MDU RESOURCES GROUP INC (Form: 10-Q, Received: 05/08/2017 09:46:46)

(In thousands)

Property, plant and equipment additions in accounts payable

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

o 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		41-0423660
(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)

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 ý No o .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 (Check one):



Large accelerated filer ý	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o
	Emerging growth company o

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. o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 1, 2017 : 195,304,376 shares.

Index



		Page

Forward-Looking Statements		5

Introduction		5

Part I -- Financial Information

Item 1	Financial Statements
	Consolidated Statements of Income -- Three Months Ended March 31, 2017 and 2016	6

	Consolidated Statements of Comprehensive Income -- Three Months Ended March 31, 2017 and 2016	7

	Consolidated Balance Sheets -- March 31, 2017 and 2016, and December 31, 2016	8

	Consolidated Statements of Cash Flows -- Three Months Ended March 31, 2017 and 2016	9

	Notes to Consolidated Financial Statements	10

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4	Controls and Procedures	41

Part II -- Other Information

Item 1	Legal Proceedings	41

Item 1A	Risk Factors	41

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 4	Mine Safety Disclosures	42

Item 5	Other Information	42

Item 6	Exhibits	42

Signatures		43

Exhibit Index		44

Exhibits

Definitions

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



Abbreviation or Acronym
2016 Annual Report	Company's Annual Report on Form 10-K for the year ended December 31, 2016
AFUDC	Allowance for funds used during construction
ASC	FASB Accounting Standards Codification
ATBs	Atmospheric tower bottoms
Brazilian Transmission Lines	Company's former investment in companies owning three electric transmission lines in Brazil
Calumet	Calumet Specialty Products Partners, L.P.
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 direct wholly owned subsidiary of Centennial
Company	MDU Resources Group, Inc.
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)
Dakota Prairie Refinery	20,000-barrel-per-day diesel topping plant built by Dakota Prairie Refining in southwestern North Dakota
Dakota Prairie Refining	Dakota Prairie Refining, LLC, a limited liability company previously owned by WBI Energy and Calumet (previously included in the Company's refining segment)
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 the Company
IFRS	International Financial Reporting Standards
Intermountain	Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital
IPUC	Idaho Public Utilities Commission
Knife River	Knife River Corporation, a direct wholly owned subsidiary of Centennial
Knife River - Northwest	Knife River Corporation - Northwest, an indirect wholly owned subsidiary of Knife River
kWh	Kilowatt-hour
LWG	Lower Willamette Group
MD&A	Management's Discussion and Analysis of Financial Condition and Results of Operations
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.
MMdk	Million dk
MNPUC	Minnesota Public Utilities Commission
Montana-Dakota	Montana-Dakota Utilities Co., a public utility division of the Company
Montana Seventeenth Judicial District Court	Montana Seventeenth Judicial District Court, Phillips County
MTPSC	Montana Public Service Commission
MW	Megawatt



NDPSC	North Dakota Public Service Commission
Omimex	Omimex Canada, Ltd.
OPUC	Oregon Public Utility Commission
Oregon DEQ	Oregon State Department of Environmental Quality
Pronghorn	Natural gas processing plant located near Belfield, North Dakota (WBI Energy Midstream's 50 percent ownership interests were sold effective January 1, 2017)
PRP	Potentially Responsible Party
ROD	Record of Decision
SEC	United States Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Tesoro	Tesoro Refining & Marketing Company LLC
Tesoro Logistics	QEP Field Services, LLC doing business as Tesoro Logistics Rockies LLC
United States District Court for the District of Montana	United States District Court for the District of Montana, Great Falls Division
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 Energy Midstream	WBI Energy Midstream, LLC, an indirect wholly owned subsidiary of WBI Holdings
WBI Energy Transmission	WBI Energy Transmission, 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
WYPSC	Wyoming Public Service Commission

Forward-Looking Statements

This Form 10-Q contains 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, 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 Part I, Item 2 - MD&A - Prospective Information.

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

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 of 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 I, Item 1A - Risk Factors in the 2016 Annual Report and subsequent filings with the SEC.

Introduction

The Company is a regulated energy delivery and construction materials and services business, which was incorporated under the laws of the state of Delaware in 1924. Its principal executive offices are at 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701) 530-1000.

Montana-Dakota, Great Plains, Cascade and Intermountain comprise the natural gas distribution segment. Montana-Dakota also comprises the electric segment.

The Company, through its wholly owned subsidiary, Centennial, owns WBI Holdings, Knife River, MDU Construction Services, Centennial Resources and Centennial Capital. WBI Holdings is comprised of the pipeline and midstream segment and Fidelity, formerly the Company's exploration and production business. Knife River is the construction materials and contracting segment, MDU Construction Services is the construction services segment, and Centennial Resources and Centennial Capital are both reflected in the Other category.

For more information on the Company's business segments and discontinued operations, see Notes 8 and 13 .

Part I -- Financial Information

Item 1. Financial Statements

MDU Resources Group, Inc.

Consolidated Statements of Income

(Unaudited)



	Three Months Ended
	March 31,
	2017		2016
	(In thousands, except per share amounts)
Operating revenues:
Electric, natural gas distribution and regulated pipeline and midstream	$	433,614	$	385,865
Nonregulated pipeline and midstream, construction materials and contracting, construction services and other	504,311		474,349
Total operating revenues	937,925		860,214
Operating expenses:
Fuel and purchased power	21,886		22,011
Purchased natural gas sold	192,948		161,035
Operation and maintenance:
Electric, natural gas distribution and regulated pipeline and midstream	78,738		74,625
Nonregulated pipeline and midstream, construction materials and contracting, construction services and other	478,478		442,500
Depreciation, depletion and amortization	51,325		54,884
Taxes, other than income	47,438		43,174
Total operating expenses	870,813		798,229
Operating income	67,112		61,985
Other income	1,017		1,049
Interest expense	20,303		22,868
Income before income taxes	47,826		40,166
Income taxes	12,188		8,301
Income from continuing operations	35,638		31,865
Income (loss) from discontinued operations, net of tax (Note 8)	1,687		(18,036		)
Net income	37,325		13,829
Loss from discontinued operations attributable to noncontrolling interest (Note 8)	—		(11,040		)
Dividends declared on preferred stocks	171		171
Earnings on common stock	$	37,154	$	24,698
Earnings per common share - basic:
Earnings before discontinued operations	$	.18	$	.16
Discontinued operations attributable to the Company, net of tax	.01		(.03		)
Earnings per common share - basic	$	.19	$	.13
Earnings per common share - diluted:
Earnings before discontinued operations	$	.18	$	.16
Discontinued operations attributable to the Company, net of tax	.01		(.03		)
Earnings per common share - diluted	$	.19	$	.13
Dividends declared per common share	$	.1925	$	.1875
Weighted average common shares outstanding - basic	195,304		195,284
Weighted average common shares outstanding - diluted	196,023		195,284

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

MDU Resources Group, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
Net income	$	37,325		$	13,829
Other comprehensive loss:
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $56 and $57 for the three months ended in 2017 and 2016, respectively	91			92
Postretirement liability adjustment:
Amortization of postretirement liability (gains) losses included in net periodic benefit cost, net of tax of $217 and $(969) for the three months ended in 2017 and 2016, respectively	357			(1,595		)
Reclassification of postretirement liability adjustment from regulatory asset, net of tax of $(725) and $0 for the three months ended in 2017 and 2016, respectively	(917		)	—
Postretirement liability adjustment	(560		)	(1,595		)
Foreign currency translation adjustment recognized during the period, net of tax of $5 and $15 for the three months ended in 2017 and 2016, respectively	9			25
Net unrealized gain on available-for-sale investments:
Net unrealized gain (loss) on available-for-sale investments arising during the period, net of tax of $(15) and $5 for the three months ended in 2017 and 2016, respectively	(27		)	8
Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $19 and $19 for the three months ended in 2017 and 2016, respectively	35			36
Net unrealized gain on available-for-sale investments	8			44
Other comprehensive loss	(452		)	(1,434		)
Comprehensive income	36,873			12,395
Comprehensive loss from discontinued operations attributable to noncontrolling interest	—			(11,040		)
Comprehensive income attributable to common stockholders	$	36,873		$	23,435

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

MDU Resources Group, Inc.

Consolidated Balance Sheets

(Unaudited)



	March 31, 2017			March 31, 2016			December 31, 2016
(In thousands, except shares and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	50,735		$	90,573		$	46,107
Receivables, net	554,185			526,619			630,243
Inventories	250,609			259,756			238,273
Prepayments and other current assets	79,254			52,380			48,461
Current assets held for sale	7,290			99,544			14,391
Total current assets	942,073			1,028,872			977,475
Investments	129,009			121,955			125,866
Property, plant and equipment	6,544,077			6,448,514			6,510,229
Less accumulated depreciation, depletion and amortization	2,609,303			2,521,108			2,578,902
Net property, plant and equipment	3,934,774			3,927,406			3,931,327
Deferred charges and other assets:
Goodwill	631,791			641,527			631,791
Other intangible assets, net	5,347			7,803			5,925
Other	409,745			351,814			415,419
Noncurrent assets held for sale	95,719			485,885			196,664
Total deferred charges and other assets	1,142,602			1,487,029			1,249,799
Total assets	$	6,148,458		$	6,565,262		$	6,284,467
Liabilities and Equity
Current liabilities:
Long-term debt due within one year	$	43,499		$	98,540		$	43,598
Accounts payable	239,013			233,021			279,962
Taxes payable	74,638			56,298			48,164
Dividends payable	37,767			36,791			37,767
Accrued compensation	32,350			40,420			65,867
Other accrued liabilities	188,373			182,804			184,377
Current liabilities held for sale	2,394			117,777			9,924
Total current liabilities	618,034			765,651			669,659
Long-term debt	1,659,507			1,759,514			1,746,561
Deferred credits and other liabilities:
Deferred income taxes	666,905			670,299			668,226
Other	890,107			811,789			883,777
Noncurrent liabilities held for sale	—			62,625			—
Total deferred credits and other liabilities	1,557,012			1,544,713			1,552,003
Commitments and contingencies
Equity :
Preferred stocks	15,000			15,000			15,000
Common stockholders' equity:
Common stock
Authorized - 500,000,000 shares, $1.00 par value Shares issued - 195,843,297 at March 31, 2017 and 2016 and December 31, 2016	195,843			195,843			195,843
Other paid-in capital	1,231,171			1,229,431			1,232,478
Retained earnings	911,702			984,315			912,282
Accumulated other comprehensive loss	(36,185		)	(38,582		)	(35,733		)
Treasury stock at cost - 538,921 shares	(3,626		)	(3,626		)	(3,626		)
Total common stockholders' equity	2,298,905			2,367,381			2,301,244
Total stockholders' equity	2,313,905			2,382,381			2,316,244
Noncontrolling interest	—			113,003			—
Total equity	2,313,905			2,495,384			2,316,244
Total liabilities and equity	$	6,148,458		$	6,565,262		$	6,284,467

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

MDU Resources Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
Operating activities:
Net income	$	37,325		$	13,829
Income (loss) from discontinued operations, net of tax	1,687			(18,036		)
Income from continuing operations	35,638			31,865
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	51,325			54,884
Deferred income taxes	(332		)	7,926
Changes in current assets and liabilities, net of acquisitions:
Receivables	63,684			61,931
Inventories	(13,676		)	(18,828		)
Other current assets	(31,006		)	(22,909		)
Accounts payable	(23,380		)	(40,584		)
Other current liabilities	(1,179		)	18,690
Other noncurrent changes	2,161			(7,711		)
Net cash provided by continuing operations	83,235			85,264
Net cash provided by (used in) discontinued operations	3,304			(39,715		)
Net cash provided by operating activities	86,539			45,549
Investing activities:
Capital expenditures	(72,316		)	(114,706		)
Net proceeds from sale or disposition of property and other	117,967			10,411
Investments	(116		)	(503		)
Net cash provided by (used in) continuing operations	45,535			(104,798		)
Net cash provided by discontinued operations	54			25,263
Net cash provided by (used in) investing activities	45,589			(79,535		)
Financing activities:
Issuance of long-term debt	59,985			226,585
Repayment of long-term debt	(147,277		)	(164,855		)
Dividends paid	(37,767		)	(36,784		)
Repurchase of common stock	(1,684		)	—
Tax withholding on stock-based compensation	(757		)	(316		)
Net cash provided by (used in) continuing operations	(127,500		)	24,630
Net cash provided by discontinued operations	—			16,025
Net cash provided by (used in) financing activities	(127,500		)	40,655
Effect of exchange rate changes on cash and cash equivalents	—			1
Increase in cash and cash equivalents	4,628			6,670
Cash and cash equivalents -- beginning of year	46,107			83,903
Cash and cash equivalents -- end of period	$	50,735		$	90,573

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

MDU Resources Group, Inc.

Notes to Consolidated

Financial Statements

March 31, 2017 and 2016

(Unaudited)

Note 1 - Basis of presentation

The accompanying consolidated interim financial statements were prepared in conformity with the basis of presentation reflected in the consolidated financial statements included in the Company's 2016 Annual Report, and the standards of accounting measurement set forth in the interim reporting guidance in the ASC and any amendments thereto adopted by the FASB. 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 2016 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. Management has also evaluated the impact of events occurring after March 31, 2017 , up to the date of issuance of these consolidated interim financial statements.

The assets and liabilities for the Company's discontinued operations have been classified as held for sale and the results of operations are shown in income (loss) from discontinued operations, other than certain general and administrative costs and interest expense which do not meet the criteria for income (loss) from discontinued operations. The Company's consolidated financial statements and accompanying notes for current and prior periods have been restated. At the time the assets were classified as held for sale, depreciation, depletion and amortization expense was no longer recorded. Unless otherwise indicated, the amounts presented in the accompanying notes to the consolidated financial statements relate to the Company's continuing operations. For more information on the Company's discontinued operations, see Note 8 .

Note 2 - Seasonality of operations

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

Note 3 - Accounts receivable and allowance for doubtful accounts

Accounts receivable consist primarily of trade receivables from the sale of goods and services which are recorded at the invoiced amount net of allowance for doubtful accounts, and costs and estimated earnings in excess of billings on uncompleted contracts. The total balance of receivables past due 90 days or more was $26.3 million , $30.5 million and $29.2 million at March 31, 2017 and 2016 , and December 31, 2016 , respectively.

The allowance for doubtful accounts is determined through a review of past due balances and other specific account data. Account balances are written off when management determines the amounts to be uncollectible. The Company's allowance for doubtful accounts at March 31, 2017 and 2016 , and December 31, 2016 , was $10.9 million , $11.1 million and $10.5 million , respectively.

