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 SEPTEMBER 30, 1996
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:
November 1, 1996 - 11,180,136 Common Shares ($5 par value)
<PAGE>
OTTER TAIL POWER COMPANY
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996 (Unaudited)
and December 31, 1995 2 & 3
Consolidated Statements of Income - Three and Nine
Months Ended September 30, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6 & 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7, 8, 9 & 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
Otter Tail Power Company
Consolidated Balance Sheets
-Assets-
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
(Thousands of dollars)
Plant:
<S> <C> <C>
Electric plant in service $733,185 $715,305
Subsidiary companies 90,163 54,266
________ ________
Total 823,348 769,571
Less accumulated depreciation and amortization 328,560 308,174
________ ________
494,788 461,397
Construction work in progress 21,522 16,285
________ ________
Net plant 516,310 477,682
________ ________
Investments 16,604 12,716
________ ________
Intangibles -- net 21,329 18,902
________ ________
Other assets 6,420 7,732
________ ________
Current assets:
Cash and cash equivalents 2,477 1,867
Temporary cash investments 47 2,208
Accounts receivable:
Trade - net 30,822 31,184
Other 5,044 8,276
Materials and supplies:
Fuel 2,770 3,322
Inventory, materials and operating supplies 22,268 19,408
Deferred income taxes 4,239 3,754
Accrued utility revenues 3,144 4,328
Other 8,523 4,427
________ ________
Total current assets 79,334 78,774
________ ________
Deferred debits:
Unamortized debt expense and reacquisition premiums 4,334 4,687
Regulatory assets 5,512 5,727
Other 1,582 2,976
________ ________
Total deferred debits 11,428 13,390
________ ________
Total $651,425 $609,196
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
- 2 -
Otter Tail Power Company
Consolidated Balance Sheets
-Liabilities-
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
(Thousands of dollars)
<S> <C> <C>
Capitalization
Common shares, par value $5 per share - authorized
25,000,000 shares; outstanding 1996 and 1995,
11,180,136 shares $55,901 $55,901
Premium on common shares 30,335 30,335
Retained earnings 103,363 98,006
________ ________
Total 189,599 184,242
Cumulative preferred shares - authorized 1,500,000
shares without par value; outstanding 1996
and 1995, 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 187,391 168,261
________ ________
Total capitalization 415,821 391,334
________ ________
Current liabilities
Short-term debt 20,350 --
Sinking fund requirements and current maturities 18,532 13,733
Accounts payable 26,408 27,828
Accrued salaries and wages 2,749 3,703
Federal and state income taxes accrued 395 393
Other taxes accrued 10,880 11,356
Interest accrued 2,001 3,509
Other 4,047 6,752
________ ________
Total current liabilities 85,362 67,274
________ ________
Noncurrent liabilities 15,121 13,498
________ ________
Deferred credits
Accumulated deferred income taxes 98,558 99,398
Accumulated deferred investment tax credit 20,113 20,994
Regulatory liabilities 13,928 14,500
Other 2,522 2,198
________ ________
Total deferred credits 135,121 137,090
________ ________
Total $651,425 $609,196
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-3-
Otter Tail Power Company
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
(Thousands of dollars) (Thousands of dollars)
<S> <C> <C> <C> <C>
Operating revenues
Electric $45,261 $49,537 $147,079 $153,169
Health services 16,527 9,901 43,598 34,784
Manufacturing 15,356 10,040 45,334 25,915
Other business operations 15,722 11,570 34,833 24,950
_________ _________ _________ _________
Total operating revenues 92,866 81,048 270,844 238,818
Operating expenses
Production fuel 6,031 7,090 21,632 24,072
Purchased power 6,513 7,822 19,010 23,326
Electric operation expenses 13,491 12,013 39,603 36,359
Electric maintenance 3,284 2,531 9,651 8,314
Cost of goods sold 32,620 20,049 85,294 53,321
Other nonelectric expenses 10,006 7,998 26,441 22,688
Depreciation and amortization 5,784 5,472 16,953 16,344
Property taxes 2,864 2,924 8,863 8,936
Income taxes 2,453 4,127 11,303 13,266
_________ _________ _________ _________
Total operating expenses 83,046 70,026 238,750 206,626
_________ _________ _________ _________
Operating income 9,820 11,022 32,094 32,192
Allowance for equity (other) funds used
during construction 82 119 225 125
Other income and deductions
and applicable taxes 605 (116) 1,883 57
_________ _________ _________ _________
Income before interest charges 10,507 11,025 34,202 32,374
