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, 2000
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, 2000 - 23,849,974 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, 2000 (Unaudited)
and December 31, 1999 2 & 3
Consolidated Statements of Income - Three Months
Ended March 31, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
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<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
-ASSETS-
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(Unaudited)
(Thousands of dollars)
<S> <C> <C>
PLANT:
Electric plant in service $ 779,329 $ 779,037
Subsidiary companies 108,862 99,558
--------- ---------
TOTAL 888,191 878,595
Less accumulated depreciation and amortization 393,178 386,618
--------- ---------
495,013 491,977
Construction work in progress 14,209 10,979
--------- ---------
NET PLANT 509,222 502,956
--------- ---------
INVESTMENTS 17,425 19,502
--------- ---------
INTANGIBLES -- NET 44,419 23,311
--------- ---------
OTHER ASSETS 6,436 6,141
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents 15,126 24,762
Temporary cash investments 768 -
Accounts receivable:
Trade - net 51,819 40,685
Other 4,712 5,616
Materials and supplies:
Fuel 4,075 3,808
Inventory, materials and operating supplies 35,817 26,329
Deferred income taxes 3,099 3,123
Accrued utility revenues 8,992 9,923
Other 6,460 5,690
--------- ---------
TOTAL CURRENT ASSETS 130,868 119,936
DEFERRED DEBITS:
Unamortized debt expense and reacquisition premiums 3,136 3,251
Regulatory assets 4,070 4,111
Other 525 1,580
--------- ---------
TOTAL DEFERRED DEBITS 7,731 8,942
--------- ---------
TOTAL $ 716,101 $ 680,788
========= =========
See accompanying notes to consolidated financial statements
- 2 -
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<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED BALANCE SHEETS
-LIABILITIES-
MARCH 31, DECEMBER 31,
2000 1999
------------- --------------
(Unaudited)
(Thousands of dollars)
<S> <C> <S> <C> <S><C> <C> <C> <C> <C>
CAPITALIZATION
Common shares, par value $5 per share
authorized 50,000,000 shares;
outstanding 2000 and 1999 -- 23,849,974 $ 119,250 $ 119,250
Premium on common shares - -
Unearned compensation (226) (301)
Retained earnings 130,527 126,744
Accumulated other comprehensive income - -
----------- -----------
TOTAL 249,551 245,693
Cumulative preferred shares
authorized 1,500,000 shares without par value;
outstanding 2000 and 1999 -- 335,000 shares
Subject to mandatory redemption 18,000 18,000
Other 15,500 15,500
Cumulative preference shares - authorized 1,000,000
shares without par value; outstanding - none - -
Long-term debt 190,691 176,437
----------- -----------
TOTAL CAPITALIZATION 473,742 455,630
----------- -----------
CURRENT LIABILITIES
Short-term debt 19,340 -
Sinking fund requirements and current maturities 8,574 5,948
Accounts payable 37,649 39,343
Accrued salaries and wages 4,176 6,197
Federal and state income taxes accrued 8,012 8,153
Other taxes accrued 11,444 10,818
Interest accrued 2,290 3,266
Other 3,769 3,589
----------- -----------
TOTAL CURRENT LIABILITIES 95,254 77,314
----------- -----------
NONCURRENT LIABILITIES 26,495 26,514
----------- -----------
DEFERRED CREDITS
Accumulated deferred income taxes 87,274 87,972
Accumulated deferred investment tax credit 16,035 16,295
Regulatory liabilities 11,193 11,359
Other 6,108 5,704
----------- -----------
TOTAL DEFERRED CREDITS 120,610 121,330
----------- -----------
TOTAL $ 716,101 $ 680,788
=========== ===========
See accompanying notes to consolidated financial statements
-3-
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<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
(in thousands, except share
and per share amounts)
<S> <C> <C>
OPERATING REVENUES
Electric $ 61,302 $ 62,719
Plastics 26,363 5,155
Health services 16,645 17,622
Manufacturing 13,940 13,585
Other business operations 16,505 12,404
-------- --------
Total operating revenues 134,755 111,485
OPERATING EXPENSES
Production fuel 8,421 9,764
Purchased power 13,921 11,892
Other electric operation and maintenance expenses 17,255 17,751
Cost of goods sold 51,753 36,712
Other nonelectric expenses 14,189 8,583
Depreciation and amortization 6,805 6,240
Property taxes 2,640 2,855
-------- --------
Total operating expenses 114,984 93,797
OPERATING INCOME
Electric 13,543 15,036
Plastics 4,750 269
Health services 1,048 2,013
Manufacturing 674 792
