Edgar Filing: MDU RESOURCES GROUP INC

form10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For The Quarterly Period Ended September 30, 2007

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 1-3480

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 x No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer 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 x.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of November 2, 2007: 182,387,920 shares.

DEFINITIONS

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

Abbreviation or Acronym

2006 Annual Report	Company's Annual Report on Form 10-K for the year ended December 31, 2006
ALJ	Administrative Law Judge
Anadarko	Anadarko Petroleum Corporation
APB	Accounting Principles Board
APB Opinion No. 28	Interim Financial Reporting
Badger Hills Project	Tongue River-Badger Hills Project
Bbl	Barrel of oil or other liquid hydrocarbons
Bcf	Billion cubic feet
BER	Montana Board of Environmental Review
Big Stone Station	450-MW coal-fired electric generating facility located near Big Stone City, South Dakota (22.7 percent ownership)
Big Stone II	Proposed 600-MW coal-fired electric generating facility located near Big Stone City, South Dakota (19.33 percent ownership)
BLM	Bureau of Land Management
Brazilian Transmission Lines	Company’s equity method investment in companies owning ECTE, ENTE and ERTE
Btu	British thermal unit
Carib Power	Carib Power Management LLC
Cascade	Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital
CBNG	Coalbed natural gas
CEM	Colorado Energy Management, LLC, a former direct wholly owned subsidiary of Centennial Resources (sold in the third quarter of 2007)
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 International	Centennial Energy Resources International, Inc., a direct wholly owned subsidiary of Centennial Resources
Centennial Power	Centennial Power, Inc., a former direct wholly owned subsidiary of Centennial Resources (sold in the third quarter of 2007)
Centennial Resources	Centennial Energy Resources LLC, a direct wholly owned subsidiary of Centennial
Clean Air Act	Federal Clean Air Act
Clean Water Act	Federal Clean Water Act
CMS	Cost Management Services, Inc.
Colorado Federal District Court	U.S. District Court for the District of Colorado
Company	MDU Resources Group, Inc.
D.C. Appeals Court	U.S. Court of Appeals for the District of Columbia Circuit
dk	Decatherm
DRC	Dakota Resource Council
EBSR	Elk Basin Storage Reservoir, one of Williston Basin's natural gas storage reservoirs, which is located in Montana and Wyoming
ECTE	Empresa Catarinense de Transmissão de Energia S.A.
EIS	Environmental Impact Statement
ENTE	Empresa Norte de Transmissão de Energia S.A.
EPA	U.S. Environmental Protection Agency
ERTE	Empresa Regional de Transmissão de Energia S.A.
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
FIN	FASB Interpretation No.
FIN 48	Accounting for Uncertainty in Income Taxes
Great Plains	Great Plains Natural Gas Co., a public utility division of the Company
Hardin Generating Facility	116-MW coal-fired electric generating facility near Hardin, Montana (sold in the third quarter of 2007)
Hartwell	Hartwell Energy Limited Partnership, a former equity method investment of the Company (sold in the third quarter of 2007)
Howell	Howell Petroleum Corporation, a wholly owned subsidiary of Anadarko
Indenture	Indenture dated as of December 15, 2003, as supplemented, from the Company to The Bank of New York, as Trustee
Innovatum	Innovatum, Inc., a former indirect wholly owned subsidiary of WBI Holdings (the stock and a portion of Innovatum’s assets were sold during the fourth quarter of 2006)
Knife River	Knife River Corporation, a direct wholly owned subsidiary of Centennial
kWh	Kilowatt-hour
LWG	Lower Willamette Group
MBbls	Thousand barrels of oil or other liquid hydrocarbons
MBI	Morse Bros., Inc., an indirect wholly owned subsidiary of Knife River
Mcf	Thousand cubic feet
MDU Brasil	MDU Brasil Ltda., an indirect wholly owned subsidiary of Centennial International
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
MMBtu	Million Btu
MMcf	Million cubic feet
MMdk	Million decatherms
Montana-Dakota	Montana-Dakota Utilities Co., a public utility division of the Company
Montana DEQ	Montana State Department of Environmental Quality
Montana Federal District Court	U.S. District Court for the District of Montana
Mortgage	Indenture of Mortgage dated May 1, 1939, as supplemented, amended and restated, from the Company to The Bank of New York and Douglas J. MacInnes, successor trustees
MPX	MPX Termoceara Ltda. (49 percent ownership, sold in June 2005)
MTPSC	Montana Public Service Commission
MW	Megawatt
ND Health Department	North Dakota Department of Health
NDPSC	North Dakota Public Service Commission
NEPA	National Environmental Policy Act
NHPA	National Historic Preservation Act
Ninth Circuit	U.S. Ninth Circuit Court of Appeals
NPRC	Northern Plains Resource Council
OPUC	Oregon Public Utility Commission
Order on Rehearing	Order on Rehearing and Compliance and Remanding Certain Issues for Hearing
Oregon DEQ	Oregon State Department of Environmental Quality
Prairielands	Prairielands Energy Marketing, Inc., an indirect wholly owned subsidiary of WBI Holdings
PSD	Prevention of Significant Deterioration
SEC	U.S. Securities and Exchange Commission
SEIS	Supplemental Environmental Impact Statement
SFAS	Statement of Financial Accounting Standards
SFAS No. 71	Accounting for the Effects of Certain Types of Regulation
SFAS No. 87	Employers’ Accounting for Pensions
SFAS No. 109	Accounting for Income Taxes
SFAS No. 142	Goodwill and Other Intangible Assets
SFAS No. 144	Accounting for the Impairment or Disposal of Long-Lived Assets
SFAS No. 157	Fair Value Measurements
SFAS No. 159	The Fair Value Option for Financial Assets and Financial Liabilities
Trinity Generating Facility	225-MW natural gas-fired electric generating facility in Trinidad and Tobago (49.99 percent ownership, sold in the first quarter of 2007)
TRWUA	Tongue River Water Users’ Association
WBI Holdings	WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial
Williston Basin	Williston Basin Interstate Pipeline Company, an indirect wholly owned subsidiary of WBI Holdings
WUTC	Washington Utilities and Transportation Commission
Wyoming Federal District Court	U.S. District Court for the District of Wyoming
Wyoming DEQ	Wyoming State Department of Environmental Quality

