projects, which may further exacerbate the already tight labor markets for skilled employees or cause additional wage inflation. The Company could also be impacted by additional costs and lost productivity associated with COVID-19 testing and tracking of employee vaccination records. If a significant percentage of the Company's workforce are unable to work because of illness, quarantine, vaccination requirements or government restrictions in connection with the COVID-19 pandemic, the Company's operations may be negatively impacted, potentially adversely affecting its business, operations, revenues, liquidity and cash flows.

In response to the COVID-19 pandemic, the Company implemented a remote work environment for a portion of the Company's workforce. As of July 2021, many of these employees returned to their office; however, some employees have transitioned to a permanent remote work environment. The increase in remote work and longevity of the pandemic may create increased vulnerability to cybersecurity incidents affecting the Company’s ability to maintain secure operations, communications and productivity. To date, the Company has not experienced any significant delays or information technology disruptions as a result of the COVID-19 pandemic.

Other factors associated with the COVID-19 pandemic that could impact the Company's businesses and future operating results, revenues and liquidity include impacts related to the health, safety, and availability of employees and contractors; extended rise in unemployment; public and private sector budget changes and constraints; continued flexible payment plans; counterparty credit; costs and availability of supplies; capital construction and infrastructure operation and maintenance programs; financing plans; pension valuations; travel restrictions; and legal and regulatory matters, including the potential for delayed regulatory filings, accounting for the impacts of the COVID-19 pandemic and recovery of invested capital. The economic and market disruptions resulting from COVID-19 could also lead to greater than normal uncertainty with respect to the realization of estimated amounts, including estimates for backlog, revenue recognition, intangible assets, other investments and provisions for credit losses.

~~Inde~~x

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

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

~~ISSUER PURCHASES OF EQUITY SECURITIES~~

~~Period~~

(a)
Total Number
of Shares
(or Units)
Purchased (1)

(b)
Average Price
Paid per Share
(or Unit)

(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs (2)

~~July 1 through July 31, 2021~~

—

~~August 1 through August 31, 2021~~

—

~~September 1 through September 30, 2021~~

—

~~Total~~

—


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

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

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

Item 4. Mine Safety Disclosures

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

Item 5. Other Information

None.

Item 6. Exhibits

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

5649

~~Inde~~xIndex

Exhibits Index

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed
Herewith

Form

Period
Ended

Exhibit

Filing
Date

File Number

3(a)

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

8-K

3.2

5/8/19

1-03480

3(b)

Amended and Restated Bylaws of MDU Resources Group, Inc.

8-K

3.1

2/15/19

1-03480

~~+10(c)~~

~~MDU Resources Group, Inc. Deferred Compensation Plan~~ ~~Adoption Agreement, as amended August 12, 2021~~

31(a)

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

31(b)

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

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

Mine Safety Disclosures

101.INS

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

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

~~+ Management contract, compensatory plan or arrangement.~~

5750

~~Inde~~xIndex

Signatures

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


		MDU RESOURCES GROUP, INC.

DATE:	~~November 4, 2021~~May 5, 2022	BY:	/s/ Jason L. Vollmer
			Jason L. Vollmer
			Vice President and Chief Financial Officer


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

5851


Three Months Ended September 30, 2020	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
	(In thousands)
Residential utility sales	$	33,086	$	48,399	$	—	$	—	$	—	$	—	$	81,485
Commercial utility sales	35,688		28,731		—		—		—		—		64,419
Industrial utility sales	8,428		4,454		—		—		—		—		12,882
Other utility sales	1,779		—		—		—		—		—		1,779
Natural gas transportation	—		11,159		27,583		—		—		—		38,742
Natural gas gathering	—		—		973		—		—		—		973
Natural gas storage	—		—		3,885		—		—		—		3,885
Contracting services	—		—		—		448,569		—		—		448,569
Construction materials	—		—		—		608,673		—		—		608,673
Intrasegment eliminations	—		—		—		(234,693)		—		—		(234,693)
Inside specialty contracting	—		—		—		—		352,845		—		352,845
Outside specialty contracting	—		—		—		—		187,202		—		187,202
Other	7,663		2,590		3,203		—		486		3,030		16,972
Intersegment eliminations	(195)		(185)		(3,622)		(110)		(425)		(3,006)		(7,543)
Revenues from contracts with customers	86,449		95,148		32,022		822,439		540,108		24		1,576,190
Revenues out of scope	998		(445)		46		—		10,500		—		11,099
Total external operating revenues	$	87,447	$	94,703	$	32,068	$	822,439	$	550,608	$	24	$	1,587,289