Note 4 - Inventories and natural gas in storage

Natural gas in storage for the Company's regulated operations is generally carried at lower of cost or net realizable value, or cost using the last-in, first-out method. All other inventories are stated at the lower of cost or net realizable value. The portion of the cost of natural gas in storage expected to be used within one year is included in inventories. Inventories consisted of:



	March 31, 2017		March 31, 2016		December 31, 2016
	(In thousands)
Aggregates held for resale	$	120,392	$	127,101	$	115,471
Asphalt oil	50,538		52,065		29,103
Materials and supplies	22,074		21,645		18,372
Merchandise for resale	16,546		17,441		16,437
Natural gas in storage (current)	11,282		11,305		25,761
Other	29,777		30,199		33,129
Total	$	250,609	$	259,756	$	238,273

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 deferred charges and other assets - other and was $ 49.5 million , $ 49.1 million and $ 49.5 million at March 31, 2017 and 2016 , and December 31, 2016 , respectively.

Note 5 - Earnings per common share

Basic earnings per common share were computed by dividing earnings on common stock by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per common share were computed by dividing earnings on common stock by the total of the weighted average number of shares of common stock outstanding during the applicable period, plus the effect of outstanding performance share awards. 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 was as follows:



	Three Months Ended
	March 31,
	2017	2016
	(In thousands)
Weighted average common shares outstanding - basic	195,304	195,284
Effect of dilutive performance share awards	719	—
Weighted average common shares outstanding - diluted	196,023	195,284
Shares excluded from the calculation of diluted earnings per share	—	—

Note 6 - New accounting standards

Revenue from Contracts with Customers In May 2014, the FASB issued guidance on accounting for revenue from contracts with customers. The guidance provides for a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. This guidance was to be effective for the Company on January 1, 2017. In August 2015, the FASB issued guidance deferring the effective date of the revenue guidance one year and allowing entities to early adopt. With this decision, the guidance will be effective for the Company on January 1, 2018. Entities will have the option of using either a full retrospective or modified retrospective approach to adopting the guidance. Under the modified approach, an entity would recognize the cumulative effect of initially applying the guidance with an adjustment to the opening balance of retained earnings in the period of adoption. In addition, the modified approach will require additional disclosures. The Company is planning to adopt the guidance using the modified retrospective approach. The guidance will require expanded disclosures, both quantitative and qualitative, related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company continues to evaluate the effects the guidance will have on its results of operations, financial position and cash flows.

Simplifying the Measurement of Inventory In July 2015, the FASB issued guidance regarding inventory that is measured using the first-in, first-out or average cost method. The guidance does not apply to inventory measured using the last-in, first-out or the retail inventory method. The guidance requires inventory within its scope to be measured at the lower of cost or net realizable value, which is the estimated selling price in the normal course of business less reasonably predictable costs of completion, disposal and transportation. These amendments more closely align GAAP with IFRS. The Company implemented the guidance on January 1, 2017, on a prospective basis. The guidance did not have a material effect on the Company's results of operations, financial position, cash flows or disclosures.

Balance Sheet Classification of Deferred Taxes In November 2015, the FASB issued guidance regarding the classification of deferred taxes on the balance sheet. The guidance requires all deferred tax assets and liabilities to be classified as noncurrent. These amendments will align GAAP with IFRS. Entities had the option to apply the guidance prospectively, for all deferred tax assets and liabilities, or retrospectively. The Company adopted the guidance in the fourth quarter of 2016 and applied the retrospective method of adoption. The guidance required a reclassification of current deferred income taxes to noncurrent deferred income taxes on the Consolidated Balance Sheets, but did not impact the Company's results of operations or cash flows. As a result of the retrospective application of this change in accounting principle, the Company reclassified deferred income taxes of $34.2 million from current assets - deferred income taxes to deferred credits and other liabilities - deferred income taxes on its Consolidated Balance Sheet at March 31, 2016.

Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued guidance regarding the classification and measurement of financial instruments. The guidance revises the way an entity classifies and measures investments in equity securities, the presentation of certain fair value changes for financial liabilities measured at fair value and amends certain disclosure requirements related to the fair value of financial instruments. This guidance will be effective for the Company on January 1, 2018, with early adoption of certain amendments permitted. The guidance should be applied using a modified retrospective approach with the exception of equity securities without readily determinable fair values which will be applied prospectively. The Company is evaluating the effects the adoption of the new guidance will have on its results of operations, financial position, cash flows and disclosures.

Leases In February 2016, the FASB issued guidance regarding leases. The guidance requires lessees to recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term on the statement of financial position for leases with terms of more than 12 months. The guidance also requires additional disclosures, both quantitative and qualitative, related to operating and finance leases for the lessee and sales-type, direct financing and operating

leases for the lessor. This guidance will be effective for the Company on January 1, 2019, and should be applied using a modified retrospective approach with early adoption permitted. There are a number of industry-specific implementation issues that are still unresolved and the final resolution of these issues could significantly impact the number of contracts that would be considered a lease for the Company under the new guidance. The Company is evaluating the effects the adoption of the new guidance will have on its results of operations, financial position, cash flows and disclosures.

Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued guidance regarding simplification of several aspects of the accounting for share-based payment transactions. The guidance affects the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and calculation of dilutive shares. Certain amendments of this guidance were to be applied retrospectively and others prospectively. The Company adopted the guidance on January 1, 2017. All amendments in the guidance that apply to the Company were adopted on a prospective basis resulting in no adjustments being made to retained earnings. The adoption of the guidance impacted the Consolidated Statements of Income and the Consolidated Balance Sheets due to the taxes related to the stock-based compensation award that vested in February 2017 being recognized as income tax expense as compared to a reduction to additional paid-in capital under the previous guidance. Adoption of the guidance also increased the number of shares included in the diluted earnings per share calculation due to the exclusion of tax benefits in the incremental shares calculation. The change in the weighted average common shares outstanding - diluted did not result in a material effect on the earnings per common share - diluted.

Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued guidance to clarify the classification of certain cash receipts and payments in the statement of cash flows. The guidance is intended to standardize the presentation and classification of certain transactions, including cash payments for debt prepayment or extinguishment, proceeds from insurance claim settlements and distributions from equity method investments. In addition, the guidance clarifies how to classify transactions that have characteristics of more than one class of cash flows. This guidance will be effective for the Company on January 1, 2018, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period and apply any adjustments as of the beginning of the fiscal year. Entities must apply the guidance retrospectively unless it is impracticable to do so, in which case they may apply it prospectively as of the earliest date practicable. The Company is evaluating the effects the adoption of the new guidance will have on its cash flows and disclosures.

Clarifying the Definition of a Business In January 2017, the FASB issued guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities is not a business. The guidance will also affect other aspects of accounting, such as determining reporting units for goodwill testing and whether an entity has acquired or sold a business. The guidance will be effective for the Company on January 1, 2018, and should be applied on a prospective basis with early adoption permitted for transactions that occur before the issuance or effective date of the amendments and only when the transactions have not been reported in the financial statements or made available for issuance. The Company is evaluating the effects the adoption of the new guidance will have on its results of operations, financial position, cash flows and disclosures.

Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued guidance on simplifying the test for goodwill impairment by eliminating Step 2, which required an entity to measure the amount of impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of such goodwill. This guidance requires entities to perform a quantitative impairment test, previously Step 1, to identify both the existence of impairment and the amount of impairment loss by comparing the fair value of a reporting unit to its carrying amount. Entities will continue to have the option of performing a qualitative assessment to determine if the quantitative impairment test is necessary. The guidance also requires additional disclosures if an entity has one or more reporting units with zero or negative carrying amounts of net assets. The guidance will be effective for the Company on January 1, 2020, and should be applied on a prospective basis with early adoption permitted. The Company is evaluating the effects the adoption of the new guidance will have on its results of operations, financial position, cash flows and disclosures.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost In March 2017, the FASB issued guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The guidance requires the service cost component to be presented in the income statement in the same line item or items as other compensation costs arising from services performed during the period. Other components of net benefit cost shall be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The guidance also only allows the service cost component to be capitalized. The guidance will be effective for the Company on January 1, 2018, including interim periods, with early adoption permitted as of the beginning of an annual period for which the financial statements have not been issued. The guidance shall be applied on a retrospective basis for the financial statement presentation and on a prospective basis for the capitalization of the service cost component. The Company is evaluating the effects the adoption of the new guidance will have on its results of operations, financial position, cash flows and disclosures.

Note 7 - Comprehensive income (loss)

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



Three Months Ended March 31, 2017	Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Hedges			Postretirement Liability Adjustment			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available-for-sale Investments			Total Accumulated Other Comprehensive Loss
	(In thousands)
Balance at beginning of period	$	(2,300	)	$	(33,221	)	$	(149	)	$	(63	)	$	(35,733	)
Other comprehensive income (loss) before reclassifications	—			—			9			(27		)	(18		)
Amounts reclassified from accumulated other comprehensive loss	91			357			—			35			483
Amounts reclassified to accumulated other comprehensive loss from a regulatory asset	—			(917		)	—			—			(917		)
Net current-period other comprehensive income (loss)	91			(560		)	9			8			(452		)
Balance at end of period	$	(2,209	)	$	(33,781	)	$	(140	)	$	(55	)	$	(36,185	)



Three Months Ended March 31, 2016	Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Hedges			Postretirement Liability Adjustment			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available-for-sale Investments			Total Accumulated Other Comprehensive Loss
	(In thousands)
Balance at beginning of period	$	(2,667	)	$	(34,257	)	$	(200	)	$	(24	)	$	(37,148	)
Other comprehensive income before reclassifications	—			—			25			8			33
Amounts reclassified from accumulated other comprehensive loss	92			(1,595		)	—			36			(1,467		)
Net current-period other comprehensive income (loss)	92			(1,595		)	25			44			(1,434		)
Balance at end of period	$	(2,575	)	$	(35,852	)	$	(175	)	$	20		$	(38,582	)

Reclassifications out of accumulated other comprehensive loss were as follows:



	Three Months Ended						Location on Consolidated Statements of Income
	March 31,
	2017			2016
	(In thousands)
Reclassification adjustment for loss on derivative instruments included in net income	$	(147	)	$	(149	)	Interest expense
	56			57			Income taxes
	(91		)	(92		)
Amortization of postretirement liability gains (losses) included in net periodic benefit cost	(574		)	2,564			(a)
	217			(969		)	Income taxes
	(357		)	1,595
Reclassification adjustment for loss on available-for-sale investments included in net income	(54		)	(55		)	Other income
	19			19			Income taxes
	(35		)	(36		)
Total reclassifications	$	(483	)	$	1,467

(a) Included in net periodic benefit cost. For more information, see Note 14 .

Note 8 - Assets held for sale and discontinued operations

Assets held for sale

The assets and liabilities of Pronghorn were classified as held for sale in the fourth quarter of 2016. Pronghorn's results of operations for 2016 were included in the pipeline and midstream segment.

Pronghorn On November 21, 2016, WBI Energy Midstream announced it had entered into a purchase and sale agreement to sell its 50 percent non-operating ownership interest in Pronghorn to Tesoro Logistics. The transaction closed on January 1, 2017, which generated approximately $100 million of proceeds for the Company. The sale of Pronghorn further reduces the Company's risk exposure to commodity prices.

The carrying amounts of the major classes of assets and liabilities that were classified as held for sale associated with Pronghorn on the Company's Consolidated Balance Sheets were as follows:



	December 31, 2016
	(In thousands)
Assets
Current assets:
Prepayments and other current assets	$	68
Total current assets held for sale	68
Noncurrent assets:
Net property, plant and equipment	93,424
Goodwill	9,737
Less allowance for impairment of assets held for sale	2,311
Total noncurrent assets held for sale	100,850
Total assets held for sale	$	100,918

Discontinued operations

The assets and liabilities of the Company's discontinued operations have been classified as held for sale and the results of operations are shown in income (loss) from discontinued operations, other than certain general and administrative costs and interest expense which do not meet the criteria for income (loss) from discontinued operations. The Company's consolidated financial statements and accompanying notes for current and prior periods have been restated. At the time the assets were classified as held for sale, depreciation, depletion and amortization expense was no longer recorded.

Dakota Prairie Refining On June 24, 2016, WBI Energy entered into a membership interest purchase agreement with Tesoro to sell all of the outstanding membership interests in Dakota Prairie Refining to Tesoro. WBI Energy and Calumet each previously owned 50 percent of the Dakota Prairie Refining membership interests and were equal members in building and operating Dakota Prairie Refinery. To effectuate the sale, WBI Energy acquired Calumet’s 50 percent membership interest in Dakota Prairie Refining on June 27, 2016. The sale of the membership interests to Tesoro closed on June 27, 2016. The sale of Dakota Prairie Refining reduces the Company’s risk by decreasing exposure to commodity prices.

The Company retained certain liabilities of Dakota Prairie Refining which were reflected in current liabilities held for sale on the Consolidated Balance Sheets. Centennial continues to guarantee certain debt obligations of Dakota Prairie Refining; however, Tesoro has agreed to indemnify Centennial for any losses and litigation expenses arising from the guarantee. For more information related to the guarantee, see Note 16 .

The carrying amounts of the major classes of assets and liabilities that are classified as held for sale related to the operations of and activity associated with Dakota Prairie Refining on the Company's Consolidated Balance Sheets were as follows:



	March 31, 2017		March 31, 2016		December 31, 2016
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	—	$	365	$	—
Receivables, net	—		11,169		—
Inventories	—		17,056		—
Income taxes receivable	11,756		7,077		13,987
Prepayments and other current assets	—		6,124		—
Total current assets held for sale	11,756		41,791		13,987
Noncurrent assets:
Net property, plant and equipment	—		407,247		—
Other	—		8,846		—
Total noncurrent assets held for sale	—		416,093		—
Total assets held for sale	$	11,756	$	457,884	$	13,987
Liabilities
Current liabilities:
Short-term borrowings	$	—	$	61,525	$	—
Long-term debt due within one year	—		6,375		—
Accounts payable	16		27,454		7,425
Taxes payable	—		1,001		—
Accrued compensation	—		717		—
Other accrued liabilities	—		7,155		—
Total current liabilities held for sale	16		104,227		7,425
Noncurrent liabilities:
Long-term debt	—		62,625		—
Deferred income taxes (a)	55		24,137		14
Total noncurrent liabilities held for sale	55		86,762		14
Total liabilities held for sale	$	71	$	190,989	$	7,439


(a)	On the Company's Consolidated Balance Sheets, these amounts were reclassified to noncurrent deferred income tax assets and are

reflected in noncurrent assets held for sale.