INTRODUCTION

The Company is a diversified natural resource company, 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, through the electric and natural gas distribution segments, generates, transmits and distributes electricity and distributes natural gas in Montana, North Dakota, South Dakota and Wyoming. Great Plains distributes natural gas in western Minnesota and southeastern North Dakota. Cascade distributes natural gas in Washington and Oregon. These operations also supply related value-added products and services.

The Company, through its wholly owned subsidiary, Centennial, owns WBI Holdings (comprised of the pipeline and energy services and the natural gas and oil production segments), Knife River (construction materials and mining segment), MDU Construction Services (construction services segment), Centennial Resources (independent power production segment) and Centennial Capital (reflected in the Other category). For more information on the Company’s business segments, see Note 17.

INDEX

Part I -- Financial Information

Consolidated Statements of Income --

Three and Nine Months Ended September 30, 2007 and 2006

Consolidated Balance Sheets --

September 30, 2007 and 2006, and December 31, 2006

Consolidated Statements of Cash Flows --

Nine Months Ended September 30, 2007 and 2006

Notes to Consolidated Financial Statements

Management's Discussion and Analysis of Financial

Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Controls and Procedures

Part II -- Other Information

Legal Proceedings

Risk Factors

Unregistered Sales of Equity Securities and Use of Proceeds

Exhibits

Signatures

Exhibit Index

Exhibits

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MDU RESOURCES GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In thousands, except per share amounts)
Operating revenues:
Electric, natural gas distribution and pipeline and energy services	$	235,562	$	171,954	$	699,063	$	633,590
Construction services, natural gas and oil production, construction materials and mining, and other		1,009,748		1,001,724		2,316,103		2,305,040
		1,245,310		1,173,678		3,015,166		2,938,630
Operating expenses:
Fuel and purchased power		20,331		19,133		52,938		51,208
Purchased natural gas sold		60,887		28,648		200,016		194,969
Operation and maintenance:
Electric, natural gas distribution and pipeline and energy services		59,650		40,012		150,967		120,112
Construction services, natural gas and oil production, construction materials and mining, independent power production and other		807,139		805,985		1,882,769		1,889,106
Depreciation, depletion and amortization		78,400		67,033		218,246		192,855
Taxes, other than income		39,747		31,438		109,320		95,654
		1,066,154		992,249		2,614,256		2,543,904

Operating income		179,156		181,429		400,910		394,726

Earnings from equity method investments		11,782		2,829		17,867		8,931

Other income		3,456		4,469		5,670		9,733

Interest expense		19,074		20,240		53,928		53,402

Income before income taxes		175,320		168,487		370,519		359,988

Income taxes		70,823		61,377		142,580		131,981

Income from continuing operations		104,497		107,110		227,939		228,007

Income from discontinued operations, net of tax (Note 4)		96,765		1,377		109,459		5,169

Net income		201,262		108,487		337,398		233,176

Dividends on preferred stocks		172		171		513		514

Earnings on common stock	$	201,090	$	108,316	$	336,885	$	232,662

Earnings per common share -- basic
Earnings before discontinued operations	$	.57	$	.59	$	1.25	$	1.26
Discontinued operations, net of tax		.53		.01		.60		.03
Earnings per common share -- basic	$	1.10	$	.60	$	1.85	$	1.29
Earnings per common share -- diluted
Earnings before discontinued operations	$	.57	$	.59	$	1.24	$	1.26
Discontinued operations, net of tax		.53		.01		.60		.03
Earnings per common share -- diluted	$	1.10	$	.60	$	1.84	$	1.29
Dividends per common share	$	.1450	$	.1350	$	.4150	$	.3884
Weighted average common shares outstanding -- basic		182,192		180,291		181,796		180,010
Weighted average common shares outstanding -- diluted		183,171		181,307		182,780		181,010

