10-Q

UNITED STATES 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, 2016

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            0-53713

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	27-0383995
(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)

866-410-8780

(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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes    x       No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  ¨      No x

Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date:

April 30, 2016 – 38,116,348 Common Shares ($5 par value)

OTTER TAIL CORPORATION

INDEX

Part I.   Financial Information		Page No.
Item 1.	Financial Statements
	Consolidated Balance Sheets – March 31, 2016 and December 31, 2015 (not audited)	2 & 3
	Consolidated Statements of Income - Three Months Ended March 31, 2016 and 2015 (not audited)	4
	Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2016 and 2015 (not audited)	5
	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2016 and 2015  (not audited)	6
	Condensed Notes to Consolidated Financial Statements (not audited)	7-29
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30-42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
Part II.  Other Information
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	44
Signatures		44

1

PART I. FINANCIAL INFORMATION

Item 1. financial statements

Otter Tail Corporation

Consolidated Balance Sheets

(not audited)

(in thousands)	March 31, 2016		December 31, 2015
Assets
Current Assets
Cash and Cash Equivalents	$	—	$	—
Accounts Receivable:
Trade—Net		73,521		62,974
Other		7,104		9,073
Inventories		85,410		85,416
Unbilled Revenues		16,476		17,869
Income Taxes Receivable		—		4,000
Regulatory Assets		18,636		18,904
Other		8,746		8,453
Total Current Assets		209,893		206,689
Investments		8,411		8,284
Other Assets		33,014		32,784
Goodwill		39,732		39,732
Other Intangibles—Net		15,266		15,673
Regulatory Assets		124,933		127,707
Plant
Electric Plant in Service		1,824,137		1,820,763
Nonelectric Operations		207,757		201,343
Construction Work in Progress		98,995		79,612
Total Gross Plant		2,130,889		2,101,718
Less Accumulated Depreciation and Amortization		728,781		713,904
Net Plant		1,402,108		1,387,814
Total Assets	$	1,833,357	$	1,818,683

See accompanying condensed notes to consolidated financial statements.

2

Otter Tail Corporation

Consolidated Balance Sheets

(not audited)

(in thousands, except share data)	March 31, 2016			December 31, 2015
Liabilities and Equity
Current Liabilities
Short-Term Debt	$	42,936		$	80,672
Current Maturities of Long-Term Debt		52,457			52,422
Accounts Payable		89,826			89,499
Accrued Salaries and Wages		13,192			16,182
Accrued Taxes		15,985			14,827
Other Accrued Liabilities		16,401			15,416
Liabilities of Discontinued Operations		2,098			2,098
Total Current Liabilities		232,895			271,116
Pensions Benefit Liability		95,122			104,912
Other Postretirement Benefits Liability		48,923			48,730
Other Noncurrent Liabilities		23,181			23,854
Commitments and Contingencies (note 9)
Deferred Credits
Deferred Income Taxes		213,049			207,669
Deferred Tax Credits		24,092			24,506
Regulatory Liabilities		78,007			77,432
Other		10,567			11,595
Total Deferred Credits		325,715			321,202
Capitalization
Long-Term Debt—Net		493,801			443,846
Cumulative Preferred Shares– Authorized 1,500,000 Shares Without Par Value; Outstanding - None		—			—
Cumulative Preference Shares – Authorized 1,000,000 Shares Without Par Value; Outstanding - None		—			—
Common Shares, Par Value $5 Per Share—Authorized, 50,000,000 Shares;
Outstanding, 2016—38,071,418 Shares; 2015—37,857,186 Shares		190,357			189,286
Premium on Common Shares		298,465			293,610
Retained Earnings		128,656			126,025
Accumulated Other Comprehensive Loss		(3,758	)		(3,898	)
Total Common Equity		613,720			605,023
Total Capitalization		1,107,521			1,048,869
Total Liabilities and Equity	$	1,833,357		$	1,818,683

See accompanying condensed notes to consolidated financial statements.

3

Otter Tail Corporation

Consolidated Statements of Income

(not audited)

	Three Months Ended March 31,
(in thousands, except share and per-share amounts)	2016		2015
Operating Revenues
Electric	$	112,985	$	113,533
Product Sales		93,257		89,308
Total Operating Revenues		206,242		202,841
Operating Expenses
Production Fuel - Electric		15,700		14,599
Purchased Power - Electric		16,886		23,692
Electric Operation and Maintenance Expenses		40,018		37,527
Cost of Products Sold (depreciation included below)		72,639		71,498
Other Nonelectric Expenses		11,455		12,463
Depreciation and Amortization		18,289		14,535
Property Taxes - Electric		3,679		3,502
Total Operating Expenses		178,666		177,816
Operating Income		27,576		25,025
Interest Charges		7,994		7,743
Other Income		400		572
Income Before Income Taxes – Continuing Operations		19,982		17,854
Income Tax Expense – Continuing Operations		5,492		4,073
Net Income from Continuing Operations		14,490		13,781
Discontinued Operations
Income (Loss) - net of Income Tax Expense (Benefit) of $20 and ($1,376) for the respective periods		30		(2,072	)
Impairment Loss - net of Income Tax Benefit of $0 for the three months ended March 31, 2015		—		(1,000	)
Gain on Disposition - net of Income Tax Expense of $4,816 for the three months ended March 31, 2015		—		7,226
Net Income from Discontinued Operations		30		4,154
Net Income		14,520		17,935
Average Number of Common Shares Outstanding—Basic		37,936,943		37,243,118
Average Number of Common Shares Outstanding—Diluted		38,045,208		37,497,881
Basic Earnings Per Common Share:
Continuing Operations	$	0.38	$	0.37
Discontinued Operations		—		0.11
	$	0.38	$	0.48
Diluted Earnings Per Common Share:
Continuing Operations	$	0.38	$	0.37
Discontinued Operations		—		0.11
	$	0.38	$	0.48
Dividends Declared Per Common Share	$	0.3125	$	0.3075

See accompanying condensed notes to consolidated financial statements

4

Otter Tail Corporation

Consolidated Statements of Comprehensive Income

(not audited)

	Three Months Ended March 31,
(in thousands)	2016			2015
Net Income	$	14,520		$	17,935
Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Securities:
Reversal of Previously Recognized Gains Realized on Sale of Investments and Included in Other Income During Period		—			(3	)
Gains Arising During Period		73			32
Income Tax Expense		(26	)		(10	)
Change in Unrealized Gains on Available-for-Sale Securities – net-of-tax		47			19
Pension and Postretirement Benefit Plans:
Amortization of Unrecognized Postretirement Benefit Losses and Costs (note 11)		154			204
Income Tax Expense		(61	)		(82	)
Pension and Postretirement Benefit Plans – net-of-tax		93			122
Total Other Comprehensive Income		140			141
Total Comprehensive Income	$	14,660		$	18,076

See accompanying condensed notes to consolidated financial statements.

5

Otter Tail Corporation

Consolidated Statements of Cash Flows

(not audited)

	Three Months Ended March 31,
(in thousands)	2016			2015
Cash Flows from Operating Activities
Net Income	$	14,520		$	17,935
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
Net Gain from Sale of Discontinued Operations		—			(7,226	)
Net (Income) Loss from Discontinued Operations		(30	)		3,072
Depreciation and Amortization		18,289			14,535
Deferred Tax Credits		(414	)		(470	)
Deferred Income Taxes		5,330			7,038
Change in Deferred Debits and Other Assets		2,825			3,538
Discretionary Contribution to Pension Plan		(10,000	)		(10,000	)
Change in Noncurrent Liabilities and Deferred Credits		3,363			41
Allowance for Equity/Other Funds Used During Construction		(95	)		(256	)
Change in Derivatives Net of Regulatory Deferral		—			(59	)
Stock Compensation Expense—Equity Awards		489			623
Other—Net		15			206
Cash (Used for) Provided by Current Assets and Current Liabilities:
Change in Receivables		(7,478	)		(11,288	)
Change in Inventories		6			688
Change in Other Current Assets		(773	)		1,270
Change in Payables and Other Current Liabilities		(5,840	)		(20,185	)
Change in Interest and Income Taxes Receivable/Payable		2,400			(1,549	)
Net Cash Provided by (Used in) Continuing Operations		22,607			(2,087	)
Net Cash Provided by (Used in) Discontinued Operations		30			(6,263	)
Net Cash Provided by (Used in) Operating Activities		22,637			(8,350	)
Cash Flows from Investing Activities
Capital Expenditures		(24,855	)		(35,738	)
Net Proceeds from Disposal of Noncurrent Assets		682			1,292
Cash Used for Investments and Other Assets		(1,425	)		(3,492	)
Net Cash Used in Investing Activities - Continuing Operations		(25,598	)		(37,938	)
Net Proceeds from Sale of Discontinued Operations		—			21,343
Net Cash Used in Investing Activities - Discontinued Operations		—			(1,759	)
Net Cash Used in Investing Activities		(25,598	)		(18,354	)
Cash Flows from Financing Activities
Change in Checks Written in Excess of Cash		(666	)		(1,236	)
Net Short-Term (Repayments) Borrowings		(37,736	)		37,798
Proceeds from Issuance of Common Stock – net of Issuance Expenses		3,415			4,697
Payments for Retirement of Capital Stock		(53	)		(1,239	)
Proceeds from Issuance of Long-Term Debt		50,000			—
Short-Term and Long-Term Debt Issuance Expenses		(58	)		(4	)
Payments for Retirement of Long-Term Debt		(52	)		(49	)
Dividends Paid and Other Distributions		(11,889	)		(11,498	)
Net Cash Provided by Financing Activities – Continuing Operations		2,961			28,469
Net Cash Used in Financing Activities – Discontinued Operations		—			(1,178	)
Net Cash Provided by Financing Activities		2,961			27,291
Net Change in Cash and Cash Equivalents - Discontinued Operations		—			(430	)
Net Change in Cash and Cash Equivalents		—			157
Cash and Cash Equivalents at Beginning of Period		—			—
Cash and Cash Equivalents at End of Period	$	—		$	157

See accompanying condensed notes to consolidated financial statements.

6

OTTER TAIL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(not audited)

In the opinion of management, Otter Tail Corporation (the Company) has included all adjustments (including normal recurring accruals) necessary for a fair presentation of the consolidated financial statements for the periods presented. The consolidated financial statements and condensed notes thereto should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Because of seasonal and other factors, the earnings for the three months ended March 31, 2016 should not be taken as an indication of earnings for all or any part of the balance of the year.

The following condensed notes are numbered to correspond to numbers of the notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

1. Summary of Significant Accounting Policies

Revenue Recognition

Due to the diverse business operations of the Company, revenue recognition depends on the product produced and sold or service performed. The Company recognizes revenue when the earnings process is complete, evidenced by an agreement with the customer, there has been delivery and acceptance, the price is fixed or determinable and collectability is reasonably assured. In cases where significant obligations remain after delivery, revenue recognition is deferred until such obligations are fulfilled. Provisions for sales returns and warranty costs are recorded at the time of the sale based on historical information and current trends. In the case of derivative instruments, such as Otter Tail Power Company (OTP) 2015 forward energy contracts, marked-to-market and realized gains and losses are recognized on a net basis in revenue in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging. Gains and losses on forward energy contracts subject to regulatory treatment, if any, are deferred and recognized on a net basis in revenue in the period realized.

For the Company’s operating companies recognizing revenue on certain products when shipped, those operating companies have no further obligation to provide services related to such product. The shipping terms used in these instances are FOB shipping point.

Warranty Reserves

Certain products previously sold by the Company carried one to fifteen year warranties. Although the Company engaged in extensive product quality programs and processes, the Company’s warranty obligations have been and may in the future be affected by product failure rates, repair or field replacement costs and additional development costs incurred in correcting product failures. The warranty reserve balances as of March 31, 2016 and December 31, 2015 relate entirely to products that were produced by entities the Company no longer owns prior to the Company selling the assets of those companies. The warranty reserve balance is included in liabilities of discontinued operations. See note 16 to consolidated financial statements.

Fair Value Measurements

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), for recurring fair value measurements. ASC 820 provides a single definition of fair value, requires enhanced disclosures about assets and liabilities measured at fair value and establishes a hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value. The three levels defined by the hierarchy and examples of each level are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed by the New York Stock Exchange and commodity derivative contracts listed on the New York Mercantile Exchange (NYMEX).

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities.

Level 3 – Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation and may include complex and subjective models and forecasts.

7

The following tables present, for each of the hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,315
Corporate Debt Securities – Held by Captive Insurance Company				3,903
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		293
Total Assets	$	2,293	$	8,218
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	107
Total Liabilities			$	107

December 31, 2015 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,235
Corporate Debt Securities – Held by Captive Insurance Company				3,858
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		196
Total Assets	$	2,196	$	8,093
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	199
Total Liabilities			$	199

The valuation techniques and inputs used for the Level 2 fair value measurements in the table above are as follows:

Forward Gasoline Purchase Contracts – These contracts are priced based on NYMEX quoted prices for Reformulated Blendstock for Oxygenate Blending (RBOB) Gasoline contracts. Prices used for the fair valuation of these contracts are based on NYMEX daily reporting date quoted prices for RBOB contracts with the same settlement periods.

Government-Backed and Government-Sponsored Enterprises’ and Corporate Debt Securities Held by the Company’s Captive Insurance Company – Fair values are determined on the basis of valuations provided by a third-party pricing service which utilizes industry accepted valuation models and observable market inputs to determine valuation. Some valuations or model inputs used by the pricing service may be based on broker quotes.

Inventories

Inventories consist of the following:

	March 31,		December 31,
(in thousands)	2016		2015
Finished Goods	$	26,440	$	25,971
Work in Process		12,110		12,821
Raw Material, Fuel and Supplies		46,860		46,624
Total Inventories	$	85,410	$	85,416

8

Goodwill and Other Intangible Assets

On September 1, 2015 Miller Welding & Iron Works, Inc. (BTD-Illinois), a wholly owned subsidiary of BTD Manufacturing, Inc. (BTD), acquired the assets of Impulse Manufacturing, Inc. (Impulse) of Dawsonville, Georgia. The newly acquired business operates under the name BTD-Georgia. Based on the preliminary purchase price allocation, the difference in the fair value of assets acquired and the price paid for Impulse resulted in an initial estimate of acquired goodwill of $8,244,000.

An assessment of the carrying amounts of the remaining goodwill of the Company’s reporting units reported under continuing operations as of December 31, 2015 indicated the fair values are substantially in excess of their respective book values and not impaired.

The following table summarizes changes to goodwill by business segment during 2016:

(in thousands)	Gross Balance December 31, 2015		Accumulated Impairments		Balance (net of impairments) December 31, 2015		Adjustments to Goodwill in 2016		Balance (net of impairments) March 31, 2016
Manufacturing	$	20,430	$	—	$	20,430	$	—	$	20,430
Plastics		19,302		—		19,302		—		19,302
Total	$	39,732	$	—	$	39,732	$	—	$	39,732

Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment in accordance with requirements under ASC Topic 360-10-35, Property, Plant, and Equipment—Overall—Subsequent Measurement. In the first quarter of 2015, OTP began purchasing emission allowances to apply against sulfur dioxide emissions from Hoot Lake Plant. The cost of unused emission allowances is included in intangible assets on the Company’s consolidated balance sheets.

The following table summarizes the components of the Company’s intangible assets at March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Remaining Amortization Periods
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,987	$	14,694	45-233 months
Covenant not to Compete		620		121		499	29 months
Other Intangible Assets		639		575		64	6 months
Emission Allowances		9		NA		9	Expensed as used
Total	$	22,949	$	7,683	$	15,266
December 31, 2015 (in thousands)
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,714	$	14,967	48-236 months
Covenant not to Compete		620		69		551	32 months
Other Intangible Assets		639		543		96	9 months
Emission Allowances		59		NA		59	Expensed as used
Total	$	22,999	$	7,326	$	15,673

The amortization expense for these intangible assets was:

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Amortization Expense – Intangible Assets	$	357	$	244

The estimated annual amortization expense for these intangible assets for the next five years is:

(in thousands)	2016		2017		2018		2019		2020
Estimated Amortization Expense – Intangible Assets	$	1,395	$	1,299	$	1,230	$	1,093	$	1,059

9

Supplemental Disclosures of Cash Flow Information

	As of March 31,
(in thousands)	2016		2015
Noncash Investing Activities:
Transactions Related to Capital Additions not Settled in Cash	$	24,618	$	25,284

Coyote Station Lignite Supply Agreement – Variable Interest Entity—In October 2012, the Coyote Station owners, including OTP, entered into a lignite sales agreement (LSA) with Coyote Creek Mining Company, L.L.C. (CCMC), a subsidiary of The North American Coal Corporation, for the purchase of lignite coal to meet the coal supply requirements of Coyote Station for the period beginning in May 2016 and ending in December 2040. The price per ton to be paid by the Coyote Station owners under the LSA will reflect the cost of production, along with an agreed profit and capital charge. CCMC was formed for the purpose of mining coal to meet the coal fuel supply requirements of Coyote Station from May 2016 through December 2040 and, based on the terms of the LSA, is considered a variable interest entity (VIE) due to the transfer of all operating and economic risk to the Coyote Station owners, as the agreement is structured so that the price of the coal would cover all costs of operations as well as future reclamation costs. The Coyote Station owners are also providing a guarantee of the value of the assets of CCMC as they would be required to buy certain assets at book value should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of CCMC in that they are required to buy the entity at the end of the contract term at equity value. Under current accounting standards, the primary beneficiary of a VIE is required to include the assets, liabilities, results of operations and cash flows of the VIE in its consolidated financial statements. No single owner of Coyote Station owns a majority interest in Coyote Station and none, individually, has the power to direct the activities that most significantly impact CCMC. Therefore, none of the owners individually, including OTP, is considered a primary beneficiary of the VIE and the Company is not required to include CCMC in its consolidated financial statements.