In the first quarter of 2017, the Company recorded a reversal of a previously accrued liability of $7.0 million ( $4.3 million after tax) due to the resolution of a legal matter. At March 31, 2017, Dakota Prairie Refining had not incurred any material exit and disposal costs, and does not expect to incur any material exit and disposal costs.

Fidelity In the second quarter of 2015, the Company began the marketing and sale process of Fidelity with an anticipated sale to occur within one year. Between September 2015 and March 2016, the Company entered into purchase and sale agreements to sell all of Fidelity's oil and natural gas assets. The completion of these sales occurred between October 2015 and April 2016. The sale of Fidelity was part of the Company's strategic plan to grow its capital investments in the remaining business segments and to focus on creating a greater long-term value.

The carrying amounts of the major classes of assets and liabilities that are classified as held for sale related to the operations of Fidelity on the Company's Consolidated Balance Sheets were as follows:



	March 31, 2017			March 31, 2016			December 31, 2016
	(In thousands)
Assets
Current assets:
Receivables, net	$	266		$	3,619		$	355
Inventories	—			1,308			—
Income taxes receivable	—			50,478			—
Prepayments and other current assets	—			2,348			—
Total current assets held for sale	266			57,753			355
Noncurrent assets:
Investments	—			37			—
Net property, plant and equipment	4,515			9,363			5,507
Deferred income taxes	91,098			82,994			91,098
Other	161			161			161
Less allowance for impairment of assets held for sale	—			(1,374		)	938
Total noncurrent assets held for sale	95,774			93,929			95,828
Total assets held for sale	$	96,040		$	151,682		$	96,183
Liabilities
Current liabilities:
Accounts payable	$	67		$	7,963		$	141
Taxes payable	4,732		(a)	35			19		(a)
Accrued compensation	—			761			—
Other accrued liabilities	2,311			4,791			2,358
Total current liabilities held for sale	7,110			13,550			2,518
Total liabilities held for sale	$	7,110		$	13,550		$	2,518


(a)	On the Company's Consolidated Balance Sheets, these amounts were reclassified to prepayments and other current assets and are reflected

in current assets held for sale.

The Company performed a fair value assessment of the assets and liabilities classified as held for sale. In the first quarter of 2016, the fair value assessment was determined using the market approach largely based on a purchase and sale agreement. The estimated fair value exceeded the carrying value and the Company recorded an impairment reversal of $1.4 million ( $900,000 after tax) in the first quarter of 2016. The impairment reversal was included in operating expenses from discontinued operations. The estimated fair value of Fidelity's assets has been categorized as Level 3 in the fair value hierarchy.

The Company incurred transaction costs of approximately $300,000 in the first quarter of 2016. In addition to the transaction costs, and due in part to the change in plans to sell the assets of Fidelity rather than sell Fidelity as a company, Fidelity incurred and expensed approximately $1.8 million of exit and disposal costs for the three months ended March 31, 2016, and has incurred $10.5 million of exit and disposal costs to date. Fidelity incurred no exit and disposal costs for the three months ended March 31, 2017, and the Company does not expect to incur any additional material exit and disposal costs. The exit and disposal costs are associated with severance and other related matters and exclude the office lease expiration discussed in the following paragraph.

Fidelity vacated its office space in Denver, Colorado in 2016. The Company incurred lease payments of approximately $500,000 in the first quarter of 2016.

Dakota Prairie Refining and Fidelity The reconciliation of the major classes of income and expense constituting pretax income (loss) from discontinued operations, which includes Dakota Prairie Refining and Fidelity, to the after-tax income (loss) from discontinued operations on the Company's Consolidated Statements of Income was as follows:



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
Operating revenues	$	105		$	47,976
Operating expenses	(6,577		)	69,769
Operating income (loss)	6,682			(21,793		)
Other income (expense)	(15		)	204
Interest expense	—			922
Income (loss) from discontinued operations before income taxes	6,667			(22,511		)
Income taxes	4,980			(4,475		)
Income (loss) from discontinued operations	1,687			(18,036		)
Loss from discontinued operations attributable to noncontrolling interest	—			(11,040		)
Income (loss) from discontinued operations attributable to the Company	$	1,687		$	(6,996	)

The pretax income (loss) from discontinued operations attributable to the Company, related to the operations of and activity associated with Dakota Prairie Refining, was $6.9 million and $(9.9) million for the three months ended March 31, 2017 and 2016, respectively.

Note 9 - Goodwill and other intangible assets

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



Three Months Ended March 31, 2017	Balance at January 1, 2017		Goodwill Acquired During the Year		Balance at March 31, 2017
	(In thousands)
Natural gas distribution	$	345,736	$	—	$	345,736
Construction materials and contracting	176,290		—		176,290
Construction services	109,765		—		109,765
Total	$	631,791	$	—	$	631,791



Three Months Ended March 31, 2016	Balance at January 1, 2016		*	Goodwill Acquired During the Year		Balance at March 31, 2016		*
	(In thousands)
Natural gas distribution	$	345,736		$	—	$	345,736
Pipeline and midstream	9,737			—		9,737
Construction materials and contracting	176,290			—		176,290
Construction services	103,441			6,323		109,764
Total	$	635,204		$	6,323	$	641,527

* Balance is presented net of accumulated impairment of $12.3 million at the pipeline and midstream segment, which occurred in prior periods.



Year Ended December 31, 2016	Balance at January 1, 2016		*	Goodwill Acquired During the Year		Held for Sale			Balance at December 31, 2016
	(In thousands)
Natural gas distribution	$	345,736		$	—	$	—		$	345,736
Pipeline and midstream	9,737			—		(9,737		)	—
Construction materials and contracting	176,290			—		—			176,290
Construction services	103,441			6,324		—			109,765
Total	$	635,204		$	6,324	$	(9,737	)	$	631,791

* Balance is presented net of accumulated impairment of $12.3 million at the pipeline and midstream segment, which occurred in prior periods.

Other amortizable intangible assets were as follows:



	March 31, 2017		March 31, 2016		December 31, 2016
	(In thousands)
Customer relationships	$	15,745	$	17,145	$	17,145
Less accumulated amortization	12,910		12,680		13,917
	2,835		4,465		3,228
Noncompete agreements	2,430		2,430		2,430
Less accumulated amortization	1,695		1,548		1,658
	735		882		772
Other	7,086		7,764		7,768
Less accumulated amortization	5,309		5,308		5,843
	1,777		2,456		1,925
Total	$	5,347	$	7,803	$	5,925

Amortization expense for amortizable intangible assets for the three months ended March 31, 2017 and 2016, was $600,000 and $600,000 , respectively. Estimated amortization expense for amortizable intangible assets is $2.2 million in 2017 , $1.2 million in 2018 , $1.0 million in 2019 , $500,000 in 2020 , $200,000 in 2021 and $800,000 thereafter.

Note 10 - Fair value measurements

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 an insurance contract, to satisfy its obligations under its unfunded, nonqualified benefit 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 $73.8 million , $69.1 million and $70.9 million , at March 31, 2017 and 2016 , and December 31, 2016 , respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these investments were $2.9 million and $1.6 million for the three months ended March 31, 2017 and 2016, respectively. The change in fair value, which is considered part of the cost of the plan, is classified in operation and maintenance expense 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). Details of available-for-sale securities were as follows:



March 31, 2017	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	9,971	$	8	$	(94	)	$	9,885
U.S. Treasury securities	412		1		—			413
Total	$	10,383	$	9	$	(94	)	$	10,298



March 31, 2016	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	10,467	$	46	$	(14	)	$	10,499
Total	$	10,467	$	46	$	(14	)	$	10,499



December 31, 2016	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	10,546	$	8	$	(105	)	$	10,449
Total	$	10,546	$	8	$	(105	)	$	10,449

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 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's Level 2 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 Level 2 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 Level 2 insurance contract is 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. For the three months ended March 31, 2017 and 2016 , there were no transfers between Levels 1 and 2.

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



	Fair Value Measurements at March 31, 2017, 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, 2017
	(In thousands)
Assets:
Money market funds	$	—	$	2,551	$	—	$	2,551
Insurance contract*	—		73,775		—		73,775
Available-for-sale securities:
Mortgage-backed securities	—		9,885		—		9,885
U.S. Treasury securities	—		413		—		413
Total assets measured at fair value	$	—	$	86,624	$	—	$	86,624

* The insurance contract invests approximately 51 percent in fixed-income investments, 22 percent in common stock of large-cap companies, 13 percent in common stock of mid-cap companies, 11 percent in common stock of small-cap companies, 2 percent in target date investments and 1 percent in cash equivalents.



	Fair Value Measurements at March 31, 2016, 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, 2016
	(In thousands)
Assets:
Money market funds	$	—	$	1,442	$	—	$	1,442
Insurance contract*	—		69,110		—		69,110
Available-for-sale securities:
Mortgage-backed securities	—		10,499		—		10,499
Total assets measured at fair value	$	—	$	81,051	$	—	$	81,051

* The insurance contract invests approximately 65 percent in fixed-income investments, 18 percent in common stock of large-cap companies, 9 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 1 percent in target date investments and 1 percent in cash equivalents.



	Fair Value Measurements at December 31, 2016, 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, 2016
	(In thousands)
Assets:
Money market funds	$	—	$	1,602	$	—	$	1,602
Insurance contract*	—		70,921		—		70,921
Available-for-sale securities:
Mortgage-backed securities	—		10,449		—		10,449
Total assets measured at fair value	$	—	$	82,972	$	—	$	82,972

* The insurance contract invests approximately 52 percent in fixed-income investments, 22 percent in common stock of large-cap companies, 13 percent in common stock of mid-cap companies, 10 percent in common stock of small-cap companies, 1 percent in target date investments and 2 percent in cash equivalents.

For information about fair value assessments of assets and liabilities classified as held for sale, see Note 8 .

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 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:



	Carrying Amount		Fair Value
	(In thousands)
Long-term debt at March 31, 2017	$	1,703,006	$	1,784,588
Long-term debt at March 31, 2016	$	1,858,054	$	1,928,150
Long-term debt at December 31, 2016	$	1,790,159	$	1,841,885

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

Note 11 - Equity

A summary of the changes in equity was as follows:



Three Months Ended March 31, 2017	Total Equity
	(In thousands)
Balance at December 31, 2016	$	2,316,244
Net income	37,325
Other comprehensive loss	(452		)
Dividends declared on preferred stocks	(171		)
Dividends declared on common stock	(37,596		)
Stock-based compensation	996
Repurchase of common stock	(1,684		)
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	(757		)
Balance at March 31, 2017	$	2,313,905



Three Months Ended March 31, 2016	Total Stockholders' Equity			Noncontrolling Interest			Total Equity
	(In thousands)
Balance at December 31, 2015	$	2,396,505		$	124,043		$	2,520,548
Net income (loss)	24,869			(11,040		)	13,829
Other comprehensive loss	(1,434		)	—			(1,434		)
Dividends declared on preferred stocks	(171		)	—			(171		)
Dividends declared on common stock	(36,620		)	—			(36,620		)
Stock-based compensation	1,065			—			1,065
Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings	(316		)	—			(316		)
Net tax deficit on stock-based compensation	(1,517		)	—			(1,517		)
Balance at March 31, 2016	$	2,382,381		$	113,003		$	2,495,384

Note 12 - Cash flow information

Cash expenditures for interest and income taxes were as follows:



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
Interest, net of amount capitalized and AFUDC - borrowed of $196 and $260 in 2017 and 2016, respectively	$	17,546		$	23,109
Income taxes refunded, net*	$	(2,762	)	$	(1,429	)


*	Income taxes refunded, net of discontinued operations, were $ (7.2) million and $ (1.4) million for the three months ended March 31, 2017 and 2016, respectively.

Noncash investing transactions were as follows:

Note 13 - 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 vast majority of 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.

The pipeline and midstream segment provides natural gas transportation, underground storage and gathering services through regulated and nonregulated pipeline systems primarily in the Rocky Mountain and northern Great Plains regions of the United States. This segment also provides cathodic protection and other energy-related services. For information on the Company's natural gas and oil gathering and processing facility sold on January 1, 2017, see Note 8.

The construction materials and contracting segment mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated contracting services. This segment operates in the central, southern and western United States and Alaska and Hawaii.

The construction services segment provides utility construction services specializing in constructing and maintaining electric and communication lines, gas pipelines, fire suppression systems, and external lighting and traffic signalization. This segment also provides utility excavation and inside electrical and mechanical services, and manufactures and distributes transmission line construction equipment and other supplies.

The Other category includes the activities of Centennial Capital, which 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 deductible layers of the insured companies' general liability, automobile liability, pollution liability and other coverages. Centennial Capital also owns certain real and personal property. The Other category also includes 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 includes the results and supporting activities of Dakota Prairie Refining and Fidelity other than certain general and administrative costs and interest expense as described above. Dakota Prairie Refining refined crude oil and produced and sold diesel fuel, naphtha, ATBs and other by-products of the production process. In the second quarter of 2016, the Company sold all of the outstanding membership interests in Dakota Prairie Refining. Fidelity engaged in oil and natural gas development and production activities in the Rocky Mountain and Mid-Continent/Gulf States regions of the United States. Between September 2015 and March 2016, the Company entered into purchase and sale agreements to sell all of Fidelity's oil and natural gas assets. The completion of these sales occurred between October 2015 and April 2016. For more information on discontinued operations, see Note 8 .

The information below follows the same accounting policies as described in Note 1 of the Company's Notes to Consolidated Financial Statements in the 2016 Annual Report. Information on the Company's businesses was as follows:



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
External operating revenues:
Regulated operations:
Electric	$	88,225		$	82,923
Natural gas distribution	342,519			299,395
Pipeline and midstream	2,870			3,547
	433,614			385,865
Nonregulated operations:
Pipeline and midstream	3,643			8,697
Construction materials and contracting	200,776			209,852
Construction services	299,572			255,500
Other	320			300
	504,311			474,349
Total external operating revenues	$	937,925		$	860,214

Intersegment operating revenues:
Regulated operations:
Electric	$	—		$	—
Natural gas distribution	—			—
Pipeline and midstream	21,489			21,098
	21,489			21,098
Nonregulated operations:
Pipeline and midstream	34			84
Construction materials and contracting	86			118
Construction services	6			462
Other	1,743			1,669
	1,869			2,333
Intersegment eliminations	(23,358		)	(23,431		)
Total intersegment operating revenues	$	—		$	—



	Three Months Ended
	March 31,
	2017			2016
	(In thousands)
Earnings on common stock:
Regulated operations:
Electric	$	14,333		$	11,119
Natural gas distribution	27,861			25,241
Pipeline and midstream	4,557			5,288
	46,751			41,648
Nonregulated operations:
Pipeline and midstream	(628		)	1
Construction materials and contracting	(19,912		)	(14,471		)
Construction services	7,362			5,974
Other	(279		)	(1,458		)
	(13,457		)	(9,954		)
Intersegment eliminations*	2,173			—
Earnings on common stock before income (loss) from discontinued operations	35,467			31,694
Income (loss) from discontinued operations, net of tax*	1,687			(18,036		)
Loss from discontinued operations attributable to noncontrolling interest	—			(11,040		)
Total earnings on common stock	$	37,154		$	24,698

* Includes an elimination for the presentation of income tax adjustments between continuing and

discontinued operations.