Nine Months Ended September 30, 2021	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
	(In thousands)
Residential utility sales	$	99,106	$	341,901	$	—	$	—	$	—	$	—	$	441,007
Commercial utility sales	105,795		203,002		—		—		—		—		308,797
Industrial utility sales	30,878		20,387		—		—		—		—		51,265
Other utility sales	5,384		—		—		—		—		—		5,384
Natural gas transportation	—		35,715		85,160		—		—		—		120,875
Natural gas storage	—		—		10,606		—		—		—		10,606
Contracting services	—		—		—		791,964		—		—		791,964
Construction materials	—		—		—		1,332,997		—		—		1,332,997
Intrasegment eliminations	—		—		—		(394,126)		—		—		(394,126)
Inside specialty contracting	—		—		—		—		1,020,130		—		1,020,130
Outside specialty contracting	—		—		—		—		502,328		—		502,328
Other	31,827		7,913		10,760		—		168		10,152		60,820
Intersegment eliminations	(407)		(425)		(38,000)		(314)		(2,128)		(10,082)		(51,356)
Revenues from contracts with customers	272,583		608,493		68,526		1,730,521		1,520,498		70		4,200,691
Revenues out of scope	(5,329)		5,880		127		—		36,239		—		36,917
Total external operating revenues	$	267,254	$	614,373	$	68,653	$	1,730,521	$	1,556,737	$	70	$	4,237,608



Nine Months Ended September 30, 2020	Electric		Natural gas distribution		Pipeline		Construction materials and contracting		Construction services		Other		Total
	(In thousands)
Residential utility sales	$	93,389	$	313,753	$	—	$	—	$	—	$	—	$	407,142
Commercial utility sales	99,152		184,754		—		—		—		—		283,906
Industrial utility sales	26,867		18,633		—		—		—		—		45,500
Other utility sales	5,018		—		—		—		—		—		5,018
Natural gas transportation	—		33,307		82,980		—		—		—		116,287
Natural gas gathering	—		—		4,244		—		—		—		4,244
Natural gas storage	—		—		10,035		—		—		—		10,035
Contracting services	—		—		—		850,326		—		—		850,326
Construction materials	—		—		—		1,299,081		—		—		1,299,081
Intrasegment eliminations	—		—		—		(443,516)		—		—		(443,516)
Inside specialty contracting	—		—		—		—		1,049,975		—		1,049,975
Outside specialty contracting	—		—		—		—		478,047		—		478,047
Other	23,830		7,800		9,807		—		1,249		8,882		51,568
Intersegment eliminations	(586)		(555)		(36,820)		(262)		(3,674)		(8,952)		(50,849)
Revenues from contracts with customers	247,670		557,692		70,246		1,705,629		1,525,597		(70)		4,106,764
Revenues out of scope	2,123		4,949		135		—		33,620		—		40,827
Total external operating revenues	$	249,793	$	562,641	$	70,381	$	1,705,629	$	1,559,217	$	(70)	$	4,147,591


	Remainder of 2021		2022		2023		2024		2025		Thereafter
	(In thousands)
Amortization expense	$	1,220	$	4,678	$	4,329	$	3,957	$	2,060	$	5,997


	Remainder of 2021		2022		2023		2024		2025		Thereafter
	(In thousands)
Long-term debt maturities	$	77	$	148,021	$	77,921	$	324,521	$	177,802	$	1,605,656



	Pension Benefits				Other Postretirement Benefits
Nine Months Ended September 30,	2021		2020		2021		2020
	(In thousands)
Components of net periodic benefit credit:
Service cost	$	—	$	—	$	1,200	$	1,149
Interest cost	7,365		9,070		1,398		1,827
Expected return on assets	(14,682)		(14,962)		(3,825)		(3,764)
Amortization of prior service credit	—		—		(1,047)		(1,048)
Amortization of net actuarial loss	6,012		5,379		18		215
Net periodic benefit credit, including amount capitalized	(1,305)		(513)		(2,256)		(1,621)
Less amount capitalized	—		—		129		106
Net periodic benefit credit	$	(1,305)	$	(513)	$	(2,385)	$	(1,727)


	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(In millions)
Purchase commitments	$	594.4	$	373.9	$	200.3	$	786.3	$	1,954.9