ITEM 3. LEGAL PROCEEDINGS
In March 1997, 11 natural gas producers filed suit in North Dakota Northwest Judicial District Court (North Dakota District Court) against Williston Basin and the company. The natural gas producers had processing agreements with Koch Hydrocarbon Company (Koch). Williston Basin and the company had natural gas purchase contracts with Koch. The natural gas producers alleged they were entitled to damages for the breach of Williston Basin's and the company's contracts with Koch although no specific damages were stated. A similar suit was filed by Apache Corporation (Apache) and Snyder Oil Corporation (Snyder) in North Dakota District Court in December 1993. The North Dakota Supreme Court in December 1999 affirmed the North Dakota District Court decision dismissing Apache's and Snyder's claims against Williston Basin and the company. Based in part upon the decision of the North Dakota Supreme Court affirming the dismissal of the claims brought by Apache and Snyder, Williston Basin and the company filed motions for summary judgment to dismiss the claims of the 11 natural gas producers. The motions for summary judgment were granted by the North Dakota District Court on July 3, 2000. The company is awaiting entry of a final judgment on the July 3, 2000 order granting the motions for summary judgment.
In July 1996, Jack J. Grynberg (Grynberg) filed suit in United States District Court for the District of Columbia (U.S. District Court) against Williston Basin and over 70 other natural gas pipeline companies. Grynberg, acting on behalf of the United States under the Federal False Claims Act, alleged improper measurement of the heating content or volume of natural gas purchased by the defendants resulting in the underpayment of royalties to the United States. In March 1997, the U.S. District Court dismissed the suit without prejudice and the dismissal was affirmed by the D.C. Circuit Court in October 1998. In June 1997, Grynberg filed a similar Federal False Claims Act suit against Williston Basin and Montana-Dakota and filed over 70 other separate similar suits against natural gas transmission companies and producers, gatherers, and processors of natural gas. In April 1999, the United States Department of Justice decided not to intervene in these cases. In response to a motion filed by Grynberg, the Judicial Panel on Multidistrict Litigation consolidated all of these cases in the Federal District Court of Wyoming (Federal District Court). Oral argument on motions to dismiss was held before the Federal District Court on March 17, 2000. Williston Basin and Montana-Dakota are awaiting a decision from the Federal District Court.
The Quinque Operating Company (Quinque), on behalf of itself and subclasses of gas producers, royalty owners and state taxing authorities, instituted a legal proceeding in State District Court for Stevens County, Kansas, against over 200 natural gas transmission companies and producers, gatherers, and processors of natural gas, including Williston Basin and Montana-Dakota. The complaint, which was served on Williston Basin and Montana- Dakota in September 1999, contains allegations of improper measurement of the heating content and volume of all natural gas measured by the defendants other than natural gas produced from federal lands. In response to a motion filed by the defendants in this suit, the Judicial Panel on Multidistrict Litigation transferred the suit to the Federal District Court for inclusion in the pretrial proceedings of the Grynberg suit.
Williston Basin and Montana-Dakota believe the claims of Grynberg and Quinque are without merit and intend to vigorously contest these suits.
In December 2000, Morse Bros., Inc. (MBI), an indirect wholly owned subsidiary of the company, was named by the United States Environmental Protection Agency (EPA) as a Potentially Responsible Party in connection with the cleanup of a commercial property site, now owned by MBI, and part of the Portland, Oregon, Harbor Superfund Site. For additional information regarding this issue, see Items 1 and 2 -- Business and Properties -- Construction Materials and Mining.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The company's common stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "MDU". The price range of the company's common stock as reported by The Wall Street Journal composite tape during 2000 and 1999 and dividends declared thereon were as follows: Common Common Common Stock Stock Price Stock Price Dividends (High) (Low) Per Share
First Quarter $ 21.44 $ 17.63 $ .21 Second Quarter 23.25 20.38 .21 Third Quarter 30.06 21.56 .22 Fourth Quarter 33.00 27.44 .22 $ .86
First Quarter $ 27.19 $ 21.25 $ .20 Second Quarter 24.38 20.31 .20 Third Quarter 24.75 22.38 .21 Fourth Quarter 24.38 18.81 .21 $ .82
As of December 31, 2000, the company's common stock was held by approximately 13,600 stockholders of record.
Between October 1, 2000 and December 31, 2000, the company issued 93,595 shares of Common Stock, $1.00 par value, as final adjustments with respect to acquisitions in prior periods. The Common Stock issued by the company in these transactions was issued in private sales exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. The former owners of the businesses acquired, now shareholders of the company, are accredited investors and have acknowledged that they would hold the company's Common Stock as an investment and not with a view to distribution.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Selected Financial Data on pages 54 and 55 of the company's Annual Report which is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of segment financial reporting and discussion of results of operations, electric and natural gas distribution include the electric and natural gas distribution operations of Montana-Dakota and the natural gas distribution operations of Great Plains Natural Gas Co. Utility services includes all the operations of Utility Services, Inc. Pipeline and energy services includes WBI Holdings' natural gas transportation, underground storage, gathering services and energy marketing and management services. Natural gas and oil production includes the natural gas and oil acquisition, exploration and production operations of WBI Holdings, while construction materials and mining includes the results of Knife River's operations.
Overview
The following table (dollars in millions, where applicable) summarizes the contribution to consolidated earnings by each of the company's business segments. Years ended December 31, 2000 1999 1998 Electric $ 17.7 $ 16.0 $ 13.9 Natural gas distribution 4.8 3.2 3.5 Utility services 8.6 6.5 3.3 Pipeline and energy services 10.5 21.0 18.6 Natural gas and oil production 38.6 16.2 (30.5) Construction materials and mining 30.1 20.4 24.5 Earnings on common stock $ 110.3 $ 83.3 $ 33.3
Earnings per common share - basic $ 1.80 $ 1.53 $ .66
Earnings per common share - diluted $ 1.80 $ 1.52 $ .66
Return on average common equity 14.3% 13.9% 6.5%
2000 compared to 1999
Consolidated earnings for 2000 increased $27.0 million from the comparable period a year ago due to higher earnings from the natural gas and oil production, construction materials and mining, utility services, electric and natural gas distribution businesses. Lower earnings at the pipeline and energy services business partially offset the earnings increase.