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

MDU RESOURCES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2007			September 30, 2006			December 31, 2006
(In thousands, except shares and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	94,528		$	68,786		$	73,078
Receivables, net		748,858			714,754			622,478
Inventories		254,710			225,234			204,440
Deferred income taxes		---			8,698			---
Prepayments and other current assets		129,421			77,615			81,083
Current assets held for sale and related to discontinued operations		594			12,529			12,656
		1,228,111			1,107,616			993,735
Investments		112,283			155,989			155,111
Property, plant and equipment		5,740,966			4,620,912			4,727,725
Less accumulated depreciation, depletion and amortization		2,203,218			1,683,286			1,735,302
		3,537,748			2,937,626			2,992,423
Deferred charges and other assets:
Goodwill		430,644			226,672			224,298
Other intangible assets, net		29,115			22,418			22,802
Other		152,607			100,542			103,840
Noncurrent assets held for sale and related to discontinued operations		140			415,693			411,265
		612,506			765,325			762,205
	$	5,490,648		$	4,966,556		$	4,903,474
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	131,971		$	98,980		$	84,034
Accounts payable		310,509			318,272			289,836
Taxes payable		114,427			44,683			54,290
Deferred income taxes		3,069			---			5,969
Dividends payable		26,616			24,569			24,606
Other accrued liabilities		266,149			163,565			180,327
Current liabilities held for sale and related to discontinued operations		---			6,110			14,900
		852,741			656,179			653,962
Long-term debt		1,146,708			1,307,050			1,170,548
Deferred credits and other liabilities:
Deferred income taxes		629,582			558,044			546,602
Other liabilities		398,353			293,024			336,916
Noncurrent liabilities held for sale and related to discontinued operations		---			31,429			30,533
		1,027,935			882,497			914,051
Commitments and contingencies
Stockholders’ equity:
Preferred stocks		15,000			15,000			15,000
Common stockholders’ equity:
Common stock
Shares issued -- $1.00 par value 182,914,769 at September 30, 2007, 181,279,379 at September 30, 2006 and 181,557,543 at December 31, 2006		182,915			181,279			181,558
Other paid-in capital		909,805			872,973			874,253
Retained earnings		1,365,497			1,046,933			1,104,210
Accumulated other comprehensive income (loss)		(6,327	)		8,271			(6,482	)
Treasury stock at cost – 538,921 shares		(3,626	)		(3,626	)		(3,626	)
Total common stockholders’ equity		2,448,264			2,105,830			2,149,913
Total stockholders’ equity		2,463,264			2,120,830			2,164,913
	$	5,490,648		$	4,966,556		$	4,903,474

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

MDU RESOURCES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2007			2006
	(In thousands)
Operating activities:
Net income	$	337,398		$	233,176
Income from discontinued operations, net of tax		109,459			5,169
Income from continuing operations		227,939			228,007
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		218,246			192,855
Earnings, net of distributions, from equity method investments		(12,448	)		(3,164	)
Deferred income taxes		41,387			26,567
Changes in current assets and liabilities, net of acquisitions:
Receivables		(67,602	)		(100,494	)
Inventories		(35,181	)		(51,059	)
Other current assets		(39,563	)		(12,299	)
Accounts payable		(19,962	)		66,089
Other current liabilities		40,182			10,153
Other noncurrent changes		7,230			14,302
Net cash provided by continuing operations		360,228			370,957
Net cash provided by (used in) discontinued operations		(46,750	)		18,203
Net cash provided by operating activities		313,478			389,160

Investing activities:
Capital expenditures		(380,087	)		(370,535	)
Acquisitions, net of cash acquired		(341,790	)		(111,710	)
Net proceeds from sale or disposition of property		16,264			19,335
Investments		3,275			(55,956	)
Proceeds from sale of equity method investments		56,150			---
Net cash used in continuing operations		(646,188	)		(518,866	)
Net cash provided by (used in) discontinued operations		548,216			(40,091	)
Net cash used in investing activities		(97,972	)		(558,957	)

Financing activities:
Issuance of short-term borrowings		310,000			---
Repayment of short-term borrowings		(310,000	)		---
Issuance of long-term debt		85,000			394,504
Repayment of long-term debt		(226,791	)		(206,437	)
Proceeds from issuance of common stock		16,580			13,255
Dividends paid		(74,025	)		(68,881	)
Tax benefit on stock-based compensation		4,883			2,050
Net cash provided by (used in) continuing operations		(194,353	)		134,491
Net cash provided by discontinued operations		---			248
Net cash provided by (used in) financing activities		(194,353	)		134,739
Effect of exchange rate changes on cash and cash equivalents		297			(1,654	)
Increase (decrease) in cash and cash equivalents		21,450			(36,712	)
Cash and cash equivalents – beginning of year		73,078			105,498
Cash and cash equivalents – end of period	$	94,528		$	68,786

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

MDU RESOURCES GROUP, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

September 30, 2007 and 2006

(Unaudited)

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 2006 Annual Report, and the standards of accounting measurement set forth in APB Opinion No. 28 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 2006 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.

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.

3. Acquisitions

During the first nine months of 2007, the Company acquired construction materials and mining businesses in North Dakota, Texas and Wyoming, a construction services business in Nevada, and Cascade, a natural gas distribution business, as discussed below. The total purchase consideration for these businesses and properties and purchase price adjustments with respect to certain other acquisitions made prior to 2007, consisting of the Company's common stock and cash and the outstanding indebtedness of Cascade, was $519.6 million.

On July 2, 2007, the acquisition of Cascade was finalized and Cascade became an indirect wholly owned subsidiary of the Company. The acquisition of Cascade was funded with cash (largely proceeds from the sale of the domestic independent power production assets) and debt. Cascade’s natural gas service areas are in Washington and Oregon. Cascade is a part of the Company’s natural gas distribution segment.

The above acquisitions were accounted for under the purchase method of accounting and, accordingly, the acquired assets and liabilities assumed have been preliminarily recorded at their respective fair values as of the date of acquisition. Final fair market values, for certain of the above acquisitions, are pending the completion of the review of the relevant assets, liabilities and issues identified as of the acquisition date. The results of operations of the acquired businesses and properties are included in the financial statements since the date of each acquisition. Pro forma financial amounts reflecting the effects of the above acquisitions are not presented, as such acquisitions were not material to the Company's financial position or results of operations.

