SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1994
OR
[ ] 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 0-368
OTTER TAIL POWER COMPANY
(Exact name of registrant as specified in its charter)
Minnesota 41-0462685
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496
(Address of principal executive offices) (Zip Code)
218-739-8200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
May 1, 1994 - 11,180,136 Common Shares ($5 par value)
OTTER TAIL POWER COMPANY
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1994
and December 31, 1993 (Unaudited) 2 & 3
Consolidated Statements of Income - Three Months
Ended March 31, 1994 and 1993 (Unaudited) 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1994 and 1993 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6, 7 & 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ASSETS -
March 31, December 31,
1994 1993
------------ ------------
(Thousands of Dollars)
Plant
<S> <C> <C>
Electric Plant in Service $681,667 $679,282
Other 35,022 34,626
--------- ---------
Total 716,689 713,908
Less Accumulated Depreciation and Amortization 275,762 270,385
--------- ---------
440,927 443,523
Construction Work in Progress 10,423 8,341
--------- ---------
Net Plant 451,350 451,864
--------- ---------
Investments and Other Assets: 43,822 43,853
--------- ---------
Current Assets:
Cash and Cash Equivalents 7,762 3,808
Temporary Cash Investments 433 451
Accounts Receivable:
Trade - Net 22,456 19,531
Other 2,772 3,361
Materials and Supplies
Fuel 3,838 3,667
Inventory, Materials and Operating Supplies 15,889 14,552
Deferred Income Taxes 4,565 4,482
Accrued Utility Revenues 3,836 4,368
Other 2,542 2,477
--------- ---------
Total Current Assets 64,093 56,697
--------- ---------
Deferred Debits:
Unamortized Debt Expense and Reacquisition Premiums 5,528 5,611
Other 6,040 5,880
--------- ---------
Total Deferred Debits 11,568 11,491
--------- ---------
TOTAL $570,833 $563,905
========= =========
See Accompanying Notes to Consolidated Financial Statements
- 2 -
</TABLE>
<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
-LIABILITIES-
March 31, December 31,
1994 1993
------------ ------------
(Thousands of Dollars)
Capitalization:
Common Shares, Par Value $5 Per Share - Authorized
<S> <C> <C>
15,000,000 Shares; Outstanding 1994 and 1993,
11,180,136 Shares $55,901 $55,901
Premium on Common Shares 30,335 30,336
Retained Earnings 88,168 84,209
--------- ---------
Total 174,404 170,446
Cumulative Preferred Shares - Authorized 1,500,000
Shares Without Par Value; Outstanding 1994
and 1993, 388,311 Shares:
Subject to Mandatory Redemption 18,000 18,000
Other 20,831 20,831
Cumulative Preference Shares - Authorized 1,000,000
Shares Without Par Value; Outstanding - None -- --
Long-Term Debt 165,816 166,563
--------- ---------
Total Capitalization 379,051 375,840
--------- ---------
Current Liabilities:
Sinking Fund Requirements and Current Maturities 7,749 9,356
Accounts Payable 17,159 15,987
Federal and State Income Taxes Accrued 5,138 --
Other Taxes Accrued 11,876 11,187
Interest Accrued 1,828 3,522
Other 4,508 5,687
--------- ---------
Total Current Liabilities 48,258 45,739
--------- ---------
Noncurrent Liabilities: 6,932 5,690
--------- ---------
Deferred Credits:
Accumulated Deferred Income Taxes 93,511 92,940
Accumulated Deferred Investment Tax Credit 23,210 23,518
Regulatory Liability 16,305 16,046
Other 3,566 4,132
--------- ---------
Total Deferred Credits 136,592 136,636
--------- ---------
TOTAL $570,833 $563,905
========= =========
See Accompanying Notes to Consolidated Financial Statements
- 3 -
</TABLE>
<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1994 1993
Restated
-------- --------
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues
Electric $54,889 $53,817
Health Services 10,920 1,053
Diversified Operations 7,627 3,844
-------- --------
Total Operating Revenues 73,436 58,714
Operating Expenses
Production Fuel 8,658 7,870
Purchased Power 6,713 7,728
Electric Operation Expenses 11,703 11,190
Electric Maintenance 3,037 2,760
Cost of Health Services Sold 7,423 --
Other Health Services Expenses 2,784 980
Diversified Cost of Goods Sold 4,803 1,968
Other Diversified Expenses 1,999 1,316
Depreciation and Amortization 5,233 4,778
Property Taxes 2,982 2,869
Income Taxes 5,754 4,998
-------- --------
Total Operating Expenses 61,089 46,457
-------- --------