1999 compared to 1998
Consolidated earnings for 1999 increased $50.0 million from the comparable period a year ago due to higher earnings from the natural gas and oil production business, largely resulting from the 1998 $39.9 million in noncash after-tax write-downs of natural gas and oil properties. Increased earnings at the utility services, pipeline and energy services and electric businesses also added to the improvement in earnings. Lower earnings at the construction materials and mining and natural gas distribution businesses somewhat offset the earnings increase.
________________________________
Reference should be made to Items 1 and 2 -- Business and Properties, Item 3 -- Legal Proceedings and Notes to Consolidated Financial Statements for information pertinent to various commitments and contingencies.
Financial and operating data
The following tables (dollars in millions, where applicable) are key financial and operating statistics for each of the company's business segments.
Electric Years ended December 31, 2000 1999 1998 Operating revenues: Retail sales $ 134.5 $ 130.9 $ 130.9 Sales for resale and other 27.1 24.0 16.4 161.6 154.9 147.3 Operating expenses: Fuel and purchased power 54.1 51.8 49.8 Operation and maintenance 42.5 41.6 40.1 Depreciation, depletion and amortization 19.1 18.4 18.1 Taxes, other than income 7.1 7.4 7.1 122.8 119.2 115.1
Operating income $ 38.8 $ 35.7 $ 32.2
Retail sales (million kWh) 2,161.3 2,075.5 2,053.9 Sales for resale (million kWh) 930.3 943.5 586.5 Average cost of fuel and purchased power per kWh $ .016 $ .016 $ .017
Natural Gas Distribution Years ended December 31, 2000 1999 1998 Operating revenues: Sales $ 229.2 $ 154.1 $ 150.6 Transportation and other 3.9 3.6 3.5 233.1 157.7 154.1 Operating expenses: Purchased natural gas sold 178.6 110.2 106.5 Operation and maintenance 32.0 29.2 28.5 Depreciation, depletion and amortization 8.4 7.4 7.1 Taxes, other than income 4.6 4.2 4.0 223.6 151.0 146.1
Operating income $ 9.5 $ 6.7 $ 8.0
Volumes (MMdk): Sales 36.6 30.9 32.0 Transportation 14.3 11.6 10.3 Total throughput 50.9 42.5 42.3
Degree days (% of normal) 100.4% 88.8% 93.7% Average cost of natural gas, including transportation thereon, per dk $ 4.88 $ 3.56 $ 3.33
Utility Services
Years ended December 31, 2000 1999 1998
Operating revenues $ 169.4 $ 99.9 $ 64.2
Operating expenses: Operation and maintenance 142.6 82.8 54.4 Depreciation, depletion and amortization 4.9 2.6 1.7 Taxes, other than income 5.3 3.0 2.2 152.8 88.4 58.3
Operating income $ 16.6 $ 11.5 $ 5.9
Pipeline and Energy Services
Years ended December 31, 2000 1999 1998 Operating revenues: Pipeline $ 77.4 $ 69.6 $ 60.8 Energy services 559.4 313.9 119.9 636.8 383.5 180.7 Operating expenses: Purchased natural gas sold 548.3 301.5 109.9 Operation and maintenance 39.1 28.2 26.3 Depreciation, depletion and amortization 15.3 8.2 7.0 Taxes, other than income 5.3 5.0 3.9 608.0 342.9 147.1
Operating income $ 28.8 $ 40.6 $ 33.6
Transportation volumes (MMdk): Montana-Dakota 30.6 31.5 32.2 Other 56.2 46.6 56.8 86.8 78.1 89.0
Gathering volumes (MMdk) 41.7 19.8 9.1
Natural Gas and Oil Production
Years ended December 31, 2000 1999 1998 Operating revenues: Natural gas $ 84.7 $ 47.9 $ 37.6 Oil 43.4 26.9 24.3 Other 10.2 3.6 --- 138.3 78.4 61.9 Operating expenses: Purchased natural gas sold 3.4 1.5 --- Operation and maintenance 31.3 24.8 18.8 Depreciation, depletion and amortization 27.0 19.2 23.3 Taxes, other than income 10.1 6.0 4.2 Write-downs of natural gas and oil properties --- --- 66.0 71.8 51.5 112.3
Operating income (loss) $ 66.5 $ 26.9 $ (50.4)
Production: Natural gas (MMcf) 29,222 24,652 20,699 Oil (000's of barrels) 1,882 1,758 1,912
Average realized prices: Natural gas (per Mcf) $ 2.90 $ 1.94 $ 1.81 Oil (per barrel) $ 23.06 $ 15.34 $ 12.71
Construction Materials and Mining
Years ended December 31, 2000 1999 1998 Operating revenues: Construction materials $ 597.7 $ 435.1 $ 310.5 Coal 33.7 34.8 35.9 631.4 469.9 346.4 Operating expenses: Operation and maintenance 534.9 402.0 280.7 Depreciation, depletion and amortization 36.2 26.0 20.6 Taxes, other than income 3.5 3.5 3.5 574.6 431.5 304.8
Operating income $ 56.8 $ 38.4 $ 41.6
Sales (000's): Aggregates (tons) 18,315 13,981 11,054 Asphalt (tons) 3,310 2,993 1,790 Ready-mixed concrete (cubic yards) 1,696 1,186 1,021 Coal (tons) 3,111 3,236 3,113
Amounts presented in the preceding tables for operating revenues, purchased natural gas sold and operation and maintenance expense will not agree with the Consolidated Statements of Income due to the elimination of intercompany transactions between the pipeline and energy services segment and the natural gas distribution and natural gas and oil production segments. The amounts relating to the elimination of intercompany transactions for operating revenues, purchased natural gas sold and operation and maintenance expense are as follows: $96.9 million, $96.0 million and $.9 million for 2000; $64.5 million, $64.0 million and $.5 million for 1999; and $58.0 million, $57.5 million and $.5 million for 1998, respectively.