4. Discontinued operations

Innovatum, a component of the pipeline and energy services segment, specialized in cable and pipeline magnetization and location. During the third quarter of 2006, the Company initiated a plan to sell Innovatum because the Company determined that Innovatum is a non-strategic asset. During the fourth quarter of 2006, the stock and a portion of the assets of Innovatum were sold and the Company expects to sell the remaining assets of Innovatum in the fourth quarter of 2007. The loss on disposal on the portion of Innovatum that has been sold was not material. The Company does not expect to have any involvement in the operations of Innovatum after the sale.

During the fourth quarter of 2006, the Company initiated a plan to sell certain of the domestic assets of Centennial Resources, which largely comprise the independent power production segment. The plan to sell was based on the increased market demand for independent power production assets, combined with the Company’s desire to efficiently fund future capital needs. The results of operations of these assets were shown in continuing operations in the Company’s financial statements in the 2006 Annual Report as the Company intended to have significant continuing involvement with these assets in the form of continuing existing operation and maintenance agreements between CEM and these assets after the sale.

The Company subsequently committed to a plan to sell CEM due to strong interest in the operations of CEM during the bidding process for the domestic independent power production assets in the first quarter of 2007. As a result of the Company’s commitment to a plan to sell CEM, the Company would no longer have significant continuing involvement in the operations of the other domestic independent power production assets after the sale. Therefore, in accordance with SFAS No. 144, the results of operations of the domestic independent power production assets, including CEM, are presented as discontinued operations.

On July 10, 2007, Centennial Resources sold its domestic independent power production business consisting of Centennial Power and CEM to Bicent Power LLC (formerly known as Montana Acquisition Company LLC). The transaction was valued at $636 million, which included the assumption of approximately $36 million of project-related debt. The gain on the sale of the assets, excluding the gain on the sale of Hartwell as discussed in Note 13, was approximately $85.4 million (after tax). A portion of the proceeds from the sale was used to pay a dividend to the Company. This dividend was then used to prepay, in part, the outstanding term loan indebtedness that was incurred by the Company to fund the Cascade acquisition. The remaining proceeds of the sale are anticipated to provide additional cash for growth opportunities that exist in the Company’s core lines of business.

In accordance with SFAS No. 144, the Company’s consolidated financial statements and accompanying notes for prior periods have been restated to present the results of operations of Innovatum and the domestic independent power production assets as discontinued operations. In addition, the assets and liabilities of these operations are treated as held for sale, and as a result, no depreciation, depletion and amortization expense was recorded from the time each of the assets was classified as held for sale, respectively.

In accordance with SFAS No. 142, at the time the Company committed to the plan to sell each of the assets, the Company was required to test the respective assets for goodwill impairment. The fair value of Innovatum, a reporting unit for goodwill impairment testing, was estimated using the expected proceeds from the sale, which was estimated to be the current book value of the assets of Innovatum other than its goodwill. As a result, a goodwill impairment of $4.3 million (before tax) was recognized and recorded as part of discontinued operations, net of tax, in the Consolidated Statements of Income in the third quarter of 2006. There were no goodwill impairments associated with the other assets held for sale.

Operating results related to Innovatum were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
	(In thousands)
Operating revenues	$	593	$	654		$	1,283	$	1,796
Income (loss) from discontinued operations before income tax expense (benefit)		218		(4,743	)		246		(5,606	)
Income tax expense (benefit)		29		(3,132	)		---		(3,398	)
Income (loss) from discontinued operations, net of tax	$	189	$	(1,611	)	$	246	$	(2,208	)

The income tax benefit for the three and nine months ended September 30, 2006, is larger than the customary relationship between the income tax benefit and the loss before tax due to a capital loss tax benefit (which reflects the effect of the $4.0 million and $4.3 million goodwill impairments in 2004 and 2006, respectively) resulting from the sale of the Innovatum stock.

Operating results related to the domestic independent power production assets were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In thousands)
Operating revenues	$	26,980	$	16,958	$	125,867	$	39,941
Income from discontinued operations (including gain on disposal of $142.4 million) before income tax expense (benefit)		160,612		3,166		177,535		6,197
Income tax expense (benefit)		64,036		178		68,322		(1,180	)
Income from discontinued operations, net of tax	$	96,576	$	2,988	$	109,213	$	7,377

The carrying amounts of the major assets and liabilities related to the domestic independent power production assets held for sale, as well as the major assets and liabilities related to Innovatum, were as follows:

	September 30, 2007		September 30, 2006		December 31, 2006
	(In thousands)
Cash and cash equivalents	$	---	$	1,419	$	1,878
Receivables, net		---		7,016		8,307
Inventories		594		1,164		490
Prepayments and other current assets		---		2,930		1,981
Total current assets held for sale and related to discontinued operations	$	594	$	12,529	$	12,656
Net property, plant and equipment	$	140	$	393,234	$	390,679
Goodwill		---		11,167		11,167
Other intangible assets, net		---		7,432		7,162
Other		---		3,860		2,257
Total noncurrent assets held for sale and related to discontinued operations	$	140	$	415,693	$	411,265
Accounts payable	$	---	$	1,143	$	11,557
Other accrued liabilities		---		4,967		3,343
Total current liabilities held for sale and related to discontinued operations	$	---	$	6,110	$	14,900
Deferred income taxes	$	---	$	28,957	$	27,956
Other liabilities		---		2,472		2,577
Total noncurrent liabilities held for sale and related to discontinued operations	$	---	$	31,429	$	30,533

5. Common stock

At the Annual Meeting of Stockholders held on April 24, 2007, the Company’s common stockholders approved an amendment to the Restated Certificate of Incorporation that increased the authorized number of common shares from 250 million shares to 500 million shares with a par value of $1.00 per share.

