UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 14, 2008
MDU Resources Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-3480 41-0423660
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1200 West Century Avenue
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (701) 530-1000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
Annual Incentive Awards
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On February 12, 2008 the Compensation Committee (the "Committee") of the Board
of Directors (the "Board") of MDU Resources Group, Inc. (the "Company")
established 2008 annual award opportunities for its executive officers including
those officers who were named executive officers in the Company's proxy
statement for the 2007 Annual Meeting of Stockholders and those who are expected
to be named executive officers in the Company's proxy statement for the 2008
Annual Meeting of Stockholders (collectively, "NEOs"). The Board approved the
award opportunities at its meeting on February 14, 2008. Filed herewith as
Exhibit 10.1 and incorporated herein by reference is the 2008 NEO Annual Award
Opportunity Chart.
Executive officers may receive annual cash incentive awards based upon
achievement of annual performance measures with a threshold, target and maximum
level. The target incentive award was established based upon the position level
and actual base salary. Actual payment may range from zero to 200% of the target
based upon achievement of corporate goals.
Except as the Committee may otherwise determine, in order to be eligible to
receive an annual incentive award under the Long-Term Performance-Based
Incentive Plan, participants must remain employed by the Company through
December 31, 2008. The Committee has full discretion to determine the extent to
which goals have been achieved, the payment level, whether any final payment
will be made and whether to adjust awards downward based upon individual
performance. Unless the Committee determines otherwise, performance measure
targets shall be adjusted to take into account unusual or nonrecurring events
affecting the Company, a subsidiary or a division or business unit, or the
financial statements thereof, or changes in applicable laws, regulations or
accounting principles to the extent such unusual or nonrecurring events or
changes in applicable laws, regulations or accounting principles otherwise would
result in dilution or enlargement of the annual incentive award intended to be
provided. Such adjustments shall be made in a manner that will not cause the
award to fail to qualify as performance-based compensation for purposes of
Section 162(m) of the Internal Revenue Code.
With respect to annual incentive awards granted pursuant to an Executive
Incentive Compensation Plan, participants who retire at age 65, die or become
disabled during the year remain eligible to receive an award. Subject to the
Committee's discretion, participants who terminate employment for other reasons
are not eligible for an award. The Committee has full discretion to determine
the extent to which goals have been achieved, the payment level and whether any
final payment will be made. Once performance goals are approved by the Committee
for Executive Incentive Compensation Plan awards, the Committee generally does
not modify the goals. However, if major unforeseen changes in economic and
environmental conditions or other significant factors beyond the control of
management substantially affected management's ability to achieve the specified
performance goals, the Committee, in consultation with the chief executive
officer, may modify the performance goals. Such goal modifications will only be
considered in years of unusually adverse or favorable external conditions.
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The 2008 awards for Messrs. Hildestad, Raile, Schneider and Harp were made
pursuant to the Long-Term Performance-Based Incentive Plan. The performance
goals for 2008 for Messrs. Hildestad and Raile are (i) budgeted earnings per
share achieved (weighted 50%) and (ii) budgeted return on invested capital
achieved (weighted 50%) with respect to the Company. The performance goals for
2008 for Mr. Schneider are (i) budgeted earnings per allocated share achieved
(weighted 50%) and (ii) budgeted return on invested capital achieved (weighted
50%) for Knife River Corporation. The performance goals for 2008 for Mr. Harp
are (i) budgeted earnings per allocated share achieved (weighted 50%) and (ii)
budgeted return on invested capital achieved (weighted 50%) for MDU Construction
Services Group, Inc.
Mr. Imsdahl's 2008 award was made pursuant to the Montana-Dakota Utilities Co.
Executive Incentive Compensation Plan based upon (i) budgeted earnings per
allocated share achieved (weighted 50%) and (ii) budgeted return on invested
capital achieved (weighted 50%) for Montana-Dakota Utilities Co., Great Plains
Natural Gas Co. and Cascade Natural Gas Corporation.
Achievement of budgeted levels of earnings per allocated share and return on
invested capital would result in a potential award of 100% of the target amount.
Achievement of less than 85% would result in no payment, while achievement of
115% would result in a payment of 200% of the target amount.