2000 compared to 1999
Electric
Electric earnings increased due to higher demand-related retail sales to all major customer classes, higher average realized rates and lower employee benefit-related expenses. Increased fuel and purchased power costs, largely higher purchased power costs, increased coal costs, and higher natural gas generation-related costs, partially offset the earnings increase. Higher maintenance expense at certain of the company's electric generating stations, and increased depreciation, depletion and amortization expense, resulting from higher property, plant and equipment balances, also partially offset the earnings increase.
Natural Gas Distribution
Earnings improved at the natural gas distribution business largely due to higher weather-related retail sales volumes resulting from weather in the fourth quarter which was 46 percent colder than a year ago. Increased service and repair margins, earnings from Great Plains, which was acquired in July 2000, and higher transportation volumes also added to the earnings increase. Increased depreciation, depletion and amortization expense, due to higher property, plant and equipment balances, and lower average realized transportation rates, partially offset the earnings increase.
Utility Services
Utility services earnings increased as a result of earnings from businesses acquired since the comparable period last year, higher work load in the Rocky Mountain region, primarily related to fiber optic installation projects, and increases from engineering services. This increase was somewhat offset by decreased construction activity for utilities on the West Coast, largely the result of utility merger activity and the California energy crisis.
Pipeline and Energy Services
Pipeline and energy services earnings decreased primarily due to the absence in 2000 of a 1999 $4.4 million after-tax reserve revenue adjustment and resulting increase to income associated with FERC orders received in the 1992 and 1995 general rate proceedings, the recognition in 1999 of a $3.9 million after-tax reserve adjustment and resulting increase to income relating to the resolution of certain production tax and other state tax matters, and the recognition in income in 1999 of $1.7 million after-tax resulting from a favorable order received from the United States Court of Appeals for the D.C. Circuit Court (D.C. Circuit Court) relating to the 1992 general rate proceeding. An asset impairment charge of $3.9 million after-tax in 2000 at one of the company's energy services companies also lowered earnings. In addition, higher bad debt expense and lower natural gas margins from energy services, and higher operation and maintenance expenses at the pipeline, largely higher compressor-related expenses and payroll costs, contributed to the decline in earnings. Partially offsetting the decline in earnings was the recognition in 2000 of a $6.7 million after-tax reserve revenue adjustment and resulting increase to income relating to the resolution of the 1995 general rate proceeding. Higher natural gas transportation volumes combined with higher average transportation rates and increased gathering volumes at the pipeline also partially offset the earnings decline. The increase in energy services revenue and the related increase in purchased natural gas sold resulted from significantly higher natural gas prices and increased volumes.
Natural Gas and Oil Production
Natural gas and oil production earnings increased primarily due to significantly higher realized natural gas and oil prices. Higher natural gas and oil production due to acquisitions since the comparable period last year and ongoing development of existing properties, along with increased other revenue due to higher sales of inventoried natural gas, added to the earnings increase. Partially offsetting the earnings improvement were increased depreciation, depletion and amortization expense, due to higher production volumes and higher rates, and increased operation and maintenance expense, mainly from higher lease operating expenses and higher general and administrative costs due primarily to acquisitions, and increased maintenance on existing properties. Increased interest expense due to higher average borrowings and interest rates also partially offset the earnings increase. Hedging activities for natural gas and oil production for 2000 resulted in realized prices that were 87 percent and 82 percent, respectively, of what otherwise would have been received.
Construction Materials and Mining
Construction materials and mining earnings increased largely due to the absence in 2000 of $5.6 million in after-tax charges to earnings in 1999, the result of the resolution of the coal arbitration proceeding. Higher earnings at the construction materials operations as a result of earnings from businesses acquired since the comparable period last year, higher aggregate, ready-mixed concrete and cement volumes at existing operations and a gain of $1.2 million after-tax on the sale of a nonstrategic property also added to the earnings improvement. Increased interest expense resulting from higher acquisition- related borrowings, higher selling, general and administrative costs, higher energy costs and increased depreciation, depletion and amortization expense due to increased aggregate volumes and increased plant balances, partially offset the earnings improvement at the construction materials operations.
1999 compared to 1998
Electric
Electric earnings improved primarily due to increased sales for resale revenue caused by a 61 percent increase in volumes at higher margins, both largely resulting from favorable contracts. Lower retail fuel and purchased power costs primarily due to decreased purchased power demand charges resulting from the 1998 pass-through of periodic maintenance costs, related to a participation power contract, also added to the earnings increase. Increased operation and maintenance expense resulting mainly from higher subcontractor costs, primarily at the Lewis & Clark Station due to boiler and turbine maintenance, and increased payroll expense partially offset the earnings improvement.
Natural Gas Distribution
Earnings decreased at the natural gas distribution business due primarily to lower sales volumes caused by weather that was 5 percent and 11 percent warmer than last year and normal, respectively. Increased operation and maintenance expense resulting from higher payroll expenses also added to the reduction in earnings. Increased volumes transported, primarily to industrial customers, and higher service and repair income partially offset the earnings decline.
Utility Services
Utility services earnings increased primarily due to businesses acquired since the comparable period last year and higher earnings from existing operations due to increased construction work load and higher margins.