Interest charges 4,397 3,875 12,248 11,277
Allowance for borrowed funds used
during construction - credit (97) 3 (265) (94)
_________ _________ _________ _________
Net income 6,207 7,147 22,219 21,191
Preferred dividend requirements 590 590 1,769 1,769
_________ _________ _________ _________
Earnings available for common shares $5,617 $6,557 $20,450 $19,422
========= ========= ========= =========
Earnings per average common share $0.50 $0.59 $1.83 $1.74
========= ========= ========= =========
Average number of common shares outstanding 11,180,136 11,180,136 11,180,136 11,180,136
Dividends per common share $0.45 $0.44 $1.35 $1.32
See accompanying notes to consolidated financial statements
</TABLE>
-4-
Otter Tail Power Company
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1996 1995
(Thousands of dollars)
<S> <C> <C>
Cash flows from operating activities:
Net income $22,219 $21,191
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 25,557 21,221
Deferred investment tax credit - net (882) (882)
Deferred income taxes (2,609) 713
Change in deferred debits and other assets 4,578 1,446
Change in noncurrent liabilities and deferred credits 831 2,397
Allowance for equity (other) funds used during construction (225) (125)
Losses from investments and disposal of noncurrent assets 496 1,149
Cash provided by (used for) current assets & current liabilities:
Change in receivables, materials and supplies 4,310 1,815
Change in other current assets (975) (427)
Change in payables and other current liabilities (2,469) (3,893)
Change in interest and income taxes payable (1,797) (2,677)
________ ________
Net cash provided by operating activities 49,034 41,928
Cash flows from investing activities:
Gross capital expenditures (50,613) (28,837)
Proceeds from disposal of noncurrent assets 4,136 2,169
Purchase of businesses, net of cash acquired (7,859) (1,634)
Change in temporary cash investments 2,161 38
Change in marketable securities and other investments (8,741) (8,455)
________ ________
Net cash used in investing activities (60,916) (36,719)
Cash flows from financing activities:
Change in short-term debt - net 20,350 11,100
Proceeds from issuance of long-term debt 90,930 37,970
Payments for retirement of long-term debt (81,926) (38,556)
Dividends paid (16,862) (16,527)
________ ________
Net cash provided by (used in) financing activities 12,492 (6,013)
Net change in cash and cash equivalents 610 (804)
Cash and cash equivalents at beginning of year 1,867 1,852
________ ________
Cash and cash equivalents at September 30 $2,477 $1,048
======== ========
Supplemental cash flow information
Cash paid for interest and income taxes:
Interest (net of amount capitalized) $13,231 $11,952
Income taxes $14,494 $14,066
</TABLE>
See accompanying notes to consolidated financial statements
- 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 1996 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, 1995, 1994, and 1993 included in the Company's
1995 Annual Report to the Securities and Exchange Commission on Form 10-K.
Because of seasonal and other factors, the earnings for the three-month
and nine-month periods ended September 30, 1996, should not be taken as an
indication of earnings for all or any part of the balance of the year.
On February 1, 1996, a subsidiary of the Company acquired a Montana-based
supplier of X-ray supplies and accessories. On April 1, 1996 a Company
subsidiary closed on the purchase of a mobile medical diagnostic services
company located in Bemidji, Minnesota. On June 1, 1996, the FCC approved
the acquisition of two radio stations in the Fargo, ND--Moorhead, MN market
by Mid-States Broadcasting, a subsidiary of the Company. On October 16,
1996, the FCC approved the acquisition of a third radio station in that
market area in 1996. In August of 1996, Mid-States Broadcasting announced
the purchase of another Fargo radio station. An application for approval
of the purchase was filed with the FCC on September 19, 1996. This would
bring to six the number of radio stations owned by the Company in the
Fargo, ND--Moorhead, MN market, the maximum allowed in one market area
under current FCC rules. The Company's telecommunications subsidiary
acquired a cable TV system serving the community of Milbank, SD on July 1,
1996. These completed and pending acquisitions will be accounted for under
the purchase method of accounting. The total price for the completed
acquisitions was $10.2 million. The combined revenues of the acquired
companies totaled approximately $24.3 million in 1995.
