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, 1995
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, 1995 - 11,180,136 Common Shares ($5 par value)
OTTER TAIL POWER COMPANY
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 (Unaudited) 2 & 3
Consolidated Statements of Income - Three
Months Ended March 31, 1995 and 1994 (Unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31,1995 and 1994 (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
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
Part I. Financial Information
Item 1. Financial Statements
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
-ASSETS-
March 31, December 31,
1995 1994
(Thousands of Dollars)
PLANT:
<S> <C> <C>
Electric Plant in Service $700,998 $698,437
Other 42,702 36,221
_________ _________
Total 743,700 734,658
Less Accumulated Depreciation and Amortization 293,365 287,902
_________ _________
450,335 446,756
Construction Work in Progress 12,487 10,485
_________ _________
Net Plant 462,822 457,241
_________ _________
INVESTMENTS AND OTHER ASSETS: 47,692 43,944
_________ _________
CURRENT ASSETS:
Cash and Cash Equivalents 2,367 1,852
Temporary Cash Investments 357 391
Accounts Receivable:
Trade - Net 31,465 27,004
Other 3,759 5,172
Materials and Supplies:
Fuel 3,346 3,664
Inventory, Materials and Operating Supplies 18,885 15,794
Deferred Income Taxes 4,312 4,306
Accrued Utility Revenues 4,018 4,154
Other 3,184 3,041
_________ _________
Total Current Assets 71,693 65,378
_________ _________
DEFERRED DEBITS:
Unamortized Debt Expense and Reacquisition Premiums 5,042 5,174
Other 6,549 7,235
_________ _________
Total Deferred Debits 11,591 12,409
_________ _________
TOTAL $593,798 $578,972
========= =========
See Accompanying Notes to Consolidated Financial Statements
- 2 -
</TABLE>
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
-LIABILITIES-
March 31, December 31
1995 1994
(Thousands of Dollars)
CAPITALIZATION:
Common Shares, Par Value $5 Per Share - Authorized
25,000,000 Shares; Outstanding 1995 and 1994,
<S> <C> <C>
11,180,136 Shares $55,901 $55,901
Premium on Common Shares 30,335 30,335
Retained Earnings 94,226 90,412
_________ _________
Total 180,462 176,648
Cumulative Preferred Shares - Authorized 1,500,000
Shares Without Par Value; Outstanding 1995
and 1994, 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 168,370 162,196
_________ _________
Total Capitalization 387,663 377,675
_________ _________
CURRENT LIABILITIES:
Short-Term Debt 950 2,900
Sinking Fund Requirements and Current Maturities 13,195 8,739
Accounts Payable 20,273 22,542
Federal and State Income Taxes Accrued 5,841 2,095
Other Taxes Accrued 12,454 11,712
Interest Accrued 1,855 3,524
Other 5,003 6,369
_________ _________
Total Current Liabilities 59,571 57,881
_________ _________
NONCURRENT LIABILITIES: 9,883 8,245
_________ _________
DEFERRED CREDITS:
Accumulated Deferred Income Taxes 96,531 94,911
Accumulated Deferred Investment Tax Credit 21,878 22,171
Regulatory Liability 15,052 15,197
Other 3,220 2,892
_________ _________
Total Deferred Credits 136,681 135,171
_________ _________
TOTAL $593,798 $578,972
========= =========
See Accompanying Notes to Consolidated Financial Statements
-3-
</TABLE>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended
March 31
1995 1994
(Thousands of Dollars)
OPERATING REVENUES
<S> <C> <C>
Electric $55,726 $54,889
Health Services 15,108 10,920
Manufacturing 7,810 2,393
Diversified Operations 5,319 5,234
_________ _________
Total Operating Revenues 83,963 73,436
OPERATING EXPENSES
Production Fuel 9,212 8,658
Purchased Power 7,780 6,713
Electric Operation Expenses 12,307 11,703
Electric Maintenance 2,954 3,037
Cost of Goods Sold 17,560 11,627
Other Nonelectric Expenses 7,451 5,382
Depreciation and Amortization 5,421 5,233
Property Taxes 3,056 2,982
Income Taxes 5,624 5,754
_________ _________
Total Operating Expenses 71,365 61,089
_________ _________
OPERATING INCOME 12,598 12,347
Allowance For Equity (Other) Funds Used
During Construction 2 31
Other Income and Deductions
and Applicable Taxes (201) 312
_________ _________
INCOME BEFORE INTEREST CHARGES 12,399 12,690
Interest Charges 3,734 3,348
Allowance For Borrowed Funds Used
During Construction - Credit (42) (14)