Pipeline and Energy Services
Pipeline and energy services earnings increased largely due to a $4.4 million after-tax reserve revenue adjustment and a $3.9 million after-tax reserve adjustment, both as previously discussed. The recognition of $1.7 million after-tax resulting from a favorable order received from the D.C. Circuit Court, as previously discussed, also contributed to the increase in earnings. Decreased transportation to storage and off-system markets at lower average transportation rates and reduced sales of inventoried natural gas somewhat offset the earnings increase. The $3.1 million after-tax reversal of reserves in 1998 for certain contingencies relating to a FERC order concerning a compliance filing also partially offset the 1999 earnings increase. The increase in energy services revenue and the related increase in purchased natural gas sold resulted primarily from the acquisition of a natural gas marketing business in July 1998.
Natural Gas and Oil Production
Natural gas and oil production earnings increased largely as a result of the 1998 $66.0 million ($39.9 million after tax) noncash write-downs of natural gas and oil properties, as discussed in Note 1 of Notes to Consolidated Financial Statements. Higher natural gas and oil prices and increased natural gas production due to both new acquisitions and the ongoing development of existing properties also increased earnings. In addition, decreased depreciation, depletion and amortization expense due largely to lower rates resulting from the write-downs of natural gas and oil properties also added to the earnings improvement. Decreased oil production, resulting mainly from normal production declines and the sale of nonstrategic properties, and higher operation and maintenance expense partially offset the increase in earnings. Higher operation and maintenance expense resulted from changes in production mix and higher general and administrative expenses. Hedging activities for natural gas and oil production for 1999 resulted in realized natural gas prices which were unchanged and realized oil prices that were 94 percent of what otherwise would have been received.
Construction Materials and Mining
Construction materials and mining earnings decreased primarily due to lower earnings at the coal operations largely resulting from $5.6 million in after-tax charges and lower average coal prices, both relating to the coal contract arbitration proceeding. Earnings at the construction materials businesses increased due to businesses acquired since the comparable period last year and increased activity at existing construction materials operations. Higher asphalt volumes, increased average ready-mixed concrete prices and increased construction and sales of other product lines all contributed to the earnings increase at the construction materials operations. Higher selling, general and administrative costs and increased interest expense resulting from increased acquisition-related long-term debt somewhat offset the increased earnings at the construction materials business. Normal seasonal losses realized in the first quarter of 1999 by construction materials businesses not owned during the full first quarter in 1998 also partially offset the earnings improvement at the construction materials business.
Safe Harbor for Forward-looking Statements
The company is including the following cautionary statement in this Form 10-K to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the company. Forward-looking statements 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 which 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 Prospective Information. All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the company, are also expressly qualified by these cautionary statements.
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, but there can be no assurance that the company's expectations, beliefs or projections will be achieved or accomplished. Furthermore, any forward-looking statement speaks only as of the date on which such 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 such 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 such factors, nor can it assess the effect of each such factor on the company's business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward- looking statement.
In addition to other factors and matters discussed elsewhere herein, some important factors that could cause actual results or outcomes for the company to differ materially from those discussed in forward-looking statements include prevailing governmental policies and regulatory actions with respect to allowed rates of return, financings, or industry and rate structures, acquisition and disposal of assets or facilities, operation and construction of plant facilities, recovery of purchased power and purchased gas costs, present or prospective generation and availability of economic supplies of natural gas. Other important factors include the level of governmental expenditures on public projects and the timing of such projects, changes in anticipated tourism levels, the effects of competition (including but not limited to electric retail wheeling and transmission costs and prices of alternate fuels and system deliverability costs), natural gas and oil commodity prices, drilling successes in natural gas and oil operations, ability to acquire natural gas and oil properties, and the availability of economic expansion or development opportunities.
The business and profitability of the company are also influenced by economic and geographic factors, including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions, population growth rates and demographic patterns, market demand for energy from plants or facilities, changes in tax rates or policies, unanticipated project delays or changes in project costs, unanticipated changes in operating expenses or capital expenditures, labor negotiations or disputes, changes in credit ratings or capital market conditions, inflation rates, inability of the various counterparties to meet their contractual obligations, changes in accounting principles and/or the application of such principles to the company, changes in technology and legal proceedings, and the ability to effectively integrate the operations of acquired companies.
Prospective Information
The following information includes highlights of the key growth strategies, projections and certain assumptions for the company over the next few years and other matters for each of its six major business segments. Many of these highlighted points are forward-looking statements. There is no assurance that the company's projections, including estimates for growth and increases in revenues and earnings, will in fact be achieved. Reference should be made to assumptions contained in this section, changes in which, as well as the various important factors listed under the heading Safe Harbor for Forward-looking Statements, that could cause actual future results to differ materially from the company's targeted growth, revenue and earnings projections.
MDU Resources Group, Inc.
- - Based on current expectations, the company anticipates that its three to five year compound annual earnings per share growth rate from operations will be in the general range of 10 to 12 percent.
- - Earnings per share, diluted, from operations for 2001 are projected in the $1.95 to $2.05 range.
- - The company expects the percentage of 2001 earnings per share from operations by quarter to be in the following approximate ranges:
- First Quarter: 13 to 18 percent - Second Quarter: 20 to 25 percent - Third Quarter: 35 to 40 percent - Fourth Quarter: 22 to 27 percent
- - The company expects to issue and sell equity from time to time to keep its debt at the nonregulated businesses at no more than 40 percent of total capitalization.
- - Based on existing operations, annual goodwill amortization expense is expected to be approximately $4 million.