Under the LSA, all development period costs of the Coyote Creek coal mine incurred during the development period will be recovered from the Coyote Station owners over the full term of the production period, which commences with the initial delivery of coal to Coyote Station (anticipated in May 2016), by being included in the cost of production. The development fee and the capital charge incurred during the development period will be recovered from the Coyote Station owners over the first 52 months of the production period by being included in the cost of production during those months. The LSA was amended on March 16, 2015 to provide, among other things, that during any period between December 31, 2016 and any subsequent date on which CCMC makes initial delivery of coal, the Coyote Station owners will pay the following costs of production as advance payments for lignite: depreciation and amortization charges on capital assets and CCMC’s obligations under its loans and leases. In addition, if the LSA terminates prior to the expiration of its term or the production period terminates prior to December 31, 2040 and the Coyote Station owners purchase all of the outstanding membership interests of CCMC as required by the LSA, the owners will satisfy, or (if permitted by CCMC’s applicable lender) assume, all of CCMC’s obligations owed to CCMC’s lenders under its loans and leases. The Coyote Station owners have limited rights to assign their rights and obligations under the LSA without the consent of CCMC’s lenders during any period in which CCMC’s obligations to its lenders remain outstanding. OTP’s 35% share of development period costs, development fees and capital charges incurred by CCMC through March 31, 2016 is $60.3 million. In the event the contract is terminated because regulations or legislation render the burning of coal cost prohibitive and the assets worthless, OTP’s maximum exposure to loss as a result of its involvement with CCMC as of March 31, 2016 could be as high as $60.3 million.

New Accounting Standards

ASU 2014-09—In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASC 606). ASC 606 is a comprehensive, principles-based accounting standard which amends current revenue recognition guidance with the objective of improving revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and the timing of revenue recognition. ASC 606 also requires expanded disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

Amendments to the ASC in ASU 2014-09, as amended, are effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, but not any earlier than January 1, 2017. Application methods permitted are: (1) full retrospective, (2) retrospective using one or more practical expedients and (3) retrospective with the cumulative effect of initial application recognized at the date of initial application. The Company is currently reviewing ASU 2014-09, identifying key impacts to its businesses, reviewing revenue streams and contracts to determine areas where the amendments in ASU 2014-09 will be applicable and evaluating transition options. The Company does not plan to adopt the updated guidance prior to January 1, 2018.

10

ASU 2015-03—In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2015 and must be applied retrospectively to balance sheets presented for periods prior to adoption. The Company adopted the updated standards in ASU 2015-03 in the first quarter of 2016. In conjunction with implementing this update, the Company is reclassifying the remaining balance of unamortized line of credit issuance costs from the deferred debit section of its consolidated balance sheet to other assets, eliminating the deferred debits section of its consolidated balance sheet and displaying long-term regulatory assets as a separate line item on its consolidated balance sheet. The effects of applying the guidance in ASU 2015-03 retrospectively to the Company’s December 31, 2015 consolidated balance sheet and of the associated reclassification of unamortized line of credit issuance costs are shown in the following table:

(in thousands)	Previously Stated		Adjustments			Restated
Other Assets	$	31,108	$	1,676		$	32,784
Unamortized Debt Expense		3,897		(3,897	)		—
Total Assets		1,820,904		(2,221	)		1,818,683
Current Liabilities
Current Maturities of Long-Term Debt		52,544		(122	)		52,422
Total Current Liabilities		271,238		(122	)		271,116
Capitalization
Long-Term Debt—Net		445,945		(2,099	)		443,846
Total Capitalization		1,050,968		(2,099	)		1,048,869
Total Liabilities and Equity		1,820,904		(2,221	)		1,818,683

ASU 2015-11—In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires that inventories be measured at the lower of cost or net realizable value instead of the lower of cost or market value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect the adoption of the updated standard to have a material impact on its consolidated financial statements.

ASU 2016-02—In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is a comprehensive amendment of the ASC, creating Topic 842, which will supersede the current requirements under ASC Topic 840 on leases and require the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. Topic 842 also requires qualitative and specific quantitative disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU 2016-02 is permitted. The Company is currently reviewing ASU 2016-02, identifying key impacts to its businesses to determine areas where the amendments in ASU 2016-02 will be applicable and evaluating transition options. The Company does not currently plan to apply the amendments in ASU 2016-02 to its consolidated financial statements prior to 2019.

ASU 2016-09—In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which is intended to improve and simplify accounting and reporting requirements related to stock-based compensation programs. The amendments in ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Under the updated standard, excess tax benefits related to vested awards recognized in stockholders' equity under prior guidance will be recognized in the income statement when the awards vest, and the level of shares that can be withheld to cover income taxes on awards to satisfy statutory income tax withholding obligations without triggering liability classification has been increased. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

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2. Business Combinations and Segment Information

Business Combinations

On September 1, 2015 BTD-Illinois, a wholly owned subsidiary of BTD, acquired the assets of Impulse of Dawsonville, Georgia for $30.8 million in cash, subject to a post-closing adjustment. Impulse is a full-service metal fabricator located 30 miles north of Atlanta, Georgia. The newly acquired business offers a wide range of metal fabrication services ranging from simple laser cutting services and high volume stamping to complex weldments and assemblies for metal fabrication buyers and original equipment manufacturers and is operating under the name BTD-Georgia. In addition to serving some of BTD’s existing customers from a location closer to the customers’ manufacturing facilities, this acquisition will provide opportunities for growth in new and existing markets for BTD, and complementing production capabilities will expand the capacity of services offered by BTD. Pro forma results of operations have not been presented for this acquisition because the effect of the acquisition was not material to the Company.

Below is condensed balance sheet information, at the date of the business combination, disclosing the preliminary allocation of the purchase price assigned to each major asset and liability category of BTD-Georgia:

(in thousands)
Assets:
Current Assets	$	4,906
Goodwill		8,244
Other Intangible Assets		5,490
Other Amortizable Assets		1,380
Fixed Assets		13,649
Total Assets	$	33,669
Liabilities:
Current Liabilities	$	2,852
Lease Obligation		11
Total Liabilities	$	2,863
Cash Paid	$	30,806

The assignment of asset values is subject to adjustment based on determination of the final purchase price. In the fourth quarter of 2015, the Company elected to early adopt ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company currently expects purchase price adjustments subsequent to March 31, 2016, if any, will result in adjustments to acquired goodwill and not result in adjustments to the Company’s consolidated net income.

Segment Information

The Company's businesses have been classified into three segments to be consistent with its business strategy and the reporting and review process used by the Company’s chief operating decision makers. These businesses sell products and provide services to customers primarily in the United States. The three segments are: Electric, Manufacturing and Plastics.

Electric includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota by OTP. In addition, OTP is a participant in the Midcontinent Independent System Operator, Inc. (MISO) markets. OTP’s operations have been the Company’s primary business since 1907.

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Manufacturing consists of businesses in the following manufacturing activities: contract machining, metal parts stamping, fabrication and painting, and production of material and handling trays and horticultural containers. These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States.

Plastics consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the upper Midwest and Southwest regions of the United States.

OTP is a wholly owned subsidiary of the Company. All of the Company’s other businesses are owned by its wholly owned subsidiary, Varistar Corporation (Varistar). The Company’s corporate operating costs include items such as corporate staff and overhead costs, the results of the Company’s captive insurance company and other items excluded from the measurement of operating segment performance. Corporate assets consist primarily of cash, prepaid expenses, investments and fixed assets. Corporate is not an operating segment. Rather, it is added to operating segment totals to reconcile to totals on the Company’s consolidated financial statements.

No single customer accounted for over 10% of the Company’s consolidated revenues in 2015. All of the Company’s long-lived assets are within the United States and 97.6% and 96.3% of its operating revenues for the respective three month periods ended March 31, 2016 and 2015 came from sales within the United States.

The Company evaluates the performance of its business segments and allocates resources to them based on earnings contribution and return on total invested capital. Information for the business segments for the three months ended March 31, 2016 and 2015 and total assets by business segment as of March 31, 2016 and December 31, 2015 are presented in the following tables:

Operating Revenue

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	112,994		$	113,547
Manufacturing		59,820			56,759
Plastics		33,437			32,552
Intersegment Eliminations		(9	)		(17	)
Total	$	206,242		$	202,841

Interest Charges

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Electric	$	6,284	$	6,121
Manufacturing		992		832
Plastics		244		246
Corporate and Intersegment Eliminations		474		544
Total	$	7,994	$	7,743

Income Taxes

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	4,612		$	4,221
Manufacturing		1,019			504
Plastics		1,367			1,264
Corporate		(1,506	)		(1,916	)
Total	$	5,492		$	4,073

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Net Income (Loss)

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	12,538		$	13,178
Manufacturing		1,853			1,184
Plastics		2,152			2,120
Corporate		(2,053	)		(2,701	)
Discontinued Operations		30			4,154
Total	$	14,520		$	17,935

Identifiable Assets

	March 31,		December 31,
(in thousands)	2016		2015
Electric	$	1,528,157	$	1,520,887
Manufacturing		179,745		173,860
Plastics		87,077		81,624
Corporate		38,378		42,312
Total	$	1,833,357	$	1,818,683

3. Rate and Regulatory Matters

Below are descriptions of OTP’s major capital expenditure projects that have had, or will have, a significant impact on OTP’s revenue requirements, rates and alternative revenue recovery mechanisms, followed by summaries of specific electric rate or rider proceedings with the Minnesota Public Utilities Commission (MPUC), the North Dakota Public Service Commission (NDPSC), the South Dakota Public Utilities Commission (SDPUC) and the Federal Energy Regulatory Commission (FERC), impacting OTP’s revenues in 2016 and 2015.

Major Capital Expenditure Projects

Big Stone Plant Air Quality Control System (AQCS)—OTP completed construction and testing of the Big Stone Plant AQCS in the fourth quarter of 2015 and placed the AQCS into commercial operation on December 29, 2015. The capitalized cost of the project, excluding Allowance for Funds Used During Construction (AFUDC) as of March 31, 2016 was approximately $368 million (OTP’s 53.9% share was approximately $198 million).

Fargo–Monticello 345 kiloVolt (kV) Capacity Expansion 2020 (CapX2020) Project (the Fargo Project)—OTP has invested approximately $81.8 million and has a 14.2% ownership interest in the jointly owned assets of this 240-mile transmission line, and owns 100% of certain assets of the project. The final phase of this project was energized on April 2, 2015.

Brookings–Southeast Twin Cities 345 kV CapX2020 Project (the Brookings Project)—OTP has invested approximately $26.7 million and has a 4.8% ownership interest in this 250-mile transmission line. The MISO granted unconditional approval of the Brookings Project as a Multi-Value Project (MVP) under the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff (MISO Tariff) in December 2011. MVPs are designed to enable the region to comply with energy policy mandates and to address reliability and economic issues affecting multiple areas within the MISO region. The cost allocation is designed to ensure the costs of transmission projects with regional benefits are properly assigned to those who benefit. The final segments of this line were energized on March 26, 2015.

The Big Stone South–Brookings MVP and CapX2020 Project—This 345 kV transmission line, currently under construction, will extend approximately 70 miles between a substation near Big Stone City, South Dakota and the Brookings County Substation near Brookings, South Dakota. OTP and Northern States Power – MN (NSP MN), a subsidiary of Xcel Energy Inc., jointly developed this project. MISO approved this project as an MVP under the MISO Tariff in December 2011. This line is expected to be in service in fall 2017. Construction began on this line in the third quarter of 2015. OTP’s capitalized costs on this project as of March 31, 2016 were approximately $29.6 million, which includes assets that are 100% owned by OTP.

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The Big Stone South–Ellendale MVP—This 345 kV transmission line will extend 160 to 170 miles between a substation near Big Stone City, South Dakota and a substation near Ellendale, North Dakota. OTP is jointly developing this project with Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. (MDU). MISO approved this project as an MVP under the MISO Tariff in December 2011. On July 10, 2014 the NDPSC approved a Certificate of Corridor Compatibility and a route permit for the North Dakota section of the proposed line. On August 22, 2014 the SDPUC issued an order approving the route permit for the South Dakota section of the proposed line. A route permit amendment to shift a portion of the route in North Dakota was approved by the NDPSC on December 16, 2015. On June 12, 2015 OTP and MDU entered into agreements to construct the project. This project is expected to be completed in 2019. OTP’s capitalized costs on this project as of March 31, 2016 were approximately $20.0 million, which includes assets that are 100% owned by OTP.

Recovery of OTP’s major transmission investments is through the MISO Tariff (several as MVPs) and, currently, Minnesota, North Dakota and South Dakota Transmission Cost Recovery (TCR) Riders.

Minnesota

2016 General Rate Case—On February 16, 2016 OTP filed a request with the MPUC for an increase in revenue recoverable under general rates in Minnesota. In its filing, OTP requested an increase in annual revenue of approximately $19.3 million, or 9.8%, based on an allowed rate of return on rate base of 8.07% and an allowed rate of return on equity of 10.4% based on an equity ratio of 52.5% of total capital. Through this rate case proceeding, OTP is proposing to recover, in base rates, revenue currently subject to recovery under Minnesota TCR and Environmental Cost Recovery (ECR) riders. On February 26, 2016 the Minnesota Department of Commerce (MNDOC) concluded that the filing was complete. On April 14, 2016 the MPUC issued an order approving interim rates, as modified, based on an annualized interim rate increase of $16.8 million, or a 9.56% increase to the base rate portion of customer bills, effective for service rendered on or after April 16, 2016.

2010 General Rate Case—OTP’s most recent general rate increase in Minnesota of approximately $5.0 million, or 1.6%, was granted by the MPUC in an order issued on April 25, 2011 and effective October 1, 2011. Pursuant to the order, OTP’s allowed rate of return on rate base increased from 8.33% to 8.61% and its allowed rate of return on equity increased from 10.43% to 10.74%.

Minnesota Conservation Improvement Programs (MNCIP)—OTP recovers conservation related costs not included in base rates under the MNCIP through the use of an annual recovery mechanism approved by the MPUC. OTP requested approval for recovery of its 2014 MNCIP financial incentive and 2014 program costs not included in base rates from the MPUC in an April 1, 2015 filing. On July 9, 2015 the MPUC granted approval of OTP’s 2014 financial incentive of $3.0 million along with an updated surcharge with an effective date of October 1, 2015. Based on results from the 2015 MNCIP program year, OTP recognized a financial incentive of $4.2 million in 2015. The 2015 MNCIP program resulted in approximately a 39% increase in energy savings compared to 2014 program results.

The MNDOC has proposed changes to the MNCIP financial incentive mechanism. OTP’s position is that minimal changes to the MNCIP financial incentive are required as the incentive will naturally be reduced by lower energy savings potential and lower avoided costs. A hearing date for a decision on this docket has not been set by the MPUC. The MNDOC opened an additional docket to investigate how investor-owned utilities calculate their avoided costs pertaining to generation capacity, energy, transmission and distribution. OTP has responded to information requests and submitted comments and reply comments within this docket.

Transmission Cost Recovery Rider—The Minnesota Public Utilities Act provides a mechanism for automatic adjustment outside of a general rate proceeding to recover the costs, plus a return on investment at the level approved in a utility’s last general rate case, of new transmission facilities that meet certain criteria. On February 18, 2015 the MPUC approved OTP’s 2014 TCR rider annual update with an effective date of March 1, 2015. OTP filed an annual update to its Minnesota TCR rider on September 30, 2015 requesting revenue recovery of approximately $7.8 million. A supplemental filing to the update was made on December 21, 2015 to address an issue surrounding the proration of accumulated deferred income taxes and, in an unrelated adjustment, the TCR rider update revenue request was reduced to $7.2 million. On March 9, 2016 the MPUC issued an order approving OTP’s annual update to its TCR rider, with an effective date of April 1, 2016. OTP will be filing an update to its TCR rider on or before May 1, 2016 to incorporate the impact of bonus depreciation for income taxes, an adjusted rate of return on rate base and allocation factors to align with its 2016 general rate case request.

Environmental Cost Recovery Rider—On December 18, 2013 the MPUC granted approval of OTP’s Minnesota ECR rider for recovery of OTP’s Minnesota jurisdictional share of the revenue requirements of its investment in the Big Stone Plant AQCS effective January 1, 2014. The ECR rider recoverable revenue requirements include a current return on the project’s construction work in progress (CWIP) balance at the level approved in OTP’s most recent general rate case. The MPUC approved OTP’s 2014 ECR rider annual update request on November 24, 2014 with an effective date of December 1, 2014.

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OTP filed its 2015 annual update on July 31, 2015, with a request to keep the 2014 annual update rate in place. On December 21, 2015 OTP filed a supplemental filing with updated financial information. The MPUC issued an order on March 9, 2016 approving OTP’s request to leave the 2014 annual update rate in place. On April 29, 2016 OTP filed an update to its ECR rider to incorporate the impact of bonus depreciation for income taxes, an adjusted rate of return on rate base and allocation factors to align with its 2016 general rate case filing.

North Dakota

General Rates—OTP’s most recent general rate increase in North Dakota of $3.6 million, or approximately 3.0%, was granted by the NDPSC in an order issued on November 25, 2009 and effective December 2009. Pursuant to the order, OTP’s allowed rate of return on rate base was set at 8.62%, and its allowed rate of return on equity was set at 10.75%.