Note 14 - Employee benefit plans

Pension and other postretirement plans

The Company has noncontributory defined benefit pension plans and other postretirement benefit plans for certain eligible employees. Components of net periodic benefit cost for the Company's pension and other postretirement benefit plans were as follows:



	Pension Benefits						Other Postretirement Benefits
Three Months Ended March 31,	2017			2016			2017			2016
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	—		$	—		$	447		$	450
Interest cost	4,014			4,390			808			949
Expected return on assets	(5,029		)	(5,280		)	(1,145		)	(1,149		)
Amortization of prior service credit	—			—			(343		)	(343		)
Amortization of net actuarial loss	1,793			1,593			336			448
Net periodic benefit cost, including amount capitalized	778			703			103			355
Less amount capitalized	107			81			(39		)	34
Net periodic benefit cost	$	671		$	622		$	142		$	321

Nonqualified benefit plans

In addition to the qualified plan defined pension benefits reflected in the table, the Company also has unfunded, nonqualified benefit plans for executive officers and certain key management employees that generally provide for defined benefit payments at age 65 following the employee's retirement or, upon death, to their beneficiaries for a 15-year period. In February 2016, the Company froze the unfunded, nonqualified defined benefit plans to new participants and eliminated benefit increases. Vesting for participants not fully vested was retained. The Company's net periodic benefit cost for these plans for the three months ended March 31, 2017 , was $1.2 million . The Company's net periodic benefit credit for these plans for the three months ended March 31, 2016 , was $1.9 million , which reflects a curtailment gain of $3.3 million .

Note 15 - Regulatory matters

On September 30, 2015, Great Plains filed an application for a natural gas rate increase with the MNPUC. Great Plains requested a total increase of approximately $1.6 million annually or approximately 6.4 percent above current rates to recover increased operating expenses along with increased investment in facilities, including the related depreciation expense and taxes. An interim increase of approximately $1.5 million or approximately 6.4 percent, subject to refund, was effective with service rendered on and after January 1, 2016. The MNPUC issued an order on September 6, 2016, authorizing an increase of approximately $1.1 million annually or approximately 5.2 percent with the requirement that Great Plains submit a compliance filing within 30 days. On September 22, 2016, Great Plains submitted the required compliance filing which included a refund plan to return the amount of interim revenues collected above the final rates. On December 22, 2016, the MNPUC issued an order approving the rates which were effective January 1, 2017. Great Plains issued refunds to customers on February 24, 2017.

On April 29, 2016, Cascade filed an application with the OPUC for a natural gas rate increase of approximately $1.9 million annually or approximately 2.8 percent above current rates. The request includes rate recovery associated with pipeline replacement and improvement projects to ensure the integrity of Cascade's system. On October 6, 2016, Cascade, staff of the OPUC and the interveners in the case filed a stipulation and settlement agreement reflecting an annual increase of approximately $754,000 effective March 1, 2017. The OPUC issued an order approving the stipulation and settlement agreement on December 12, 2016.

On June 10, 2016, Montana-Dakota filed an application for an increase in electric rates with the WYPSC. Montana-Dakota requested an increase of approximately $3.2 million annually or approximately 13.1 percent above current rates to recover Montana-Dakota's increased investment in facilities along with additional depreciation, operation and maintenance expenses including increased fuel costs, and taxes associated with the increases in investment. On December 28, 2016, Montana-Dakota and the interveners of the case filed a stipulation and agreement reflecting an increase of approximately $2.7 million annually or approximately 11.1 percent above current rates. On April 6, 2017, the WYPSC issued a final order approving the stipulation and agreement with rates effective with service rendered on and after March 1, 2017.

On August 12, 2016, Intermountain filed an application with the IPUC for a natural gas rate increase of approximately $10.2 million annually or approximately 4.1 percent above current rates. The request includes rate recovery associated with increased investment in facilities and increased operating expenses. On January 17, 2017, Intermountain provided the IPUC with an updated revenue request of approximately $9.4 million . A hearing was held March 1-3, 2017. On April 28, 2017, the IPUC issued an order approving an increase of approximately $4.1 million or approximately 1.6 percent above current rates based on a 9.5 percent return on equity effective with service rendered on and after May 1, 2017. Intermountain is reviewing the final order.

On September 1, 2016, and as amended on January 10, 2017, Montana-Dakota submitted an update to its transmission formula rate under the MISO tariff including a revenue requirement for the Company's multivalue project along with a true-up of prior year expenditures of $11.1 million , which was effective January 1, 2017.

On December 2, 2016, Montana-Dakota filed an application with the MTPSC requesting authority to implement gas and electric tax tracking adjustments for Montana state and local taxes and fees that reflect the changes in state and local property taxes applicable to natural gas and electric utilities pursuant to Montana law. The requested tax tracking adjustments would result in an increase in revenues of approximately $814,000 . On January 17, 2017, the MTPSC issued an order on the tax tracking adjustments. The gas tracking adjustment was approved as an increase to revenues of approximately $474,000 effective January 1, 2017. The electric tax tracking adjustment was approved as an increase to revenues of approximately $251,000 effective May 15, 2017. Montana-Dakota filed a motion for reconsideration of the electric tax tracking adjustment on January 27, 2017. The motion for reconsideration is pending before the MTPSC.

On December 21, 2016, Great Plains filed an application with the MNPUC requesting authority to implement a natural gas utility infrastructure cost tariff of approximately $456,000 annually effective beginning with service rendered May 20, 2017. The tariff will allow Great Plains to recover infrastructure investments, not previously included in rates, mandated by federal or state agencies associated with Great Plains' pipeline integrity programs. This matter is pending before the MNPUC.

On April 1, 2017, Montana-Dakota implemented Phase 2 of the electric rate case approved by the MTPSC on March 25, 2016. The annual increase of $4.7 million is effective with service rendered on and after April 1, 2017.

Montana-Dakota previously filed an application with the NDPSC on October 14, 2016, for an electric rate increase which also included a requested return on equity to be used in the determination of applications previously filed by Montana-Dakota for a renewable resource cost adjustment rider, an electric generation resource recovery rider, and a transmission cost adjustment rider. On April 7, 2017, Montana-Dakota, the NDPSC Advocacy Staff and the interveners in the case filed a settlement agreement resolving all issues in the general rate case. The settlement agreement included a net increase of approximately $7.5 million or 3.7 percent above previously approved final rates and a true-up of the return on equity used in the interim renewable resource cost adjustment, the electric generation resource recovery and transmission cost adjustment riders of 9.45 percent; a return on equity of 9.65 percent for base rates and the renewable resource cost adjustment rider on a go-forward basis; and a return on equity of 9.45 percent through December 31, 2019, for the natural gas-fired internal combustion engines and associated facilities included in the electric generation resource recovery rider. If the settlement agreement is approved by the NDPSC, final

rates will be less than the interim rates currently in effect. Therefore, Montana-Dakota will refund the difference to customers, which is approximately 19 percent of the amount collected from the general rate case interim increase, along with refunds, if any, to reflect true-ups for the various riders. The amount of refunds, less amounts previously accrued, are not expected to be material to the consolidated financial statements. A hearing on the settlement was held on April 10, 2017. This matter is pending before the NDPSC. The background information related to the settlement and related applications are discussed in the following paragraphs.

On October 26, 2015, Montana-Dakota filed an application with the NDPSC requesting a renewable resource cost adjustment rider for the recovery of the Thunder Spirit Wind project. On January 5, 2016, the NDPSC approved the rider to be effective January 7, 2016, resulting in an annual increase on an interim basis, subject to refund, of $15.1 million based upon a 10.5 percent return on equity. The interim rate is pending the determination of the return on equity in the general rate case application filed October 14, 2016, as discussed in this note.

On October 26, 2015, Montana-Dakota filed an application with the NDPSC for an update to the electric generation resource recovery rider. On March 9, 2016, the NDPSC approved the rider to be effective with service rendered on and after March 15, 2016, which resulted in interim rates, subject to refund, of $9.7 million based upon a 10.5 percent return on equity. The interim rates include recovery of Montana-Dakota's investment in the 88-MW simple-cycle natural gas turbine and associated facilities near Mandan, North Dakota, and the 19 MW of new generation from natural gas-fired internal combustion engines and associated facilities near Sidney, Montana. The net investment authorized for the natural gas-fired internal combustion engines and the return on equity on both investments are pending the general rate case application filed October 14, 2016, as discussed in this note.

On November 25, 2015, Montana-Dakota filed an application with the NDPSC for an update of its transmission cost adjustment rider for recovery of MISO-related charges and two transmission projects in North Dakota. On February 10, 2016, the NDPSC approved the transmission cost adjustment effective with service rendered on and after February 12, 2016, resulting in an annual increase on an interim basis, subject to refund, of $6.8 million based upon a 10.5 percent return on equity. The interim rate is pending the determination of the return on equity in the general rate case application filed October 14, 2016, as discussed in this note.

On October 14, 2016, Montana-Dakota filed an application with the NDPSC for an electric rate increase of approximately $13.4 million annually or 6.6 percent above current rates. The request includes rate recovery associated with increased investment in facilities, along with the related depreciation, operation and maintenance expenses and taxes associated with the increased investment. Montana-Dakota requested an interim increase of approximately $13.0 million or approximately 6.5 percent, subject to refund, to be effective within 60 days of the filing. On November 21, 2016, Montana-Dakota filed and on November 30, 2016, the NDPSC approved a revised interim increase of approximately $11.7 million , based on adjustments accepted by the NDPSC, or approximately 5.8 percent above current rates, subject to refund, effective with service rendered on or after December 13, 2016. This matter is pending the approval of the settlement agreement by the NDPSC, as previously discussed.

Note 16 - Contingencies

The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries. 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. The Company had accrued liabilities of $29.1 million , $19.0 million and $31.8 million , which include liabilities held for sale, for contingencies, including litigation, production taxes, royalty claims and environmental matters at March 31, 2017 and 2016 , and December 31, 2016 , respectively, including amounts that may have been accrued for matters discussed in Litigation and Environmental matters within this note.

Litigation

Natural Gas Gathering Operations Omimex filed a complaint against WBI Energy Midstream in Montana Seventeenth Judicial District Court in July 2010 alleging WBI Energy Midstream breached a gathering contract with Omimex as a result of the increased operating pressures demanded by a third party on a natural gas gathering system in Montana. In December 2011, Omimex filed an amended complaint alleging WBI Energy Midstream breached obligations to operate its gathering system as a common carrier under United States and Montana law. WBI Energy Midstream removed the action to the United States District Court for the District of Montana. The parties subsequently settled the breach of contract claim and, subject to final determination on liability, stipulated to the damages on the common carrier claim, for amounts that are not material. A trial on the common carrier claim was held during July 2013. On December 9, 2014, the United States District Court for the District of Montana issued an order determining WBI Energy Midstream breached its obligations as a common carrier and ordered judgment in favor of Omimex for the amount of the stipulated damages. WBI Energy Midstream filed an appeal from the United States

District Court for the District of Montana's order and judgment. The parties reached a settlement of the matter in March 2017. The settlement provides for a payment by WBI Energy Midstream of an amount that is not material to the Company.

The Company also is subject to other litigation, and actual and potential claims in the ordinary course of its business which may include, but are not limited to, matters involving property damage, personal injury, and environmental, contractual, statutory and regulatory obligations. Accruals are based on the best information available but actual losses in future periods are affected by various factors making them uncertain. After taking into account liabilities accrued for the foregoing matters, management believes that the outcomes with respect to the above issues and other probable and reasonably possible losses in excess of the amounts accrued, while uncertain, will not have a material effect upon the Company's financial position, results of operations or cash flows.

Environmental matters

Portland Harbor Site In December 2000, Knife River - Northwest was named by the EPA as a PRP in connection with the cleanup of a riverbed site adjacent to a commercial property site acquired by Knife River - Northwest from Georgia-Pacific West, Inc. in 1999. The riverbed site is part of the Portland, Oregon, Harbor Superfund Site. The EPA wants responsible parties to share in the cleanup of sediment contamination in the Willamette River. To date, costs of the overall remedial investigation and feasibility study of the harbor site are being recorded, and initially paid, through an administrative consent order by the LWG, a group of several entities, which does not include Knife River - Northwest or Georgia-Pacific West, Inc. Investigative costs are indicated to be in excess of $100 million . On January 6, 2017, Region 10 of the EPA issued a ROD with its selected remedy for cleanup of the in-river portion of the site. Implementation of the remedy is expected to take up to 13 years with a present value cost estimate of approximately $1 billion . Corrective action will not be taken until remedial design/remedial action plans are approved by the EPA. Knife River - Northwest also received notice in January 2008 that the Portland Harbor Natural Resource Trustee Council intends to perform an injury assessment to natural resources resulting from the release of hazardous substances at the Harbor Superfund Site. The Portland Harbor Natural Resource Trustee Council indicates the injury determination is appropriate to facilitate early settlement of damages and restoration for natural resource injuries. It is not possible to estimate the costs of natural resource damages until an assessment is completed and allocations are undertaken.

Based upon a review of the Portland Harbor sediment contamination evaluation by the Oregon DEQ and other information available, Knife River - Northwest does not believe it is a responsible party. In addition, Knife River - Northwest has notified Georgia-Pacific West, Inc., that it intends to seek indemnity for liabilities incurred in relation to the above matters pursuant to the terms of their sale agreement. Knife River - Northwest has entered into an agreement tolling the statute of limitations in connection with the LWG's potential claim for contribution to the costs of the remedial investigation and feasibility study. By letter in March 2009, LWG stated its intent to file suit against Knife River - Northwest and others to recover LWG's investigation costs to the extent Knife River - Northwest cannot demonstrate its non-liability for the contamination or is unwilling to participate in an alternative dispute resolution process that has been established to address the matter. At this time, Knife River - Northwest has agreed to participate in the alternative dispute resolution process.

The Company believes it is not probable that it will incur any material environmental remediation costs or damages in relation to the above referenced matter.

