A long-term highway funding bill designed to provide safer transportation routes and put thousands of construction workers back to work is just one of a number of legislative items being closely watched by the executives of MDU Resources of Bismarck, North Dakota.

Described frequently as a diversified natural resource company, MDU Resources today generates, transmits, and distributes electricity and natural gas in Montana, North Dakota, South Dakota, and Wyoming. Moreover, it also operates a number of construction-related businesses, where of course a federal highway funding bill can have a sizable impact.

“Our goal is to keep inventory levels at the right size for the demand in the market, and this will help us as more funding comes into infrastructure and we’re able to increase production without having to increase cost,” explains MDU Resources CFO Doran Schwartz , who says that the company has given its working capital a leg up by more conservatively managing its inventory levels.

“We focused on our balance sheet last year, and we took a look at our production levels. Our inventory peaked out at $110 million of aggregate inventory. We ended the year at about $89 million and we continue to reduce that, and this allows us to live within our operating cash flows,” says Schwartz, who credits the company’s cash management techniques with having helped MDU pay down its debt.

However, when it comes to characterizing MDU’s business, there little question that Schwartz’s metric of choice remains return on invested capital (ROIC).

“In terms of the capital that we have deployed, the number is roughly $4.25 billion right now. What does that return back to shareholders? Well, historically, we have targeted the 10 percent range. We’re not there right now, but that’s the target we’d like to get back tom, if not better,” says Schwartz.

For its part, MDU’s ROIC for the 12 months ended June 30, 2008, was 19.1 percent higher than the median ROIC for a peer group of companies over the same time period on a continuing operations basis, according to company reports. ###