Renewable Resource Adjustment—OTP has a North Dakota Renewable Resource Adjustment (NDRRA) which enables OTP to recover the North Dakota share of its investments in renewable energy facilities it owns in North Dakota. This rider allows OTP to recover costs associated with new renewable energy projects as they are completed with a return on investment at the level approved in OTP's most recent general rate case. On March 25, 2015 the NDPSC approved OTP’s 2014 annual update to the NDRRA rider, including a change in rate design from an amount per kwh consumed to a percentage of a customer’s bill, with an effective date of April 1, 2015. OTP submitted its 2015 annual update to the NDRRA rider rate on December 31, 2015 with a requested implementation date of April 1, 2016. On February 25, 2016 OTP made a supplemental filing to address the impact of bonus depreciation for income taxes and related deferred tax assets on the NDRRA, as well as an adjustment to the estimated amount of PTC used. The NDPSC held a hearing on this matter on April 27, 2016. The Commission is expected to rule on the requested update before the end of the second quarter of 2016.

Transmission Cost Recovery Rider—North Dakota law provides a mechanism for automatic adjustment outside of a general rate proceeding to recover jurisdictional capital and operating costs incurred by a public utility for new or modified electric transmission facilities. For qualifying projects, the law authorizes a current return on CWIP and a return on investment at the level approved in the utility's most recent general rate case. The NDPSC approved OTP’s 2014 annual update to its TCR rider rate on December 17, 2014 with an effective date of January 1, 2015. On August 31, 2015 OTP filed its 2015 annual update to its North Dakota TCR rider rate requesting recovery of approximately $10.2 million for 2016 compared with $8.5 million for 2015, including costs assessed by the MISO as well as new costs from the Southwest Power Pool (SPP) that OTP began incurring January 1, 2016. These new costs are associated with OTP’s load connected to the transmission system of Central Power Electric Cooperative (CPEC) that will become subject to SPP transmission-related charges when CPEC transmission assets are added to the SPP. The NDPSC approved OTP’s 2015 annual update to its TCR rider rate on December 16, 2015, with an effective date of January 1, 2016.

Environmental Cost Recovery Rider— On February 8, 2013 OTP filed a request with the NDPSC for an ECR rider to recover OTP’s North Dakota jurisdictional share of the revenue requirements associated with its investment in the Big Stone Plant AQCS. On December 18, 2013 the NDPSC approved OTP’s North Dakota ECR rider based on revenue requirements through the 2013 calendar year and thereafter, with rates effective for bills rendered on or after January 1, 2014. The ECR provides for a current return on CWIP and a return on investment at the level approved in OTP’s most recent general rate case. The NDPSC approved OTP’s 2014 ECR rider annual update request on July 10, 2014 with an August 1, 2014 implementation date. On March 31, 2015 OTP filed its annual update to the ECR. This update included a request to increase the ECR rider rate from 7.531% to 9.193% of base rates. The NDPSC approved the annual update on June 17, 2015 with an effective date of July 1, 2015, along with the approval of recovery of OTP’s North Dakota jurisdictional share of Hoot Lake Plant Mercury and Air Toxics Standards (MATS) project costs. On March 31, 2016 OTP filed its annual update to the ECR rider requesting a reduction in the rate from 9.193% to 7.904% of base rates, or a revenue requirement reduction from $12.2 million to $10.4 million, effective July 1, 2016. The rate reduction request is primarily due to the Company’s 2015 bonus depreciation election for income taxes, which reduces revenue requirements.

Reagent Costs and Emission Allowances—On July 31, 2014 OTP filed a request with the NDPSC to revise its Fuel Clause Adjustment (FCA) rider in North Dakota to include recovery of new reagent and emission allowance costs. On February 25, 2015 the NDPSC approved recovery of these costs through modification of the ECR rider, instead of recovery through the FCA as OTP had proposed. The ECR rider reagent and emissions allowance charge became effective May 1, 2015.

South Dakota

2010 General Rate Case—OTP’s most recent general rate increase in South Dakota of approximately $643,000 or approximately 2.32% was granted by the SDPUC in an order issued on April 21, 2011 and effective with bills rendered on and after June 1, 2011. Pursuant to the order, OTP’s allowed rate of return on rate base was set at 8.50%.

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Transmission Cost Recovery Rider—South Dakota law provides a mechanism for automatic adjustment outside of a general rate proceeding to recover jurisdictional capital and operating costs incurred by a public utility for new or modified electric transmission facilities. The SDPUC approved OTP’s 2014 annual update on February 13, 2015 with an effective date of March 1, 2015. OTP filed its 2015 annual update on October 30, 2015 with a proposed effective date of March 1, 2016. A supplemental filing was made on February 3, 2016 to true-up the filing to include the impact of bonus depreciation elected for 2015, the inclusion of a deferred tax asset relating to a net operating loss and the proration of accumulated deferred income taxes. On February 12, 2016, the SDPUC approved OTP’s annual update to its TCR rider, with an effective date of March 1, 2016. This update included the recovery of new SPP transmission costs OTP began to incur on January 1, 2016.

Environmental Cost Recovery Rider—On November 25, 2014 the SDPUC approved OTP’s ECR rider request to recover OTP’s South Dakota jurisdictional share of revenue requirements associated with its investment in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects, with an effective date of December 1, 2014. On August 31, 2015 OTP filed its annual update to the South Dakota ECR requesting recovery of approximately $2.7 million in annual revenue. The SDPUC approved the request on October 15, 2015 with an effective date of November 1, 2015.

Reagent Costs and Emission Allowances—On August 1, 2014 OTP filed a request with the SDPUC to revise its FCA rider in South Dakota to include recovery of reagent and emission allowance costs. On September 16, 2014 the SDPUC approved OTP’s request to include recovery of these costs in its South Dakota FCA rider.

Revenues Recorded under Rate Riders

The following table presents revenue recorded by OTP under rate riders in place in Minnesota, North Dakota and South Dakota for the three month periods ended March 31:

Rate Rider (in thousands)	2016		2015
Minnesota
Conservation Improvement Program Costs and Incentives1	$	2,506	$	1,928
Transmission Cost Recovery		2,276		1,615
Environmental Cost Recovery		3,082		2,557
North Dakota
Renewable Resource Adjustment		2,059		1,883
Transmission Cost Recovery		2,236		1,936
Environmental Cost Recovery		2,811		2,156
South Dakota
Transmission Cost Recovery		651		363
Environmental Cost Recovery		633		504
Conservation Improvement Program Costs and Incentives		159		140

¹Includes MNCIP costs recovered in base rates.

FERC

Multi-Value Transmission Projects—On December 16, 2010 the FERC approved the cost allocation for a new classification of projects in the MISO region called MVPs. MVPs are designed to enable the region to comply with energy policy mandates and to address reliability and economic issues affecting multiple transmission zones within the MISO region. The cost allocation is designed to ensure that the costs of transmission projects with regional benefits are properly assigned to those who benefit. On October 20, 2011 the FERC reaffirmed the MVP cost allocation on rehearing.

Effective January 1, 2012 the FERC authorized OTP to recover 100% of prudently incurred CWIP and Abandoned Plant Recovery on two projects approved by MISO as MVPs in MISO’s 2011 Transmission Expansion Plan: the Big Stone South–Brookings MVP and the Big Stone South–Ellendale MVP.

On November 12, 2013 a group of industrial customers and other stakeholders filed a complaint with the FERC seeking to reduce the return on equity (ROE) component of the transmission rates that MISO transmission owners, including OTP, may collect under the MISO Tariff. The complainants are seeking to reduce the current 12.38% ROE used in MISO’s transmission rates to a proposed 9.15%. On October 16, 2014 the FERC issued an order finding that the current MISO ROE may be unjust and unreasonable and setting the issue for hearing. An initial decision by the presiding administrative law judge (ALJ) was issued on December 22, 2015 finding that the MISO transmission owners’ ROE should be 10.32%. The FERC is expected to issue its order later in 2016. On November 6, 2014 a group of MISO transmission owners, including OTP, filed for a FERC incentive of an additional 50-basis points for Regional Transmission Organization participation (RTO Adder). On January 5,  

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2015 the FERC granted the request, deferring collection of the RTO Adder until the FERC issues its order in the ROE complaint proceeding.

On February 12, 2015 another group of stakeholders filed a complaint with the FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including OTP, may collect under the MISO Tariff from the current 12.38% to a proposed 8.67%. The FERC issued an order on June 18, 2015 setting the complaint for hearing and hearings were held the week of February 16, 2016. The ALJ is scheduled to issue an initial decision by June 30, 2016. A decision by the FERC is not expected until 2017.

Based on a potential reduction by the FERC in the ROE component of the MISO Tariff, OTP recorded reductions in revenue of $0.3 million and $0.6 million in the three month periods ended March 31, 2016 and 2015, respectively, and has a $1.4 million liability on its balance sheet as of March 31, 2016, representing OTP’s best estimate of a refund obligation, net of amounts that would be subject to recovery under state jurisdictional TCR riders.

4. Regulatory Assets and Liabilities

As a regulated entity, OTP accounts for the financial effects of regulation in accordance with ASC Topic 980, Regulated Operations (ASC 980). This accounting standard allows for the recording of a regulatory asset or liability for costs that will be collected or refunded in the future as required under regulation. Additionally, ASC 980-605-25 provides for the recognition of revenues authorized for recovery outside of a general rate case under alternative revenue programs which provide for recovery of costs and incentives or returns on investment in such items as transmission infrastructure, renewable energy resources or conservation initiatives. The following tables indicate the amount of regulatory assets and liabilities recorded on the Company’s consolidated balance sheets:

	March 31, 2016						Remaining Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	97,908	$	105,347	see below
Deferred Marked-to-Market Losses1		4,063		9,515		13,578	57 months
Conservation Improvement Program Costs and Incentives2		2,789		5,065		7,854	27 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,791		5,791	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		826		2,634		3,460	60 months
North Dakota Renewable Resource Rider Accrued Revenues2		1,501		305		1,806	21 months
Debt Reacquisition Premiums1		351		1,451		1,802	198 months
Deferred Income Taxes1		—		1,351		1,351	asset lives
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		763		227		990	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		618		718	86 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		559		—		559	12 months
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		245		—		245	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	12 months
Total Regulatory Assets	$	18,636	$	124,933	$	143,569
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	75,468	$	75,468	asset lives
Refundable Fuel Clause Adjustment Revenues		3,294		—		3,294	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,403		1,403	24 months
Deferred Income Taxes		—		1,043		1,043	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		982		—		982	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		787		—		787	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		602		—		602	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		342		—		342	12 months
Minnesota Transmission Cost Recovery Rider Accrued Refund		183		—		183	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		6		93		99	213 months
Total Regulatory Liabilities	$	6,196	$	78,007	$	84,203
Net Regulatory Asset Position	$	12,440	$	46,926	$	59,366

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

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	December 31, 2015						Remaining Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	99,293	$	106,732	see below
Deferred Marked-to-Market Losses1		4,063		10,530		14,593	60 months
Conservation Improvement Program Costs and Incentives2		4,411		4,266		8,677	18 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,672		5,672	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		942		2,620		3,562	84 months
Debt Reacquisition Premiums1		351		1,539		1,890	201 months
Deferred Income Taxes1		—		1,455		1,455	asset lives
North Dakota Renewable Resource Rider Accrued Revenues2		—		1,266		1,266	15 months
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		698		355		1,053	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		643		743	89 months
Minnesota Transmission Cost Recovery Rider Accrued Revenues2		576		—		576	12 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		291		—		291	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	see below
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		33		—		33	12 months
Total Regulatory Assets	$	18,904	$	127,707	$	146,611
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	74,948	$	74,948	asset lives
Refundable Fuel Clause Adjustment Revenues		1,834		—		1,834	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,279		1,279	see below
Deferred Income Taxes		—		1,110		1,110	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		777		—		777	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		321		—		321	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		185		—		185	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		132		—		132	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		5		95		100	216 months
North Dakota Renewable Resource Rider Accrued Refund		68		—		68	12 months
Total Regulatory Liabilities	$	3,322	$	77,432	$	80,754
Net Regulatory Asset Position	$	15,582	$	50,275	$	65,857

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

The regulatory asset related to prior service costs and actuarial losses on pensions and other postretirement benefits represents benefit costs and actuarial losses subject to recovery through rates as they are expensed over the remaining service lives of active employees included in the plans. These unrecognized benefit costs and actuarial losses are required to be recognized as components of Accumulated Other Comprehensive Income in equity under ASC Topic 715, Compensation—Retirement Benefits, but are eligible for treatment as regulatory assets based on their probable recovery in future retail electric rates.

All Deferred Marked-to-Market Losses recorded as of March 31, 2016 relate to forward purchases of energy scheduled for delivery through December 2020.

Conservation Improvement Program Costs and Incentives represent mandated conservation expenditures and incentives recoverable through retail electric rates.

The Accumulated Asset Retirement Obligation (ARO) Accretion/Depreciation Adjustment will accrete and be amortized over the lives of property with asset retirement obligations.

Big Stone II Unrecovered Project Costs – Minnesota are the Minnesota share of generation and transmission plant-related costs incurred by OTP related to its participation in the abandoned Big Stone II project.

North Dakota Renewable Resource Rider Accrued Revenues relate to qualifying renewable resource costs incurred to serve North Dakota customers that have not been billed to North Dakota customers as of March 31, 2016.

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Debt Reacquisition Premiums are being recovered from OTP customers over the remaining original lives of the reacquired debt issues, the longest of which is 198 months.

The regulatory assets and liabilities related to Deferred Income Taxes result from changes in statutory tax rates accounted for in accordance with ASC Topic 740, Income Taxes.

MISO Schedule 26/26A Transmission Cost Recovery Rider True-up relates to the over/under collection of revenue based on comparison of the expected versus actual construction on eligible projects in the period. The true-up also includes the state jurisdictional portion of MISO Schedule 26/26A for regional transmission cost recovery that was included in the calculation of the state transmission riders and subsequently adjusted to reflect actual billing amounts in the schedule.

Big Stone II Unrecovered Project Costs – South Dakota are the South Dakota share of generation and transmission plant-related costs incurred by OTP related to its participation in the abandoned Big Stone II project.

Minnesota Deferred Rate Case Expenses Subject to Recovery relate to costs incurred in conjunction with OTP’s 2016 rate case in Minnesota that will be subject to recovery after new rates go into effect subsequent to the completion of the rate case.

The South Dakota Transmission Cost Recovery Rider Accrued Revenues relate to revenues earned on qualifying transmission system facilities that have not been billed to South Dakota customers as of March 31, 2016.

Minnesota Renewable Resource Rider Accrued Revenues relate to revenues earned on qualifying renewable resource costs incurred to serve Minnesota customers that have not been billed to Minnesota customers. On April 4, 2013 the MPUC approved OTP’s request to set the rider rate to zero effective May 1, 2013 and authorized that any unrecovered balance be retained as a regulatory asset to be recovered during the current interim rate period.

The Accumulated Reserve for Estimated Removal Costs – Net of Salvage is reduced as actual removal costs, net of salvage revenues, are incurred.

Revenue for Rate Case Expenses Subject to Refund – Minnesota relates to revenues collected under general rates to recover costs related to prior rate case proceedings in excess of the actual costs incurred, which are subject to refund.

The Minnesota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the Minnesota share of OTP’s investment in the Big Stone Plant AQCS project that are refundable to Minnesota customers as of March 31, 2016.

The North Dakota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the North Dakota share of OTP’s investments in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects that are refundable to North Dakota customers as of March 31, 2016.

The North Dakota Transmission Cost Recovery Rider Accrued Refund relates to amounts collected for qualifying transmission system facilities and operating costs incurred to serve North Dakota customers that are refundable to North Dakota customers as of March 31, 2016.

The South Dakota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the South Dakota share of OTP’s investments in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects that are refundable to South Dakota customers as of March 31, 2016.

Minnesota Transmission Cost Recovery Rider Accrued Refund relates to amounts collected for qualifying renewable resource costs incurred to serve Minnesota customers that are refundable to Minnesota customers as of March 31, 2016.

If for any reason OTP ceases to meet the criteria for application of guidance under ASC 980 for all or part of its operations, the regulatory assets and liabilities that no longer meet such criteria would be removed from the consolidated balance sheet and included in the consolidated statement of income as an expense or income item in the period in which the application of guidance under ASC 980 ceases.