6. Allowance for doubtful accounts

The Company's allowance for doubtful accounts as of September 30, 2007 and 2006, and December 31, 2006, was $12.2 million, $5.9 million and $7.7 million, respectively.

7. Natural gas in underground storage

Natural gas in underground storage for the Company's regulated operations is generally carried at cost using the last-in, first-out method. The portion of the cost of natural gas in underground storage expected to be used within one year was included in inventories and was $49.1 million, $43.8 million and $32.6 million at September 30, 2007 and 2006, and December 31, 2006, respectively. The remainder of natural gas in underground storage was included in other assets and was $44.2 million, $43.2 million, and $44.2 million at September 30, 2007 and 2006, and December 31, 2006, respectively.

8. Inventories

Inventories, other than natural gas in underground storage for the Company’s regulated operations, consisted primarily of aggregates held for resale of $102.4 million, $92.1 million and $88.1 million; materials and supplies of $68.2 million, $61.4 million and $54.1 million; and other inventories of $35.0 million, $27.9 million and $29.6 million, as of September 30, 2007 and 2006, and December 31, 2006, respectively. These inventories were stated at the lower of average cost or market value.

9. 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 stock options, restricted stock grants and performance share awards. For the three and nine months ended September 30, 2007 and 2006, there were no shares excluded from the calculation of diluted earnings per share. Common stock outstanding includes issued shares less shares held in treasury.

10. Cash flow information

Cash expenditures for interest and income taxes were as follows:

	Nine Months Ended September 30,
	2007		2006
	(In thousands)
Interest, net of amount capitalized	$	55,139	$	48,957
Income taxes	$	153,030	$	105,264

Income taxes paid for the nine months ended September 30, 2007, increased from the amount paid for the nine months ended September 30, 2006, primarily due to higher estimated quarterly income tax payments due in large part to the gain on the sale of the domestic independent power production assets as discussed in Note 4.

11. New accounting standards

FIN 48 In July 2006, the FASB issued FIN 48. FIN 48 clarifies the application of SFAS No. 109 by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The criterion allows for recognition in the financial statements of a tax position when it is more likely than not that the position will be sustained upon examination. FIN 48 was effective for the Company on January 1, 2007. The adoption of FIN 48 did not have a material effect on the Company’s financial position or results of operations. For more information on the implementation of FIN 48, see Note 16.

SFAS No. 157 In September 2006, the FASB issued SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements with certain exceptions. SFAS No. 157 is effective for the Company on January 1, 2008. The Company is evaluating the effects of the adoption of SFAS No. 157.

SFAS No. 159 In February 2007, the FASB issued SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The standard also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Company on January 1, 2008. The Company is evaluating the effects of the adoption of SFAS No. 159.

12. Comprehensive income

Comprehensive income is the sum of net income as reported and other comprehensive income (loss). The Company's other comprehensive income (loss) resulted from gains (losses) on derivative instruments qualifying as hedges and foreign currency translation adjustments. For more information on derivative instruments, see Note 15.

Comprehensive income, and the components of other comprehensive income (loss) and related tax effects, were as follows:

	Three Months Ended September 30,
	2007			2006
	(In thousands)
Net income	$	201,262		$	108,487
Other comprehensive income:
Net unrealized gain (loss) on derivative instruments qualifying as hedges:
Net unrealized gain on derivative instruments arising during the period, net of tax of $3,075 and $8,709 in 2007 and 2006, respectively		4,958			13,912
Less: Reclassification adjustment for gain on derivative instruments included in net income, net of tax of $3,247 and $2,654 in 2007 and 2006, respectively		5,187			4,240
Net unrealized gain (loss) on derivative instruments qualifying as hedges		(229	)		9,672
Foreign currency translation adjustment		2,795			(401	)
		2,566			9,271
Comprehensive income	$	203,828		$	117,758

	Nine Months Ended September 30,
	2007			2006
	(In thousands)
Net income	$	337,398		$	233,176
Other comprehensive income:
Net unrealized gain (loss) on derivative instruments qualifying as hedges:
Net unrealized gain on derivative instruments arising during the period, net of tax of $4,066 and $15,840 in 2007 and 2006, respectively		6,541			25,304
Less: Reclassification adjustment for gain (loss) on derivative instruments included in net income, net of tax of $9,305 and $(12,121) in 2007 and 2006, respectively		14,864			(19,361	)
Net unrealized gain (loss) on derivative instruments qualifying as hedges		(8,323	)		44,665
Foreign currency translation adjustment		8,478			(2,578	)
		155			42,087
Comprehensive income	$	337,553		$	275,263

13. Equity method investments

The Company’s equity method investments at September 30, 2007, include the Brazilian Transmission Lines.

In August 2006, MDU Brasil acquired ownership interests in companies owning the Brazilian Transmission Lines. The interests involve the ENTE (13.3-percent ownership interest), ERTE (13.3-percent ownership interest) and ECTE (25-percent ownership interest) electric transmission lines, which are primarily in northeastern and southern Brazil.

In February 2004, Centennial International acquired 49.99 percent of Carib Power. Carib Power, through a wholly owned subsidiary, owns a 225-MW natural gas-fired electric generating facility in Trinidad and Tobago. On February 26, 2007, the Company sold its interest in Carib Power. The sale did not have a significant effect on the Company’s results of operations.

In September 2004, Centennial Resources, through indirect wholly owned subsidiaries, acquired a 50-percent ownership interest in Hartwell, which owns a 310-MW natural gas-fired electric generating facility near Hartwell, Georgia. On July 10, 2007, the Company sold its ownership interest in Hartwell, and realized a gain of $10.1 million ($6.1 million after tax) from the sale which is recorded in earnings from equity method investments on the Consolidated Statements of Income.