On August 8, 1996, the Company's telecommunications subsidiary signed a
letter of intent to acquire The Peoples Telephone Company ("Peoples") of
Bigfork, MN, subject to negotiation of a definitive purchase agreement,
completion of a due diligence investigation, and approval by regulatory
authorities and by the Boards of Directors of both companies. Peoples,
with 1,862 access lines serving five communities in northern Minnesota, had
1995 revenues of $1.5 million. The Company anticipates that, if completed,
this business combination will be accounted for under the pooling of
interests method.
Quadrant Co. continues to provide primary service to one of its two steam
customers under an agreement which can be terminated by either party upon
one year's prior written notice. Quadrant is currently providing backup
service to its other steam customer under an agreement that commenced on
June 1, 1996 and terminates on May 31, 1998, subject to earlier termination
by either party upon 90 days' written notice. Quadrant also continues to
burn municipal solid waste for three Minnesota counties under a contract
extension which will expire in April of 1997. Two Minnesota counties,
representing about 30% of Quadrant's waste volume, did not renew or extend
their contracts for waste incineration which expired in September of 1996.
Quadrant is in the process of negotiating a new waste incineration
agreement with the representative of the remaining counties. New pollution
rules for Minnesota municipal waste incinerators have recently been issued.
The impact of these rules on Quadrant Co. operations is currently being
evaluated. The costs to comply with new pollution rules combined with a
decline in future revenues from decreased steam sales and the loss of two
waste customers threaten the economic viability of the plant, which had a
net undepreciated book value of approximately $3.4 million on September 30,
1996.
The Company is an investor in a North Dakota limited liability company
constructing a food processing plant. A letter of credit established in
September of 1995 providing for $3.5 million in capital commitment payments
to the limited liability company and set to expire on August 1, 1996, has
been extended to February 1, 1997. Management expects the remaining
commitment, $1.1 million at September 30, 1996, to be drawn by December 31,
1996.
Under Statement of Financial Accounting Standards No. 87, employers are
required to recognize liabilities and expenses associated with pension
plans based on actuary valuations. In the second quarter of 1996, the
Company requested restated actuary reports for its Executive Survivor and
Supplemental Retirement Program amended July 1, 1994, based on revised
assumptions regarding expected retirement age and projected benefits under
the July 1, 1994 plan amendment, which expanded the plan to include non-
officer upper level management employees. The restatement will result in a
one-time expense adjustment of $2.59 million for the year 1996, along with
a $711,000 reduction in the $1,426,000 additional minimum liability
reflected on the Company's December 31, 1995 balance sheet. The Company
recognized $864,000 of the expense adjustment as additional operating
expense in the third quarter of 1996.
Under Statement of Financial Accounting Standards No. 106, employers are
required to accrue the expected cost of providing postretirement benefits
other than pensions during the years qualifying employees provide service
to the employer. During the second quarter of 1996 actuary valuations for
postretirement benefits other than pensions were computed to reflect a
change in assumptions related to group life insurance. The change in
actuarial assumptions will result in a $1.26 million reduction in 1996
expenses related to a reduction in expected postretirement benefit
obligations.
Forward Looking Information - Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995:
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Act"), the Company has filed cautionary
statements identifying important factors that could cause the Company's
actual results to differ materially from those discussed in forward-looking
statements made by or on behalf of the Company. When used in this Form 10-
Q and in future filings by the Company with the Securities and Exchange
Commission, in the Company's press releases and in oral statements, words
such as "may", "will", "expect", "anticipate", "continue", "estimate",
"project", "believes" or similar expressions are intended to identify
forward-looking statements within the meaning of the Act. Factors that
might cause such differences include, but are not limited to, the factors
discussed under "Factors affecting future earnings" on pages 29-31 of the
Company's 1995 Annual Report to Shareholders, which is incorporated by
reference in the Company's Form 10-K for the fiscal year ended December 31,
1995. These factors are in addition to any other cautionary statements,
written or oral, which may be made or referred to in connection with any
such forward-looking statement or contained in any subsequent filings by
the Company with the Securities and Exchange Commission.
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 $49,034,000 along with net
proceeds from the issuance of short-term debt of $20,350,000 as shown on
the Consolidated Statement of Cash Flows for the nine months ended
September 30, 1996, combined with funds on hand of $4,075,000 at December
31, 1995, allowed the Company to finance its capital expenditures and pay
dividends, and provided for a majority of its investment in additional
nonutility businesses. At September 30, 1996, the Company had $28,252,000
available in unused lines of credit 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 years and to provide for the
majority of its 1996-2000 electric utility construction program
expenditures.