_________ _________
NET INCOME 8,707 9,356
Preferred Dividend Requirements 589 590
_________ _________
EARNINGS AVAILABLE FOR COMMON SHARES $8,118 $8,766
========= =========
Earnings Per Average Common Share $0.73 $0.78
========= =========
Average Number of Common Shares Outstanding 11,180,136 11,180,136
Dividends Per Common Share $0.44 $0.43
See Accompanying Notes to Consolidated Financial Statements
-4-
</TABLE>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
March 31,
1995 1994
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $8,707 $9,356
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 7,020 6,427
Deferred Investment Tax Credit - Net (294) (308)
Deferred Income Taxes 232 928
Change in Deferred Debits and Other Assets 1,850 395
Change in Noncurrent Liabilities and Deferred Credits 1,966 376
Allowance for Equity (Other) Funds Used During Construction (2) (31)
Loss on Disposal of Noncurrent Assets 713 20
Cash Provided by (Used for) Current Assets & Current Liabilities:
Change in Receivables, Materials and Supplies (1,605) (3,360)
Change in Other Current Assets 57 496
Change in Payables and Other Current Liabilities (2,835) 1,086
Change in Interest and Income Taxes Payable 1,988 3,442
________ ________
Net Cash Provided by Operating Activities 17,797 18,827
CASH FLOWS FROM INVESTING ACTIVITIES:
Gross Capital Expenditures (8,058) (6,573)
Proceeds from Disposal of Noncurrent Assets 1,560 494
Purchase of Subsidiaries, Net of Cash Acquired (1,634) (286)
Change in Temporary Cash Investments 35 18
Change in Marketable Securities and Other Investments (2,401) (381)
________ ________
Net Cash Used in Investing Activities (10,498) (6,728)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in Short-Term Debt - Net Issuances (1,950) --
Proceeds from Issuance of Long-Term Debt 4,570 390
Payments for Retirement of Long-Term Debt (3,895) (3,082)
Payments for Debt Issuance Expenses -- (56)
Dividends Paid (5,509) (5,397)
________ ________
Net Cash Used in Financing Activities (6,784) (8,145)
Net Change in Cash and Cash Equivalents 515 3,954
Cash and Cash Equivalents at Beginning of Year 1,852 3,808
________ ________
Cash and Cash Equivalents at March 31 $2,367 $7,762
======== ========
Supplemental Cash Flow Information
Cash Paid for Interest and Income Taxes:
Interest $5,169 $4,816
Income Taxes $1,182 $552
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
- 5 -
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 1995 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, 1994, 1993, and 1992 included in the Company's 1994 Annual
Report to the Securities and Exchange Commission on Form 10-K.
In January 1995 the Company acquired an additional manufacturing business
and three small diagnostic imaging companies. The total revenues of these
companies were $17,122,000 in 1994. These acquisitions were accounted for
under the purchase method of accounting.
The breakdown of Cost of Goods Sold and Other Nonelectric Expenses by
business segments are as follows:
3 Months Ended
Cost of Goods Sold Other Nonelectric Expenses
1995 1994 1995 1994
(in thousands)
Health Services $9,279 $6,824 $4,287 $3,224
Manufacturing 6,225 1,786 1,010 255
Diversified Operations 2,056 3,017 2,154 1,903
------ ------ ------ -------
Total $17,560 $11,627 $7,451 $5,382
Because of seasonal and other factors, the earnings for the three-month
period ended March 31, 1995, 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 $17,797,000 as shown on the
Consolidated Statement of Cash Flows for the three months ended March 31,
1995, combined with funds on hand of $2,243,000 at December 31, 1994,
allowed the Company to finance its construction program, pay dividends,
invest in additional nonutility businesses, and in passive investments. At
March 31, 1995, the Company had $17,474,000 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 meet all sinking fund payments for First
Mortgage Bonds in the next five year and to provide for most of its
1995-1999 construction program expenditures (including allowance for funds
used during construction). Additional short- or long-term financing will be
required in the period 1995-1999 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, complete its common stock
repurchase program or for other corporate purposes.