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5. Open Contract Positions Subject to Legally Enforceable Netting Arrangements

OTP has certain derivative contracts that are designated as normal purchases. Individual counterparty exposures for these contracts can be offset according to legally enforceable netting arrangements. However, the Company does not net offsetting assets and liabilities under legally enforceable netting arrangements on the face of its consolidated balance sheet. The following table shows forward contract positions subject to legally enforceable netting arrangements as of March 31, 2016 and December 31, 2015:

(in thousands)	March 31, 2016			December 31, 2015
Open Contract Gain Positions Subject to Legally Enforceable Netting Arrangements	$	—		$	—
Open Contract Loss Positions Subject to Legally Enforceable Netting Arrangements		(18,264	)		(16,070	)
Net Balance Subject to Legally Enforceable Netting Arrangements	$	(18,264	)	$	(16,070	)

The following table provides a breakdown of OTP’s credit risk standing on forward energy contracts in loss positions as of March 31, 2016 and December 31, 2015:

Loss Position  (in thousands)	March 31, 2016		December 31, 2015
Loss Contracts Covered by Deposited Funds or Letters of Credit	$	107	$	199
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade1		18,157		15,871
Loss Contracts with No Ratings Triggers or Deposit Requirements		—		—
Loss Position	$	18,264	$	16,070
1Certain OTP derivative energy contracts contain provisions that require an investment grade credit rating from each of the major credit rating agencies on OTP’s debt. If OTP’s debt ratings were to fall below investment grade, the counterparties to these forward energy contracts could request the immediate deposit of cash to cover contracts in net liability positions.
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade	$	18,157	$	15,871
Offsetting Gains with Counterparties under Master Netting Agreements		—		—
Reporting Date Deposit Requirement if Credit Risk Feature Triggered	$	18,157	$	15,871

6. Reconciliation of Common Shareholders’ Equity, Common Shares and Earnings Per Share

Reconciliation of Common Shareholders’ Equity

(in thousands)	Par Value, Common Shares			Premium on Common Shares			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Total Common Equity
Balance, December 31, 2015	$	189,286		$	293,610		$	126,025		$	(3,898	)	$	605,023
Common Stock Issuances, Net of Expenses		1,080			4,410									5,490
Common Stock Retirements		(9	)		(44	)								(53	)
Net Income								14,520						14,520
Other Comprehensive Income											140			140
Employee Stock Incentive Plans Expense					489									489
Common Dividends ($0.3125 per share)								(11,889	)					(11,889	)
Balance, March 31, 2016	$	190,357		$	298,465		$	128,656		$	(3,758	)	$	613,720

Shelf Registration

The Company’s shelf registration statement filed with the Securities and Exchange Commission on May 11, 2015, under which the Company may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement, including common shares of the Company, expires on May 11, 2018. On May 11, 2015, the Company entered into a Distribution Agreement with J.P. Morgan Securities (JPMS) under which it may offer and sell its common shares from time to time in an At-the-Market offering program through JPMS, as its distribution agent, up to an aggregate sales price of $75 million.

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Common Shares

Following is a reconciliation of the Company’s common shares outstanding from December 31, 2015 through March 31, 2016:

Common Shares Outstanding, December 31, 2015	37,857,186
Issuances:
Executive Stock Performance Awards (2013 and 2014 shares earned)	54,700
Automatic Dividend Reinvestment and Share Purchase Plan:
Dividends Reinvested	49,635
Cash Invested	49,281
Employee Stock Purchase Plan:
Cash Invested	21,819
Dividends Reinvested	7,153
Employee Stock Ownership Plan	23,837
Vesting of Restricted Stock Units	9,675
Retirements:
Shares Withheld for Individual Income Tax Requirements	(1,868	)
Common Shares Outstanding, March 31, 2016	38,071,418

Earnings Per Share

The numerator used in the calculation of both basic and diluted earnings per common share is net income for the three month periods ended March 31, 2016 and 2015. The denominator used in the calculation of basic earnings per common share is the weighted average number of common shares outstanding during the period excluding nonvested restricted shares granted to the Company’s directors and employees, which are considered contingently returnable and not outstanding for the purpose of calculating basic earnings per share. The denominator used in the calculation of diluted earnings per common share is derived by adjusting basic shares outstanding for the items listed in the following reconciliation for the three month periods ended March 31:

	2016		2015
Weighted Average Common Shares Outstanding – Basic		37,936,943		37,243,118
Plus Outstanding Share Awards net of Share Reductions for Unrecognized Stock-Based Compensation Expense and Excess Tax Benefits:
Shares Expected to be Awarded for Stock Performance Awards Granted to Executive Officers based on Measurement Period-to-Date Performance		46,885		137,460
Underlying Shares Related to Nonvested Restricted Stock Units Granted to Employees		39,841		42,540
Nonvested Restricted Shares		17,776		49,998
Shares Expected to be Issued Under the Deferred Compensation Program for Directors		3,763		24,277
Potentially Dilutive Stock Options		—		488
Total Dilutive Shares		108,265		254,763
Weighted Average Common Shares Outstanding – Diluted		38,045,208		37,497,881

The effect of dilutive shares on earnings per share for the three month periods ended March 31, 2016 and 2015, resulted in no differences greater than $0.01 between basic and diluted earnings per share in total or from continuing or discontinued operations in either period.

7. Share-Based Payments

Stock Incentive Awards

On February 4, 2016 the following stock incentive awards were granted to the Company’s executive officers under the 2014 Stock Incentive Plan:

Award	Shares/ Units Granted		Weighted Average Grant-Date Fair Value per Award		Vesting
Restricted Stock Units Granted to Executive Officers		22,000	$	28.915	25% per year through February 6, 2020
Stock Performance Awards Granted to Executive Officers		81,500	$	24.03	December 31, 2018

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The vesting of restricted stock units is accelerated in the event of a change in control, disability, death or retirement, subject to proration on retirement in certain cases. All restricted stock units granted to executive officers are eligible to receive dividend equivalent payments on all unvested awards over the awards’ respective vesting periods, subject to forfeiture under the terms of the restricted stock unit award agreements. The grant-date fair value of each restricted stock unit was the average of the high and low market price per share on the date of grant.

Under the 2016 performance share award agreements the aggregate award for performance at target is 81,500 shares. For target performance the Company’s executive officers would earn an aggregate of 54,333 common shares based on the Company’s total shareholder return relative to the total shareholder return of the companies that comprise the Edison Electric Institute Index over the performance measurement period of January 1, 2016 through December 31, 2018, with the beginning and ending share values based on the average closing price of a share of the Company’s common stock for the 20 trading days immediately following January 1, 2016 and the average closing price for the 20 trading days immediately preceding January 1, 2019, respectively. The Company’s executive officers would also earn an aggregate of 27,167 common shares for achieving the target set for the Company’s 3-year average adjusted return on equity. Actual payment may range from zero to 150% of the target amount, or up to an aggregate of 122,250 common shares. The executive officers have no voting or dividend rights related to these shares until the shares, if any, are issued at the end of the performance measurement period. The terms of these awards are such that the entire award will be classified and accounted for as a liability, as required under ASC Topic 718, Compensation—Stock Compensation, and will be measured over the performance period based on the fair value of the award at the end of each reporting period subsequent to the grant date.

Under the 2016 performance share award agreements, payment and the amount of payment in the event of retirement, resignation for good reason or involuntary termination without cause is to be made at the end of the performance period based on actual performance, subject to proration in certain cases, except that the payment of performance awards granted to certain officers who are parties to executive employment agreements with the Company is to be made at the target amount at the date of any such event. The vesting of these performance share award agreements is accelerated and paid out at target in the event of a change in control, disability or death (and on retirement at or after the age of 62 for certain officers who are parties to executive employment agreements with the Company).

The end of the period over which compensation expense is recognized for the above share-based awards for the individual grantees is the shorter of the indicated vesting period for the respective awards or the date the grantee becomes eligible for retirement as defined in their award agreement.

As of March 31, 2016 the remaining unrecognized compensation expense related to outstanding, unvested stock-based compensation was approximately $4.5 million (before income taxes) which will be amortized over a weighted-average period of 2.7 years.

Amounts of compensation expense recognized under the Company’s six stock-based payment programs for the three month periods ended March 31, 2016 and 2015 are presented in the table below:

	Three months ended
	March 31,
(in thousands)	2016		2015
Stock Performance Awards Granted to Executive Officers	$	537	$	1,020
Restricted Stock Units Granted to Executive Officers		245		253
Restricted Stock Granted to Executive Officers		29		157
Restricted Stock Granted to Directors		107		98
Restricted Stock Units Granted to Non-Executive Employees		64		66
Employee Stock Purchase Plan (15% discount)		44		49
Totals	$	1,026	$	1,643

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8. Retained Earnings Restriction

The Company is a holding company with no significant operations of its own. The primary source of funds for payments of dividends to the Company’s shareholders is from dividends paid or distributions made by the Company’s subsidiaries. As a result of certain statutory limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by the Company’s subsidiaries.

Both the Company and OTP credit agreements contain restrictions on the payment of cash dividends upon a default or event of default. An event of default would be considered to have occurred if the Company did not meet certain financial covenants. As of March 31, 2016 the Company was in compliance with these financial covenants. See note 10 to the Company’s consolidated financial statements on Form 10-K for the year ended December 31, 2015 for further information on the covenants.

Under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account. What constitutes “funds properly included in a capital account” is undefined in the Federal Power Act or the related regulations; however, FERC has consistently interpreted the provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividend is not excessive and (3) there is no self-dealing on the part of corporate officials.

The MPUC indirectly limits the amount of dividends OTP can pay to the Company by requiring an equity-to-total-capitalization ratio between 46.9% and 57.3%. OTP’s equity to total capitalization ratio including short-term debt was 52.0% as of March 31, 2016. Total capitalization for OTP cannot currently exceed $1,056,300,000.

9. Commitments and Contingencies

Construction and Other Purchase Commitments

At December 31, 2015 OTP had commitments under contracts, including its share of construction program commitments extending into 2019, of approximately $89.6 million. At March 31, 2016 OTP had commitments under contracts, including its share of construction program commitments, extending into 2019, of approximately $102.9 million.

Electric Utility Capacity and Energy Requirements and Coal and Delivery Contracts

OTP has commitments for the purchase of capacity and energy requirements under agreements extending into 2040. OTP has contracts providing for the purchase and delivery of a significant portion of its current coal requirements. OTP’s current coal purchase agreements, under which OTP is committed to the minimum purchase amounts or to make payments in lieu thereof, expire in 2016, 2017 and 2040. In January 2016, OTP entered into an agreement with Cloud Peak Energy Resources LLC for the purchase of subbituminous coal for Hoot Lake Plant for the period of January 1, 2016 through December 31, 2023. OTP has no fixed minimum purchase requirements under the agreement but all of Hoot Lake Plant’s coal requirements for the period covered must be purchased under this agreement.

Operating Leases

OTP has obligations to make future operating lease payments primarily related to land leases and coal rail-car leases. The Company’s nonelectric companies have obligations to make future operating lease payments primarily related to leases of buildings and manufacturing equipment.

Contingencies

Contingencies, by their nature, relate to uncertainties that require the Company’s management to exercise judgment both in assessing the likelihood a liability has been incurred as well as in estimating the amount of potential loss. The most significant contingencies impacting the Company’s consolidated financial statements are those related to environmental remediation, risks associated with indemnification obligations under divestitures of discontinued operations and litigation matters. Should all of these known items result in liabilities being incurred, the loss could be as high as $1.0 million.

Based on a potential reduction by the FERC in the ROE component of the MISO Tariff, OTP has recorded a $1.4 million liability on its balance sheet as of March 31, 2016, representing OTP’s best estimate of a refund obligation, net of amounts that would be subject to recovery under state jurisdictional TCR riders.

In 2014, the EPA published proposed standards of performance for CO2 emissions from new fossil fuel-fired power plants, proposed CO2 emission guidelines for existing fossil fuel-fired power plants and proposed CO2 standards of performance for CO2 emissions from reconstructed and modified fossil fuel-fired power plants under section 111 of the Clean Air Act, essentially requiring that such plants install updated control technology when constructing, modifying or reconstructing to reduce their emissions. The EPA published final rules for each of these proposals on October 23, 2015. On February 9, 2016

24

the U.S. Supreme Court granted a stay of the CO2 emission guidelines for existing fossil fuel-fired power plants, pending disposition of petitions for review in the D.C. Circuit and disposition of a petition for a writ of certiorari seeking review by the U.S. Supreme Court, if such a writ is sought. Oral argument before the D.C. Circuit is scheduled for June 2016. Uncertainty regarding the status of the rules will likely continue for some time. OTP is actively engaged with the stakeholder processes in each of its states that have continued to move forward with planning efforts during the stay.

Other

The Company is a party to litigation and regulatory enforcement matters arising in the normal course of business. The Company regularly analyzes current information and, as necessary, provides accruals for liabilities that are probable of occurring and that can be reasonably estimated. The Company believes the effect on its consolidated results of operations, financial position and cash flows, if any, for the disposition of all matters pending as of March 31, 2016 will not be material.

10. Short-Term and Long-Term Borrowings

The following table presents the status of our lines of credit as of March 31, 2016 and December 31, 2015:

(in thousands)	Line Limit		In Use on March 31, 2016		Restricted due to Outstanding Letters of Credit		Available on March 31, 2016		Available on December 31, 2015
Otter Tail Corporation Credit Agreement	$	150,000	$	20,880	$	—	$	129,120	$	90,334
OTP Credit Agreement		170,000		22,056		—		147,944		148,694
Total	$	320,000	$	42,936	$	—	$	277,064	$	239,028

Debt Issuances and Retirements

On February 5, 2016 the Company entered into a Term Loan Agreement (the Term Loan Agreement) with the Banks named therein, JPMorgan Chase Bank, N.A., as administrative agent, and JPMS, as Lead Arranger and Book Runner. The Term Loan Agreement provides for an unsecured term loan with an aggregate commitment of $50 million that the Company may use for purposes of funding working capital, capital expenditures and other corporate purposes of the Company and certain of our subsidiaries. Under the Term Loan Agreement, the Company may, on up to two occasions, enter into additional tranches of term loans in minimum increments of $10 million, subject to the consent of the lenders and so long as the aggregate amount of outstanding term loans does not exceed $100 million at any time. Borrowings under the Term Loan Agreement will bear interest at either (1) LIBOR plus 0.90% or (2) the greater of (a) the Prime Rate, (b) the Federal Reserve Bank of New York Rate plus 0.50% and (c) LIBOR multiplied by the Statutory Reserve Rate plus 1%. The applicable interest rate will depend on the Company’s election of whether to make the advance a LIBOR advance. The Term Loan Agreement terminates on February 5, 2018. The Term Loan Agreement contains a number of restrictions on the Company, Varistar and certain subsidiaries of Varistar, including restrictions on their ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party and engage in transactions with related parties. The Term Loan Agreement also contains affirmative covenants and events of default, and certain financial covenants. Specifically, the Company must not permit the ratio of its Interest-bearing Debt to Total Capitalization to be greater than 0.60 to 1.00 or permit its Interest and Dividend Coverage Ratio to be less than 1.50 to 1.00 (each measured on a consolidated basis), as provided in the Term Loan Agreement. The Term Loan Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in the Company’s credit ratings. The Company’s obligations under the Term Loan Agreement are guaranteed by Varistar and certain of its subsidiaries.

On February 5, 2016 the Company borrowed $50 million under the Term Loan Agreement at an interest rate based on the 30 day LIBOR plus 90 basis points and used the proceeds to pay down borrowings under the Otter Tail Corporation Credit Agreement that were used to fund the expansion of BTD’s Minnesota facilities in 2015 and to fund the September 1, 2015 acquisition of BTD-Georgia.

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The following tables provide a breakdown of the assignment of the Company’s consolidated short-term and long-term debt outstanding as of March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	OTP		Otter Tail Corporation		Otter Tail Corporation Consolidated
Short-Term Debt	$	22,056	$	20,880	$	42,936
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Term Loan, LIBOR plus 0.90%, due February 5, 2018				50,000		50,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				163		163
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				944		944
Total	$	445,000	$	103,437	$	548,437
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,457		52,457
Unamortized Long-Term Debt Issuance Costs		2,039		140		2,179
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,961	$	50,840	$	493,801
Total Short-Term and Long-Term Debt (with current maturities)	$	465,017	$	124,177	$	589,194

December 31, 2015 (in thousands)	OTP		Otter Tail Corporation		Otter Tail Corporation Consolidated
Short-Term Debt	$	21,006	$	59,666	$	80,672
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				182		182
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				977		977
Total	$	445,000	$	53,489	$	498,489
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,422		52,422
Unamortized Long-Term Debt Issuance Costs		2,099		122		2,221
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,901	$	945	$	443,846
Total Short-Term and Long-Term Debt (with current maturities)	$	463,907	$	113,033	$	576,940

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11. Pension Plan and Other Postretirement Benefits

Pension Plan—Components of net periodic pension benefit cost of the Company's noncontributory funded pension plan are as follows:

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	1,382		$	1,500
Interest Cost on Projected Benefit Obligation		3,522			3,325
Expected Return on Assets		(4,867	)		(4,600	)
Amortization of Prior-Service Cost:
From Regulatory Asset		47			47
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		1,227			1,633
From Other Comprehensive Income1		31			40
Net Periodic Pension Cost	$	1,343		$	1,946
1Corporate cost included in Other Nonelectric Expenses.

Cash flows—The Company made discretionary plan contributions totaling $10,000,000 in January 2016. The Company currently is not required and does not expect to make an additional contribution to the plan in 2016. The Company also made discretionary plan contributions totaling $10,000,000 in January 2015.

Executive Survivor and Supplemental Retirement Plan—Components of net periodic pension benefit cost of the Company’s unfunded, nonqualified benefit plan for executive officers and certain key management employees are as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Service Cost—Benefit Earned During the Period	$	63	$	47
Interest Cost on Projected Benefit Obligation		417		381
Amortization of Prior-Service Cost:
From Regulatory Asset		4		4
From Other Comprehensive Income1		9		10
Amortization of Net Actuarial Loss:
From Regulatory Asset		73		83
From Other Comprehensive Income2		112		151
Net Periodic Pension Cost	$	678	$	676
1Amortization of Prior Service Costs from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	4	$	4
Other Nonelectric Expenses		5		6
2Amortization of Net Actuarial Loss from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	68	$	78
Other Nonelectric Expenses		44		73

Postretirement Benefits—Components of net periodic postretirement benefit cost for health insurance and life insurance benefits for retired OTP and corporate employees, net of the effect of Medicare Part D Subsidy:

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	306		$	375
Interest Cost on Projected Benefit Obligation		541			550
Amortization of Prior-Service Cost:
From Regulatory Asset		33			51
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		—			48
From Other Comprehensive Income1		—			1
Net Periodic Postretirement Benefit Cost	$	881		$	1,026
Effect of Medicare Part D Subsidy	$	(257	)	$	(450	)
1 Corporate cost included in Other Nonelectric Expenses.