Additional short-term or long-term financing will be required in the period
1996-2000 in connection with a portion of the Company's estimated capital
project expenditures, 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, or for other corporate purposes. Proceeds from the
issuance of long-term debt net of payments for the retirement of long-term
debt of $9,004,000, for the nine months ended September 30, 1996, were used
to finance equipment purchases at the Company's medical and manufacturing
subsidiaries and to finance a portion of the investment in additional
nonutility businesses. Debt repayments and financing activities at the
subsidiary level in the third quarter of 1996 resulted in a shift of
approximately $6 million in debt from current to long-term status.
On August 30, 1996, the Company filed a shelf registration statement with
the Securities and Exchange Commission for the issuance of up to
$50,000,000 of its debt securities, which may be sold from time to time in
one or more series, the proceeds of which will be used to repay short-term
and other indebtedness, to redeem one or more of the outstanding series of
the Company's First Mortgage Bonds, and for general corporate purposes. On
August 30, 1996, the Company also filed a shelf registration statement with
the Securities and Exchange Commission for the issuance of up to 1,000,000
Common Shares pursuant to the Company's Automatic Dividend Reinvestment and
Share Purchase Plan, which will permit shares purchased by shareholders,
employees, or customers who participate in the plan to be either new issue
Common Shares or Common Shares purchased on the open market. Proceeds from
newly issued Common Shares will be used for general corporate purposes.
Business acquisitions in the first nine months of 1996 accounted for:
$17,861,000 of the $35,897,000 increase in subsidiary companies plant, the
entire increase in intangible assets, $12,791,000 of the $19,130,000
increase in long-term debt, and $4,793,000 of the $4,799,000 increase in
sinking fund requirements and current maturities. The remainder of the
increase in subsidiary companies plant reflects plant and equipment
purchases in all segments of subsidiary operations.
The increases in electric plant in service and construction work in
progress for the first nine months of 1996 are due to new construction and
capital expenditures in all electric utility plant areas: production,
transmission, distribution, and general. The increase in investments
includes $1.3 million invested in limited partnerships that invest in tax-
credit qualifying affordable housing projects, and $2.1 million related to
business acquisitions and the reclassification of a note receivable.
The decrease in other receivables is due to the timing of payments received
from the Company's jointly-owned plant partners, the reclassification of a
note receivable from current to long-term status, and the sale of two large
notes to a finance company by the Company's health services subsidiary.
The increase in inventory is related to purchases of medical equipment for
new installations and increased sales at the Company's manufacturing
subsidiaries. The increase in other current assets includes $1,758,000 in
proceeds from the sale of Big Stone Plant's steel coal cars. The funds are
being held by the trustee for the Company's First Mortgage Bonds and are
expected to be released in the fourth quarter of 1996. The remainder of
the increase in other current assets is mainly due to material and
production costs incurred on construction jobs ahead of allowable billing
schedules. The decrease in other deferred debits reflects increased
allocation of deferred overhead costs related to normal seasonal
fluctuations in electric construction activity.
The decrease in accounts payable is mainly due to a normal seasonal decline
in sales at the electric utility. The decrease in interest accrued is due
to the timing of bond interest payments, the majority of which are due in
the first and third quarters of the calendar year. The reduction in other
current liabilities reflects payments of $2.7 million in capital
commitments during the first nine months of 1996. The increase in
noncurrent liabilities reflects increases in employee benefit provisions
resulting mainly from the restatement of the Executive Survivor and
Supplemental Retirement Program.
Material Changes in Results of Operations
The 8.6% decrease in electric operating revenues for the quarter ended
September 30, 1996, as compared to the same period in 1995, is the combined
result of a 3.0% decrease in retail revenue, an 83.8% decrease in
contractual power pool sales revenue and a 46.5% decrease in noncontractual
power pool sales revenue. While retail revenue decreased 3.0% for the three
month period ended September 30, 1996, as compared to the same period in
1995, retail kwh sales remained relatively stable. The decrease in retail
revenue is the result of lower fuel costs at Big Stone Plant being passed
on to customers through the Fuel Adjustment Clause and lower rates charged
to one of the Company's largest industrial customers under the Company's
recently developed Large General Service Time of Use Rider. The decrease
in contractual power pool sales revenue reflects a 40MW firm power sale in
the summer of 1995 while there was no similar sale in 1996. The 4.0%
decrease in electric operating revenues for the nine months ended September
30, 1996 compared to the nine months ended September 30, 1995, is primarily
due to a 42.6% decrease in noncontractual power pool sales.