After-tax annual incentive compensation payments above the target amount are
limited to 20% of earnings in excess of planned earnings. The earnings in excess
of planned earnings are calculated without regard to the after-tax incentive
amounts above target. The 20% limitation is measured at the major business unit
level for business unit and operating company executives, which include Messrs.
Schneider, Harp and Imsdahl, and at the corporate level for corporate
executives, which include Messrs. Hildestad and Raile.
The Committee also considers annual improvement in the return on invested
capital measure for incentive purposes to help ensure that return on invested
capital equals or exceeds the weighted average cost of capital. Targets are
established in connection with the Company's annual financial planning process,
where the Company assesses the future operating environment and sets projections
of results. Beginning in 2006, the Committee implemented a change in how the
return on investment capital targets are established for use in the Company's
annual incentive plans. The change was implemented to emphasize the need for
each business unit and the Company to generate, within a reasonable period of
time, a return on invested capital that is at least equal to the business unit's
or the Company's weighted average cost of capital. If a business unit's or the
Company's return on invested capital, as established in the annual financial
planning process, was below its weighted average cost of capital, the return on
invested capital target used for incentive plan purposes would be increased. In
February 2008, the Committee determined the amount of incremental increase, if
any, would be based on a consideration of various factors, including the
economic environment, industry trends and company specific conditions when
establishing the return on invested capital targets.
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Mr. Harp's Additional Incentive Opportunity
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Mr. Harp was given an additional one-time incentive opportunity, depending on
MDU Construction Services Group, Inc.'s 2008 actual return on invested capital
versus its 2008 weighted average cost of capital. Mr. Harp will receive an
additional $200,000 in annual incentive if MDU Construction Services Group,
Inc.'s 2008 actual return on invested capital exceeds its 2008 weighted average
cost of capital by a certain number of basis points. If the goal is not met, Mr.
Harp will not be eligible to receive any amount under this incentive
opportunity.
Mr. Schneider's 2007 Annual Incentive Award
-------------------------------------------
On February 12, 2008, at the request of Mr. Hildestad, the Committee reviewed
Mr. Schneider's 2007 annual incentive performance goals, which were (i) budgeted
earnings per allocated share achieved (weighted 50%) and (ii) budgeted return on
invested capital achieved (weighted 50%) for Knife River Corporation. After
reviewing Knife River Corporation's earnings per allocated share and return on
invested capital for 2007, the Committee approved and recommended that the Board
approve the modification of Mr. Schneider's 2007 annual incentive performance
goals by reducing these performance goals. The Board approved the modification
of Mr. Schneider's 2007 annual incentive performance goals at its meeting on
February 14, 2008. The reduction reflects:
o the sale of certain real estate assets that did not occur due to the
Company's decision to delay the sale and
o unidentified acquisitions that did not occur.
The Committee considered these events to be unusual conditions that warranted
modifications to Mr. Schneider's annual incentive performance targets under the
terms of the Knife River Corporation Executive Incentive Compensation Plan. If
the Committee had not modified Mr. Schneider's 2007 annual incentive performance
goals, Mr. Schneider's 2007 annual incentive award would have been $164,053 or
approximately $43,000 less than the $206,780 annual incentive award earned for
2007.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR
On February 14, 2008, the Board of Directors of the Company amended Section 5.12
of the Company Bylaws relating to those officers who are authorized to execute
documents in the name and on behalf of the Company. The amendment adds the
general counsel as an officer authorized to execute documents. This Bylaw
section also provides such authorization to the chief executive officer,
president, any vice president or assistant vice president or such other officer
or agent of the Company authorized by the Board of Directors. The amendment was
effective February 14, 2008.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
Exhibit Number Description of Exhibit
3.1 Bylaws of MDU Resources Group, Inc., as amended February
14, 2008
10.1 MDU Resources Group, Inc. 2008 NEO Annual Award
Opportunity Chart
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 20, 2008
MDU Resources Group, Inc.
By: /s/ Paul K. Sandness
----------------------------------
Paul K. Sandness
General Counsel and Secretary
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Bylaws of MDU Resources Group, Inc., as amended February 14,
2008
10.1 MDU Resources Group, Inc. 2008 NEO Annual Award Opportunity
Chart
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