Manufactured Gas Plant Sites There are three claims against Cascade for cleanup of environmental contamination at manufactured gas plant sites operated by Cascade's predecessors.

The first claim is for contamination at a site in Eugene, Oregon which was received in 1995. There are PRPs in addition to Cascade that may be liable for cleanup of the contamination. Some of these PRPs have shared in the investigation costs. It is expected that these and other PRPs will share in the cleanup costs. Several alternatives for cleanup have been identified, with preliminary cost estimates ranging from approximately $500,000 to $11.0 million . The Oregon DEQ released a ROD in January 2015 that selected a remediation alternative for the site as recommended in an earlier staff report. It is not known at this time what share of the cleanup costs will actually be borne by Cascade; however, Cascade anticipates its proportional share could be approximately 50 percent. Cascade has accrued $1.6 million for remediation of this site. In January 2013, the OPUC approved Cascade's application to defer environmental remediation costs at the Eugene site for a period of 12 months starting November 30, 2012. Cascade received orders reauthorizing the deferred accounting for the 12-month periods starting November 30, 2013, December 1, 2014, and December 1, 2015. Cascade has requested authority to defer accounting for the 12-month period starting December 1, 2016, which is pending before the OPUC.

The second claim is for contamination at a site in Bremerton, Washington which was received in 1997. A preliminary investigation has found soil and groundwater at the site contain contaminants requiring further investigation and cleanup. The EPA conducted a Targeted Brownfields Assessment of the site and released a report summarizing the results of that assessment in August 2009. The assessment confirms that contaminants have affected soil and groundwater at the site, as well as sediments in the adjacent Port Washington Narrows. Alternative remediation options have been identified with preliminary cost estimates ranging from $340,000 to $6.4 million . Data developed through the assessment and previous investigations indicates the contamination likely derived from multiple, different sources and multiple current and former owners of properties and businesses in the vicinity of the site may be responsible for the contamination. In April 2010, the Washington DOE issued notice it considered Cascade a PRP for hazardous substances at the site. In May 2012, the EPA added the site to the National Priorities List of Superfund sites. Cascade has entered into an administrative settlement agreement and consent order with the EPA regarding the scope and schedule for a

remedial investigation and feasibility study for the site. Cascade has accrued $12.4 million for the remedial investigation, feasibility study and remediation of this site. In April 2010, Cascade filed a petition with the WUTC for authority to defer the costs, which are included in other noncurrent assets, incurred in relation to the environmental remediation of this site. The WUTC approved the petition in September 2010, subject to conditions set forth in the order.

The third claim is for contamination at a site in Bellingham, Washington. Cascade received notice from a party in May 2008 that Cascade may be a PRP, along with other parties, for contamination from a manufactured gas plant owned by Cascade and its predecessor from about 1946 to 1962. The notice indicates that current estimates to complete investigation and cleanup of the site exceed $8.0 million . Other PRPs have reached an agreed order and work plan with the Washington DOE for completion of a remedial investigation and feasibility study for the site. A report documenting the initial phase of the remedial investigation was completed in June 2011. There is currently not enough information available to estimate the potential liability to Cascade associated with this claim although Cascade believes its proportional share of any liability will be relatively small in comparison to other PRPs. The plant manufactured gas from coal between approximately 1890 and 1946. In 1946, shortly after Cascade's predecessor acquired the plant, it converted the plant to a propane-air gas facility. There are no documented wastes or by-products resulting from the mixing or distribution of propane-air gas.

Cascade has received notices from and entered into agreement with certain of its insurance carriers that they will participate in defense of Cascade for these contamination claims subject to full and complete reservations of rights and defenses to insurance coverage. To the extent these claims are not covered by insurance, Cascade intends to seek recovery through the OPUC and WUTC of remediation costs in its natural gas rates charged to customers. The accruals related to these matters are reflected in regulatory assets.

Guarantees

In June 2016, WBI Energy sold all of the outstanding membership interests in Dakota Prairie Refining. In connection with the sale, Centennial agreed to continue to guarantee certain debt obligations of Dakota Prairie Refining which totaled $62.6 million at March 31, 2017 , and are expected to mature by 2023. Tesoro agreed to indemnify Centennial for any losses and litigation expenses arising from the guarantee. The estimated fair values of the indemnity asset and guarantee liability are reflected in deferred charges and other assets - other and deferred credits and other liabilities - other, respectively, on the Consolidated Balance Sheets. Continuation of the guarantee was required as a condition to the sale of Dakota Prairie Refining.

In March 2016, a sale agreement was signed to sell Fidelity's assets in the Paradox Basin. In connection with the sale, Centennial agreed to guarantee Fidelity's indemnity obligations associated with the Paradox assets. The guarantee was required by the buyer as a condition to the sale of the Paradox Basin assets.

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 who were the sellers in three purchase and sale agreements for periods ranging up to 10 years from the date of sale. 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 March 31, 2017 , the fixed maximum amounts guaranteed under these agreements aggregated $92.8 million . The amounts of scheduled expiration of the maximum amounts guaranteed under these agreements aggregate $8.3 million in 2017 ; $26.2 million in 2018 ; $54.3 million in 2019 ; and $4.0 million , which has no scheduled maturity date. There were no amounts outstanding under the above guarantees at March 31, 2017 . 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 March 31, 2017 , the fixed maximum amounts guaranteed under these letters of credit aggregated $31.0 million . The amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate $30.3 million in 2017 and $700,000 in 2018. There were no amounts outstanding under the above letters of credit at March 31, 2017 . In the event of default under these letter of credit obligations, the subsidiary issuing the letter of credit for that particular obligation would be required to make payments under its 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 for these guarantees were reflected on the Consolidated Balance Sheet at March 31, 2017 .

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 March 31, 2017 , approximately $744.0 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

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.

Dakota Prairie Refining, LLC On February 7, 2013, WBI Energy and Calumet formed a limited liability company, Dakota Prairie Refining, and entered into an operating agreement to develop, build and operate Dakota Prairie Refinery in southwestern North Dakota. WBI Energy and Calumet each had a 50 percent ownership interest in Dakota Prairie Refining. WBI Energy's and Calumet's capital commitments, based on a total project cost of $300 million , under the agreement were $150 million and $75 million , respectively. Capital commitments in excess of $300 million were shared equally between WBI Energy and Calumet. Dakota Prairie Refining entered into a term loan for project debt financing of $75 million on April 22, 2013. The operating agreement provided for allocation of profits and losses consistent with ownership interests; however, deductions attributable to project financing debt was allocated to Calumet. Calumet's cash distributions from Dakota Prairie Refining were decreased by the principal and interest paid on the project debt, while the cash distributions to WBI Energy were not decreased. Pursuant to the operating agreement, Centennial agreed to guarantee Dakota Prairie Refining's obligation under the term loan. The net loss attributable to noncontrolling interest on the Consolidated Statements of Income is pretax as Dakota Prairie Refining was a limited liability company. For more information related to the guarantee, see Guarantees in this note.

Dakota Prairie Refining was determined to be a VIE, and the Company had determined that it was the primary beneficiary as it had an obligation to absorb losses that could have been potentially significant to the VIE through WBI Energy's equity investment and Centennial's guarantee of the third-party term loan. Accordingly, the Company consolidated Dakota Prairie Refining in its financial statements and recorded a noncontrolling interest for Calumet's ownership interest.

On June 24, 2016, WBI Energy entered into a membership interest purchase agreement with Tesoro to sell all of the outstanding membership interests in Dakota Prairie Refining to Tesoro. To effectuate the sale, WBI Energy acquired Calumet’s 50 percent membership interest in Dakota Prairie Refining on June 27, 2016. The sale of the membership interests to Tesoro closed on June 27, 2016. For more information on the Company's discontinued operations, see Note 8 .

Dakota Prairie Refinery commenced operations in May 2015. The assets of Dakota Prairie Refining were used solely for the benefit of Dakota Prairie Refining. The total assets and liabilities of Dakota Prairie Refining were as follows:



	March 31, 2016
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	478
Accounts receivable	11,169
Inventories	17,056
Prepayments and other current assets	6,124
Total current assets	34,827
Net property, plant and equipment	419,492
Deferred charges and other assets:
Other	8,941
Total deferred charges and other assets	8,941
Total assets	$	463,260
Liabilities
Current liabilities:
Short-term borrowings	$	63,200
Long-term debt due within one year	6,375
Accounts payable	27,697
Taxes payable	1,001
Accrued compensation	717
Other accrued liabilities	7,155
Total current liabilities	106,145
Long-term debt	62,625
Total liabilities	$	168,770

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 Company's Consolidated Balance Sheets and is recovered from customers as a component of 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 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 March 31, 2017 , 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 $42.7 million .

Note 17 - Subsequent events

On March 1, 2017, the Company provided notice of its intent to redeem all outstanding shares of its preferred stock. Effective April 1, 2017, all outstanding preferred stock was redeemed for a repurchase price of approximately $15.9 million . The redemption of the preferred stock was funded with borrowings from the Company's commercial paper program and cash on hand.

On April 25, 2017, Cascade amended its revolving credit agreement to increase the borrowing limit to $75.0 million and extend the termination date to April 24, 2020.

On April 25, 2017, Intermountain amended its revolving credit agreement to increase the borrowing limit to $85.0 million and extend the termination date to April 24, 2020.

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

Overview

The Company's strategy is to apply its expertise in the regulated energy delivery and construction materials and services businesses to increase market share, increase profitability and enhance shareholder value through:


•	Organic growth as well as a continued disciplined approach to the acquisition of well-managed companies and properties


•	The elimination of system-wide cost redundancies through increased focus on integration of operations and standardization and consolidation of various support services and functions across companies within the organization


•	The development of projects that are accretive to earnings per share and return on invested capital


•	Divestiture of certain assets to fund capital growth projects throughout the Company

The Company has capabilities to fund its growth and operations through various sources, including internally generated funds, commercial paper facilities, revolving credit facilities, the issuance from time to time of debt and equity securities and asset sales. For more information on the Company's capital expenditures, see Liquidity and Capital Commitments.

The key strategies for each of the Company's business segments and certain related business challenges are summarized below. For a summary of the Company's businesses, see Note 13 .

Key Strategies and Challenges

Electric and Natural Gas Distribution

Strategy Provide safe and reliable competitively priced energy and related services to customers. The electric and natural gas distribution segments continually seek opportunities to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation and transmission and natural gas systems, and through selected acquisitions of companies and properties at prices that will provide stable cash flows and an opportunity for the Company to earn a competitive return on investment.

Challenges Both segments are subject to extensive regulation in the state jurisdictions where they conduct operations with respect to costs and timely recovery and permitted returns on investment as well as subject to certain operational, system integrity and environmental regulations. These regulations can require substantial investment to upgrade facilities. The ability of these segments to grow through acquisitions is subject to significant competition. In addition, the ability of both segments to grow service territory and customer base is affected by 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 cost and lead time, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which will necessitate increases in electric energy prices. Legislative and regulatory initiatives to increase renewable energy resources and reduce GHG emissions could impact the price and demand for electricity and natural gas and could result in the retirement of certain electric generating facilities before they are fully depreciated.

Pipeline and Midstream

Strategy Utilize the segment's existing expertise in energy infrastructure and related services to increase market share and profitability through optimization of existing operations, internal growth, and investments in and acquisitions of energy-related assets and companies both in its current operating areas and beyond its Rocky Mountain and northern Great Plains base. Incremental and new growth opportunities include: access to new energy sources for storage, gathering and transportation services; expansion of existing storage, gathering and transmission facilities; incremental pipeline projects which expand pipeline capacity; and expansion of the pipeline and midstream business to include liquid pipelines and processing activities.

Challenges Ongoing challenges for this segment include: energy price volatility; basis differentials; environmental and regulatory requirements; securing permits and easements; recruitment and retention of a skilled workforce; and competition from other pipeline and midstream companies.

Construction Materials and Contracting

Strategy Focus on high-growth strategic markets located near major transportation corridors and desirable mid-sized metropolitan areas; strengthen long-term, strategic aggregate reserve position through purchase and/or lease opportunities; enhance profitability through cost containment, margin discipline and vertical integration of the segment's operations; develop and recruit talented employees; and continue growth through organic and acquisition opportunities. Vertical integration allows the segment 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. 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, asphalt concrete, ready-mixed concrete and related products), complementing and expanding on the Company's expertise.

Challenges Recruitment and retention of key personnel and volatility in the cost of raw materials such as diesel, gasoline, liquid asphalt, cement and steel, are ongoing challenges. This business unit expects to continue cost containment efforts, positioning its operations for the resurgence in the private market, while continuing the emphasis on industrial, energy and public works projects.

Construction Services

Strategy Provide a superior return on investment by: building new and strengthening existing customer relationships; effectively controlling costs; retaining, developing and recruiting talented employees; growing through organic and acquisition opportunities; and focusing efforts on projects that will permit higher margins while properly managing risk.

Challenges This segment operates in highly competitive markets with many jobs subject to competitive bidding. Maintenance of effective operational and cost controls, retention of key personnel, managing through downturns in the economy and effective management of working capital are ongoing challenges.

Additional Information

For more information on the risks and challenges the Company faces as it pursues its growth strategies and other factors that should be considered for a better understanding of the Company's financial condition, see Part II, Item 1A - Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2016 Annual Report. For more information on key growth strategies, projections and certain assumptions, see Prospective Information. For information pertinent to various commitments and contingencies, see Notes to Consolidated Financial Statements.

Earnings Overview

The following table summarizes the contribution to the consolidated earnings by each of the Company's businesses.



	Three Months Ended
	March 31,
	2017			2016
	(Dollars in millions, where applicable)
Electric	$	14.3		$	11.1
Natural gas distribution	27.9			25.2
Pipeline and midstream	3.9			5.3
Construction materials and contracting	(19.9		)	(14.5		)
Construction services	7.4			6.0
Other	(.3		)	(1.5		)
Intersegment eliminations	2.2			—
Earnings before discontinued operations	35.5			31.6
Earnings (loss) from discontinued operations, net of tax	1.7			(18.0		)
Loss from discontinued operations attributable to noncontrolling interest	—			(11.1		)
Earnings on common stock	$	37.2		$	24.7
Earnings per common share – basic:
Earnings before discontinued operations	$	.18		$	.16
Discontinued operations attributable to the Company, net of tax	.01			(.03		)
Earnings per common share – basic	$	.19		$	.13
Earnings per common share – diluted:
Earnings before discontinued operations	$	.18		$	.16
Discontinued operations attributable to the Company, net of tax	.01			(.03		)
Earnings per common share – diluted	$	.19		$	.13

Three Months Ended March 31, 2017 and 2016 The Company recognized consolidated earnings of $37.2 million for the quarter ended March 31, 2017 , compared to $24.7 million from the comparable prior period largely due to:


•	Discontinued operations which reflects the absence in 2017 of a loss at the refining business which was sold in June 2016, as well as the reversal in 2017 of a previously accrued liability due to the resolution of a legal matter


•	Higher natural gas retail sales volumes of 21 percent to all customer classes due to increased customers and colder weather in all regions served at the natural gas distribution business


•	Higher electric retail sales margins, primarily due to the recovery of additional investment in a MISO project, approved final and interim rate increases and 6 percent higher retail sales volumes primarily to residential and commercial customers at the electric business


•	Higher inside electrical workloads and margins offset in part by the absence in 2017 of a tax benefit of $1.5 million at the construction services business

These increases were partially offset by:


•	Lower construction margins and revenues and lower ready-mixed concrete volumes and margins at the construction materials and contracting business


•	Lower earnings due to the sale of Pronghorn in January 2017 at the pipeline and midstream business

Financial and Operating Data

Below are key financial and operating data for each of the Company's businesses.

