MDU Resources Group, Inc. Q2 2009 Earnings Call Transcript

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2009-08-03 15:08:18.0

Tags: Call Transcript, Cost Savings, Earnings, Integration, MDU Resources Group Inc., Litigation, Business Operations, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Paul Patterson - Glenrock Associates.

Paul Patterson - Glenrock Associates

I wanted to touch base with you on two items. One was the pipeline litigation settlement - how much was that? And also you mentioned some nonrecurring integration expenses that happened in the quarter, if you could just give us a flavor for those things.

Terry Hildestad

Sure. I'll let Steve address the pipeline settlement and then pass it over to Dave Goodin to talk about the one-time charges.

Steve Bietz

As Terry mentioned, we did resolve the litigation that we had outstanding regarding our outbasin storage field. As a result, we reversed previously recorded costs associated with some of the gas that had migrated outside of the storage field and the net of that was approximately $2 million for the quarter.

Paul Patterson - Glenrock Associates

Okay. But the O&M seemed like it was lower than that. It looked like it was more like about $5.5 million lower.

Steve Bietz

I think there were some other items in there, Paul, partly. Some of that, we're postulating that some of that was related to some service work, so there's a little bit of cost of goods sold associated with that for some of the work at our energy services business.

Paul Patterson - Glenrock Associates

I got you. And then the nonrecurring integration expenses?

Dave Goodin

Yes, Paul. This is Dave Goodin.

Relative to our integration expenses, this last quarter we incurred approximately about $1.5 million in one-time expenses and on a year-to-date a little over $3 million of one-time expenses relative to our integration.

Paul Patterson - Glenrock Associates

And those would probably be not there in 2010, correct?

Dave Goodin

That would be correct.

Paul Patterson - Glenrock Associates

Okay. Now when we're thinking about cost savings and the efforts that you guys have made in the construction materials and other sides of the businesses, how much of that would you say is sustainable or would be sort of a deferral? Could you give us any flavor for that? I mean, in other words, is all these cost savings things that are just making things more efficient or are there some things that maybe you're delaying that you could do next year or when things are a little bit better economically?

Bill Schneider

The cost savings that we have generated thus far are sustainable. We think that what we've done to get the cost structure down in our corporation is going to continue, plus we're not done. We think we have some more efficiencies that we can gain as we go forward. The other thing is our vertical integration that you've heard about many times in the past has really proven to be a great strategy now, particularly with so much of this stimulus spending focusing on the asphalt oil, where we have the rock; we have in many cases the oil as well as the laydown and the construction end of it.

 

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