Electric
- - Montana-Dakota has obtained and holds valid and existing franchises authorizing it to conduct its electric and natural gas operations in all of the municipalities it serves where such franchises are required. As franchises expire, Montana-Dakota may face increasing competition in its service areas, particularly its service to smaller towns, from rural electric cooperatives. Currently, a smaller town in western North Dakota is considering municipalization of Montana-Dakota's electric and natural gas facilities. Montana-Dakota is vigorously contesting any such proposal but is currently unable to determine the ultimate outcome of any such proceeding. Montana-Dakota intends to protect its service area and seek renewal of all expiring franchises and will continue to take steps to effectively operate in an increasingly competitive environment.
Natural gas distribution
- - Annual natural gas throughput for 2001 is expected to be approximately 56 million decatherms, with about 40 million decatherms from sales and 16 million from transportation.
- - The number of natural gas retail customers at existing operations is expected to grow by approximately 1.5 to 2 percent on an annual basis over the next three to five years.
- - Earnings are expected to increase from the growth in sales of new value-added products and services such as appliance repair contracts and home security systems.
Utility services
- - Revenues for this segment are expected to exceed $300 million in 2001.
- - This segment's goal is to achieve compound annual revenue and earnings growth rates of approximately 20 to 25 percent over the next five years.
Pipeline and energy services
- - Two pipeline projects related to the company's coal bed natural gas drilling program in the Powder River Basin of Wyoming and Montana were completed in 2000. The two projects provide the pipeline company the ability to move approximately 40 percent more coal bed natural gas through its system than has historically been transported, as well as enabling additional deliveries to other pipeline systems. The largest project involved building a 75-mile, nonregulated pipeline through the heart of the basin, to move gas produced from throughout the Powder River Basin to interconnecting pipeline systems, including the company's own transmission system.
- - In 2001, Williston Basin's natural gas throughput is expected to increase by approximately 9 percent.
- - This segment continues business development activities looking for assets and resources that add value to existing operations through further vertical integration of its natural gas delivery and storage systems.
Natural gas and oil production
- - The 2001 drilling program is projected to include over 500 wells, 90 percent of which are expected to be drilled on operated properties and the emphasis will continue to be on natural gas. The 2001 drilling program is expected to be the largest drilling program in the company's history.
- - Combined natural gas and oil production at this segment is expected to be 30 to 40 percent higher in 2001 than in 2000.
- - The company's estimates for natural gas prices in the Rocky Mountain region are in the range of $2.50 to $3.00 per Mcf during 2001. The company's estimates for natural gas prices on the New York Mercantile Exchange (NYMEX) for 2001 are in the range of $3 to $4 per Mcf.
- - The company's 2001 estimates for NYMEX crude oil prices are in the range of $23 to $26 per barrel.
- - This segment has entered into hedging arrangements for a portion of its 2001 production. The company has entered into swap agreements and fixed price forward sales representing approximately one-fourth of 2001 estimated annual natural gas production. Natural gas swap prices range from $4.57 to $4.60 per Mcf based on NYMEX and $4.04 to $4.44 per Mcf for Rocky Mountain gas sales. In addition, approximately one-third of 2001 estimated annual oil production is hedged at NYMEX prices ranging from $28.65 to $29.22 per barrel.
Construction materials and mining
- - On September 28, 2000, the company announced an agreement to sell its coal operations to Westmoreland Coal Company for $28.8 million cash, excluding final settlement cost adjustments. The agreement is subject to various closing conditions and therefore will not be finalized unless and until the parties are satisfied that those conditions are met. Earnings from coal operations would normally be expected to contribute less than 10 percent of annual earnings of the construction materials and mining segment.
- - Excluding the effects of potential future acquisitions, aggregate, asphalt and ready-mixed concrete volumes are expected to increase by approximately 15 percent, 32 percent and 13 percent, respectively, in 2001.
- - This segment expects to achieve compound annual revenue and earnings growth rates of approximately 10 to 20 percent over the next five years.
- - Earnings are expected to increase from a combination of acquisitions and by optimizing both synergies and improvements at existing operations.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (all such statements hereinafter referred to as SFAS No. 133). For further information on SFAS No. 133, see Note 1 of Notes to Consolidated Financial Statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition" (SAB No. 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The company adopted SAB No. 101 in the fourth quarter of 2000. The adoption of SAB No. 101 did not have a material effect on the company's financial position or results of operations.
Liquidity and Capital Commitments
The company's capital expenditures (in millions) for 1998 through 2000 and as anticipated for 2001 through 2003 are summarized in the following table, which also includes the company's capital needs for the retirement of maturing long-term debt and preferred stock.
Actual Estimated* 1998 1999 2000 Capital Expenditures: 2001 2002 2003 $ 13.0 $ 18.2 $ 15.8 Electric $ 14.8 $ 16.6 $ 20.9 8.3 9.2 21.3 Natural gas distribution 13.9 11.2 10.7 18.3 16.1 42.6 Utility services 52.6 30.5 31.7 17.6 35.1 69.0 Pipeline and energy services 61.4 56.8 38.0 Natural gas and oil 100.6 64.3 173.5 production 103.6 130.5 109.8 Construction materials 172.1 105.1 218.7 and mining 126.4 92.9 73.8 329.9 248.0 540.9 372.7 338.5 284.9 Net proceeds from sale or disposition (4.3) (16.6) (11.0) of property (31.6) (.4) (.1) 325.6 231.4 529.9 Net capital expenditures 341.1 338.1 284.8
Retirement of long-term 113.7 18.8 29.4 debt and preferred stock 19.7 50.5 282.8 $439.3 $250.2 $559.3 $360.8 $388.6 $567.6
- ------------------------ * The estimated 2001 through 2003 capital expenditures reflected in the above table include potential future acquisitions. The company continues to evaluate potential future acquisitions; however, these acquisitions are dependent upon the availability of economic opportunities and, as a result, actual acquisitions and capital expenditures may vary significantly from the above estimates.