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12. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Short-Term Debt—The carrying amount approximates fair value because the debt obligations are short-term and the balances outstanding as of March 31, 2016 and December 31, 2015 related to the Otter Tail Corporation Credit Agreement and the OTP Credit Agreement were subject to variable interest rates of LIBOR plus 1.75% and LIBOR plus 1.25%, respectively, which approximate market rates.

Long-Term Debt including Current Maturities—The fair value of the Company's and OTP’s long-term debt is estimated based on the current market indications of rates available to the Company for the issuance of debt. The Company’s long-term debt subject to variable interest rates approximates fair value. The fair value measurements of the Company’s long-term debt issues fall into level 2 of the fair value hierarchy set forth in ASC 820.

	March 31, 2016						December 31, 2015
(in thousands)	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Short-Term Debt		(42,936	)		(42,936	)		(80,672	)		(80,672	)
Long-Term Debt including Current Maturities		(546,258	)		(623,484	)		(496,268	)		(561,245	)

14. Income Tax Expense – Continuing Operations

The following table provides a reconciliation of income tax expense calculated at the net composite federal and state statutory rate on income from continuing operations before income taxes and income tax expense for continuing operations reported on the Company’s consolidated statements of income for the three month periods ended March 31, 2016 and 2015:

	Three Months Ended March 31,
(in thousands)	2016			2015
Income Before Income Taxes – Continuing Operations	$	19,982		$	17,854
Tax Computed at Company’s Net Composite Federal and State Statutory Rate (39%)		7,793			6,963
Increases (Decreases) in Tax from:
Federal Production Tax Credits		(1,686	)		(2,054	)
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes		(212	)		(212	)
Section 199 Domestic Production Activities Deduction		(104	)		(362	)
Employee Stock Ownership Plan Dividend Deduction		(158	)		(172	)
Corporate Owned Life Insurance		(64	)		(80	)
AFUDC Equity		(37	)		(100	)
Other Items – Net		(40	)		90
Income Tax Expense – Continuing Operations	$	5,492		$	4,073
Effective Income Tax Rate – Continuing Operations		27.5	%		22.8	%

The following table summarizes the activity related to our unrecognized tax benefits:

(in thousands)	2016		2015
Balance on January 1	$	468	$	222
Increases Related to Tax Positions for Prior Years		—		—
Increases Related to Tax Positions for Current Year		16		44
Uncertain Positions Resolved During Year		—		—
Balance on March 31	$	484	$	266

The balance of unrecognized tax benefits as of March 31, 2016 would reduce the Company’s effective tax rate if recognized. The total amount of unrecognized tax benefits as of March 31, 2016 is not expected to change significantly within the next 12 months. The Company classifies interest and penalties on tax uncertainties as components of the provision for income taxes in its consolidated statement of income. There was no amount accrued for interest on tax uncertainties as of March 31, 2016.

The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of March 31, 2016, with limited exceptions, the Company is no longer subject to examinations by taxing authorities for tax years prior to 2012 for federal and North Dakota state income taxes and for tax years prior to 2013 for Minnesota state income taxes.

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16. Discontinued Operations

On April 30, 2015 the Company sold Foley Company (Foley), its former water, wastewater, power and industrial construction contractor. On February 28, 2015 the Company sold the assets of AEV, Inc. its former energy and electrical construction contractor. On February 8, 2013 the Company completed the sale of substantially all the assets of its former dock and boat lift company and on November 30, 2012 the Company completed the sale of the assets of its former wind tower manufacturing business. The Company’s Construction and Wind Energy segments were eliminated as a result of the sales of Foley, AEV, Inc. and its former wind tower manufacturing business. The financial position, results of operations and cash flows of Foley, AEV, Inc., the Company’s former dock and boatlift company and its former wind tower manufacturing business are reported as discontinued operations in the Company’s consolidated financial statements. Following are summary presentations of the results of discontinued operations for the three month periods ended March 31:

(in thousands)	2016			2015
Operating Revenues	$	—		$	18,724
Operating Expenses		(50	)		22,141
Goodwill Impairment Charge		—			1,000
Operating Income (Loss)		50			(4,417	)
Other Deductions		—			(31	)
Income Tax Expense (Benefit)		20			(1,376	)
Net Income (Loss) from Operations		30			(3,072	)
Gain on Disposition Before Taxes		—			12,042
Income Tax Expense on Disposition		—			4,816
Net Gain on Disposition		—			7,226
Net Income	$	30		$	4,154

Foley and AEV, Inc.entered into fixed-price construction contracts. Revenues under these contracts were recognized on a percentage-of-completion basis. The method used to determine the percentage of completion was based on the ratio of costs incurred to total estimated costs on construction projects in progress. In the first quarter of 2015, an increase in estimated costs in excess of previous period cost estimates on one large job in progress at Foley resulted in pretax charges of $2.3 million. Foley also recorded a $1.0 million goodwill impairment charge based on adjustments to its carrying value in the first quarter of 2015.

Following are summary presentations of the major components of liabilities of discontinued operations as of March 31, 2016 and December 31, 2015:

(in thousands)	March 31, 2016		December 31, 2015
Current Liabilities	$	2,098	$	2,098
Liabilities of Discontinued Operations	$	2,098	$	2,098

Included in current liabilities of discontinued operations are warranty reserves. Details regarding the warranty reserves follow:

(in thousands)	2016		2015
Warranty Reserve Balance, January 1	$	2,103	$	2,527
Additional Provision for Warranties Made During the Year		—		—
Settlements Made During the Year		—		(6	)
Decrease in Warranty Estimates for Prior Years		—		—
Warranty Reserve Balance, March 31	$	2,103	$	2,521

The warranty reserve balances as of March 31, 2016 relate entirely to products produced by the Company’s former wind tower and dock and boatlift manufacturing companies. Expenses associated with remediation activities of these companies could be substantial. Although the assets of these companies have been sold and their operating results are reported under discontinued operations in the Company’s consolidated statements of income, the Company retains responsibility for warranty claims related to the products they produced prior to the sales of these companies.

For wind towers, the potential exists for multiple claims based on one defect repeated throughout the production process or for claims where the cost to repair or replace the defective part is highly disproportionate to the original cost of the part. For example, if the Company is required to cover remediation expenses in addition to regular warranty coverage, the Company could be required to accrue additional expenses and experience additional unplanned cash expenditures which could adversely affect the Company’s consolidated results of operations and financial condition.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

Results of Operations

Following is an analysis of the operating results of Otter Tail Corporation (the Company, we, us and our) by business segment for the three months ended March 31, 2016 and 2015, followed by a discussion of changes in our consolidated financial position during the three months ended March 31, 2016 and our business outlook for the remainder of 2016.

Comparison of the Three Months Ended March 31, 2016 and 2015

Consolidated operating revenues were $206.2 million for the three months ended March 31, 2016 compared with $202.8 million for the three months ended March 31, 2015. Operating income was $27.6 million for the three months ended March 31, 2016 compared with $25.0 million for the three months ended March 31, 2015. The Company recorded diluted earnings per share from continuing operations of $0.38 for the three months ended March 31, 2016 compared with $0.37 for the three months ended March 31, 2015, and total diluted earnings per share of $0.38 for the three months ended March 31, 2016 compared with $0.48 for the three months ended March 31, 2015.

Amounts presented in the segment tables that follow for operating revenues, cost of products sold and other nonelectric operating expenses for the three month periods ended March 31, 2016 and 2015 will not agree with amounts presented in the consolidated statements of income due to the elimination of intersegment transactions. The amounts of intersegment eliminations by income statement line item are listed below:

Intersegment Eliminations (in thousands)	March 31, 2016		March 31, 2015
Operating Revenues:
Electric	$	9	$	14
Nonelectric		—		3
Other Nonelectric Expenses		9		17

Electric

	Three Months Ended
	March 31,							%
(in thousands)	2016		2015		Change			Change
Retail Sales Revenues	$	100,655	$	103,614	$	(2,959	)		(2.9	)
Wholesale Revenues – Company Generation		911		1,060		(149	)		(14.1	)
Net Revenue – Energy Trading Activity		—		127		(127	)		(100.0	)
Other Revenues		11,428		8,746		2,682			30.7
Total Operating Revenues	$	112,994	$	113,547	$	(553	)		(0.5	)
Production Fuel		15,700		14,599		1,101			7.5
Purchased Power – System Use		16,886		23,692		(6,806	)		(28.7	)
Other Operation and Maintenance Expenses		40,018		37,527		2,491			6.6
Depreciation and Amortization		13,483		11,064		2,419			21.9
Property Taxes		3,679		3,502		177			5.1
Operating Income	$	23,228	$	23,163	$	65			0.3
Electric kilowatt-hour (kwh) Sales (in thousands)
Retail kwh Sales		1,373,199		1,361,683		11,516			0.8
Wholesale kwh Sales – Company Generation		43,410		36,097		7,313			20.3
Wholesale kwh Sales – Purchased Power Resold		—		20		(20	)		(100.0	)
Heating Degree Days		2,799		3,324		(525	)		(15.8	)

The $3.0 million decrease in retail revenue includes:

· A $5.5 million decrease in revenues from the recovery of fuel and purchased power costs mainly due to a 29.3% decrease in the price per kwh of electricity purchased for retail customers.

· A $2.2 million decrease in revenues related to lower kwh sales due to milder weather in the first quarter of 2016, reflective of a 15.8% decrease in heating degree days between the quarters.

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· A $1.0 million decrease in revenues due to lower sales to residential customers in North Dakota and Minnesota and lower sales to commercial customers in North Dakota.

offset by:

· A $2.4 million increase in revenues related to a 48.1% increase in kwh sales to industrial customers, mainly pipeline operators.

· A $1.3 million increase in Environmental Costs Recovery (ECR) rider revenue due to the recovery of additional investment and costs related to the operation of the air quality control system (AQCS) at Big Stone Plant that was placed in service in December 2015.

· A $1.2 million increase in Transmission Costs Recovery (TCR) rider revenues related to increased investment in transmission plant.

· A $0.6 million net increase in Conservation Improvement Program (CIP) cost recovery and incentive revenues mainly related to recovery of increased program costs.

· A $0.2 million increase in North Dakota Renewable Resource Adjustment (NDRRA) rider revenues related to a 19.9% reduction in kwh generation from company-owned wind turbines eligible for federal Production Tax Credits (PTCs) due to lower wind speeds in the first quarter of 2016, which resulted in fewer PTC-related benefits being passed back to customers through the NDRRA in the first quarter of 2016.

Other electric revenues increased $2.7 million as a result of an increase in Midcontinent Independent System Operator, Inc. (MISO) accrued transmission tariff revenues related to increased investment in regional transmission lines and driven in part by returns on and recovery of Capacity Expansion 2020 (CapX2020) and MISO designated Multi-Value Project (MVP) investment costs and operating expenses.

Production fuel costs increased $1.1 million as a result of a 4.9% increase in kwhs generated from OTP’s steam-powered and combustion turbine generators. Coyote Station generated more kwhs compared to the first quarter of 2015 when it was operating at reduced load due to a December 2014 boiler feed pump failure and ensuing fire. Big Stone Plant generated more kwhs in the first quarter of 2016 compared to the first quarter of 2015 when it was shut down for a planned maintenance outage during March 2015.

The cost of purchased power to serve retail customers decreased $6.8 million due to a 29.3% decrease in the cost per kwh purchased. The decreased cost per kwh purchased was driven by lower market demand mainly resulting from the milder winter weather in 2016 and lower prices for natural gas used in the generation of electricity in the first quarter of 2016 compared with the first quarter of 2015.

Electric operating and maintenance expenses increased $2.5 million as a result of:

· A $1.0 million expense for first quarter 2016 transmission costs related to a regional transmission cooperative terminating its integrated transmission agreement with OTP and joining the Southwest Power Pool.

· A $0.9 million increase in MISO transmission service charges related to increasing investments in regional CapX2020 and MISO-designated MVP transmission projects.

· A $0.8 million increase in CIP program expenditures.

· A $0.6 million increase in pollution control reagent expenses incurred to comply with federal emissions laws and regulations and for the initial operations of Big Stone Plant’s AQCS in the first quarter of 2016.

· A $1.0 million increase in expenditures for vegetation maintenance and other items.

offset by:

· A $1.2 million net reduction in generation plant maintenance costs, mainly related to Big Stone Plant incurring higher maintenance costs in the first quarter of 2015 while offline for planned maintenance in March 2015.

· A $0.6 million reduction in labor benefit costs related to a decrease in corporate expenses billed to OTP.

Depreciation expense increased $2.4 million mainly due to the AQCS at Big Stone Plant being placed in service at the end of December 2015 along with increased investment in transmission plant with the final phases of the Fargo-Monticello and Brookings-Southeast Twin Cities 345 kilovolt (kV) transmission lines placed in service near the end of the first quarter of 2015.

The $0.2 million increase in property tax expense is related to property additions in Minnesota and North Dakota in 2015.

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Manufacturing

	Three Months Ended
	March 31,						%
(in thousands)	2016		2015		Change		Change
Operating Revenues	$	59,820	$	56,759	$	3,061		5.4
Cost of Products Sold		46,055		45,699		356		0.8
Operating Expenses		6,074		5,938		136		2.3
Depreciation and Amortization		3,836		2,592		1,244		48.0
Operating Income	$	3,855	$	2,530	$	1,325		52.4

The $3.1 million increase in revenues in our Manufacturing segment includes the following:

· Revenues at BTD Manufacturing, Inc. (BTD), increased $3.9 million, including:

o Revenue of $7.8 million earned in the first quarter of 2016 at BTD-Georgia, which was acquired in September 2015.

o A $1.7 million increase in revenues mainly related to the production of wind tower components.

o A $1.4 million increase in revenues from tooling production and sales.

Offset by:

o A $6.4 million decrease in revenue related to lower sales to manufacturers of recreational and agricultural equipment due to softness in end markets served by those manufacturers.

o A $0.6 million decrease in revenue from sales of scrap metal due to a reduction in scrap metal prices.

· Revenues at T.O. Plastics, Inc. (T.O. Plastics), our manufacturer of thermoformed plastic and horticultural products, decreased $0.8 million, including:

o A $1.0 million decrease in industrial market sales primarily as a result of a customer insourcing product into its own manufacturing facilities.

Offset by:

o A $0.3 million increase in revenue from sales of horticultural containers.

The $0.4 million increase in cost of products sold in our Manufacturing segment includes the following:

· Cost of products sold at BTD increased $1.1 million. This included $6.6 million in cost of products sold at BTD-Georgia in the first quarter of 2016, offset by a $5.5 million net decrease in cost of products sold at BTD’s other facilities. The $5.5 million decrease is related to the decrease in sales to recreational and agricultural product manufacturers and to productivity improvements, partially offset by an increase in costs of products sold at BTD’s Illinois plant.

· Cost of products sold at T.O. Plastics decreased $0.7 million related to the decrease in sales.

The $0.1 million increase in operating expenses in our Manufacturing segment includes the following:

· Operating expenses at BTD increased $0.3 million, primarily due to $0.8 million in operating expenses incurred at BTD-Georgia in the first quarter of 2016, offset by a $0.5 million decrease in operating expenses at BTD’s other facilities as a result of reductions in labor-related costs.

· Operating expenses at T.O. Plastics decreased $0.2 million as a result of a decrease in selling expenses.

The $1.2 million increase in depreciation and amortization expenses in our Manufacturing segment includes $0.8 million in depreciation and amortization expenses at BTD-Georgia in the first quarter of 2016 and a $0.4 million increase in depreciation and amortization expenses at BTD’s other facilities as a result of placing new assets in service in Minnesota.

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Plastics

	Three Months Ended
	March 31,							%
(in thousands)	2016		2015		Change			Change
Operating Revenues	$	33,437	$	32,552	$	885			2.7
Cost of Products Sold		26,584		25,799		785			3.0
Operating Expenses		2,148		2,290		(142	)		(6.2	)
Depreciation and Amortization		958		848		110			13.0
Operating Income	$	3,747	$	3,615	$	132			3.7

The $0.9 million increase in Plastic segment revenues is the result of an 18.5% increase in pounds of polyvinyl chloride (PVC) pipe sold, mostly offset by a 13.3% decrease in the price per pound of pipe sold. The Plastics segment reported increased sales in the southwest and central regions of the United States. Cost of products sold increased $0.8 million due to the increase in sales volume, mostly offset by a 13.1% decrease in the cost per pound of PVC pipe sold. The decreases in revenue per pound of pipe sold and costs per pound of pipe sold are both related to a decrease in resin costs between the quarters.

Corporate

Corporate includes items such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of operating segment performance. Corporate is not an operating segment. Rather it is added to operating segment totals to reconcile to totals on our consolidated statements of income.

	Three Months Ended
	March 31,							%
(in thousands)	2016		2015		Change			Change
Operating Expenses	$	3,242	$	4,252	$	(1,010	)		(23.8	)
Depreciation and Amortization		12		31		(19	)		(61.3	)

Corporate operating expenses decreased $1.0 million, mainly due to:

· A $1.3 million decrease in labor and benefit costs related to a reduction in employee count and lower stock compensation and performance incentive expenses.