Other business operations (244) (422)
-------- --------
19,771 17,688
OTHER INCOME AND DEDUCTIONS - NET 684 355
INTEREST CHARGES 3,955 3,619
-------- --------
INCOME BEFORE INCOME TAXES 16,500 14,424
INCOME TAXES 6,083 5,175
-------- --------
NET INCOME 10,417 9,249
Preferred dividend requirements 470 590
-------- --------
EARNINGS AVAILABLE FOR COMMON SHARES $ 9,947 $ 8,659
======== ========
Basic and diluted earnings per average common share: $ 0.42 $ 0.36
======== ========
Average number of common shares outstanding 23,849,974 23,779,814
Dividends per common share $0.255 $0.2475
See accompanying notes to consolidated financial statements
-4-
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<TABLE>
<CAPTION>
OTTER TAIL POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
(Thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,417 $ 9,249
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,326 8,855
Deferred investment tax credit - net (260) (294)
Deferred income taxes (800) (490)
Change in deferred debits and other assets 726 303
Change in noncurrent liabilities and deferred credits 386 764
Allowance for equity (other) funds used during construction (88) (33)
(Gains)/Losses from investments and disposal of noncurrent assets 161 (36)
Cash provided by (used for) current assets & current liabilities:
Change in receivables, materials and supplies (13,413) (1,259)
Change in other current assets 2,089 2,380
Change in payables and other current liabilities (5,911) (2,173)
Change in interest and income taxes payable (1,117) 3,268
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,516 20,534
CASH FLOWS FROM INVESTING ACTIVITIES:
Gross capital expenditures (10,906) (4,910)
Proceeds from disposal of noncurrent assets 360 206
Purchase of businesses, net of cash acquired (31,377) -
Change in temporary cash investments (768) -
Change in other investments 1,979 (2,264)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (40,712) (6,968)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt - net 19,340 (824)
Proceeds from issuance of common stock - 1,430
Proceeds from issuance of long-term debt 18,791 8,866
Payments for retirement of long-term debt (1,938) (1,220)
Dividends paid (6,633) (6,473)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,560 1,779
NET CHANGE IN CASH AND CASH EQUIVALENTS (9,636) 15,345
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 24,762 3,919
-------- --------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 15,126 $ 19,264
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes:
Interest (net of amount capitalized) $ 4,707 $ 4,348
Income taxes $ 7,311 $ 1,696
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 2000 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, 1999, 1998, and 1997 included in the Company's 1999 Annual
Report to the Securities and Exchange Commission on Form 10-K. Because of
seasonal and other factors, the earnings for the three-month period ended
March 31, 2000, should not be taken as an indication of earnings for all or
any part of the balance of the year.
Common Shares and Earnings per Share
- ------------------------------------
On January 31, 2000, the Company's board of directors declared a two-for-one
common stock split in the form of a 100 percent stock dividend effective
March 15, 2000. All share and per-share data reflects the stock split.
On April 10, 2000 the Board of Directors granted 344,000 stock options to
executives and key management employees and 16,000 stock options to outside
directors under the 1999 Stock Incentive Plan (Incentive Plan). The exercise
price of the stock options is equal to the fair market value per share at
the date of the grant. The options granted to outside directors are
exercisable immediately, and all other options vest over a four-year period
at a rate of 25% per year. The options expire ten years after the date of
the grant. In addition during the quarter ended March 31, 2000, 11,116
shares of restricted stock were issued under the Incentive Plan. As of April
10, 2000 a total of 801,704 options were outstanding and a total of 13,414
shares of restricted stock had been issued under the Incentive Plan. A
total of 2,600,000 shares of the Company's common stock are available for
granting of awards under the Incentive Plan. The Company accounts for the
Incentive Plan under Accounting Principles Board Opinion No. 25, which does
not require recording of compensation expense.