Capital expenditures for 2000, 1999 and 1998, related to acquisitions, in the preceding table include the following noncash transactions: issuance of the company's equity securities and the conversion of a note receivable to purchase consideration of $132.1 million in 2000; the issuance of the company's equity securities of $77.5 million in 1999; and the issuance of the company's equity securities, less treasury stock acquired, in 1998 of $138.8 million.
In 2000, the company acquired a number of businesses, none of which was individually material, including construction materials and mining businesses with operations in Alaska, California, Montana and Oregon; a coal bed natural gas development operation based in Colorado with related oil and gas leases and properties in Montana and Wyoming; utility services businesses based in California, Colorado, Montana and Ohio; a natural gas distribution business serving southeastern North Dakota and western Minnesota; and an energy services company based in Texas. The total purchase consideration for these businesses, consisting of the company's common stock, cash and the conversion of a note receivable to purchase consideration was $286.0 million.
The 2000 capital expenditures, including those for the previously mentioned acquisitions, and retirements of long-term debt and preferred stock, were met from internal sources, the issuance of long-term debt and the company's equity securities. Capital expenditures for the years 2001 through 2003, include those for system upgrades, routine replacements, service extensions, routine equipment maintenance and replacements, pipeline and gathering expansion projects, the building of construction materials handling and transportation facilities, the further enhancement of natural gas and oil production and reserve growth, and for potential future acquisitions. The company continues to evaluate potential future acquisitions; however, these acquisitions are dependent upon the availability of economic opportunities and, as a result, actual acquisitions and capital expenditures may vary significantly from the estimates in the preceding table. It is anticipated that all of the funds required for capital expenditures and retirements of long-term debt and preferred stock for the years 2001 through 2003 will be met from various sources. These sources include internally generated funds, the company's $40 million revolving credit and term loan agreement, an existing line of credit of $8.2 million, a commercial paper credit facility at Centennial, as described below, and through the issuance of long-term debt and the company's equity securities. At December 31, 2000, $40 million under the revolving credit and term loan agreement and $6.3 million under the line of credit were outstanding.
Centennial, a direct wholly owned subsidiary of the company, has a revolving credit agreement with various banks on behalf of its subsidiaries that supports $315 million of Centennial's $325 million commercial paper program. Under the Centennial commercial paper program, $261.4 million was outstanding at December 31, 2000. The commercial paper borrowings are classified as long term as Centennial intends to refinance these borrowings on a long-term basis through continued commercial paper borrowings supported by the revolving credit agreement due September 29, 2003. Centennial intends to renew this existing credit agreement on an annual basis.
Centennial has an uncommitted long-term master shelf agreement on behalf of its subsidiaries that allows for borrowings of up to $200 million. Under the master shelf agreement, $150 million was outstanding at December 31, 2000.
On October 4, 2000, the company filed an application with the FERC seeking authorization to issue a combination of certain securities, as the company determines to be necessary, not to exceed a total of $750 million. The FERC approved the company's application on November 7, 2000.
On November 20 and December 26, 2000, and February 2, 2001, the company reported sales that together totaled 1,038,739 shares of the company's Common Stock to Acqua Wellington North American Equities Fund Ltd. (Acqua Wellington), pursuant to purchase agreements by and between the company and Acqua Wellington. The company received total proceeds from these sales of $29.5 million. These proceeds were used for refunding outstanding debt obligations and for other general corporate purposes.
The company's issuance of first mortgage debt is subject to certain restrictions imposed under the terms and conditions of its Indenture of Mortgage. Generally, those restrictions require the company to pledge $1.43 of unfunded property to the Trustee for each dollar of indebtedness incurred under the Indenture and that annual earnings (pretax and before interest charges), as defined in the Indenture, equal at least two times its annualized first mortgage bond interest costs. Under the more restrictive of the two tests, as of December 31, 2000, the company could have issued approximately $295 million of additional first mortgage bonds.
The company's coverage of fixed charges including preferred dividends was 4.1 and 4.3 times for 2000 and 1999, respectively. Additionally, the company's first mortgage bond interest coverage was 8.3 times in 2000 compared to 7.1 times in 1999. Common stockholders' equity as a percent of total capitalization was 54 percent at both December 31, 2000 and 1999.
Effects of Inflation
Inflation did not have a significant effect on the company's operations in 2000, 1999 or 1998.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity price risk --
The company utilizes derivative financial instruments, including price swap and collar agreements, to manage a portion of the market risk associated with fluctuations in the price of natural gas and oil. 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 financial instruments in the event of nonperformance by counterparties, but does not expect any counterparties to fail to meet their obligations given their existing credit ratings.
The swap and collar agreements call for the company to receive monthly payments from or make payments to counterparties based upon the difference between a fixed and a variable price as specified by the agreements. The variable price is either a quoted natural gas price on the NYMEX, Colorado Interstate Gas Index or other various indexes or an oil price quoted on the NYMEX. The company believes that there is a high degree of correlation because the timing of purchases and production and the swap and collar agreements are closely matched, and hedge prices are established in the areas of operations. For the years ending December 31, 2000, 1999 and 1998, gains or losses on the swap and collar agreements were matched and reported in operating revenues on the Consolidated Statements of Income as a component of the related commodity transaction at the time of settlement with the counterparty.
The following table summarizes hedge agreements entered into by certain wholly owned subsidiaries of the company, as of December 31, 2000. These agreements call for the subsidiaries to receive fixed prices and pay variable prices.
(Notional amount and fair value in thousands)
Weighted Average Notional Fixed Price Amount (Per MMBtu) (In MMBtu's) Fair Value
Natural gas swap agreements maturing $ 4.45 5,461 $(12,311) in 2001
Weighted Average Notional Fixed Price Amount (Per barrel) (In barrels) Fair Value
Oil swap agreements maturing in 2001 $28.80 593 $ 2,261
The following table summarizes hedge agreements entered into by certain wholly owned subsidiaries of the company, as of December 31, 1999. These agreements call for the subsidiaries to receive fixed prices and pay variable prices.