Operating Income 12,347 12,257
Allowance For Equity (Other) Funds Used
During Construction 31 13
Other Income and Deductions
and Applicable Taxes 312 (41)
-------- --------
Income Before Interest Charges 12,690 12,229
Interest Charges 3,348 3,246
Allowance For Borrowed Funds Used
During Construction - Credit (14) (7)
-------- --------
Net Income 9,356 8,990
Preferred Dividend Requirements 590 617
-------- --------
Earnings Available for Common Shares $8,766 $8,373
======== ========
Earnings Per Average Common Share $0.78 $0.75
======== ========
Average Number of Common Shares Outstanding 11,180,136 11,180,136
Dividends Per Common Share $0.43 $0.42
See Accompanying Notes to Consolidated Financial Statements
- 4 -
</TABLE>
<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1994 1993
Restated
-------- --------
(Thousands of Dollars)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $9,356 $8,990
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 6,427 5,538
Deferred Investment Tax Credit - Net (308) (306)
Deferred Income Taxes 928 892
Change in Deferred Debits and Other Assets 395 (24)
Change in Noncurrent Liabilities and Deferred Credits 376 5,001
Allowance for Equity (Other) Funds Used During Construction (31) (14)
Loss on Disposal of Noncurrent Assets 20 260
Cash Provided by (Used for) Current Assets and
Current Liabilities:
Change in Receivables, Materials and Supplies (3,360) 1,658
Change in Other Current Assets 496 (4,129)
Change in Payables and Other Current Liabilities 1,086 (2,225)
Change in Interest and Income Taxes Payable 3,442 2,168
--------- ---------
Net Cash Provided by Operating Activities 18,827 17,809
Cash Flows From Investing Activities:
Gross Capital Expenditures (6,573) (5,495)
Proceeds from Disposal of Noncurrent Assets 494 69
Purchase of Subsidiaries, Net of Cash Acquired (574) (3,964)
Change in Temporary Cash Investments 18 (4,976)
Change in Marketable Securities (381) (1,792)
--------- ---------
Net Cash Used in Investing Activities (7,016) (16,158)
Cash Flows From Financing Activities:
Proceeds from Issuance of Long-Term Debt 678 1,898
Payments for Retirement of Long-Term Debt (3,082) (763)
Payments for Debt Issuance Expenses (56) --
Dividends Paid (5,397) (5,313)
--------- ---------
Net Cash Used in Financing Activities (7,857) (4,178)
Net Change in Cash and Cash Equivalents 3,954 (2,527)
Cash and Cash Equivalents at Beginning of Year 3,808 8,369
--------- ---------
Cash and Cash Equivalents at March 31 $7,762 $5,842
========= =========
Supplemental Cash Flow Information
Cash Paid for Interest and Income Taxes:
Interest $4,816 $5,062
Income Taxes $552 $420
See Accompanying Notes to Consolidated Financial Statements
- 5 -
</TABLE>
OTTER TAIL POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company, in its opinion, has included all adjustments (including normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods. The financial statements for 1994 are subject to
adjustment at the end of the year when they will be audited by independent
accountants. The financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the years ended
December 31, 1993, 1992 and 1991 included in the Company's 1993 Annual Report
to the Securities and Exchange Commission on Form 10-K.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112 - Employers' Accounting for Postemployment
Benefits and SFAS No. 115 - Accounting for Certain Investments in Debt and
Equity Securities. SFAS No. 112 establishes standards of financial accounting
and reporting for the estimated cost of benefits provided by an employer to
former or inactive employees after employment but before retirement. SFAS No.
115 establishes standards of financial accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities. The adoption of SFAS No. 112 and
SFAS No. 115 did not have a material impact on the Company's financial
statements.
On September 22, 1993, the North Dakota Public Service Commission entered an
Order approving an Agreement for Incentive Regulation for 1993. As part of
the Order, the Company is required to accrue the North Dakota portion of
unbilled revenue as of January 1, 1993, ($4.4 million) and to amortize it over
a 36-month period beginning in January 1993. The Company's financial
statements for the three months ended March 31, 1993, have been restated to
reflect this change. The effects of the restatement are considered
immaterial.