The effect of outstanding stock options on the computation of diluted
earnings per share was immaterial for the quarters ended March 31, 2000 and
1999.
The Company issued 75,034 common shares in the first quarter of 1999 under
its Automatic Dividend Reinvestment and Share Purchase Plan. The Company
currently purchases the common shares needed for this plan from the open
market instead of issuing new shares.
During January 2000, 24,080 common shares were purchased from the open
market to complete the first purchase period under the 1999 Employee Stock
Purchase Plan (Purchase Plan). The purchase price per share paid by the
employees was $15.96. The average price paid by the Company to purchase
these shares was $19.36. The Purchase Plan allows eligible employees to
purchase the Company's common shares at 85% of the lower market price at
either the beginning or the end of each six-month purchase period. A total
of 400,000 shares of the Company's common stock are available for purchase
by employees under the Purchase Plan.
Comprehensive Income
- --------------------
The only element of comprehensive income for the three month period ended
March 31, 2000 was net income of $10,417,000. Elements of comprehensive
income for the three month period ended March 31, 1999, include net income
of $9,249,000 and other comprehensive income of $91,000 (net of $64,000 in
deferred taxes) related to the recognition of $155,000 in unrealized gains
on "available-for-sale" securities held by a Company subsidiary.
Segment Information and Acquisition
- -----------------------------------
Effective January 1, 2000, the Company acquired the assets and operations of
Vinyltech Corporation (Vinyltech) located in Phoenix, Arizona. Vinyltech is
a manufacturer of polyvinyl chloride (PVC) pipe and produces approximately
90 million pounds of pipe annually. Annual revenues for 1999 were
approximately $41 million. The acquisition has been accounted for using the
purchase method of accounting. The excess of the purchase price over the
net assets acquired of approximately $22 million is being amortized over 15
years.
The Company's business operations are broken down into five segments based
on products and services. Electric operations includes the electric utility
only and is based in Minnesota, North Dakota, and South Dakota. Plastics
operations consists of businesses involved in the production of PVC pipe in
the Upper Midwest and Southwest regions of the United States. Health services
operations consists of businesses involved in the sale, service, rental,
refurbishing and operation of medical imaging equipment and the sale of related
supplies and accessories to various medical institutions located in 23 states.
Manufacturing operations is made up of businesses involved in the production
of agricultural equipment, frame-straightening equipment and accessories for
the auto body shop industry, contract machining, and metal parts stamping
and fabrication located primarily in the Upper Midwest. Other business
operations consists of businesses diversified in such areas as electrical
and telephone construction contracting, transportation, telecommunications,
energy services and natural gas marketing. The electrical and telephone
construction contracting companies, and energy services and natural gas
marketing business operate primarily in the Upper Midwest. The
telecommunications companies operate in central and northeast Minnesota and
the transportation company operates in 48 states and 6 Canadian provinces.
The Company evaluates the performance of its business segments and allocates
resources to them based on earnings contribution and return on total
invested capital.
Operating Income
----------------
Three months ended
March 31,
------------------------------
(in thousands) 2000 1999
- -----------------------------------------------------------------
Electric $13,543 $15,036
Plastics 4,750 269
Health Services 1,048 2,013
Manufacturing 674 792
Other Business Operations (244) (422)
------- -------
Total $19,771 $17,688
------- -------
Identifiable Assets
-------------------
As of As of
March 31, December 31,
(in thousands) 2000 1999
- ----------------------------------------------------------------
Electric $525,734 $524,012
Plastics 63,799 15,979
Health Services 26,738 29,542
Manufacturing 36,346 30,853
Other Business Operations 63,484 80,402
-------- --------
Total $716,101 $680,788
-------- --------
Substantially all sales and long-lived assets of the Company are within the
United States.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform to 2000
presentation. Such reclassification had no impact on net income or
shareholders' equity.