At September 30, 2007 and 2006, and December 31, 2006, the Company's equity method investments had total assets of $380.5 million, $576.6 million and $583.6 million, respectively, and long-term debt of $210.3 million, $324.3 million and $321.5 million, respectively. The Company's investment in its equity method investments was approximately $55.2 million, $99.2 million and $102.0 million, including undistributed earnings of $5.2 million, $6.6 million and $8.5 million, at September 30, 2007 and 2006, and December 31, 2006, respectively.

14. Goodwill and other intangible assets

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

	Balance		Goodwill		Balance
	as of		Acquired		as of
Nine Months Ended	January 1,		During		September 30,
September 30, 2007	2007		the Year*		2007
	(In thousands)
Electric	$	---	$	---	$	---
Natural gas distribution		---		177,167		177,167
Construction services		86,942		4,443		91,385
Pipeline and energy services		1,159		---		1,159
Natural gas and oil production		---		---		---
Construction materials and mining		136,197		24,736		160,933
Independent power production		---		---		---
Other		---		---		---
Total	$	224,298	$	206,346	$	430,644
*Includes purchase price adjustments that were not material related to acquisitions in a prior period.

	Balance		Goodwill		Balance
	as of		Acquired		as of
Nine Months Ended	January 1,		During		September 30,
September 30, 2006	2006		the Year*		2006
	(In thousands)
Electric	$	---	$	---	$	---
Natural gas distribution		---		---		---
Construction services		80,970		5,956		86,926
Pipeline and energy services		1,159		---		1,159
Natural gas and oil production		---		---		---
Construction materials and mining		133,264		5,323		138,587
Independent power production		---		---		---
Other		---		---		---
Total	$	215,393	$	11,279	$	226,672
*Includes purchase price adjustments that were not material related to acquisitions in a prior period.

Year Ended December 31, 2006	Balance as of January 1, 2006		Goodwill Acquired During the Year*		Balance as of December 31, 2006
	(In thousands)
Electric	$	---	$	---	$	---
Natural gas distribution		---		---		---
Construction services		80,970		5,972		86,942
Pipeline and energy services		1,159		---		1,159
Natural gas and oil production		---		---		---
Construction materials and mining		133,264		2,933		136,197
Independent power production		---		---		---
Other		---		---		---
Total	$	215,393	$	8,905	$	224,298

*Includes purchase price adjustments that were not material related to acquisitions in a prior period.

Other intangible assets were as follows:

	September 30, 2007			September 30, 2006			December 31, 2006
	(In thousands)
Amortizable intangible assets:
Customer relationships	$	21,518		$	6,900		$	13,030
Accumulated amortization		(3,609	)		(1,127	)		(1,890	)
		17,909			5,773			11,140
Noncompete agreements		10,596			12,886			12,886
Accumulated amortization		(3,170	)		(9,104	)		(8,540	)
		7,426			3,782			4,346
Acquired contracts		2,539			8,165			8,307
Accumulated amortization		(1,281	)		(4,242	)		(4,646	)
		1,258			3,923			3,661
Other		3,401			9,512			5,062
Accumulated amortization		(879	)		(1,096	)		(1,407	)
		2,522			8,416			3,655
Unamortizable intangible assets		---			524			---
Total	$	29,115		$	22,418		$	22,802

The unamortizable intangible assets at September 30, 2006, were recognized in accordance with SFAS No. 87, which requires that if an additional minimum liability is recognized, an equal amount shall be recognized as an intangible asset provided that the asset recognized shall not exceed the amount of unrecognized prior service cost.

Amortization expense for amortizable intangible assets for the three and nine months ended September 30, 2007, was $1.0 million and $2.9 million, respectively. Amortization expense for the three and nine months ended September 30, 2006, and for the year ended December 31, 2006, was $1.2 million, $3.3 million and $4.3 million, respectively. Estimated amortization expense for amortizable intangible assets is $4.8 million in 2007, $5.5 million in 2008, $4.3 million in 2009, $3.4 million in 2010, $2.8 million in 2011 and $11.2 million thereafter.

15.

Derivative instruments

The Company’s policy allows the use of derivative instruments as part of an overall energy price, foreign currency and interest rate risk management program to efficiently manage and minimize commodity price, foreign currency and interest rate risk. The Company’s policy prohibits the use of derivative instruments for speculating to take advantage of market trends and conditions, and the Company has procedures in place to monitor compliance with its policies. The Company is exposed to credit-related losses in relation to derivative instruments in the event of nonperformance by counterparties. The Company’s policy requires that natural gas and oil price derivative instruments at Fidelity and interest rate derivative instruments not exceed a period of 24 months and foreign currency derivative instruments not exceed a 12-month period. Cascade is authorized to maintain a portfolio of natural gas derivative instruments not to exceed a period of three years. The Company’s policy requires settlement of natural gas and oil price derivative instruments monthly and all interest rate derivative transactions must be settled over a period that will not exceed 90 days, and any foreign currency derivative transaction settlement periods may not exceed a 12-month period. The Company has policies and procedures that management believes minimize credit-risk exposure. These policies and procedures include an evaluation of potential counterparties’ credit ratings and credit exposure limitations. Accordingly, the Company does not anticipate any material effect on its financial position or results of operations as a result of nonperformance by counterparties.

As of September 30, 2007, the Company had no outstanding foreign currency or interest rate hedges. The following information should be read in conjunction with Note 7 in the Company’s Notes to Consolidated Financial Statements in the 2006 Annual Report.