(Notional amount and fair value in thousands)
Weighted Average Notional Fixed Price Amount (Per MMBtu) (In MMBtu's) Fair Value
Natural gas swap agreements maturing in 2000 $2.33 5,307 $ 597
Weighted Average Notional Fixed Price Amount (Per barrel) (In barrels) Fair Value
Oil swap agreements maturing in 2000 $19.55 769 $ (1,870)
Weighted Average Floor/Ceiling Notional Price Amount (Per MMBtu) (In MMBtu's) Fair Value
Natural gas collar agreements maturing in 2000 $2.34/$2.68 3,196 $ 112
Weighted Average Floor/Ceiling Notional Price Amount (Per barrel) (In barrels) Fair Value
Oil collar agreement maturing in 2000 $20.00/$22.33 183 $ (134)
The fair value of these derivative financial instruments reflects the estimated amounts that the company would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current favorable or unfavorable position on open contracts. The favorable or unfavorable position is not recorded on the company's Consolidated Balance Sheets as of December 31, 2000 and 1999. Favorable and unfavorable positions related to commodity hedge agreements are expected to be generally offset by corresponding increases and decreases in the value of the underlying commodity transactions.
In the event a derivative financial instrument does not qualify for hedge accounting or when the underlying commodity transaction matures, is sold, is extinguished, or is terminated, the current favorable or unfavorable position on the open contract would be included in results of operations. The company's policy requires approval to terminate a hedge agreement prior to its original maturity. In the event a hedge agreement is terminated, the realized gain or loss at the time of termination would be deferred until the underlying commodity transaction is sold or matures and is expected to generally offset the corresponding increases or decreases in the value of the underlying commodity transaction.
The company has energy marketing operations that are exposed to risks, including risks relating to changes in natural gas prices and counterparty performance (credit risk), associated with natural gas forward purchase and sale commitments. These commitments involve the purchase and sale of natural gas and related delivery of such commodity. The energy marketing operations seek to match natural gas purchases and sales on specific contracts so that a margin is obtained on the transportation of such commodity as distinguished from earning a margin on changes in market prices. In addition, the energy marketing contracts are generally entered into on a seasonal basis with contracts of a duration generally not exceeding 12 months. Contracts related to these activities are valued at fair value and changes in fair value are recorded as assets or liabilities on the company's Consolidated Balance Sheets. The net change in fair value representing unrealized gains and losses resulting from changes in market prices on these contracts is reflected in earnings on the company's Consolidated Statements of Income. Net unrealized gains and losses on these contracts were not material in 2000, 1999 or 1998. In general, market risk is the risk of fluctuations in the market price of the commodity being marketed and is influenced primarily by supply and demand. The company monitors and manages its exposure to market risk through a variety of risk management techniques. Such procedures include monitoring commitments and positions, evaluating sensitivity to changes in market prices and market volatility, and reporting to senior management. Credit risk is the risk of loss from nonperformance by counterparties of their contractual obligations. The company maintains credit procedures, which management believes significantly minimize overall credit risk. The company seeks to mitigate credit risk by applying specific eligibility criteria to prospective counterparties and may require letters of credit or similar security to secure payment on such sales contracts. However, despite mitigation efforts, defaults by counterparties may occur. To date, no such defaults have had a material effect on the company's financial position or results of operations.
Interest rate risk --
The company uses fixed and variable rate long-term debt to partially finance capital expenditures and mandatory debt retirements. These debt agreements expose the company to market risk related to changes in interest rates. The company manages this risk by taking advantage of market conditions when timing the placement of long-term or permanent financing. The company also has outstanding 15,000 shares of 5.10% Series preferred stock subject to mandatory redemption as of December 31, 2000. The company is obligated to make annual sinking fund contributions to retire the preferred stock and pay cumulative preferred dividends at a fixed rate of 5.10%. The table below shows the amount of debt, including current portion, and related weighted average interest rates, by expected maturity dates and the aggregate annual sinking fund amount applicable to preferred stock subject to mandatory redemption and the related dividend rate, as of December 31, 2000. Weighted average variable rates are based on forward rates as of December 31, 2000.
Fair 2001 2002 2003 2004 2005 Thereafter Total Value (Dollars in millions)
Long-term debt: Fixed rate $19.6 $50.4 $ 21.9 $21.6 $69.9 $303.6 $487.0 $500.8 Weighted average interest rate 7.8% 9.0% 7.4% 6.6% 8.0% 7.6% 7.7% -
Variable rate - - $260.8 - - - $260.8 $271.3 Weighted average interest rate - - 6.9% - - - 6.9% -
Preferred stock subject to mandatory redemption $ .1 $ .1 $ .1 $ .1 $ .1 $ 1.0 $ 1.5 $ .9 Dividend rate 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% -
For further information on risk management activities and financial instruments, see Note 3 of Notes to Consolidated Financial Statements.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Pages 29 through 53 of the company's Annual Report, which is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to Pages 2 through 6 and 19 through 21 of the company's Proxy Statement dated March 9, 2001 (Proxy Statement) which is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to Pages 14 through 19 of the Proxy Statement, which is incorporated herein by reference with the exception of the compensation committee report on executive compensation and the MDU Resources Group, Inc. comparison of five- year total stockholder return.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to Pages 21 and 22 of the Proxy Statement, which is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits.
Index to Financial Statements and Financial Statement Schedules Page 1. Financial Statements:
Report of Independent Public Accountants * Consolidated Statements of Income for each of the three years in the period ended December 31, 2000 * Consolidated Balance Sheets at December 31, 2000 and 1999 * Consolidated Statements of Common Stockholders' Equity for each of the three years in the period ended December 31, 2000 * Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2000 * Notes to Consolidated Financial Statements *
2. Financial Statement Schedules (Schedules are omitted because of the absence of the conditions under which they are required, or because the information required is included in the company's Consolidated Financial Statements and Notes thereto.)