Electric



	Three Months Ended
	March 31,
	2017		2016
	(Dollars in millions, where applicable)
Operating revenues	$	88.2	$	82.9
Operating expenses:
Fuel and purchased power	21.9		22.0
Operation and maintenance	28.2		26.9
Depreciation, depletion and amortization	11.8		12.9
Taxes, other than income	3.5		3.4
	65.4		65.2
Operating income	22.8		17.7
Earnings	$	14.3	$	11.1
Retail sales (million kWh):
Residential	355.8		323.6
Commercial	397.0		373.7
Industrial	141.9		143.7
Other	22.3		21.4
	917.0		862.4
Average cost of fuel and purchased power per kWh	$	.022	$	.024

Three Months Ended March 31, 2017 and 2016 Electric earnings increased $3.2 million ( 29 percent) due to:


•	Higher retail sales margins, primarily due to the recovery of additional investment in a MISO project, approved final and interim rate increases and increased retail sales volumes of 6 percent, primarily to residential and commercial customers


•	Lower depreciation, depletion and amortization expense of $600,000 (after tax) due to lower depreciation rates implemented in conjunction with regulatory recovery activity

Partially offsetting the earnings increase was higher operation and maintenance expense, which includes $700,000 (after tax) due to higher payroll-related costs and timing of software maintenance costs.

Natural Gas Distribution



	Three Months Ended
	March 31,
	2017			2016
	(Dollars in millions, where applicable)
Operating revenues	$	342.5		$	299.4
Operating expenses:
Purchased natural gas sold	214.4			182.1
Operation and maintenance	40.9			38.8
Depreciation, depletion and amortization	17.1			16.4
Taxes, other than income	18.6			16.7
	291.0			254.0
Operating income	51.5			45.4
Earnings	$	27.9		$	25.2
Volumes (MMdk)
Sales:
Residential	28.1			23.4
Commercial	19.0			15.6
Industrial	1.6			1.3
	48.7			40.3
Transportation:
Commercial	.7			.6
Industrial	38.0			40.7
	38.7			41.3
Total throughput	87.4			81.6
Degree days (% of normal)*
Montana-Dakota/Great Plains	98		%	81		%
Cascade	117		%	87		%
Intermountain	109		%	95		%
Average cost of natural gas, including transportation, per dk	$	4.40		$	4.52

* Degree days are a measure of the daily temperature-related demand for energy for heating.

Three Months Ended March 31, 2017 and 2016 Natural gas distribution earnings increased $2.7 million ( 10 percent) due to higher natural gas retail sales margins resulting from higher retail sales volumes of 21 percent to all customer classes, primarily increased customers and colder weather in all regions served, and approved rate recovery.

Partially offsetting the increase were:


•	Higher operation and maintenance expense, which includes $1.4 million (after tax) largely the result of higher payroll-related costs, timing of software maintenance costs and bad debt expense


•	Higher depreciation, depletion and amortization expense of $400,000 (after tax) due to increased property, plant and equipment balances

Pipeline and Midstream



	Three Months Ended
	March 31,
	2017			2016
	(Dollars in millions)
Operating revenues	$	28.0		$	33.4
Operating expenses:
Operation and maintenance	13.5			13.8
Depreciation, depletion and amortization	4.1			6.2
Taxes, other than income	3.0			2.8
	20.6			22.8
Operating income	7.4			10.6
Earnings	$	3.9		$	5.3
Transportation volumes (MMdk)	67.1			75.3
Natural gas gathering volumes (MMdk)	3.9			4.9
Customer natural gas storage balance (MMdk):
Beginning of period	26.4			16.6
Net withdrawal	(11.4		)	(2.1		)
End of period	15.0			14.5

Three Months Ended March 31, 2017 and 2016 Pipeline and midstream earnings decreased $1.4 million ( 26 percent) primarily the result of:


•	Lower gathering and processing earnings of $3.2 million (after tax), primarily due to lower volumes resulting from the sale of Pronghorn in January 2017, as well as normal declines and lower gathering rates in certain operating areas


•	Lower transportation earnings due to lower transportation volumes, largely offset by increased firm contract demand revenue

Partially offsetting the decreases were:


•	Lower depreciation, depletion and amortization expense of $1.3 million (after tax), primarily the absence of Pronghorn


•	Lower interest expense of $600,000 (after tax) due to lower debt balances

Construction Materials and Contracting



	Three Months Ended
	March 31,
	2017			2016
	(Dollars in millions)
Operating revenues	$	200.9		$	210.0
Operating expenses:
Operation and maintenance	205.8			204.7
Depreciation, depletion and amortization	13.7			15.1
Taxes, other than income	9.0			9.6
	228.5			229.4
Operating loss	(27.6		)	(19.4		)
Loss	$	(19.9	)	$	(14.5	)
Sales (000's):
Aggregates (tons)	3,505			3,626
Asphalt (tons)	215			239
Ready-mixed concrete (cubic yards)	562			644

Three Months Ended March 31, 2017 and 2016 Construction materials and contracting experienced a seasonal first quarter loss of $19.9 million compared to a loss of $14.5 million a year ago ( 38 percent increased loss) due to:


•	Lower earnings of $3.2 million (after tax) resulting from lower construction margins and revenues primarily due to poor weather conditions


•	Lower earnings of $2.4 million (after tax) resulting from lower ready-mixed concrete volumes and margins primarily due to poor weather conditions and the effect of large projects in 2016


•	Lower earnings resulting from lower asset sales gains

Partially offsetting these decreases was higher earnings of $1.1 million (after tax) resulting from higher aggregate margins largely due to lower production costs and strong commercial and residential demand in certain regions.

Construction Services



	Three Months Ended
	March 31,
	2017		2016
	(In millions)
Operating revenues	$	299.6	$	256.0
Operating expenses:
Operation and maintenance	269.6		233.6
Depreciation, depletion and amortization	4.0		3.8
Taxes, other than income	13.3		10.6
	286.9		248.0
Operating income	12.7		8.0
Earnings	$	7.4	$	6.0

Three Months Ended March 31, 2017 and 2016 Construction services earnings increased $1.4 million ( 23 percent) due to:


•	Higher earnings of $3.9 million (after tax) resulting from higher inside electrical workloads and margins in the Western and Central regions largely due to timing of project startup and successful execution of labor activity on projects under full construction


•	Higher earnings of $1.2 million (after tax) resulting from higher industrial construction workloads and margins due to the scheduled timing of construction projects from our customer base

Partially offsetting the increases were:


•	The absence in 2017 of a tax benefit of $1.5 million related to the disposition of a non-strategic asset


•	Higher selling, general and administrative expense of $1.0 million (after tax), largely due to higher payroll-related costs


•	Lower equipment sales, as well as lower rental volumes and margins, due to decreased customer demand

Other



	Three Months Ended
	March 31,
	2017			2016
	(In millions)
Operating revenues	$	2.1		$	2.0
Operating expenses:
Operation and maintenance	1.2			1.7
Depreciation, depletion and amortization	.6			.5
Taxes, other than income	—			.1
	1.8			2.3
Operating income (loss)	.3			(.3		)
Loss	$	(.3	)	$	(1.5	)

Included in Other are 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.

Three Months Ended March 31, 2017 and 2016 Other loss decreased $1.2 million, primarily the result of lower interest expense due to the repayment of long-term debt with the sale of the remaining exploration and production assets and lower operation and maintenance expense previously allocated to the refining business due to the sale of this business in 2016.

Discontinued Operations



	Three Months Ended
	March 31,
	2017				2016
	(In millions)
Income (loss) from discontinued operations before intercompany eliminations, net of tax	$	3.9			$	(18.1	)
Intercompany eliminations	(2.2		)	*	.1
Income (loss) from discontinued operations, net of tax	1.7				(18.0		)
Loss from discontinued operations attributable to noncontrolling interest	—				(11.1		)
Income (loss) from discontinued operations attributable to the Company, net of tax	$	1.7			$	(6.9	)

* Includes an elimination for the presentation of income tax adjustments between continuing and discontinued operations.

Three Months Ended March 31, 2017 and 2016 The Company's income from discontinued operations was $1.7 million compared to a loss of $6.9 million for the comparable prior period. The increase was largely due to the absence in 2017 of a loss at the refining business which was sold in June 2016, as well as the reversal in 2017 of a previously accrued liability due to the resolution of a legal matter.

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 relating to these items are as follows:



	Three Months Ended
	March 31,
	2017				2016
	(In millions)
Intersegment transactions:
Operating revenues	$	23.4			$	23.5
Purchased natural gas sold	21.5				21.1
Operation and maintenance	1.9				2.4
Income from continuing operations	(2.2		)	*	—

* Includes an elimination for the presentation of income tax adjustments between continuing and discontinued operations.

For more information on intersegment eliminations, see Note 13 .

Prospective Information

The following information highlights the key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters for certain of the Company's businesses. Many of these highlighted points are "forward-looking statements." There is no assurance that the Company's projections, including estimates for growth and changes in earnings, will in fact be achieved. Please refer to assumptions contained in this section and the various important factors listed in Part II, Item 1A - Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2016 Annual Report. Changes in such assumptions and factors could cause actual future results to differ materially from the Company's growth and earnings projections.

MDU Resources Group, Inc.


•	The Company continually seeks opportunities to expand through organic growth opportunities and strategic acquisitions.


•	The Company focuses on creating value through vertical integration among its businesses.

Electric and natural gas distribution

•

The Company expects to grow its rate base by approximately 4 percent annually over the next five years on a compound basis. This growth projection is on a much larger base, having grown rate base at a record pace of 12 percent compounded annually over the past five-year period. The utility operations are spread across eight states where customer growth is expected to be higher than the national average. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new electric generation and transmission, and electric and natural gas distribution. Rate base at December 31, 2016, was $1.9 billion.


•	The Company expects its customer base to grow by 1 percent to 2 percent per year.


•	In June 2016, the Company, along with a partner, began to build a 345-kilovolt transmission line from Ellendale, North Dakota, to Big Stone City, South Dakota, about 160 miles. The project has been approved as a MISO multivalue project. More

than 99 percent of the necessary easements have been secured. The Company's total capital investment in this project is expected to be in the range of $150 million to $170 million. The Company expects this project to be completed in 2019.

•

In December 2016, the Company signed a 25-year agreement to purchase the power from the expansion of the Thunder Spirit Wind farm in southwest North Dakota. The agreement also includes an option to buy the project at the close of construction. The expansion of the Thunder Spirit Wind farm will boost the combined production at the wind farm to approximately 150 MW of renewable energy and, if purchased, will increase the Company's generation portfolio from approximately 22 percent renewables to 27 percent. The original 107.5-MW Thunder Spirit Wind farm includes 43 turbines; it was purchased by the Company in December 2015. The expansion includes 13 to 16 turbines, depending on the turbine size selected. It is expected to be online in December 2018. Construction costs for the project are estimated to be $85 million.


•	The Company is in the process of completing its 2017 electric integrated resource plan and is evaluating its future generation and power supply portfolio options, including a large-scale resource. The plan will be finalized and filed by mid-2017.


•	The Company is involved with a number of pipeline projects to enhance the reliability and deliverability of its system.


•	The Company is focused on organic growth, while monitoring potential merger and acquisition opportunities.


•	Regulatory actions

Completed Cases:

Since January 1, 2015, the Company has implemented final rate increases totaling $61.6 million in annual revenue. This includes electric rate proceedings in Montana, North Dakota, South Dakota, Wyoming and before the FERC, and natural gas proceedings in Idaho, Minnesota, Montana, North Dakota, Oregon, South Dakota, Washington and Wyoming. Recently implemented final rates include:


◦	On June 10, 2016, the Company filed an application for an increase in electric rates with the WYPSC, as discussed in Note 15 .


◦	On August 12, 2016, the Company filed an application with the IPUC for a natural gas rate increase, as discussed in Note 15 .


◦	On April 1, 2017, the Company implemented Phase 2 of the electric rate case approved by the MTPSC, as discussed in Note 15 .

Pending Cases:

The Company is requesting rate increases totaling $39.6 million in annual revenue, which includes $39.1 million in implemented interim rates. Cases pending are:


◦	On December 2, 2016, the Company filed an application with the MTPSC requesting authority to implement gas and electric tax tracking adjustments, as discussed in Note 15 .


◦	On December 21, 2016, the Company filed an application with the MNPUC requesting authority to implement a natural gas utility infrastructure cost tariff, as discussed in Note 15 .

◦

The Company previously filed an application with the NDPSC on October 14, 2016, for an electric rate increase which also included a requested return on equity to be used in the determination of applications previously filed by the Company for a renewable resource cost adjustment rider, an electric generation resource recovery rider, and a transmission cost adjustment rider, as discussed in Note 15 .

Pipeline and midstream

•

In September 2016, the Company secured sufficient capacity commitments and started survey work on a 38-mile pipeline that will deliver natural gas supply to eastern North Dakota and far western Minnesota. The Valley Expansion project will connect the Viking Gas Transmission Company pipeline near Felton, Minnesota, to the Company's existing pipeline near Mapleton, North Dakota. Cost of the expansion is estimated at $55 million to $60 million. The project, which is designed to transport 40 million cubic feet of natural gas per day, is under the jurisdiction of the FERC. In October 2016, the Company received FERC approval on its pre-filing for the Valley Expansion project. With minor enhancements, the pipeline will be able to transport significantly more volume if required, based on capacity requested or as needed in the future as the region's demand grows. Following receipt of necessary permits and regulatory approvals, construction is expected to begin in 2018 with completion expected in late 2018.