Cascade core

At September 30, 2007, Cascade held natural gas swap agreements which were not

designated as hedges.

Cascade utilizes natural gas swap agreements to manage a portion of the market risk associated with fluctuations in the price of natural gas on its forecasted purchases of natural gas for core customers in accordance with authority granted by the WUTC and OPUC. Core customers consist of residential, commercial and smaller industrial customers. The fair value of the derivative instrument must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or a liability. Cascade applies SFAS No. 71 and records periodic changes in the fair market value of the derivative instruments on the Consolidated Balance Sheets as a regulatory asset or a regulatory liability, and settlements of these arrangements are expected to be recovered through the purchased gas cost adjustment mechanism. Under the terms of these arrangements, Cascade will either pay or receive settlement payments based on the difference between the fixed strike price and the monthly index price applicable to each contract.

Fidelity and Cascade non-core

At September 30, 2007, Fidelity held natural gas and oil swap and collar derivative instruments designated as cash flow hedging instruments. Cascade held natural gas swap derivative instruments designated as cash flow hedging instruments.

Fidelity utilizes natural gas and oil price swap and collar agreements to manage a portion of the market risk associated with fluctuations in the price of natural gas and oil on its forecasted sales of natural gas and oil production. Cascade utilizes natural gas swap agreements to manage a portion of the market risk associated with fluctuations in the price of natural gas on its forecasted purchases of natural gas for non-core customers. Cascade’s non-core customers, who are not covered by the purchased gas cost adjustment mechanism, are generally large industrial, electric generation and institutional customers. Each of the price swap and collar agreements was designated as a hedge of the forecasted sale of the related production or as a hedge of the forecasted purchase of the related commodity.

The fair value of the hedging instruments must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or a liability. Changes in the fair value attributable to the effective portion of hedging instruments, net of tax, are recorded in stockholders' equity as a component of accumulated other comprehensive income (loss). At the date the natural gas or oil quantities are settled, the amounts accumulated in other comprehensive income (loss) are reported in the Consolidated Statements of Income. To the extent that the hedges are not effective, the ineffective portion of the changes in fair market value is recorded directly in earnings. The proceeds received for natural gas and oil production and the amount paid for natural gas purchases are also generally based on market prices.

For the three and nine months ended September 30, 2007, the amount of hedge ineffectiveness was immaterial. In the second quarter of 2006, Fidelity had oil collar agreements that became ineffective and no longer qualified for hedge accounting. The ineffectiveness related to these collar agreements resulted in a gain of approximately $841,000 (before tax) for the three months ended September 30, 2006, and a loss of approximately $138,000 (before tax) for the nine months ended September 30, 2006. The ineffectiveness related to these collar agreements was recorded in operation and maintenance expense. The amount of hedge ineffectiveness on the remaining hedges was immaterial for the three and nine months ended September 30, 2006. For the three and nine months ended September 30, 2007 and 2006, there were no components of the derivative instruments’ gain or loss excluded from the assessment of hedge effectiveness. Gains and losses must be reclassified into earnings as a result of the discontinuance of cash flow hedges if it is probable that the original forecasted transactions will not occur. There were no such reclassifications into earnings as a result of the discontinuance of hedges.

Gains and losses on derivative instruments that are reclassified from accumulated other comprehensive income (loss) to current-period earnings are included in the line item in which the hedged item is recorded. As of September 30, 2007, the maximum term of the swap and collar agreements, in which the exposure to the variability in future cash flows for forecasted transactions is being hedged, is 15 months. The Company estimates that over the next 12 months, net gains of approximately $10.7 million (after tax) will be reclassified from accumulated other comprehensive income into earnings, subject to changes in natural gas market prices, as the hedged transactions affect earnings.

16.	Income taxes

On January 1, 2007, the Company adopted FIN 48 as discussed in Note 11.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years ending prior to 2003.

Upon the adoption of FIN 48, the Company recognized a decrease in the liability for unrecognized tax benefits, which was not material and was accounted for as an increase to the January 1, 2007, balance of retained earnings. At the date of adoption, the amount of unrecognized tax benefits was $4.5 million.

Included in the balance of unrecognized tax benefits at the date of adoption are $3.0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The amount of unrecognized tax benefits at the date of adoption that, if recognized, would affect the effective tax rate was $1.5 million, including $304,000 for the payment of interest and penalties. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes.

Prior to the sale of the domestic independent power production assets on July 10, 2007, as discussed in Note 4, the Company considered earnings (including the gain from the sale of its foreign equity method investment in a natural gas-fired electric generating facility in Brazil in 2005) to be reinvested indefinitely outside of the United States and, accordingly, no U.S. deferred income taxes were recorded with respect to such earnings. Following the sale of these assets, the Company reconsidered its long-term plans for future development and expansion of its foreign investment, and has determined that it has no immediate plans to explore or invest in additional foreign investments at this time. Therefore, in accordance with SFAS No. 109, deferred income taxes must now be accrued with respect to the temporary differences which had not been previously recorded. The cumulative undistributed earnings at September 30, 2007, were approximately $36 million. The amount of deferred tax liability, net of allowable foreign tax credits, associated with the undistributed earnings and recognized in the third quarter of 2007 was approximately $10 million. Future earnings will also be subject to additional U.S. taxes, net of allowable foreign tax credits.

17. Business segment data

The Company’s reportable segments are those that are based on the Company’s method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The vast majority of the Company’s operations are located within the United States. The Company also has investments in foreign countries, which largely consist of investments in companies owning electric transmission lines.

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 Minnesota, Oregon and Washington. These operations also supply related value-added products and services.