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 Company's
ongoing involvement in diversification efforts, the timing and scope of
deregulation and open competition, growth of electric revenues, changes in
the economy of the Upper Midwest, governmental and regulatory action, fuel
and purchased power costs, environmental issues, weather conditions, and
other factors discussed under "Factors affecting future earnings" on pages
24-25 of the Company's 1999 Annual Report to Shareholders, which is
incorporated by reference in the Company's Form 10-K for the fiscal year
ended December 31, 1999. 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 $1.5 million as shown on the
Consolidated Statement of Cash Flows for the three months ended March 31,
2000, combined with cash on hand of $24.8 million as of December 31, 1999
allowed the Company to pay dividends, finance its capital expenditures and
partially fund an acquisition. Net cash provided by operating activities
decreased $19.0 million for the three months ended March 31, 2000 as
compared to the quarter ended March 31, 1999. This decrease was caused by
an increase in working capital due to increased sales within the Plastics
and Manufacturing segments and the payment of income taxes related to the
sale of the radio station properties. Most of the $33.7 million change in
net cash used in investing activities was due to the acquisition of
Vinyltech. Net cash provided by financing activities increased $27.8
million as a result of increased line of credit borrowings and debt to
finance the acquisition of Vinyltech. The Company and its subsidiaries have
bank lines and lines of credit totaling $44.0 million. As of March 31,
2000, $24.6 million was available in unused lines of credit, which could be
used to supplement cash needs.
The Company estimates that funds internally generated net of forecasted
dividend payments, combined with funds on hand, will be sufficient to meet
sinking fund payments on First Mortgage Bonds and preferred stock redemption
requirements in the next five years and to provide for its estimated 2000-
2004 consolidated capital expenditures. Additional short-term or long-term
financing will be required in the period 2000-2004 in connection with the
maturity of long-term debt, in the event the Company decides to refund or
retire early any of its presently outstanding debt or cumulative preferred
shares, acquisitions, or for other corporate purposes.
Subsidiary companies plant increased $9.3 million as a result of the
Vinyltech acquisition, purchases of tractors and trailers by the
transportation company and increased investments in plant at the
manufacturing and plastics companies. The $3.2 million increase in
construction work in progress reflects the normal seasonal increase in work
in progress at the electric utility. Goodwill associated with the
acquisition of Vinyltech is the reason for the $21.1 million increase in
intangibles. Increased sales in the plastic and manufacturing segments led
to most of the $11.1 million increase in trade accounts receivable. Almost
half of the $9.5 million increase in inventory, materials and operating
supplies was due to the acquisition of Vinyltech. The remaining increase is
due to the build up of inventory within the plastics and manufacturing
segments to meet increased sales.
The $16.9 million increase in long-term debt, sinking fund requirements and
current maturities reflects the financing needed for the Vinyltech
acquisition. Normal seasonal increases in credit line usage at the Company's
plastics, manufacturing and construction subsidiaries led to the $19.3
million increase in short-term debt. Accrued salaries and wages decreased
$2.0 million as a result of the payment of 1999 accrued employee incentives.
The $1.0 million decrease in interest accrued is due to the timing of
interest payments on long-term debt, the majority of which are due in the
first and third quarters of the year.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
Comparison of the Quarters Ended March 31, 2000 and 1999
--------------------------------------------------------
Consolidated Results
--------------------
The Company recorded earnings per share of $0.42 for the quarter ended March
31, 2000 as compared to earnings per share of $0.36 for the quarter ended
March 31, 1999. Total operating revenues were $134.8 million for the
quarter ended March 31, 2000, up $23.3 million from the $111.5 million
recorded for the quarter ended March 31, 1999. Operating income increased
$2.1 million from $17.7 million for the first quarter of 1999 to $19.8
million for the first quarter of 2000. The favorable first quarter results
can be attributed primarily to strong demand in the PVC pipe industry and
the Company's acquisition of Vinyltech. The increase in operating income
from the plastics segment more than offset decreases in the other segments.