- ------------------------ * The Consolidated Financial Statements listed in the above index which are included in the company's Annual Report to Stockholders for 2000 are hereby incorporated by reference. With the exception of the pages referred to in Items 6 and 8, the company's Annual Report to Stockholders for 2000 is not to be deemed filed as part of this report.
3. Exhibits: 3(a) Restated Certificate of Incorporation of the company, as amended to date, filed as Exhibit 3(a) to Form 10-Q for the quarter ended June 30, 1999, in File No. 1-3480 * 3(b) By-laws of the company, as amended to date, filed as Exhibit 3(b) to Form 10-Q for the quarterly period ended September 30, 1998, in File No. 1-3480 * 4(a) Indenture of Mortgage, dated as of May 1, 1939, as restated in the Forty-Fifth Supplemental Indenture, dated as of April 21, 1992, and the Forty-Sixth through Forty-Ninth Supplements thereto between the company and the New York Trust Company (The Bank of New York, successor Corporate Trustee) and A. C. Downing (Douglas J. MacInnes, successor Co- Trustee), filed as Exhibit 4(a) in Registration No. 33-66682; and Exhibits 4(e), 4(f) and 4(g) in Registration No. 33-53896; and Exhibit 4(c)(i) in Registration No. 333-49472 * 4(b) Rights agreement, dated as of November 12, 1998, between the company and Norwest Bank Minnesota, N.A., Rights Agent, filed as Exhibit 4.1 to Form 8-A on November 12, 1998, in File No. 1-3480 * + 10(a) Executive Incentive Compensation Plan, as amended to date, filed as Exhibit 10(a) to Form 10-K for the year ended December 31, 1998, in File No. 1-3480 * + 10(b) 1992 Key Employee Stock Option Plan, as amended to date, filed as Exhibit 10(a) to Form 10-Q for the quarter ended June 30, 2000 in File No. 1-3480 * + 10(c) Supplemental Income Security Plan, as amended to date, filed as Exhibit 10(d) to Form 10-K for the year ended December 31, 1996, in File No. 1-3480 * + 10(d) Directors' Compensation Policy, as amended to date, filed as Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 2000, in File No. 1-3480 * + 10(e) Deferred Compensation Plan for Directors, as amended to date, filed as Exhibit 10(c) to Form 10-Q for the quarter ended June 30, 2000, in File No. 1-3480 * + 10(f) Non-Employee Director Stock Compensation Plan, as amended to date, filed as Exhibit 10(b) to Form 10-Q for the quarter ended March 31, 1999, in File No. 1-3480 * + 10(g) 1997 Non-Employee Director Long-Term Incentive Plan, as amended to date, filed as Exhibit 10(d) to Form 10-Q for the quarter ended June 30, 2000, in File No. 1-3480 * + 10(h) 1997 Executive Long-Term Incentive Plan, as amended to date ** 12 Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends ** 13 Selected financial data, financial statements and supplementary data as contained in the Annual Report to Stockholders for 2000 ** 21 Subsidiaries of MDU Resources Group, Inc. ** 23 Consent of Independent Public Accountants **
- ------------------------ * Incorporated herein by reference as indicated. ** Filed herewith. + Management contract, compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K
Form 8-K was filed on November 20, 2000. Under Item 5 -- Other Events, the company reported the sale of 246,532 shares of company Common Stock to Acqua Wellington North American Equities Fund, Ltd.
Form 8-K was filed on December 27, 2000. Under Item 5 -- Other Events, the company reported the sale of 263,420 shares of company Common Stock to Acqua Wellington North American Equities Fund, Ltd.
Form 8-K was filed on January 26, 2001. Under Item 5 -- Other Events, the company reported the press release issued January 25, 2001 regarding earnings for the year ended December 31, 2000.
Form 8-K was filed on February 2, 2001. Under Item 5 -- Other Events, the company reported the sale of 528,787 shares of company Common Stock to Acqua Wellington North American Equities Fund, Ltd.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MDU RESOURCES GROUP, INC.
Date: March 2, 2001 By: /s/ Martin A. White Martin A. White (Chairman of the Board, President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.
Signature Title Date
/s/ Martin A. White Chief Executive March 2, 2001 Martin A. White (Chairman of the Board Officer President and Chief Executive Officer) and Director
/s/ Douglas C. Kane Chief March 2, 2001 Douglas C. Kane (Executive Vice President, Administrative & Chief Administrative & Corporate Corporate Development Officer) Development Officer and Director
/s/ Warren L. Robinson Chief Financial March 2, 2001 Warren L. Robinson (Executive Vice President, Officer Treasurer and Chief Financial Officer)
/s/ Vernon A. Raile Chief Accounting March 2, 2001 Vernon A. Raile (Vice President, Officer Controller and Chief Accounting Officer)
/s/ Thomas Everist Director March 2, 2001 Thomas Everist
/s/ Dennis W. Johnson Director March 2, 2001 Dennis W. Johnson
/s/ Richard L. Muus Director March 2, 2001 Richard L. Muus
/s/ Robert L. Nance Director March 2, 2001 Robert L. Nance
/s/ John L. Olson Director March 2, 2001 John L. Olson
/s/ Harry J. Pearce Director March 2, 2001 Harry J. Pearce
/s/ Homer A. Scott, Jr. Director March 2, 2001 Homer A. Scott, Jr.
/s/ Joseph T. Simmons Director March 2, 2001 Joseph T. Simmons
/s/ Sister Thomas Welder Director March 2, 2001 Sister Thomas Welder