The construction services segment specializes in electric line construction, pipeline construction, utility excavation, inside electrical wiring, cabling and mechanical work, fire protection and the manufacture and distribution of specialty equipment.

The pipeline and energy services 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. The pipeline and energy services segment also provides energy-related management services.

The natural gas and oil production segment is engaged in natural gas and oil acquisition, exploration, development and production activities primarily in the Rocky Mountain and Mid-Continent regions of the United States and in and around the Gulf of Mexico.

The construction materials and mining 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 construction services. The construction materials and mining segment operates in the north central, southern and western United States and Alaska and Hawaii.

The independent power production segment’s international operation has investments in companies that own electric transmission lines. Prior to the July 10, 2007 sale, this segment’s domestic operation owned, built and operated electric generating facilities in the United States and had investments in natural resource-based projects. For more information regarding the discontinued operations of the domestic operations of this segment and the sale of these assets, see Note 4.

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 and automobile liability coverages. Centennial Capital also owns certain real and personal property.

The information below follows the same accounting policies as described in Note 1 of the Company’s Notes to Consolidated Financial Statements in the 2006 Annual Report. Information on the Company’s businesses was as follows:

			Inter-
Three Months	External Operating		segment Operating			Earnings on Common
Ended September 30, 2007	Revenues		Revenues			Stock
	(In thousands)
Electric	$	53,986	$	---		$	5,668
Natural gas distribution		90,706		---			(4,544	)
Pipeline and energy services		90,870		11,627			9,408
		235,562		11,627			10,532
Construction services		293,286		46			13,678
Natural gas and oil production		76,839		46,242			33,182
Construction materials and mining		639,623		---			50,389
Independent power production		---		---			93,139
Other		---		2,446			170
		1,009,748		48,734			190,558
Intersegment eliminations		---		(60,361	)		---
Total	$	1,245,310	$	---		$	201,090

			Inter-			Earnings
Three Months	External Operating		segment Operating			on Common
Ended September 30, 2006	Revenues		Revenues			Stock
	(In thousands)
Electric	$	53,204	$	---		$	5,698
Natural gas distribution		31,378		---			(2,347	)
Pipeline and energy services		87,372		16,434			7,141
		171,954		16,434			10,492
Construction services		262,188		139			8,300
Natural gas and oil production		71,885		50,607			35,012
Construction materials and mining		667,651		---			52,520
Independent power production		---		---			1,714
Other		---		1,773			278
		1,001,724		52,519			97,824
Intersegment eliminations		---		(68,953	)		---
Total	$	1,173,678	$	---		$	108,316

Nine Months	External Operating		Inter- segment Operating			Earnings on Common
Ended September 30, 2007	Revenues		Revenues			Stock
	(In thousands)
Electric	$	145,681	$	---		$	13,020
Natural gas distribution		280,172		---			1,041
Pipeline and energy services		273,210		54,579			21,346
		699,063		54,579			35,407
Construction services		793,406		520			33,938
Natural gas and oil production		200,032		169,023			98,969
Construction materials and mining		1,322,665		---			66,135
Independent power production		---		---			101,627
Other		---		7,326			809
		2,316,103		176,869			301,478
Intersegment eliminations		---		(231,448	)		---
Total	$	3,015,166	$	---		$	336,885

Nine Months	External Operating		Inter- segment Operating			Earnings on Common
Ended September 30, 2006	Revenues		Revenues			Stock
	(In thousands)
Electric	$	139,109	$	---		$	10,003
Natural gas distribution		229,497		---			446
Pipeline and energy services		264,984		67,808			17,290
		633,590		67,808			27,739
Construction services		728,936		385			23,377
Natural gas and oil production		189,890		175,104			107,249
Construction materials and mining		1,386,214		---			68,957
Independent power production		---		---			4,560
Other		---		5,861			780
		2,305,040		181,350			204,923
Intersegment eliminations		---		(249,158	)		---
Total	$	2,938,630	$	---		$	232,662

The pipeline and energy services segment recognized income from discontinued operations, net of tax, of $189,000 and $246,000 for the three and nine months ended September 30, 2007, respectively and a loss from discontinued operations, net of tax of $1.6 million and $2.2 million for the three and nine months ended September 30, 2006, respectively. The independent power production segment recognized income from discontinued operations, net of tax, of $96.6 million, $109.2 million, $3.0 million and $7.4 million for the three and nine months ended September 30, 2007 and 2006, respectively. Excluding the income (loss) from discontinued operations at pipeline and energy services, earnings (loss) from electric, natural gas distribution and pipeline and energy services are substantially all from regulated operations. Earnings from construction services, natural gas and oil production, construction materials and mining, independent power production, and other are all from nonregulated operations.

18. Employee benefit 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:

Three Months	Pension Benefits		Other Postretirement Benefits
Ended September 30,	2007	2006	2007	2006
	(In thousands)
Components of net periodic benefit cost:

Service cost	$	2,568		$	3,197		$	446		$	782
Interest cost		5,389			5,861			1,071			1,107
Expected return on assets		(6,497	)		(7,983	)		(1,235	)		(1,643	)
Amortization of prior service cost		183			233			(662	)		14
Recognized net actuarial (gain) loss		582			569			121			(18	)
Amortization of net transition obligation (asset)		---			---			496			704
Net periodic benefit cost, including amount capitalized		2,225			1,877			237			946
Less amount capitalized		220			179			104			80
Net periodic benefit cost	$	2,005		$	1,698		$	133		$	866

Nine Months		Pension Benefits				Other Postretirement Benefits
Ended September 30,		2007		2006