· A $0.5 million reduction in contracted services.

offset by:

· A $0.8 million decrease in corporate costs allocated to the Electric segment mainly related to the reductions in labor and benefit costs.

Interest Charges

The $0.3 million increase in interest charges in the three months ended March 31, 2016 compared with the three months ended March 31, 2015 is related to a $57 million increase in the average level of the Company’s consolidated variable rate short-term and long-term debt outstanding between the quarters.

Other Income

The $0.2 million decrease in other income in the three months ended March 31, 2016 compared with the three months ended March 31, 2015 is due to a reduction in allowance for funds used during construction at OTP related to increased use of lower-cost short-term borrowings in the first quarter of 2016 compared with the first quarter of 2015.

Income Taxes – Continuing Operations

Income tax expense - continuing operations increased $1.4 million in the three months ended March 31, 2016 compared with the three months ended March 31, 2015 as a result of a $2.1 million increase in income from continuing operations before income taxes and a $0.4 million reduction in federal PTCs earned between the quarters. The following table provides a reconciliation of income tax expense calculated at our net composite federal and state statutory rate on income from continuing

33

operations before income taxes and income tax expense for continuing operations reported on our consolidated statements of income for the three month periods ended March 31, 2016 and 2015:

	Three Months Ended March 31,
(in thousands)	2016			2015
Income Before Income Taxes – Continuing Operations	$	19,982		$	17,854
Tax Computed at Company’s Net Composite Federal and State Statutory Rate (39%)		7,793			6,963
Increases (Decreases) in Tax from:
Federal Production Tax Credits		(1,686	)		(2,054	)
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes		(212	)		(212	)
Section 199 Domestic Production Activities Deduction		(104	)		(362	)
Employee Stock Ownership Plan Dividend Deduction		(158	)		(172	)
Corporate Owned Life Insurance		(64	)		(80	)
AFUDC Equity		(37	)		(100	)
Other Items – Net		(40	)		90
Income Tax Expense – Continuing Operations	$	5,492		$	4,073
Effective Income Tax Rate – Continuing Operations		27.5	%		22.8	%

Federal PTCs are recognized as wind energy is generated based on a per kwh rate prescribed in applicable federal statutes. OTP’s kwh generation from its wind turbines eligible for PTCs decreased 19.9% in the three months ended March 31, 2016 compared with the three months ended March 31, 2015 due to lower wind speeds. North Dakota wind energy credits are based on dollars invested in qualifying facilities and are being recognized on a straight-line basis over 25 years.

Discontinued Operations

On April 30, 2015 we sold Foley Company (Foley), our former water, wastewater, power and industrial construction contractor. On February 28, 2015 we sold the assets of AEV, Inc. our former energy and electrical construction contractor, resulting in a first quarter 2015 net gain on the sale of $7.2 million. On February 8, 2013 we completed the sale of substantially all the assets of our former dock and boatlift company and on November 30, 2012 we completed the sale of the assets of our former wind tower manufacturing business. Our Construction and Wind Energy segments were eliminated as a result of the sales of Foley, AEV, Inc. and our former wind tower manufacturing business. The financial position, results of operations and cash flows of Foley, AEV, Inc., our former dock and boatlift company and our former wind tower manufacturing business are reported as discontinued operations in our consolidated financial statements. Following are summary presentations of the results of discontinued operations for the three month periods ended March 31:

(in thousands)	2016			2015
Operating Revenues	$	—		$	18,724
Operating Expenses		(50	)		22,141
Goodwill Impairment Charge		—			1,000
Operating Income (Loss)		50			(4,417	)
Other Deductions		—			(31	)
Income Tax Expense (Benefit)		20			(1,376	)
Net Income (Loss) from Operations		30			(3,072	)
Gain on Disposition Before Taxes		—			12,042
Income Tax Expense on Disposition		—			4,816
Net Gain on Disposition		—			7,226
Net Income	$	30		$	4,154

Foley and AEV, Inc. entered into fixed-price construction contracts. Revenues under these contracts were recognized on a percentage-of-completion basis. The method used to determine the percentage of completion was based on the ratio of costs incurred to total estimated costs on construction projects in progress. In the first quarter of 2015, an increase in estimated costs in excess of previous period cost estimates on one large job in progress at Foley resulted in pretax charges of $2.3 million. Foley also recorded a $1.0 million goodwill impairment charge based on adjustments to its carrying value in the first quarter of 2015.

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Financial Position

The following table presents the status of our lines of credit as of March 31, 2016 and December 31, 2015:

(in thousands)	Line Limit		In Use on March 31,  2016		Restricted due to Outstanding Letters of Credit		Available on March 31, 2016		Available on December 31, 2015
Otter Tail Corporation Credit Agreement	$	150,000	$	20,880	$	—	$	129,120	$	90,334
OTP Credit Agreement		170,000		22,056		—		147,944		148,694
Total	$	320,000	$	42,936	$	—	$	277,064	$	239,028

We believe we have the necessary liquidity to effectively conduct business operations for an extended period if needed. Our balance sheet is strong and we are in compliance with our debt covenants. Financial flexibility is provided by operating cash flows, unused lines of credit, strong financial coverages, investment grade credit ratings and alternative financing arrangements such as leasing.

We believe our financial condition is strong and our cash, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability because of investment-grade credit ratings, when taken together, provide adequate resources to fund ongoing operating requirements and future capital expenditures related to expansion of existing businesses and development of new projects. On May 11, 2015 we filed a shelf registration statement with the Securities and Exchange Commission (SEC) under which we may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement, which expires on May 11, 2018. On May 11, 2015, we entered into a Distribution Agreement with J.P. Morgan Securities LLC (JPMS) under which we may offer and sell our common shares from time to time through JPMS, as our distribution agent, up to an aggregate sales price of $75 million through an At-the-Market offering program. No shares were issued under this program in the first quarter of 2016.

Equity or debt financing will be required in the period 2016 through 2020 given the expansion plans related to our Electric segment to fund construction of new rate base investments. Also, such financing will be required should we decide to reduce borrowings under our lines of credit or refund or retire early any of our presently outstanding debt, to complete acquisitions or for other corporate purposes. Our operating cash flows and access to capital markets can be impacted by macroeconomic factors outside our control. In addition, our borrowing costs can be impacted by changing interest rates on short-term and long-term debt and ratings assigned to us by independent rating agencies, which in part are based on certain credit measures such as interest coverage and leverage ratios.

The determination of the amount of future cash dividends to be declared and paid will depend on, among other things, our financial condition, improvement in earnings per share, cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by our subsidiaries. See note 8 to consolidated financial statements for more information. The decision to declare a dividend is reviewed quarterly by the board of directors. On January 28, 2016 our board of directors increased the quarterly dividend from $0.3075 to $0.3125 per common share.

Cash provided by operating activities of continuing operations was $22.6 million for the three months ended March 31, 2016 compared with cash used in operating activities of $2.1 million for the three months ended March 31, 2015. Contributing to the $24.7 million increase in cash provided by operating activities of continuing operations between the quarters was a $19.4 million decrease in cash used for working capital items and a $4.5 million increase in net income from continuing operations net of non-cash depreciation and amortization expenses. The $19.4 million decrease in cash used for working capital items between the periods includes:

· A $7.4 million decrease in cash used for accounts payable related to operating activities at OTP between the quarters.

· A $6.3 million decrease in cash used for accounts payable in the Plastics segment between the quarters, due in part to lower resin costs.

· A $4.4 million decrease in cash used for accounts receivable related to operating activities at OTP between the quarters.

In continuing operations, net cash used in investing activities was $25.6 million for the three months ended March 31, 2016 compared with $37.9 million for the three months ended March 31, 2015. The $12.3 million decrease in cash used for investing activities includes:

· An $8.3 million reduction in capital expenditures at OTP as the Big Stone Plant AQCS was under construction in the first quarter of 2015 and in service in the first quarter of 2016.

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· A $1.9 million reduction in capital expenditures at BTD as work on BTD’s Minnesota expansion project was winding down and nearing completion in the first quarter of 2016.

· A $2.1 million decrease in cash used for investments, reflecting the deposit of $2.0 million in proceeds from the sale of the assets of AEV, Inc. into an escrow account in the first quarter of 2015, with no similar transaction in the first quarter of 2016.

First quarter 2015 investing activities of discontinued operations includes $21.3 million in cash proceeds from the sale of the assets of AEV, Inc., partially offset by $1.8 million in cash used in investing activities of discontinued operations, mainly related to the purchase by AEV, Inc. of assets being leased under operating leases prior to the assets being sold.

Net cash provided by financing activities of continuing operations was $3.0 million for the three months ended March 31, 2016 compared with $28.5 million for the three months ended March 31, 2015. Financing activities in the first quarter of 2016 included $50 million in borrowings under a Term Loan Agreement and $3.4 million in proceeds from the issuance of stock under the automatic dividend reinvestment and share purchase plan, offset by $38.4 million in cash used to pay down short-term borrowings and checks written in excess of cash and $11.9 million in common stock dividend payments. The outstanding short-term borrowings that were paid down were, in part, used to fund the expansion of BTD’s Minnesota facilities in 2015 and the September 1, 2015 acquisition of BTD-Georgia. Financing activities in the first quarter of 2015 included $37.8 million in short-term borrowings used, in part, to fund capital expenditures and $11.5 million in common stock dividend payments.

CAPITAL REQUIREMENTS

2016-2020 Capital Expenditures

The following table shows our 2015 capital expenditures and 2016 through 2020 anticipated capital expenditures and electric utility average rate base:

(in millions)	2015		2016		2017		2018		2019		2020
Capital Expenditures:
Electric Segment:
Transmission			$	107	$	96	$	51	$	5	$	7
Renewables and Natural Gas Generation				4		3		162		113		81
Other				46		41		40		51		51
Total Electric Segment	$	136	$	157	$	140	$	253	$	169	$	139
Manufacturing and Plastics Segments		24		18		38		19		20		19
Total Capital Expenditures	$	160	$	175	$	178	$	272	$	189	$	158
Total Electric Utility Average Rate Base			$	1,032	$	1,087	$	1,241	$	1,295	$	1,354

The capital expenditure plan for the 2016-2020 time period calls for $858 million based on the need for additional wind and solar in rate base and capital spending on a natural gas-fired plant that is expected to replace Hoot Lake Plant when it is retired in 2021. Taking into account the increased capital expenditure plan along with the impact of the recently extended bonus depreciation for income taxes, our compounded annual growth rate in rate base is expected to be 8.0%.

Execution on the currently anticipated electric utility capital expenditure plan is expected to grow rate base and be a key driver in increasing utility earnings over the 2016 through 2020 timeframe.

Contractual Obligations

Our contractual obligations reported in the table on page 50 of our Annual Report on Form 10-K for the year ended December 31, 2015 increased $13.3 million in the first quarter of 2016. Our other purchase obligations increased $1.3 million in 2016, $11.9 million in 2017 and 2018 and $0.1 million in 2019, mainly as a result of additional purchase obligations entered into in the first quarter of 2016 related to the construction of the Big Stone South-Ellendale and Big Stone South-Brookings 345 kV transmission line MVPs.

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CAPITAL RESOURCES

On May 11, 2015 we filed a shelf registration statement with the SEC under which we may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement, which expires on May 11, 2018. On May 11, 2015, we entered into a Distribution Agreement with JPMS under which we may offer and sell our common shares from time to time through JPMS, as our distribution agent, up to an aggregate sales price of $75 million through an At-the-Market offering program. We sold no shares under this program in the first quarter of 2016.

Short-Term Debt

The following table presents the status of our lines of credit as of March 31, 2016 and December 31, 2015:

(in thousands)	Line Limit		In Use on March 31, 2016		Restricted due to Outstanding Letters of Credit		Available on March 31, 2016		Available on December 31, 2015
Otter Tail Corporation Credit Agreement	$	150,000	$	20,880	$	—	$	129,120	$	90,334
OTP Credit Agreement		170,000		22,056		—		147,944		148,694
Total	$	320,000	$	42,936	$	—	$	277,064	$	239,028

On October 29, 2012 we entered into a Third Amended and Restated Credit Agreement (the Otter Tail Corporation Credit Agreement), which is an unsecured $150 million revolving credit facility that may be increased to $250 million on the terms and subject to the conditions described in the Otter Tail Corporation Credit Agreement. On October 29, 2015 the Otter Tail Corporation Credit Agreement was amended to extend its expiration date by one year from October 29, 2019 to October 29, 2020. We can draw on this credit facility to refinance certain indebtedness and support our operations and the operations of certain of our subsidiaries. Borrowings under the Otter Tail Corporation Credit Agreement bear interest at LIBOR plus 1.75%, subject to adjustment based on our senior unsecured credit ratings. We are required to pay commitment fees based on the average daily unused amount available to be drawn under the revolving credit facility. The Otter Tail Corporation Credit Agreement contains a number of restrictions on us and the businesses of our wholly owned subsidiary, Varistar Corporation (Varistar) and its subsidiaries, including restrictions on our and their ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of certain other parties and engage in transactions with related parties. The Otter Tail Corporation Credit Agreement also contains affirmative covenants and events of default, and financial covenants as described below under the heading “Financial Covenants.” The Otter Tail Corporation Credit Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in our credit ratings. Our obligations under the Otter Tail Corporation Credit Agreement are guaranteed by certain of our subsidiaries. Outstanding letters of credit issued by us under the Otter Tail Corporation Credit Agreement can reduce the amount available for borrowing under the line by up to $40 million.

On October 29, 2012 OTP entered into a Second Amended and Restated Credit Agreement (the OTP Credit Agreement), providing for an unsecured $170 million revolving credit facility that may be increased to $250 million on the terms and subject to the conditions described in the OTP Credit Agreement. On October 29, 2015 the OTP Credit Agreement was amended to extend its expiration date by one year from October 29, 2019 to October 29, 2020. OTP can draw on this credit facility to support the working capital needs and other capital requirements of its operations, including letters of credit in an aggregate amount not to exceed $50 million outstanding at any time. Borrowings under this line of credit bear interest at LIBOR plus 1.25%, subject to adjustment based on the ratings of OTP’s senior unsecured debt. OTP is required to pay commitment fees based on the average daily unused amount available to be drawn under the revolving credit facility. The OTP Credit Agreement contains a number of restrictions on the business of OTP, including restrictions on its ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. The OTP Credit Agreement also contains affirmative covenants and events of default, and financial covenants as described below under the heading “Financial Covenants.” The OTP Credit Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in OTP’s credit ratings. OTP’s obligations under the OTP Credit Agreement are not guaranteed by any other party.

Long-Term Debt

Term Loan Agreement

On February 5, 2016 we entered into a Term Loan Agreement (the Term Loan Agreement) with the Banks named therein, JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent, and JPMS, as Lead Arranger and Book Runner. The Term Loan Agreement provides for an unsecured term loan with an aggregate commitment of $50 million that we may use for purposes of funding working capital, capital expenditures and other corporate purposes of the Company and certain of our subsidiaries. Under the Term Loan Agreement, we may, on up to two occasions, enter into additional tranches of term loans in

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minimum increments of $10 million, subject to the consent of the lenders and so long as the aggregate amount of outstanding term loans does not exceed $100 million at any time. Borrowings under the Term Loan Agreement will bear interest at either (1) LIBOR plus 0.90% or (2) the greater of (a) the Prime Rate, (b) the Federal Reserve Bank of New York Rate plus 0.50% and (c) LIBOR multiplied by the Statutory Reserve Rate plus 1%. The applicable interest rate will depend on our election of whether to make the advance a LIBOR advance. The Term Loan Agreement terminates on February 5, 2018.

On February 5, 2016 we borrowed $50 million under the Term Loan Agreement at an interest rate based on the 30 day LIBOR plus 90 basis points and used the proceeds to pay down borrowings under the Otter Tail Corporation Credit Agreement that were used to fund the expansion of BTD’s Minnesota facilities in 2015 and to fund the September 1, 2015 acquisition of BTD-Georgia.

The Term Loan Agreement contains a number of restrictions on us, Varistar and certain subsidiaries of Varistar, including restrictions on our and their ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party and engage in transactions with related parties. The Term Loan Agreement also contains affirmative covenants and events of default, as well as certain financial covenants as described below under the heading “Financial Covenants.” The Term Loan Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in our credit ratings. Our obligations under the Term Loan Agreement are guaranteed by Varistar and certain of its subsidiaries.

2013 Note Purchase Agreement

On August 14, 2013 OTP entered into a Note Purchase Agreement (the 2013 Note Purchase Agreement) with the Purchasers named therein, pursuant to which OTP agreed to issue to the Purchasers, in a private placement transaction, $60 million aggregate principal amount of OTP’s 4.68% Series A Senior Unsecured Notes due February 27, 2029 (the Series A Notes) and $90 million aggregate principal amount of OTP’s 5.47% Series B Senior Unsecured Notes due February 27, 2044 (the Series B Notes and, together with the Series A Notes, the Notes). On February 27, 2014 OTP issued all $150 million aggregate principal amount of the Notes. OTP used a portion of the proceeds of the Notes to retire its $40.9 million term loan under a Credit Agreement with JPMorgan and to repay $82.5 million of short-term debt then outstanding under the OTP Credit Agreement. Remaining proceeds of the Notes were used to fund OTP construction program expenditures.