The bulk of the increases in Plant - Other, Accounts Receivable - Trade,
Inventory, Materials and Operating Supplies, Long-Term Debt, and Sinking
Fund Requirements and Current Maturities are due to the acquisitions of an
additional manufacturing company and three small diagnostic imaging
companies. In addition, Investments and Other Assets also increased because
of further passive investments. Inventory, Materials and Operating
Supplies also increased due to timing of purchases of the health services
companies and increases in steel inventory in the manufacturing companies as
result of a longer lead-times. Accounts Payable decreased due to the
seasonal decline at the electric utility.
The increase in Construction Work in Progress is due to new electric
construction principally in transmission, distribution, and general plant.
The increase in Federal and State Income Taxes Accrued was due to the timing
of tax payments. The reduction in Interest Accrued was caused by the timing
of interest payments.
Material Changes in Results of Operations
The 1.5% increase in Electric Operating Revenues for the quarter ended March
31, 1995, as compared to the quarter ended March 31, 1994, was due to a 70%
increase in noncontractual power pool sales offset by a 2.7% decrease in
retail sales. Noncontractual power pool sales increased because the Company
had more energy to market due to warmer weather and greater plant
availability in 1995. Retail sales decreased mainly because of the warmer
weather in 1995.
The increase in Production Fuel for the three months ended March 31, 1995,
as compared to the same period a year ago, was chiefly because of a 7.5%
increase in generation which resulted from greater plant availability in
1995. The increase in Purchased Power for the quarter ended March 31, 1995,
as compared to the quarter ended March 31, 1994, was due to a 91% increase
in kwh purchased for resale which correlates to the increase in power pool
sales. The increase in Electric Operation Expenses for the three months
ended March 31, 1995, as compared to the same interval a year ago, was
chiefly due to a settlement with the Minnesota Public Utilities Commission.
The settlement required recovery of Conservation Improvement Program costs
in current rates starting in 1995.
The increase in Health Services Operating Revenues for the quarter ended
March 31,1995, as compared to the same period a year ago, resulted
principally from the acquisition of three additional mobile imaging
companies and the sale of three scanners. The increase in Cost of Health
Services Sold and Other Health Services Expenses resulted primarily from the
increase in sales.
The increase in Manufacturing Operating Revenues for the three months ended
March 31, 1995, as compared to the quarter ended March 31, 1994, resulted
chiefly from an acquisition of a new company, as well as continued expansion
of existing product lines. The increase in Manufacturing Cost of Goods Sold
and Other Manufacturing Expenses resulted predominately from the increase in
sales.
The decrease in Other Income and Deductions and Applicable Taxes for the
quarter ended March 31, 1995, as compared to the quarter ended March 31,
1994, primarily resulted from the timing of net investment earnings realized
in the Company's marketable securities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
27 Financial Data Schedule
b) Report on Form 8-K.
No reports on Form 8-K were filed during the fiscal quarter ended March
31, 1995.
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: /s/ Andrew E. Anderson
Andrew E. Anderson
Vice President, Finance /Chief Accounting Officer
Authorized Officer
Dated: May 10, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheet as of March 31, 1995, and the
Consolidated Statement of Income for the three months ended March 31, 1995,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 432,723
<OTHER-PROPERTY-AND-INVEST> 77,791
<TOTAL-CURRENT-ASSETS> 71,693
<TOTAL-DEFERRED-CHARGES> 11,591
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 593,798
<COMMON> 55,901
<CAPITAL-SURPLUS-PAID-IN> 30,335
<RETAINED-EARNINGS> 94,226
<TOTAL-COMMON-STOCKHOLDERS-EQ> 180,462
18,000
20,831
<LONG-TERM-DEBT-NET> 168,370
<SHORT-TERM-NOTES> 950
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 13,195
0
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<GROSS-OPERATING-REVENUE> 83,963
<INCOME-TAX-EXPENSE> 5,624
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<OTHER-INCOME-NET> (199)
<INCOME-BEFORE-INTEREST-EXPEN> 12,399
<TOTAL-INTEREST-EXPENSE> 3,692
<NET-INCOME> 8,707
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<EARNINGS-AVAILABLE-FOR-COMM> 8,118
<COMMON-STOCK-DIVIDENDS> 4,919
<TOTAL-INTEREST-ON-BONDS> 3,621
<CASH-FLOW-OPERATIONS> 17,797
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