A number of factors have contributed to the decreases in noncontractual
power pool sales for both the three and nine month periods. Midcontinent
Area Power Pool (MAPP) line loading relief procedures have resulted in
schedule cuts. The summer of 1996 was milder than the summer of 1995. In
addition, high water levels in the summer of 1996 furnished MAPP's hydro
generators with an excess of low-priced electricity to market. Many
utilities within and outside of MAPP have renegotiated and lowered their
freight and fuel costs making power marketing more competitive. Many
utilities have increased the time span between unit maintenance outages and
shifted outage times away from traditional overhaul periods, resulting in
increases in on-line availability. MAPP transmission service charges have
made it less economical to ship energy over longer distances. In addition,
lower plant availability in 1996 related to a scheduled outage for repairs
at Hoot Lake Unit 3 in February and March contributed to the decrease in
noncontractual power pool sales in the first nine months of 1996.
Production fuel expense decreased for the three and nine month periods
ended September 30, 1996, as compared to the same periods in 1995, by 14.9%
and 10.1%, respectively. Fuel costs and generation declined at all three
of the Company's major power plants for the three and nine month periods
ended September 30, 1996, compared to the same periods in 1995, except for
year-to-date generation at Big Stone Plant. Big Stone Plant's fuel costs
for the quarter and nine months ended September 30, 1996, compared to the
same periods in 1995, are down 11.4% and 10.7%, respectively, while
generation decreased only 6.5% for the quarter and showed an increase of
2.5% for the nine months ended September 30, 1996, compared to the same
periods in 1995. The price variances at Big Stone Plant are the result of
switching from lignite to subbituminous coal in August of 1995. Two
factors contributing to the decrease in system-wide generation are lower
demand as a result of fewer opportunity sales, and maintenance shutdowns at
Hoot Lake Plant in early 1996 and at Big Stone, which began a scheduled
ten-week major overhaul on September 6, 1996.
The decreases in purchased power for the quarter and nine months ended
September 30, 1996, as compared to the same periods in 1995, reflect
decreases in kwh purchases for resale of 47% and 43% for the respective
periods. The decreases in purchases for resale correlate to the decreases
in noncontractual power pool sales.
The increases in electric operation expenses for the three and nine month
periods ended September 30, 1996, as compared to the three and nine month
periods ended September 30, 1995, are due to expenses related to coal
contract and freight negotiations, increased benefit costs resulting from
revised actuarial assumptions for the Company's Executive Survivor and
Supplemental Retirement Plan, and increased payments for contracted
services in 1996.
The increases in electric maintenance expenses for the three and nine month
periods ended September 30, 1996, as compared to the same periods a year
ago, are due to increased production plant maintenance expenses, especially
at Hoot Lake Unit 3 which was down for scheduled maintenance in February
and March of 1996 and had a turbine rebuild and steam chest replacement in
July of 1996. Big Stone Plant showed an increase in maintenance expenses
for the quarter as a result of beginning a major overhaul on September 6,
1996. Transmission and distribution plant maintenance expenses are up
significantly in the third quarter of 1996, as compared to the third
quarter of 1995, due to increased expenditures for tree trimming to enhance
system reliability.