Electric Operations
-------------------
Three months ended
March 31,
------------------- Percentage
(in thousands) 2000 1999 Change
- ---------------------------------------------------------------------------
Operating revenues $61,302 $62,719 (2.3)
Production fuel 8,421 9,764 (13.8)
Purchased power 13,921 11,892 17.1
Other operation and maintenance expenses 17,255 17,751 (2.8)
Depreciation and amortization 5,523 5,423 1.8
Property taxes 2,639 2,853 (7.5)
------- ------- -----
Operating income $13,543 $15,036 (9.9)
------- ------- -----
The decrease in electric operating revenues for the quarter ended March 31,
2000, as compared to the same period in 1999, is due to a $1.2 million
(12.2%) decrease in revenues from power pool sales and a $293,000 (0.6%)
decrease in retail revenue, offset by a $99,000 (6.2%) increase in other
electric revenue. The decrease in revenue from power pool sales is directly
related to a 14.6% decrease in power pool kwh sales primarily caused by a
17.9% reduction in generation from the Company's plants due to maintenance
outages. The Company's Coyote Station experienced an unscheduled outage the
first 20 days of January and on March 16, 2000 the plant was taken off-line
for a five-week scheduled maintenance outage. Hoot Lake Plant Unit 3 (66,000
kw nameplate rating) was off-line for six weeks during the first quarter of
2000 for unscheduled maintenance. As of May 1, 2000 all of the Company's
generating plants were back on-line. The decrease in retail revenue is the
result of decreased cost-of-energy revenues and decreased conservation
improvement surcharge revenues offset by a 2.1% increase in retail kwh
sales. The recovery of fuel and purchased power costs through the cost-of-
energy adjustment mechanism in retail rates lags two to four months behind
the incurrance of those costs which gave rise to the decrease in cost-of-
energy revenues for the first quarter.
Production fuel expenses decreased in the three months ended March 31, 2000,
as compared to the three months ended March 31, 1999, as a direct result of
the 17.9% decrease in kwh generated. The cost of purchased power increased
due to a $3.4 million increase in the cost of purchased power for system use
offset by a $1.4 million decrease in the cost of purchased power for resale.
Due to the maintenance outages at the Company's steam generating plants
during the first quarter of 2000, the Company replaced generation with
purchased power.
Due to continued favorable investment results from the electric utility's
funded pension plan, the Company recognized during the first quarter of
2000 a credit of approximately $1.1 million for net periodic pension cost
under Statement of Financial Accounting Standard No. 87 - Employers'
Accounting for Pensions. This credit to expense was offset by increases
in other electric operation and maintenance expenses. For the first
quarter of 1999 the credit to expense for the net periodic pension cost was
approximately $22,000.
Plastics Operations
-------------------
Three months ended
March 31,
------------------- Percentage
(in thousands) 2000 1999 change
- ----------------------------------------------------------
Operating revenues $26,363 $ 5,155 411.4
Cost of goods sold 19,295 4,197 359.7
Operating expenses 2,318 689 236.4
------- ------ -------
Operating income $ 4,750 $ 269 1,665.8
------- ------ -------
Following the acquisition of Vinyltech, the Company established a new
operating segment, Plastics. Prior to 2000, these operations were included
in Manufacturing. Prior year amounts have been reclassified to reflect this
change.
The increases in operating revenues, cost of goods sold, operating expenses
and operating income are primarily due to the acquisition of Vinyltech on
January 1, 2000. The increases also reflect a 50% increase in average sales
price per pound of pipe and an increase in pounds of pipe sold at the
Company's other PVC pipe plant.
Health Services Operations
--------------------------
Three months ended
March 31,
------------------- Percentage
(in thousands) 2000 1999 change
- ----------------------------------------------------------
Operating revenues $16,645 $17,622 ( 5.5)
Cost of goods sold 13,378 13,536 ( 1.2)
Operating expenses 2,219 2,073 7.0
------- ------ -----
Operating income $ 1,048 $ 2,013 (47.9)
------- ------ -----
The primary reason for the decrease in Health Services operating revenues and
operating income for the quarter ended March 31, 2000 as compared to the same
quarter in 1999, was the decline in equipment installations between the
periods. Offsetting slightly the decline in equipment installations was an
8% increase in the number of imaging scans performed. The increase in the
number of scans completed is due to the addition of more routes.