Because of seasonal and other factors, the earnings for the three-month period
ended March 31, 1994, should not be taken as an indication of earnings for all
or any part of the balance of the year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Material Changes in Financial Position
Cash provided by operating activities of $18,827,000 as shown on the
Consolidated Statement of Cash Flows for the three months ended March 31,
1994, allowed the Company to finance its construction program, pay dividends,
retire long-term debt, and invest in an additional nonutility business. At
March 31, 1994, the Company had $8,195,000 in Cash, Cash Equivalents and
Temporary Cash Investments. In addition, the Company had $17,145,000 in
marketable securities included in Investments and Other Assets which could be
used to supplement cash needs.
The Company estimates that funds internally generated, combined with funds on
hand, will be sufficient to provide for all of its 1994-1998 electric
construction program expenditures (including allowance for funds used during
construction) and to meet all sinking fund payments for First Mortgage Bonds
in the next five years. Additional short or long-term financing will be
required in the period 1994-1998 in connection with the maturity of First
Mortgage Bonds and a Long-Term Lease Obligation ($21,000,000), in the event
the Company decides to refund or retire early any of its presently outstanding
debt or cumulative preferred shares, to complete its common stock repurchase
program or for other corporate purposes.
The increases in Construction Work in Progress reflects new construction
related to electric utility operations, principally in production,
transmission, and distribution plant. The increase in Cash and Cash
Equivalents is because the cash provided from operating activities exceeded
what was used in investing and financing activities. Normal changes in
seasonal demand for electricity and increased activity at one of the Company's
Health Services subsidiaries caused the increase in Trade Accounts Receivable.
The increases in the current liability for Federal and State Income Taxes
Accrued and Other Taxes Accrued were caused by the timing of tax payments.
The reduction in Interest Accrued reflects the fact that interest payments for
the majority of the Company's bonds were made in February. Payment of an
employee incentive plan liability accrued at December 31, 1993, caused the
balance in Other Current Liabilities to decrease. Noncurrent Liabilities
increased due primarily to the accrual of postretirement benefits other than
pensions costs.
The increase in Inventory, Materials and Operating Supplies, and Accounts
Payable, and the decrease in Sinking Fund Requirements and Current Maturities
are due to increased activity at one of the Company's Health Services
subsidiaries. The increase in Accounts Payable was offset, to a smaller
extent, by a seasonal decline in the Accounts Payable of the electric utility.
Material Changes in Results of Operations
The 2% increase in Electric Operating Revenues for the quarter ended March 31,
1994, as compared to the quarter ended March 31, 1993, is due primarily to a
4.6% increase in retail revenue offset by a 27% decrease in power pool sales.
Retail revenue increased because of a 5.9% increase in kwh sales. The colder
weather experienced in the first quarter of 1994 (average system heating
degree days increased by 5.3% over 1993) contributed to the increase in kwh
sales. Power pool sales decreased for the quarter due to a 32.6% decrease in
kwh sales, as the Company utilized generation to serve its own retail
customers.
The increase in Production Fuel for the quarter ended March 31, 1994, as
compared to the quarter ended March 31, 1993, is due primarily to a 9.3%
increase in generation, which relates to the increase in retail kwh sold. The
decrease in Purchased Power for the three months ended March 31, 1994, as
compared to the same period in 1993, is due to a 38.6% decrease in kwh
purchases for resale, which corresponds to the decrease in power pool sales.
The increase in Health Services Operating Revenues, Cost of Health Services
Sold, and Other Health Services Expenses for the quarter ended March 31, 1994,
as compared to the same period in 1993, is principally due to including the
results of a new Health Services subsidiary acquired by the Company toward the
end of the first quarter of 1993.
The increase in Diversified Operations Operating Revenues, Diversified Cost of
Goods Sold, and Other Diversified Expenses in the first quarter of 1994, as
compared to the same period in 1993, was primarily caused by including three
months of subsidiary operations in the first quarter of 1994, as compared to
only two months in 1993.
The increase in Income Taxes for the three months ended March 31, 1994, as
compared to the same period in 1993, is primarily due to higher taxable
income, the Federal tax rate change, and a SFAS 109 adjustment made in 1993.
The increase in Other Income and Deductions and Applicable Taxes in the
quarter ended March 31, 1994, as compared to the same period in 1993, is due
to higher investment income.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits: None
b) Report on Form 8-K.
No reports on Form 8-K were filed during the fiscal quarter
ended March 31, 1994.
SIGNATURES
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 thereunto duly authorized.
OTTER TAIL POWER COMPANY
By: Andrew E. Anderson
Andrew E. Anderson
Controller/Chief Accounting Officer
Authorized Officer
Dated: May 11, 1994