•	The Company signed agreements to complete expansion projects, including the Charbonneau and Line Section 25 expansion project, in 2016. The Charbonneau and Line Section 25 expansion project will include a new compression station as well as other compression modifications and is expected to be in service in the second quarter of 2017.


•	The Company continues to focus on growing and improving existing operations through organic projects to become the leading pipeline company and midstream provider in all areas in which it operates.

Construction materials and contracting


•	Approximate work backlog at March 31, 2017, was $725 million, compared to $831 million a year ago.


•	Projected revenues are in the range of $1.85 billion to $1.95 billion in 2017.


•	The Company anticipates margins in 2017 to be slightly higher as compared to 2016 margins.


•	In December 2015, Congress passed, and the president signed, a $305 billion, five-year highway bill for funding of transportation infrastructure projects that are a key part of the Company's market.


•	As one of the country's largest sand and gravel producers, the Company will continue to strategically manage its 1.0 billion tons of aggregate reserves in all its markets, as well as take further advantage of being vertically integrated.


•	Of the seven labor contracts that Knife River was negotiating, as reported in Items 1 and 2 - Business Properties - General in the 2016 Annual Report, three have been ratified. The four remaining contracts are still in negotiations.

Construction services


•	Approximate work backlog at March 31, 2017, was $529 million, compared to $530 million a year ago.


•	Projected revenues are in the range of $1.0 billion to $1.1 billion in 2017.


•	The Company anticipates margins in 2017 to be comparable to 2016 margins.


•	The Company continues to pursue opportunities for expansion in energy projects such as petrochemical, transmission, substations, utility services, and renewables. Initiatives are aimed at capturing additional market share and expanding into new markets.


•	As the 13th-largest specialty contractor, the Company continues to pursue opportunities for expansion and execute initiatives in current and new markets that align with the Company's expertise, resources and strategic growth plan.


•	The five labor contracts that MDU Construction Services was negotiating, as reported in Items 1 and 2 - Business Properties - General in the 2016 Annual Report, have been ratified.

Liquidity and Capital Commitments

At March 31, 2017 , the Company had cash and cash equivalents of $ 50.7 million and available borrowing capacity of $652.3 million under the outstanding credit facilities of the Company and its subsidiaries. The Company expects to meet its obligations for debt maturing within one year from various sources, including internally generated funds; the Company's credit facilities, as described in Capital resources; and through the issuance of long-term debt.

Cash flows

Operating activities The changes in cash flows from operating activities generally follow the results of operations as discussed in Financial and Operating Data and also are affected by changes in working capital. Changes in cash flows for discontinued operations are related to the former exploration and production and refining businesses.

Cash flows provided by operating activities in the first three months of 2017 increased $41.0 million from the comparable period in 2016 . The increase in cash flows provided by operating activities was largely from the absence in 2017 of the use of cash at the exploration and production and refining businesses in 2016.

Investing activities Cash flows provided by investing activities in the first three months of 2017 was $45.6 million compared to cash flows used in investing activities of $79.5 million in the first three months of 2016 . The change was primarily due to net proceeds from the sale of Pronghorn at the pipeline and midstream business along with lower capital expenditures primarily at the electric and construction services businesses. Partially offsetting the change was the absence of net proceeds from the sale of property at the exploration and production business.

Financing activities Cash flows used in financing activities in the first three months of 2017 was $127.5 million compared to cash flows provided by financing activities of $40.7 million in the first three months of 2016 . The change was primarily due to lower issuance of long-term debt in 2017 of $166.6 million.

Defined benefit pension plans

There were no material changes to the Company's qualified noncontributory defined benefit pension plans from those reported in the 2016 Annual Report. For more information, see Note 14 and Part II, Item 7 in the 2016 Annual Report.

Capital expenditures

Capital expenditures for the first three months of 2017 were $55.1 million and are estimated to be approximately $519.0 million for 2017 . Estimated capital expenditures include:


•	System upgrades


•	Routine replacements


•	Service extensions


•	Routine equipment maintenance and replacements


•	Buildings, land and building improvements


•	Pipeline, gathering and other midstream projects


•	Power generation and transmission opportunities


•	Environmental upgrades


•	Other growth opportunities

The Company continues to evaluate potential future acquisitions and other growth opportunities; however, they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimated 2017 capital expenditures referred to previously. The Company expects the 2017 estimated capital expenditures to be funded by various sources, including internally generated funds; the Company's credit facilities, as described in Capital resources; through the issuance of long-term debt; and asset sales.

Capital resources

Certain debt instruments of the Company and its subsidiaries, including those discussed later, contain restrictive covenants and cross-default provisions. In order to borrow under the respective credit agreements, the Company and its subsidiaries must be in compliance with the applicable covenants and certain other conditions, all of which the Company and its subsidiaries, as applicable, were in compliance with at March 31, 2017 . In the event the Company and its 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 - Note 6, in the 2016 Annual Report.

The following table summarizes the outstanding revolving credit facilities of the Company and its subsidiaries at March 31, 2017 :



Company	Facility		Facility Limit			Amount Outstanding			Letters of Credit			Expiration Date
			(In millions)
MDU Resources Group, Inc.	Commercial paper/Revolving credit agreement	(a)	$	175.0		$	34.3	(b)	$	—		5/8/19
Cascade Natural Gas Corporation	Revolving credit agreement		$	50.0	(c)	$	—		$	2.2	(d)	7/9/18
Intermountain Gas Company	Revolving credit agreement		$	65.0	(e)	$	—		$	—		7/13/18
Centennial Energy Holdings, Inc.	Commercial paper/Revolving credit agreement	(f)	$	500.0		$	101.2	(b)	$	—		9/23/21


(a)	The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of the Company on stated conditions, up to a maximum of $225.0 million). There were no amounts outstanding under the credit agreement.


(b)	Amount outstanding under commercial paper program.


(c)	Certain provisions allow for increased borrowings, up to a maximum of $75.0 million.


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


(e)	Certain provisions allow for increased borrowings, up to a maximum of $90.0 million.


(f)	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 $600.0 million). There were no amounts outstanding under the credit agreement.

The Company'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, the Company and Centennial do not issue commercial paper in an aggregate amount exceeding the available capacity under their 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 the construction businesses.

The following includes information related to the preceding table.

MDU Resources Group, Inc. The Company's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. The Company's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Downgrades in the Company's credit ratings have not limited, nor are currently expected to limit, the Company's ability to access the capital markets. If the Company were to experience a downgrade of its credit ratings, it may need to borrow under its credit agreement and may experience an increase in overall interest rates with respect to its cost of borrowings.

Prior to the maturity of the credit agreement, the Company expects that it will negotiate the extension or replacement of this agreement. If the Company is unable to successfully negotiate an extension of, or replacement for, the credit agreement, or if the fees on this facility become too expensive, which the Company does not currently anticipate, the Company would seek alternative funding.

The Company's coverage of earnings to fixed charges including preferred stock dividends was 4.1 times, 3.3 times and 3.9 times for the 12 months ended March 31, 2017 and 2016, and December 31, 2016 , respectively.

Total equity as a percent of total capitalization was 58 percent, 56 percent and 56 percent at March 31, 2017 and 2016 , and December 31, 2016 , 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.

Cascade Natural Gas Corporation On April 25, 2017, Cascade amended its revolving credit agreement to increase the borrowing limit from $50.0 million to $75.0 million and extend the termination date from July 9, 2018 to April 24, 2020. The credit agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

Cascade's credit agreement also contains cross-default provisions. These provisions state that if Cascade fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, Cascade will be in default under the revolving credit agreement.

Intermountain Gas Company On April 25, 2017, Intermountain amended its revolving credit agreement to increase the borrowing limit from $65.0 million to $85.0 million and extend the termination date from July 13, 2018 to April 24, 2020. The credit agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

Intermountain's credit agreement also contains cross-default provisions. These provisions state that if Intermountain fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, or certain conditions result in an early termination date under any swap contract that is in excess of a specified amount, then Intermountain will be in default under the revolving credit agreement.

Centennial Energy Holdings, Inc. Centennial's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. Centennial's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Downgrades in Centennial's credit ratings have not limited, nor are currently expected to limit, Centennial's ability to access the capital markets. If Centennial were to experience a downgrade of its credit ratings, it may need to borrow under its credit agreement and may experience an increase in overall interest rates with respect to its cost of borrowings.

Prior to the maturity of the Centennial credit agreement, Centennial expects that it will negotiate the extension or replacement of this agreement, which provides credit support to access the capital markets. In the event Centennial is unable to successfully negotiate this agreement, or in the event the fees on this facility become too expensive, which Centennial does not currently anticipate, it would seek alternative funding.

WBI Energy Transmission, Inc. WBI Energy Transmission has a $200.0 million uncommitted note purchase and private shelf agreement with an expiration date of May 16, 2019. WBI Energy Transmission had $100.0 million of notes outstanding at March 31, 2017 , which reduced the remaining capacity under this uncommitted private shelf agreement to $100.0 million.

Off balance sheet arrangements

As of March 31, 2017 , the Company had no material off balance sheet arrangements as defined by the rules of the SEC.

Contractual obligations and commercial commitments

There are no material changes in the Company's contractual obligations from continuing operations relating to long-term debt, estimated interest payments, operating leases, purchase commitments, asset retirement obligations, uncertain tax positions and minimum funding requirements for its defined benefit plans for 2017 from those reported in the 2016 Annual Report.

For more information on contractual obligations and commercial commitments, see Part II, Item 7 in the 2016 Annual Report.

New Accounting Standards

For information regarding new accounting standards, see Note 6 , which is incorporated by reference.

Critical Accounting Policies Involving Significant Estimates

The Company's critical accounting policies involving significant estimates include impairment testing of assets held for sale, impairment testing of long-lived assets and intangibles, revenue recognition, pension and other postretirement benefits, and income taxes. There were no material changes in the Company's critical accounting policies involving significant estimates from those reported in the 2016 Annual Report. For more information on critical accounting policies involving significant estimates, see Part II, Item 7 in the 2016 Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the impact of market fluctuations associated with interest rates. 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 2016 Annual Report.

At March 31, 2017 , the Company had no outstanding interest rate hedges.

Item 4. Controls and Procedures

The following information includes the evaluation of disclosure controls and procedures by the Company's chief executive officer and the chief financial officer, along with any significant changes in internal controls of the Company.

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 procedures include controls and procedures 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 procedures. 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.

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 quarter ended March 31, 2017 , that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II -- Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings required by this item, see Note 16 , which is incorporated herein by reference.

Item 1A. Risk Factors

There are no material changes to the Company's risk factors from those reported in Part I, Item 1A - Risk Factors in the 2016 Annual Report.

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)		(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, 2017	—
February 1 through February 28, 2017	64,384		$26.15
March 1 through March 31, 2017	—
Total	64,384


(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 exhibits filed with this report.

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:	May 8, 2017	BY:	/s/ Doran N. Schwartz
			Doran N. Schwartz
			Vice President and Chief Financial Officer


		BY:	/s/ Jason L. Vollmer
			Jason L. Vollmer
			Vice President, Chief Accounting Officer and Treasurer

Exhibit Index



Exhibit No.

3		Bylaws of MDU Resources Group, Inc., as amended and restated on February 16, 2017, filed as Exhibit 3.1 to Form 8-K dated February 16, 2017, filed on February 21, 2017, in File No. 1-03480*

+10(a)		MDU Resources Group, Inc. 401(k) Retirement Plan, as restated as of January 1, 2017**

+10(b)		Instrument of Amendment to the MDU Resources Group, Inc. 401(k) Retirement Plan, dated March 31, 2017**

+10(c)		Form of Performance Share Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 16, 2017, filed as Exhibit 10.1 to Form 8-K dated February 16, 2017, filed on February 21, 2017, in File No. 1-03480*

12		Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends**

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**

32		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**

95		Mine Safety Disclosures**

101		The following materials from MDU Resources Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements, tagged in summary and detail.

* Incorporated herein by reference as indicated.

** Filed herewith.

+ Management contract, compensatory plan or arrangement.

MDU Resources Group, Inc. agrees to furnish to the SEC upon request any instrument with respect to long-term debt that MDU Resources Group, Inc. has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.



		Page
INTRODUCTION		1

ARTICLE I	DEFINITIONS	4

ARTICLE II	PARTICIPATION	12
2.1	Requirements	12
2.2	Termination of Participation	12
2.3	Reemployment	13

ARTICLE III	CONTRIBUTIONS	14
3.1	Savings Contributions	14
3.2	Suspension of Participant Contribution	16
3.3	Matching Contributions	17
3.4	Employer Contributions	18
3.5	Special Limitations on Savings Contributions	19
3.6	Special Matching Contribution Limitations	23
3.7	Contribution Limitation	25
3.8	Rollover Contributions	27

ARTICLE IV	ACCOUNTS; VESTING; DISTRIBUTIONS	29
4.1	Participants’ Accounts	29
4.2	Vesting	29
4.3	Distribution	31
4.4	Method of Payment	32
4.5	Withdrawals by Participants	32
4.6	Timing of Distributions	34
4.7	Distributions Made in Accordance with Code Section 401(A)(31)	36
4.8	Loans to Participants	37

ARTICLE IV A	MINIMUM DISTRIBUTION REQUIREMENTS	40

4A.1	General Rules	40
4A.2	Time and Manner of Distribution	40
4A.3	Required Minimum Distributions During Participant’s Lifetime	42
4A.4	Required Minimum Distributions After Participant’s Death	43
4A.5	Definitions.	45
4A.6	Election to Receive Required Minimum Distributions for 2009	46

ARTICLE V	INVESTMENT OF CONTRIBUTIONS	48
5.1	Making of Contributions	48
5.2	Investment	48
5.3	Voting of Common Stock of the Company	50
5.4	Tendering of Stock	50



		Page
5.5	Dividend Election	51

ARTICLE VI	PLAN ADMINISTRATION; CLAIMS FOR BENEFITS	52
6.1	Named Fiduciaries	52
6.2	Administrative Powers and Duties	52
6.3	Benefit Claims Procedure: Review Procedure	53
6.4	Applications and Forms	56
6.5	Facility of Distribution and Payment	57
6.6	Beneficiary Designations	57
6.7	Form and Method of Designation	57
6.8	Administrative Expenses	58

ARTICLE VII	TRUST FUND	59
7.1	Trust Agreement	59
7.2	Reversion	59

ARTICLE VIII	AMENDMENT AND TERMINATION	60
8.1	Amendments	60
8.2	Right to Terminate	61
8.3	Action by the Company	61
8.4	Distribution of Accounts Upon Plan Termination	62