The 2013 Note Purchase Agreement states that OTP may prepay all or any part of the Notes (in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment) at 100% of the principal amount prepaid, together with accrued interest and a make-whole amount, provided that if no default or event of default under the 2013 Note Purchase Agreement exists, any optional prepayment made by OTP of (i) all of the Series A Notes then outstanding on or after November 27, 2028 or (ii) all of the Series B Notes then outstanding on or after November 27, 2043, will be made at 100% of the principal prepaid but without any make-whole amount. In addition, the 2013 Note Purchase Agreement states OTP must offer to prepay all of the outstanding Notes at 100% of the principal amount together with unpaid accrued interest in the event of a change of control of OTP.

The 2013 Note Purchase Agreement contains a number of restrictions on the business of OTP, including restrictions on OTP’s ability to merge, sell assets, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. The 2013 Note Purchase Agreement also contains affirmative covenants and events of default, as well as certain financial covenants as described below under the heading “Financial Covenants.” The 2013 Note Purchase Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in OTP’s credit ratings. The 2013 Note Purchase Agreement includes a “most favored lender” provision generally requiring that in the event OTP’s existing credit agreement or any renewal, extension or replacement thereof, at any time contains any financial covenant or other provision providing for limitations on interest expense and such a covenant is not contained in the 2013 Note Purchase Agreement under substantially similar terms or would be more beneficial to the holders of the Notes than any analogous provision contained in the 2013 Note Purchase Agreement (an “Additional Covenant”), then unless waived by the Required Holders (as defined in the 2013 Note Purchase Agreement), the Additional Covenant will be deemed to be incorporated into the 2013 Note Purchase Agreement. The 2013 Note Purchase Agreement also provides for the amendment, modification or deletion of an Additional Covenant if such Additional Covenant is amended or modified under or deleted from the OTP credit agreement, provided that no default or event of default has occurred and is continuing.

2007 and 2011 Note Purchase Agreements

On December 1, 2011, OTP issued $140 million aggregate principal amount of its 4.63% Senior Unsecured Notes due December 1, 2021 pursuant to a Note Purchase Agreement dated as of July 29, 2011 (2011 Note Purchase Agreement). OTP also has outstanding its $155 million senior unsecured notes issued in four series consisting of $33 million aggregate principal amount of 5.95% Senior Unsecured Notes, Series A, due 2017; $30 million aggregate principal amount of 6.15% Senior Unsecured Notes, Series B, due 2022; $42 million aggregate principal amount of 6.37% Senior Unsecured Notes, Series C, due

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2027; and $50 million aggregate principal amount of 6.47% Senior Unsecured Notes, Series D, due 2037 (collectively, the 2007 Notes). The 2007 Notes were issued pursuant to a Note Purchase Agreement dated as of August 20, 2007 (the 2007 Note Purchase Agreement).

The 2011 Note Purchase Agreement and the 2007 Note Purchase Agreement each states that OTP may prepay all or any part of the notes issued thereunder (in an amount not less than 10% of the aggregate principal amount of the notes then outstanding in the case of a partial prepayment) at 100% of the principal amount prepaid, together with accrued interest and a make-whole amount. The 2011 Note Purchase Agreement states in the event of a transfer of utility assets put event, the noteholders thereunder have the right to require OTP to repurchase the notes held by them in full, together with accrued interest and a make-whole amount, on the terms and conditions specified in the 2011 Note Purchase Agreement. The 2011 Note Purchase Agreement and the 2007 Note Purchase Agreement each also states that OTP must offer to prepay all of the outstanding notes issued thereunder at 100% of the principal amount together with unpaid accrued interest in the event of a change of control of OTP. The note purchase agreements contain a number of restrictions on OTP, including restrictions on OTP’s ability to merge, sell assets, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. The note purchase agreements also include affirmative covenants and events of default, and certain financial covenants as described below under the heading “Financial Covenants.”

Financial Covenants

We were in compliance with the financial covenants in our debt agreements as of March 31, 2016.

No Credit or Note Purchase Agreement contains any provisions that would trigger an acceleration of the related debt as a result of changes in the credit rating levels assigned to the related obligor by rating agencies.

Our borrowing agreements are subject to certain financial covenants. Specifically:

· Under the Otter Tail Corporation Credit Agreement and the Term Loan Agreement, we may not permit the ratio of our Interest-bearing Debt to Total Capitalization to be greater than 0.60 to 1.00 or permit our Interest and Dividend Coverage Ratio to be less than 1.50 to 1.00 (each measured on a consolidated basis). As of March 31, 2016 our Interest and Dividend Coverage Ratio calculated under the requirements of the Otter Tail Corporation Credit Agreement and the Term Loan Agreement was 3.66 to 1.00.

· Under the OTP Credit Agreement, OTP may not permit the ratio of its Interest-bearing Debt to Total Capitalization to be greater than 0.60 to 1.00.

· Under the 2007 Note Purchase Agreement and 2011 Note Purchase Agreement, OTP may not permit the ratio of its Consolidated Debt to Total Capitalization to be greater than 0.60 to 1.00 or permit its Interest and Dividend Coverage Ratio to be less than 1.50 to 1.00, in each case as provided in the related borrowing agreement, and OTP may not permit its Priority Debt to exceed 20% of its Total Capitalization, as provided in the related agreement. As of March 31, 2016 OTP’s Interest and Dividend Coverage Ratio and Interest Charges Coverage Ratio, calculated under the requirements of the 2007 Note Purchase Agreement and 2011 Note Purchase Agreement, was 3.62 to 1.00.

· Under the 2013 Note Purchase Agreement, OTP may not permit its Interest-bearing Debt to exceed 60% of Total Capitalization and may not permit its Priority Indebtedness to exceed 20% of its Total Capitalization, each as provided in the 2013 Note Purchase Agreement.

As of March 31, 2016 our ratio of interest-bearing debt to total capitalization was 0.49 to 1.00 on a consolidated basis and 0.48 to 1.00 for OTP.

OFF-BALANCE-SHEET ARRANGEMENTS

We and our subsidiary companies have outstanding letters of credit totaling $4.8 million, but our line of credit borrowing limits are not restricted by the outstanding letters of credit. We do not have any other off-balance-sheet arrangements or any relationships with unconsolidated entities or financial partnerships. These entities are often referred to as structured finance special purpose entities or variable interest entities, which are established for the purpose of facilitating off-balance-sheet arrangements or for other contractually narrow or limited purposes. We are not exposed to any financing, liquidity, market or credit risk that could arise if we had such relationships.

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2016 BUSINESS OUTLOOK

We are reaffirming our consolidated diluted earnings per share guidance for 2016 to be in the range of $1.50 to $1.65. This guidance reflects the current mix of businesses we own, considers the cyclical nature of some of our businesses and reflects current economic challenges facing our Manufacturing and Plastics segments, as well as plans and strategies for improving future operating results. We expect capital expenditures for 2016 to be $175 million compared with $160 million in capital expenditures in 2015. Major projects in our planned expenditures for 2016 include investments in two large transmission line projects for the Electric segment, which are expected to positively impact earnings and provide an immediate return on capital.

Segment components of our 2016 earnings per share initial and revised guidance range compared with 2015 actual earnings are as follows:

	2015 EPS by Segment			2016 Guidance February 8, 2016						2016 Guidance Revised May 2, 2016
Diluted Earnings Per Share				Low			High			Low			High
Electric	$	1.29		$	1.29		$	1.32		$	1.29		$	1.32
Manufacturing	$	0.11		$	0.11		$	0.15		$	0.12		$	0.16
Plastics	$	0.32		$	0.26		$	0.30		$	0.24		$	0.28
Corporate	$	(0.16	)	$	(0.16	)	$	(0.12	)	$	(0.15	)	$	(0.11	)
Total – Continuing Operations	$	1.56		$	1.50		$	1.65		$	1.50		$	1.65
Expected Return on Equity					9.3	%		10.2	%		9.3	%		10.2	%

Contributing to our earnings guidance for 2016 are the following items:

· We expect 2016 Electric segment net income to be slightly higher than 2015 segment net income based on:

o Normalized weather for the remainder of 2016.

o Constructive outcome of a rate case filed in Minnesota in February 2016.

o Rider recovery increases, including environmental riders in Minnesota, North Dakota and South Dakota related to the Big Stone AQCS environmental upgrades and transmission riders related to the Electric segments continuing investments in its share of the MVPs in South Dakota.

o Meeting forecasted sales to pipeline and commercial customers.

o A decrease in pension costs as a result of an increase in the discount rate from 4.35% to 4.76%.

offset by: 

o The effect of the 2015 adoption of bonus depreciation for income taxes reducing projected earnings from Electric segment operations by $0.06 per share in 2016.

o Higher depreciation and property tax expense due to large capital projects being put into service.

o Higher short-term interest costs as major construction projects continue to be funded.

o Increased operating expenses associated with reagents and employee expenses.

o Increased transmission expenses associated with termination of historic integrated transmission agreements.

· We are raising our guidance for 2016 net income from our Manufacturing segment based on strong first quarter results, driven by improved productivity despite softening end markets, and continued focus on improved productivity and cost reductions for the remainder of the year. In spite of softening end markets, we expect 2016 net income from our Manufacturing segment to increase over 2015 due to:

o An increase at BTD due to increases in sales volume as a result of having BTD-Georgia in place for a full year. Full year sales for BTD-Georgia are now estimated to be $30 million compared with original expectations of $33 million. The decline is due to continued softness in end markets served by the BTD-Georgia location.

o Excluding the full year impact of BTD-Georgia, revenues are now expected to decline approximately 2%, compared with an original growth expectation of 7%. This change is due to challenging market conditions impacting end markets served by BTD. BTD has significant exposure to the agriculture, oil and gas and recreational vehicle end markets, all of which are forecasted to be down in 2016 compared to 2015.

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o Improved margins on parts and tooling sales given improved productivity across all of BTD’s locations as a result of lower expediting costs, costs of quality and maintenance expenses. These increases are expected to be offset by higher facility costs associated with BTD’s expansion of its square footage.

o Scrap revenues, based on current commodity prices for scrap steel, are expected to be down in 2016 compared to 2015 given the excess capacity in the steel industry and the impact of low prices from imported steel.

o A decrease in earnings from T.O. Plastics mainly driven by an expected decrease in operating margins due to a shift in product mix relating to a customer bringing a product back into its own manufacturing facilities.

o Backlog for the manufacturing companies of approximately $102 million for 2016 compared with $106 million one year ago.

· We are lowering our guidance for 2016 net income for our Plastics segment as announced resin price increases in the second quarter are not expected to be fully passed on in sales prices due to current competitive pricing conditions. 2016 net income from this segment is expected to be down from 2015 with lower expected operating margins due to tighter spreads between raw material costs and sales prices, along with higher labor and freight costs.

· We expect lower corporate costs than originally estimated for 2016 due to continued cost reduction efforts.

Critical Accounting Policies Involving Significant Estimates

The discussion and analysis of the financial statements and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We use estimates based on the best information available in recording transactions and balances resulting from business operations. Estimates are used for such items as depreciable lives, asset impairment evaluations, tax provisions, collectability of trade accounts receivable, self-insurance programs, unbilled electric revenues, warranty reserves and actuarially determined benefits costs and liabilities. As better information becomes available or actual amounts are known, estimates are revised. Operating results can be affected by revised estimates. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the application of these critical accounting policies and the development of these estimates with the Audit Committee of the board of directors. A discussion of critical accounting policies is included under the caption “Critical Accounting Policies Involving Significant Estimates” on pages 56 through 59 of our Annual Report on Form 10-K for the year ended December 31, 2015. There were no material changes in critical accounting policies or estimates during the quarter ended March 31, 2016.

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), we have filed cautionary statements identifying important factors that could cause our 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 our 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 and are included, along with this statement, for purposes of complying with the safe harbor provision of the Act. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among other factors, the risks and uncertainties described in the section entitled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as the various factors described below:

· Federal and state environmental regulation could require us to incur substantial capital expenditures and increased operating costs.

· Volatile financial markets and changes in our debt ratings could restrict our ability to access capital and could increase borrowing costs and pension plan and postretirement health care expenses.

· We rely on access to both short- and long-term capital markets as a source of liquidity for capital requirements not satisfied by cash flows from operations. If we are not able to access capital at competitive rates, our ability to implement our business plans may be adversely affected.

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· Disruptions, uncertainty or volatility in the financial markets can also adversely impact our results of operations, the ability of our customers to finance purchases of goods and services, and our financial condition, as well as exert downward pressure on stock prices and/or limit our ability to sustain our current common stock dividend level.

· We made a $10.0 million discretionary contribution to our defined benefit pension plan in January 2016. We could be required to contribute additional capital to the pension plan in the future if the market value of pension plan assets significantly declines, plan assets do not earn in line with our long-term rate of return assumptions or relief under the Pension Protection Act is no longer granted.

· Any significant impairment of our goodwill would cause a decrease in our asset values and a reduction in our net operating income.

· Declines in projected operating cash flows at any of our reporting units may result in goodwill impairments that could adversely affect our results of operations and financial position, as well as financing agreement covenants.

· The inability of our subsidiaries to provide sufficient earnings and cash flows to allow us to meet our financial obligations and debt covenants and pay dividends to our shareholders could have an adverse effect on us.

· We rely on our information systems to conduct our business and failure to protect these systems against security breaches or cyber-attacks could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

· Economic conditions could negatively impact our businesses.

· If we are unable to achieve the organic growth we expect, our financial performance may be adversely affected.

· Our plans to grow and realign our business mix through capital projects, acquisitions and dispositions may not be successful, which could result in poor financial performance.

· We may, from time to time, sell assets to provide capital to fund investments in our electric utility business or for other corporate purposes, which could result in the recognition of a loss on the sale of any assets sold and other potential liabilities. The sale of any of our businesses could expose us to additional risks associated with indemnification obligations under the applicable sales agreements and any related disputes.

· Significant warranty claims and remediation costs in excess of amounts normally reserved for such items could adversely affect our results of operations and financial condition.

· We are subject to risks associated with energy markets.

· We are subject to risks and uncertainties related to the timing and recovery of deferred tax assets which could have a negative impact on our net income in future periods.

· We may experience fluctuations in revenues and expenses related to our electric operations, which may cause our financial results to fluctuate and could impair our ability to make distributions to our shareholders or scheduled payments on our debt obligations, or to meet covenants under our borrowing agreements.

· Actions by the regulators of our electric operations could result in rate reductions, lower revenues and earnings or delays in recovering capital expenditures.

· OTP’s operations are subject to an extensive legal and regulatory framework under federal and state laws as well as regulations imposed by other organizations that may have a negative impact on our business and results of operations.

· OTP’s electric generating facilities are subject to operational risks that could result in unscheduled plant outages, unanticipated operation and maintenance expenses and increased power purchase costs.

· Changes to regulation of generating plant emissions, including but not limited to carbon dioxide emissions, could affect our operating costs and the costs of supplying electricity to our customers.

· Competition from foreign and domestic manufacturers, the price and availability of raw materials, prices and supply of scrap or recyclable material and general economic conditions could affect the revenues and earnings of our manufacturing businesses.

· Our plastics operations are highly dependent on a limited number of vendors for PVC resin and a limited supply of resin. The loss of a key vendor, or any interruption or delay in the supply of PVC resin, could result in reduced sales or increased costs for this segment.

· We compete against a large number of other manufacturers of PVC pipe and manufacturers of alternative products. Customers may not distinguish the pipe companies’ products from those of our competitors.

· Changes in PVC resin prices can negatively impact PVC pipe prices, profit margins on PVC pipe sales and the value of PVC pipe held in inventory.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk 

At March 31, 2016 we had exposure to market risk associated with interest rates because we had $50 million outstanding subject to a variable interest rate that is indexed to 30 day LIBOR plus 90 basis points under the Term Loan Agreement that terminates on February 5, 2018. We had $20.9 million in short-term debt outstanding subject to variable interest rates that are indexed to LIBOR plus 1.75% under our $150 million revolving credit facility, and OTP had $22.1 million in short-term debt outstanding subject to variable interest rates indexed to LIBOR plus 1.25% under its $170 million revolving credit facility.

All of our remaining consolidated long-term debt outstanding on March 31, 2016 has fixed interest rates. We manage our interest rate risk through the issuance of fixed-rate debt with varying maturities, through economic refunding of debt through optional refundings, limiting the amount of variable interest rate debt, and the utilization of short-term borrowings to allow flexibility in the timing and placement of long-term debt.

We have not used interest rate swaps to manage net exposure to interest rate changes related to our portfolio of borrowings. We maintain a ratio of fixed-rate debt to total debt within a certain range. It is our policy to enter into interest rate transactions and other financial instruments only to the extent considered necessary to meet our stated objectives. We do not enter into interest rate transactions for speculative or trading purposes.

The companies in our Manufacturing segment are exposed to market risk related to changes in commodity prices for steel, aluminum and polystyrene (PS) and other plastics resins. The price and availability of these raw materials could affect the revenues and earnings of our Manufacturing segment.

The plastics companies are exposed to market risk related to changes in commodity prices for PVC resins, the raw material used to manufacture PVC pipe. The PVC pipe industry is highly sensitive to commodity raw material pricing volatility. Historically, when resin prices are rising or stable, sales volume has been higher and when resin prices are falling, sales volume has been lower. Operating income may decline when the supply of PVC pipe increases faster than demand. Due to the commodity nature of PVC resin and the dynamic supply and demand factors worldwide, it is very difficult to predict gross margin percentages or to assume that historical trends will continue.