Manufacturing Operations
------------------------
Three months ended
March 31,
------------------- Percentage
(in thousands) 2000 1999 change
- ----------------------------------------------------------
Operating revenues $13,940 $13,585 2.6
Cost of goods sold 10,448 10,277 1.7
Operating expenses 2,818 2,516 12.0
------- ------ -----
Operating income $ 674 $ 792 (14.9)
------- ------ -----
Of the five manufacturing subsidiaries, two experienced increases in
operating income totaling $925,000, two remained stable and one had
decreased operating income of $1.0 million for the three months ended March
31, 2000, as compared to same period in 1999. Operating income increased
for two of the subsidiaries due to increased sales volumes and an increase
in the sale price per unit. Operating income decreased at the one
subsidiary due to the depressed agricultural economy, which had a direct
impact on sales for the quarter, and operating expenses increased due to
research and development costs for a new product.
Other Business Operations
-------------------------
Three months ended
March 31,
------------------- Percentage
(in thousands) 2000 1999 change
- ----------------------------------------------------------
Operating revenues $16,505 $12,404 33.1
Cost of goods sold 8,632 8,702 ( 0.8)
Operating expenses 8,117 4,124 96.8
------- ------ -----
Operating (loss) income $ (244) $ (422) 42.2
------- ------ -----
The primary reason for the increases in Other Business operating revenues
and operating expenses, for the period ended March 31, 2000, as compared to
the same quarter in 1999, is the acquisition of a transportation company in
September 1999. Partially offsetting these increases is the absence of
operating income in 2000 related to the radio stations, which were sold in
October 1999.
Other Income and Deductions, Interest Charges, and Income Taxes
---------------------------------------------------------------
For the three months ended March 31, 2000, as compared to the same period in
1999, other income and deductions increased $329,000 (92.7%) as a result of
increased investment income. The $336,000 (9.3%) increase in interest
charges is due to an increase in long-term debt and higher interest rates on
the line of credit between the periods. The increase in income taxes of
$908,000 (17.5%) for the quarter ended March 31, 2000, as compared to the
quarter ended March 31, 1999 is primarily due to the $2.1 million (14.4%)
increase in income before taxes for the same comparable periods.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company does not have material market risk exposure related to foreign
currency exchange rate risk, commodity price risk or interest rate risk.
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits:
27 Financial Data Schedule
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fiscal quarter ended
March 31, 2000.
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/John Erickson
---------------------------------------
John Erickson
Vice President, Chief Financial Officer, and Treasurer
(Chief Financial Officer/Authorized Officer)
Dated: May 12, 2000
------------
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of March 31, 2000, and the Consolidated
Statement of Income for the three months ended March 31, 2000, 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-31-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 445,878
<OTHER-PROPERTY-AND-INVEST> 131,624
<TOTAL-CURRENT-ASSETS> 130,868
<TOTAL-DEFERRED-CHARGES> 7,731
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 716,101
<COMMON> 119,250
<CAPITAL-SURPLUS-PAID-IN> (226)
<RETAINED-EARNINGS> 130,527
<TOTAL-COMMON-STOCKHOLDERS-EQ> 249,551
18,000
15,500
<LONG-TERM-DEBT-NET> 190,691
<SHORT-TERM-NOTES> 19,340
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,574
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 214,445
<TOT-CAPITALIZATION-AND-LIAB> 716,101
<GROSS-OPERATING-REVENUE> 134,755
<INCOME-TAX-EXPENSE> 6,083
<OTHER-OPERATING-EXPENSES> 114,984
<TOTAL-OPERATING-EXPENSES> 121,067
<OPERATING-INCOME-LOSS> 13,688
<OTHER-INCOME-NET> 684
<INCOME-BEFORE-INTEREST-EXPEN> 14,372
<TOTAL-INTEREST-EXPENSE> 3,955
<NET-INCOME> 10,417
470
<EARNINGS-AVAILABLE-FOR-COMM> 9,947
<COMMON-STOCK-DIVIDENDS> 6,082
<TOTAL-INTEREST-ON-BONDS> 3,902
<CASH-FLOW-OPERATIONS> 1,516
<EPS-BASIC> .42
<EPS-DILUTED> .42
</TABLE>