ARTICLE IX	ADOPTION OF THE PLAN BY AFFILIATES	63

ARTICLE X	GENERAL	64
10.1	No Guarantee of Employment	64
10.2	Nonalienation of Benefits	64
10.3	Missing Persons	64
10.4	Governing Law	65
10.5	Merger or Consolidation of Plan	65
10.6	Distribution to Alternate Payees	65

ARTICLE XI	TOP HEAVY PROVISIONS	66
11.1	Top Heavy Plan	66
11.2	Operative Provisions	66

ARTICLE XII	SPECIAL RULES FOR CERTAIN OFFICERS	69

Supplement A		70
A-1	Introduction	70
A-2	Participation	70
A-3	Use of Terms	71
A-4	Inconsistencies with the Plan	71



		Page
Supplement B		72
B-1	Introduction	72
B-2	The Merger	72
B-3	Participation	72
B-4	Transfer of Assets	72
B-5	Transfer of Account Balances	72
B-6	Limitations	73

Supplement C		74
C-1	Introduction	74
C-2	The Spin-off and Merger	74
C-3	Transfer of Assets	74
C-4	Transfer of Account Balances	74
C-5	Use of Terms	75

Supplement D-1		76
D-1-1	Introduction	76
D-1-2	Eligibility to Share in the Profit Sharing Feature	76
D-1-3	Amount of Profit Sharing Contributions, Allocation	81
D-1-4	Vesting	81
D-1-5	Use of Terms	82
D-1-6	Inconsistencies with the Plan	82

Supplement D-2		83
D-2-1	Introduction	83
D-2-2	Eligibility to Share in the Retirement Contribution	83
D-2-3	Amount of Retirement Contributions, Allocation	84
D-2-4	Vesting	85
D-2-5	Use of Terms	85
D-2-6	Inconsistencies with the Plan	85

Supplement D-3		86
RESERVED		86

Supplement D-4		87
RESERVED		87

Supplement D-5		88
RESERVED		88

Supplement D-6		89
D-6-1	Introduction	89
D-6-2	Eligibility to Share in the Retirement Contribution	89
D-6-3	Amount of Retirement Contribution Allocation	91



		Page
D-6-4	Vesting	91
D-6-5	Use of Terms	91
D-6-6	Inconsistencies with the Plan	91

SUPPLEMENT D-6A		92

D-6A-1	Introduction	92
D-6A-2	Eligibility to Share in the Retirement Contribution	92
D-6A-3	Amount of Retirement Contribution	93
D-6A-4	Vesting	94
D-6A-5	Use of Terms	94
D-6A-6	Inconsistencies with the Plan	94

Supplement D-7		95
D-7-1	Introduction	95
D-7-2	Eligibility to Share in the Retirement Contribution	95
D-7-3	Amount of Retirement Contribution	95
D-7-4	Vesting	96
D-7-5	Use of Terms	96
D-7-6	Inconsistencies with the Plan	96

Supplement D-8		97

RESERVED		97

Supplement D-9		98
D-9-1	Introduction	98
D-9-2	Eligibility to Share in the Retirement Contribution	98
D-9-3	Amount of Retirement Contribution	98
D-9-4	Vesting	99
D-9-5	Use of Terms	99
D-9-6	Inconsistencies with the Plan	99

Supplement E		100
E-1	Introduction	100
E-2	Merger	100
E-3	Transfer of Assets	100
E-4	Transfer of Account Balances	100
E-5	Participation	100
E-6	Vesting	101
E-7	Distribution of Benefits	101
E-8	Administration Expenses	101
E-9	Use of Terms	101
E-10	Inconsistencies with the Plan	101



		Page
Supplement F		102

RESERVED		102

Supplement G		103
G-1	Introduction	103
G-2	Use of Terms	103
G-3	Inconsistencies with the Plan	103
G-4	Eligibility and Participation	103
G-5	Prevailing Wage Compensation	103
G-6	Supplemental Contributions	104
G-7	Depositing of Employer Contributions	104
G-8	Vesting	104
G-9	Davis-Bacon Subaccount	105
G-10	Contribution Limitation	105

Supplement H Umpqua River Navigation Company		106
H-1	Introduction	106
H-2	Merger	106
H-3	Transfer of Assets	106
H-4	Transfer of Account Balances	106
H-5	Participation	106
H-6	Vesting	107
H-7	Distribution of Benefits	107
H-8	Hardship Withdrawal	107
H-9	Use of Terms	107
H-10	Inconsistencies with the Plan	107

Supplement H-1 Morse Bros., Inc.		108
H-1-1	Introduction	108
H-1-2	Merger	108
H-1-3	Transfer of Assets	108
H-1-4	Transfer of Account Balances	108
H-1-5	Participation	108
H-1-6	Vesting	109
H-1-7	Distribution of Benefits	109
H-1-8	Withdrawals	109
H-1-9	After-Tax Withdrawals	110
H-1-10	Use of Terms	110
H-1-11	Inconsistencies with the Plan	110

Supplement H-2 Pouk & Steinle		111
H-2-1	Introduction	111
H-2-2	Merger	111
H-2-3	Transfer of Assets	111
H-2-4	Transfer of Account Balances	111



		Page
H-2-5	Participation	111
H-2-6	Fee Reimbursement	111
H-2-7	Vesting	112
H-2-8	Distribution of Benefits	112
H-2-9	Hardship Withdrawals	112
H-2-10	Use of Terms	112
H-2-11	Inconsistencies with the Plan	112

Supplement H-3 Oregon Electric Construction, Inc.		113
H-3-1	Introduction	113
H-3-2	Merger	113
H-3-3	Transfer of Assets	113
H-3-4	Transfer of Account Balances	113
H-3-5	Participation	113
H-3-6	Vesting	114
H-3-7	Distribution of Benefits	114
H-3-8	Hardship Withdrawals	114
H-3-9	Use of Terms	114
H-3-10	Inconsistencies with the Plan	114

Supplement H-4 Salaried Employees of Hawaiian Cement		115
H-4-1	Introduction	115
H-4-2	Merger	115
H-4-3	Transfer of Assets	115
H-4-4	Transfer of Account Balances	115
H-4-5	Participation	115
H-4-6	Fee Reimbursement	116
H-4-7	Vesting	116
H-4-8	Hardship Withdrawals	116
H-4-9	Withdrawal of Rollover Contributions	116
H-4-10	Use of Terms	116
H-4-11	Inconsistencies with the Plan	116

Supplement H-5 Loy Clark Pipeline Company		117
H-5-1	Introduction	117
H-5-2	Merger	117
H-5-3	Transfer of Assets	117
H-5-4	Transfer of Account Balances	117
H-5-5	Participation	117
H-5-6	Vesting	118
H-5-7	Distribution of Benefits	118
H-5-8	Use of Terms	118
H-5-9	Inconsistencies with the Plan	118

Supplement H-6 JTL Group, Inc.		119
H-6-1	Introduction	119



		Page
H-6-2	Merger	119
H-6-3	Transfer of Assets	119
H-6-4	Transfer of Account Balances	119
H-6-5	Participation	120
H-6-6	Vesting	120
H-6-7	Distribution of Benefits	120
H-6-8	Loans to Participants	121
H-6-9	Withdrawals	121
H-6-10	Use of Terms	121
H-6-11	Inconsistencies with the Plan	121

Supplement H-7 Rocky Mountain Contractors		122
H-7-1	Introduction	122
H-7-2	Merger	122
H-7-3	Transfer of Assets	122
H-7-4	Transfer of Account Balances	122
H-7-5	Participation	123
H-7-6	Vesting	123
H-7-7	Hardship Withdrawals	123
H-7-8	Age 59-1/2 Withdrawals	124
H-7-9	Loans	124
H-7-10	Distribution of Benefits	124
H-7-11	Use of Terms	125
H-7-12	Inconsistencies with the Plan	125

Supplement H-8 Hawaiian Cement Non-Salaried Employees		126
H-8-1	Introduction	126
H-8-2	Merger	126
H-8-3	Transfer of Assets	126
H-8-4	Transfer of Account Balances	126
H-8-5	Participation	126
H-8-6	Vesting	127
H-8-7	Hardship Withdrawals	127
H-8-8	Use of Terms	127
H-8-9	Inconsistencies with the Plan	127

Supplement H-9 Bauerly Brothers, Inc. Davis-Bacon Pension		128
H-9-1	Introduction	128
H-9-2	Merger	128
H-9-3	Transfer of Assets	128
H-9-4	Transfer of Account Balances	128
H-9-5	Vesting	128
H-9-6	Distribution of Benefits	129
H-9-7	Withdrawals	129
H-9-8	Loans	129



		Page
H-9-9	Use of Terms	129
H-9-10	Inconsistencies with the Plan	129

Supplement H-10 Buffalo Bituminous, Inc.		130
H-10-1	Introduction	130
H-10-2	Merger	130
H-10-3	Transfer of Assets	130
H-10-4	Transfer of Account Balances	130
H-10-5	Vesting	130
H-10-6	Distribution of Benefits	131
H-10-7	Withdrawals	131
H-10-8	Loans	131
H-10-9	Use of Terms	131
H-10-10	Inconsistencies with the Plan	131

Supplement H-11 Granite City Ready Mix		132
H-11-1	Introduction	132
H-11-2	Merger	132
H-11-3	Transfer of Assets	132
H-11-4	Transfer of Account Balances	132
H-11-5	Participation	132
H-11-6	Vesting	133
H-11-7	Distribution of Benefits	133
H-11-8	Hardship Withdrawals	133
H-11-9	Use of Terms	133
H-11-10	Inconsistencies with the Plan	133

Supplement H-12 Bauerly Brothers, Inc. 401(k) Plan		134
H-12-1	Introduction	134
H-12-2	Merger	134
H-12-3	Transfer of Assets	134
H-12-4	Transfer of Account Balances	134
H-12-5	Participation	134
H-12-6	Vesting	135
H-12-7	Hardship Withdrawals	135
H-12-8	Use of Terms	135
H-12-9	Inconsistencies with the Plan	135

Supplement I DAKOTA PRAIRIE REFINING, LLC		136
I-1	Introduction	136
I-2	Employer Provisions	136
I-3	Controlled Group Provisions	137
I-4	Plan Provisions	138
I-5	Investments in Common Stock/ESOP Participation	139
I-6	Reversion to Single Employer Plan	139


(a)	Eligibility for Participation . Each Eligible Employee who was a Participant in the Plan immediately prior to the Effective Date shall continue to participate in the Plan as of the Effective Date.


(b)	Each other Eligible Employee who is not a Participant prior to the Effective Date or who becomes an Eligible Employee on and after the Effective Date shall become a Participant on the date he or she becomes an Eligible Employee, provided such Eligible Employee complies with any enrollment procedures established by the Committee.


(a)	A Participant shall terminate active participation in the Plan upon any of the following events:


(b)	A Participant who elects, pursuant to Section 4.5(b), to make a complete or partial withdrawal from the Savings Contribution Account, Matching Contribution Account, and Rollover Account after age 59-1/2 shall not be deemed to terminate participation in the Plan by such election alone.


(c)	A Participant who ceases to be an Eligible Employee (other than by termination of employment), or discontinues savings contributions under Section 3.1, or enters the military service of the United States, shall also be an inactive Participant with respect to the Deferred Savings Feature of the Plan; provided, however that,


(c)	Upon becoming a Participant, and at any time thereafter, each Participant may elect the percentage of Compensation to be contributed as a Savings Contribution to the Plan. Any such election will take effect as soon as administratively feasible. Each election by a Participant under this Section shall be made pursuant to the method established by the Committee for this purpose.


(g)	Savings Contributions must be contributed to the Trust Fund as soon as practicable, but in no event later than the fifteenth (15th) business day of the month following the month in which such deferrals were made. Savings Contributions made pursuant to Subsection 3.1(d), (e), or (f) above shall be invested pursuant to Subsection 5.2(a) below.


3.2	Suspension of Participant Contribution. A Participant may suspend the amount of savings contributions at any time as provided in Section 3.1 (c). Such suspension will take effect as soon as administratively feasible. A Participant will not be permitted to make up suspended savings contributions to the Plan.


3.4	Employer Contributions. Each Employer, in its sole discretion, may make either or both of the following types of contributions to the Plan on behalf of Participants employed by that Employer.


(d)	If a reduction in the amount of savings contributions on behalf of a Participant is required because of the application of (a) above, the reduction shall be treated as taxable earnings to the Participant for the pay period in which the reduction occurs, and the Employer shall withhold any taxes required by law on such taxable earnings.


(e)	If a distribution of excess deferral contributions (and related earnings) is required because of the application of (a) above, the Employer shall withhold any taxes required by law on such distribution.


(f)	In the event an active Participant is required to reduce savings contributions to the Plan as a result of the application of the provisions of (a) above, the matching contribution under Section 3.3 made on behalf of the Participant for the remainder of the Plan Year shall be applied to the reduced amount of savings contributions.


(e)	If a distribution of excess savings contributions or excess matching contributions (and related earnings) is required because of the application of a) above, the Employer shall withhold any taxes required by law on such distribution.


(b)	At least once each Plan Year, the Employer shall cause to be furnished to each Participant a statement of the contributions made by the Employer on the Participant’s behalf, and the value of the Participant’s Accounts, as well as such information as may be necessary to set forth earnings, gains, or losses with respect to the Participant’s Accounts.


(b)	If a Participant’s employment with the Company and all Affiliates terminates before becoming vested in their Profit Sharing Account, and such Participant is subsequently reemployed by the Company or an Affiliate, the following special rules shall apply:


(i)	A “1-Year Break In Service” means a Plan Year in which a terminated Participant completes less than 500 Hours of Service.


(ii)	If the Participant was not vested at his or her prior termination of employment, the Participant’s years of vesting service prior to the termination of employment shall be aggregated with years of vesting service accrued upon reemployment only if number of their consecutive 1-Year Breaks in Service is less than five (5).


(iii)	In the case of a Maternity or Paternity Absence (as defined below), a Participant shall be credited, for the first Plan Year in which they otherwise would have incurred a 1-Year Break In Service (and solely for purposes of determining whether such a Break In Service has occurred), with the Hours of Service which normally would have been credited to the Participant but


(a)	The amount credited to a Participant’s Accounts, to the extent such Participant is vested in such Accounts, shall become payable to the Participant (or the beneficiary, as applicable) subject to Section 4.6 upon any of the following events:


(vi)	As a withdrawal after age 59-1/2 pursuant to Section 4.5(b).


4.4	Method of Payment . Participants (or their beneficiaries), in accordance with such uniform rules as the Committee may establish, shall elect distribution of their Accounts in one of the following methods:


(b)	in annual installments over a period of time, not to exceed five (5) years.