The breakdown of cost of goods sold and other nonelectric expenses by
business segments other than electric are as follows:
Three months ended September
Cost of goods sold Other nonelectric expenses
1996 1995 1996 1995
(in thousands)
Health services $10,661 $5,749 $4,229 $3,965
Manufacturing $11,606 $7,407 $2,204 $1,546
Other business operations $10,353 $6,893 $3,573 $2,487
------- ------- ------- ------
Total $32,620 $20,049 $10,006 $7,998
======= ======= ======= ======
Nine months ended September 30
Cost of goods sold Other nonelectric expenses
1996 1995 1996 1995
(in thousands)
Health services $28,260 $20,427 $11,759 $12,085
Manufacturing $34,029 $19,526 $5,744 $3,681
Other business operations $23,005 $13,368 $8,938 $6,922
------- ------- ------- -------
Total $85,294 $53,321 $26,441 $22,688
======= ======= ======= =======
The increases in health services revenue and cost of goods sold for both
the three and nine month periods ended September 30, 1996, as compared to
the same periods in 1995, are due to the acquisitions of two health
services companies: one on February 1, 1996, and a second more significant
acquisition on April 1, 1996. The decrease in health services other
nonelectric expenses for the nine months ended September 30, 1996, compared
to the nine months ended September 30, 1995, reflects decreased sales
activity in the first quarter of 1996. Health services other nonelectric
expenses increased in both the third and second quarters of 1996 over the
same periods in 1995, by $264,000 and $409,000, respectively, as a result
of the April 1, 1996 acquisition. However, these increases were not
significant enough to offset a $999,000 decrease in this category in the
first quarter of 1996, as compared to the first quarter of 1995, as a
result of the decreased sales activity in 1996.
The increases in manufacturing operating revenue for the three and nine
month periods ended September 30, 1996, as compared to the same periods in
1995, reflect revenues from Northern Pipe Products, which was acquired in
October of 1995, and increased sales at BTD Manufacturing. The increases
in manufacturing cost of goods sold and other nonelectric expenses for both
the three and nine month periods ended September 30, 1996, as compared to
the same periods in 1995, are directly related to the increases in
manufacturing revenue.
The increases in other business operations revenue for the quarter and nine
months ended September 30, 1996, as compared to the quarter and nine months
ended September 30, 1995, reflect material cost pass through billings by
the Company's construction subsidiaries on material intensive jobs in 1996,
and 1996 inaugural season revenues from the Fargo-Moorhead RedHawks
baseball franchise. The increases in material costs billed are also
reflected in increased cost of goods sold from other business operations
for the same comparable periods. Increases in other business operations
other nonelectric expenses for the three and nine month periods ended
September 30, 1996, as compared to the same periods in 1995, are due to
increased construction activity, RedHawks first-season operations, and 1996
radio station acquisitions.
The increases in other income and deductions and applicable taxes for the
three and nine month periods ended September 30, 1996, as compared to the
same periods in 1995, reflect increases in miscellaneous revenue from the
subsidiaries in 1996, the initial recording of affordable housing tax
credits in 1996, and losses on marketable securities recognized in 1995
related to the Company's preferred stock investment program which ended in
October of 1995.
The increases in interest charges for the three and nine month periods
ended September 30, 1996, as compared to the same periods in 1995, are
related to increased debt at the Company's subsidiaries due to acquisitions
and growth and to an increase in the use of short-term debt at the parent
company level in the first nine months of 1996 compared to the first nine
months of 1995.
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
September 30, 1996.
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: Jeff Legge
----------------------------
Jeff Legge
Controller
(Chief Accounting Officer/Authorized Officer)
Dated: November 13, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of September 30, 1996, and the Consolidated
Statement of Income for the nine months ended September 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 449,718
<OTHER-PROPERTY-AND-INVEST> 110,945
<TOTAL-CURRENT-ASSETS> 79,334
<TOTAL-DEFERRED-CHARGES> 11,428
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 651,425
<COMMON> 55,901
<CAPITAL-SURPLUS-PAID-IN> 30,335
<RETAINED-EARNINGS> 103,363
<TOTAL-COMMON-STOCKHOLDERS-EQ> 189,599
18,000
20,831
<LONG-TERM-DEBT-NET> 187,391
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 18,532
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 217,072
<TOT-CAPITALIZATION-AND-LIAB> 651,425
<GROSS-OPERATING-REVENUE> 270,844
<INCOME-TAX-EXPENSE> 11,303
<OTHER-OPERATING-EXPENSES> 227,447
<TOTAL-OPERATING-EXPENSES> 238,750
<OPERATING-INCOME-LOSS> 32,094
<OTHER-INCOME-NET> 2,108
<INCOME-BEFORE-INTEREST-EXPEN> 34,202
<TOTAL-INTEREST-EXPENSE> 11,983
<NET-INCOME> 22,219
1,769
<EARNINGS-AVAILABLE-FOR-COMM> 20,450
<COMMON-STOCK-DIVIDENDS> 15,093
<TOTAL-INTEREST-ON-BONDS> 11,751
<CASH-FLOW-OPERATIONS> 49,034
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