Item 4. Controls and Procedures

Under the supervision and with the participation of company management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of March 31, 2016, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2016.

During the fiscal quarter ended March 31, 2016, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject of various pending or threatened legal actions and proceedings in the ordinary course of our business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance. We record a liability in our consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where we have assessed that a loss is probable and an amount can be reasonably estimated. We believe the final resolution of currently pending or threatened legal actions and proceedings, either individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

There has been no material change in the risk factors set forth under Part I, Item 1A, “Risk Factors” on pages 26 through 32 of our Annual Report on Form 10-K for the year ended December 31, 2015.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

We do not have a publicly announced stock repurchase program. The following table shows common shares of the Company that were surrendered to us by employees to pay taxes in connection with shares issued for incentive awards in February 2016 under our 2014 Stock Incentive Plan: 

Calendar Month	Total Number of Shares Purchased		Average Price Paid per Share
January 2016		—		—
February 2016		1,868	$	28.40
March 2016		—		—
Total		1,868

Item 6.    Exhibits

4.1 Term Loan Agreement dated as of February 5, 2016, between Otter Tail Corporation and the Banks named therein, and JPMorgan Chase Bank, N.A., as administrative agent for the Banks, and J.P. Morgan Securities LLC, as Lead Arranger and Book Runner.

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 Financial statements from the Quarterly Report on Form 10-Q of Otter Tail Corporation for the quarter ended March 31, 2016, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) the Condensed Notes to Consolidated Financial Statements.

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 CORPORATION
By:	/s/ Kevin G. Moug
	Kevin G. Moug
	Chief Financial Officer
	(Chief Financial Officer/Authorized Officer)

Dated: May 9, 2016

44

EXHIBIT INDEX

Exhibit Number	Description
4.1	Term Loan Agreement dated as of February 5, 2016, between Otter Tail Corporation and the Banks named therein, and JPMorgan Chase Bank, N.A., as administrative agent for the Banks, and J.P. Morgan Securities LLC, as Lead Arranger and Book Runner.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial statements from the Quarterly Report on Form 10-Q of Otter Tail Corporation for the quarter ended March 31, 2016, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) the Condensed Notes to Consolidated Financial Statements.

45

EX-4.1

Exhibit 4.1

TERM LOAN AGREEMENT

Dated as of

February 5, 2016

by and between,

OTTER TAIL CORPORATION,

as Borrower,

and

JPMORGAN CHASE BANK, N.A.,

as Agent

J.P. MORGAN SECURITIES LLC

as Lead Arranger and Book Runner

Table of Contents

	Page
Article I DEFINITIONS AND ACCOUNTING TERMS	1
Section 1.1 Defined Terms	1
Section 1.2 Accounting Terms and Calculations	12
Section 1.3 Computation of Time Periods	13
Section 1.4 Other Definitional Terms	13
Section 1.5 References to Agreements and Laws	13
Article II TERMS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT	13
Section 2.1 The Loan	13
Section 2.2 Advance Options	13
Section 2.3 Borrowing Procedures	14
Section 2.4 Continuation or Conversion of the Loan	15
Section 2.5 Evidence of Indebtedness	15
Section 2.6 Funding Losses	16
Section 2.7 [Intentionally Omitted]	16
Section 2.8 [Intentionally Omitted]	16
Section 2.9 Incremental Term Loans	17
Section 2.10 Purpose of the Loan	17
Section 2.11 Defaulting Banks	17
Section 2.12 Replacement of Banks	18
Section 2.13 Authorized Representatives	19
Section 2.14 [Intentionally Omitted]	19
Section 2.15 Tax Matters.	19
Article III INTEREST AND FEES	20

Section 3.1 Interest	20
Section 3.2 [Intentionally Omitted]	20
Section 3.3 Computation	20
Section 3.4 Payment Dates	20
Article IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT AND SETOFF	20
Section 4.1 Repayment	20
Section 4.2 Optional Prepayments	20
Section 4.3 [Intentionally Omitted]	20
Section 4.4 Payments	21
Section 4.5 Proration of Payments	21
Article V ADDITIONAL PROVISIONS RELATING TO TERM LOANS	21
Section 5.1 Increased Costs	21
Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability	22
Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful	23
Section 5.4 Discretion of the Banks as to Manner of Funding	23
Article VI CONDITIONS PRECEDENT	23
Section 6.1 Conditions of Closing	23
Section 6.2 Additional Conditions Precedent to the Loan	24
Article VII REPRESENTATIONS AND WARRANTIES	24
Section 7.1 Organization, Standing, Etc	24
Section 7.2 Authorization and Validity	25
Section 7.3 No Conflict; No Default	25
Section 7.4 Government Consent	25
Section 7.5 Financial Statements and Condition	25

Section 7.6 Litigation and Contingent Liabilities	26
Section 7.7 Compliance	26
Section 7.8 Environmental, Health and Safety Laws	26
Section 7.9 ERISA	26
Section 7.10 Regulation U	26
Section 7.11 Ownership of Property; Liens	27
Section 7.12 Taxes	27
Section 7.13 Trademarks, Patents	27
Section 7.14 Investment Company Act	27
Section 7.15 Subsidiaries	27
Section 7.16 Partnerships and Joint Ventures	27
Section 7.17 Senior Debt	27
Section 7.18 Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws	28
Article VIII AFFIRMATIVE COVENANTS	28
Section 8.1 Financial Statements and Reports	28
Section 8.2 Corporate Existence	30
Section 8.3 Insurance	30
Section 8.4 Payment of Taxes and Claims	30
Section 8.5 Inspection	30
Section 8.6 Maintenance of Properties	31
Section 8.7 Books and Records	31
Section 8.8 Compliance	31
Section 8.9 ERISA	31
Section 8.10 Environmental Matters	31
Section 8.11 Senior Debt	31

Section 8.12 Subsidiaries	31
Section 8.13 Ratings	32
Article IX NEGATIVE COVENANTS	32
Section 9.1 Merger	32
Section 9.2 Sale of Assets	32
Section 9.3 Plans	33
Section 9.4 Ownership of Stock	33
Section 9.5 Other Agreements	34
Section 9.6 Restricted Payments	34
Section 9.7 Investments	34
Section 9.8 Liens	37
Section 9.9 Contingent Liabilities	40
Section 9.10 Transactions with Related Parties	41
Section 9.11 Use of Proceeds	41
Section 9.12 Financial Covenants	41
Article X EVENTS OF DEFAULT AND REMEDIES	42
Section 10.1 Events of Default	42
Section 10.2 Remedies	45
Section 10.3 [Intentionally Omitted]	45
Section 10.4 Setoff	45
Article XI THE AGENT	45
Section 11.1 Appointment and Grant of Authority	45
Section 11.2 Non-Reliance on Agent	46
Section 11.3 Responsibility of the Agent and Other Matters	46
Section 11.4 Action on Instructions	47

Section 11.5 Indemnification	47
Section 11.6 JPMorgan and Affiliates	47
Section 11.7 Notice to Holder of Notes	47
Section 11.8 Successor Agent	48
Article XII MISCELLANEOUS	48
Section 12.1 No Waiver and Amendment	48
Section 12.2 Amendments, Etc	48
Section 12.3 Assignments and Participations	49
Section 12.4 Costs, Expenses and Taxes; Indemnification	52
Section 12.5 Notices	53
Section 12.6 [Intentionally Omitted]	53
Section 12.7 Severability	54
Section 12.8 Subsidiary References	54
Section 12.9 Captions	54
Section 12.10 Entire Agreement	54
Section 12.11 Counterparts	54
Section 12.12 Governing Law	54
Section 12.13 Consent to Jurisdiction	54
Section 12.14 Waiver of Jury Trial	55
Section 12.15 Customer Identification - USA PATRIOT Act Notice	55
Section 12.16 OFAC and Asset Control Regulations	55
Section 12.17 Confidentiality	55
Section 12.18 Interest Rate Limitation	56
Section 12.19 No Advisory or Fiduciary Responsibility	57

TERM LOAN AGREEMENT

THIS TERM LOAN AGREEMENT, dated as of February 5, 2016, is by and between OTTER TAIL CORPORATION, a Minnesota corporation (the “Borrower”), the banks or financial institutions listed on the signature pages hereof or which hereafter become parties hereto by means of assignment and assumption as hereinafter described (individually referred to as a “Bank” or collectively as the “Banks”), and JPMorgan Chase Bank, N.A., as Agent.

Preliminary Statement

The Borrower has requested that the Banks make term loans available to the Borrower on the date hereof, as more particularly described herein.

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Article I DEFINITIONS AND ACCOUNTING TERMS.

Section 1.1 Defined Terms. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following respective meanings (and such meanings shall be equally applicable to both the singular and plural form of the terms defined, as the context may require):

“Adjusted LIBO Rate” means, with respect to any LIBOR Advance for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Advance” means the portion of the outstanding Loan by the Banks as to which one of the available interest rate options and, if pertinent, an Interest Period, is applicable. An Advance may be a “LIBOR Advance” or a “Base Rate Advance” (each, a “type” of Advance).

“Adverse Event” means the occurrence of any event that has had or could reasonably be expected to have a material adverse effect on the business, operations, property, assets or financial condition of the Borrower and the Subsidiaries as a consolidated enterprise or on the ability of the Borrower and the Material Subsidiaries, taken as a whole, to perform their obligations under the Loan Documents.

“Agent” means JPMorgan Chase Bank, N.A. (including its branches and affiliates), as administrative agent for the Banks hereunder and each successor, as provided in Section 11.8, who shall act as Agent.

“Agreement” means this Term Loan Agreement, as it may be further amended, modified, supplemented, restated or replaced from time to time.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.

1

“Applicable Margin” means (a) with respect to LIBOR Advances, a per annum rate equal to 0.90% and (b) with respect to Base Rate Advances, a per annum rate equal to 0.0%.

“Approved Fund” means any Fund that is administered or managed by (a) a Bank, (b) an affiliate of a Bank or (c) an entity or an affiliate of an entity that administers or manages a Bank.

“Augmenting Bank” has the meaning ascribed to such term in Section 2.9.

“Authorized Representatives” means any officers or employees of the Borrower designated by the Borrower for purposes of giving and receiving notices hereunder, requesting and repaying the Loan, agreeing to rates of interest and otherwise transacting business with the Agent and the Banks hereunder.

“Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that the Adjusted LIBO Rate for any day shall be based on the LIBO Rate at approximately 11:00 a.m. London time on such day, subject to the interest rate floors set forth therein. Any change in the Base Rate due to a change in the Prime Rate, the FRBNY Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the FRBNY Rate or the Adjusted LIBO Rate, respectively. For the avoidance of doubt, if the Base Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Base Rate Advance” means an Advance designated as such in a notice of borrowing under Section 2.3 or a notice of continuation or conversion under Section 2.4.

“Borrower” shall have the meaning set forth in the introductory paragraph.

“Borrower Obligations” means each and every debt, liability and other obligation of the Borrower of every type and description arising under or in connection with any of the Loan Documents which the Borrower may now or at any time hereafter owe to a Bank or to the Banks or to the Agent, whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and including specifically, but not limited to, all indebtedness, liabilities and obligations of the Borrower arising under this Agreement and the Notes.

“Business Day” means any day (other than a Saturday, Sunday or legal holiday in the State of Minnesota) on which national banks are permitted to be open in Minneapolis, Minnesota and New York, New York and, with respect to LIBOR Advances, a day on which dealings in Dollars may be carried on by the Agent in the interbank LIBOR market.

2

“Capitalized Lease” means any lease which is or should be capitalized on the books of the lessee in accordance with GAAP.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute, together with regulations thereunder.

“Commitment” means, with respect to each Bank, the commitment of such Bank to make a Term Loan hereunder on the date hereof, subject to the terms and conditions of the Agent, or, if so indicated, the maximum unpaid principal amount of the Term Loan of any Bank. The initial amount of each Bank’s Commitment is set forth on Schedule 2.01, or other documentation contemplated hereby pursuant to which such Bank shall have assumed its Commitment, as applicable. As of the date of this Agreement, the aggregate Commitments of all of the Banks is $50,000,000.

“Compliance Certificate” means a certificate in the form of Exhibit B, duly completed and signed by an authorized officer of the Borrower.

“Controlled Foreign Corporation” means a Subsidiary that is a controlled foreign corporation under Section 957 of the Code.

“Default” means any event which, with the giving of notice to the Borrower or lapse of time, or both, would constitute an Event of Default.

“Defaulting Bank” means any Bank, as determined by the Agent, that has (a) failed (a “Funding Default”) to fund any portion of its Loan (a “Defaulted Loan”) within three (3) Business Days of the date required in the determination of the Agent to be funded by it hereunder, (b) notified the Borrower, the Agent, or any Bank in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations (i) under this Agreement or (ii) under other agreements in which it is obligated to extend credit unless, in the case of this clause (ii), such obligation is the subject of a good faith dispute, (c) failed, within three (3) Business Days after request by the Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund its Loan, (d) otherwise failed to pay over to the Agent or any other Bank any other amount required to be paid by it hereunder within three (3) Business Days of the date when due, unless the subject of a good faith dispute, or (e) (i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian, appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided, that a Bank shall not become a Defaulting Bank solely as the result of (x) the acquisition or maintenance of an ownership interest in such Bank or a Person controlling such Bank or (y) the exercise of control over a Bank or a Person controlling such Bank, in each case, by a governmental authority or an instrumentality thereof. Any determination by the Agent that a Bank is a Defaulting Bank will be conclusive and binding absent manifest error, and such Bank will be deemed to be a Defaulting Bank upon notification of such determination by the Agent to the Borrower and the Banks.

3

“EBIT” means, for any period of determination, the consolidated net income of the Borrower and its Subsidiaries before provision for income taxes, plus, (i) to the extent subtracted in determining consolidated net income, Interest Expense, all as determined in accordance with GAAP, excluding (to the extent included): (a) non-operating gains (including, without limitation, extraordinary or nonrecurring gains, gains from discontinuance of operations and gains arising from the sale of assets other than inventory), excluding gains resulting from sale of fixed assets, during the applicable period; (b) similar non-operating losses, excluding losses from sale of fixed assets, during such period; (c) payments of any premiums and any other costs, fees and expenses required to be paid by the terms thereof in connection with the repayment or redemption of Interest-bearing Debt existing as of the date of this Agreement and capital stock existing as of the date of this Agreement; (d) fees, cash charges and other cash expenses paid by the Borrower or any of its Subsidiaries in connection with any permitted acquisition, permitted disposition of assets, recapitalization, Investment, issuance of Indebtedness, issuance of equity interests, refinancing transaction or modification or amendment of any debt instrument (including any transaction undertaken but not completed) up to an aggregate amount not to exceed $5,000,000 in any period of four consecutive fiscal quarters; (e) non-cash charges attributable to any swap, collar or other hedging agreement; (f) non-cash compensation charges or expenses, including any such charges arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other management equity plans and including non-cash bonus payments; (g) the amount of any minority interest expense (less the amount of any cash dividends paid to the holders of such minority interests); (h) any impairment charge or asset write-off of the Borrower and its Subsidiaries, including any charge or write-off related to intangible assets, long-lived assets or investments, including, pursuant to Financial Accounting Standards Board Statement No. 142 “Goodwill and Other Intangible Assets” or Financial Accounting Standards Board Statement No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” and the amortization of intangibles arising pursuant to the Financial Accounting Standards Board Statement No. 141 “Business Combinations;” (i) plant closure, severance and other restructuring charges up to an aggregate amount not to exceed $5,000,000 in any period of four consecutive fiscal quarters; and (j) other non-cash charges reducing consolidated net income of the Borrower and its Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual or reserve for potential cash charges in any future period but including impairment charges, write-offs and write-downs), minus (ii) the sum, without duplication, of amounts for (a) non-cash gains attributable to any swap, collar or other hedging agreement and (b) other non-cash gains increasing consolidated net income of the Borrower and its Subsidiaries for such period (other than any such non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash gain in any prior period); provided that if the Borrower or any Subsidiary acquires a Person (an “Acquired Person”) in an Acquisition in such period, then all of the Acquired Person’s EBIT (calculated for such Person as set forth above) for the period of determination shall be added to EBIT, and if the Borrower or any Subsidiary sells all or substantially all of the stock or assets of any Subsidiary in any such period, then the EBIT of such Subsidiary (calculated for such Person as set forth above) shall be deducted from EBIT.

4

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute, together with regulations thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a group of which the Borrower is a member and which is treated as a single employer under Section 414 of the Code.

“Event of Default” means any event described in Section 10.1.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the FRBNY based on such day’s federal funds transactions by depository institutions (as determined in such manner as the FRBNY shall set forth on its public website from time to time) and published on the next succeeding Business Day by the FRBNY as the federal funds effective rate. For the avoidance of doubt, if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System or an successor thereto.

“Fitch” means Fitch Ratings and its successors.

“FRBNY” means the Federal Reserve Bank of New York.

“FRBNY Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day; provided that if both such rates are not so published for any day that is a Business Day, the term “FRBNY Rate” means the rate quoted for such day for a federal funds transaction at 11:00 a.m. on such day received by the Agent from a Federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

5

“GAAP” means generally accepted accounting principles as in effect from time to time and applied in accordance with Section 1.2.

“Guaranty” means to (a) endorse, guarantee, contingently agree to purchase or to provide funds for the payment of, or otherwise become contingently liable upon, any payment obligation of any other Person, except by the endorsement of negotiable instruments for deposit or collection (or similar transactions) in the ordinary course of business, or (b) agree to maintain the net worth or working capital of, or provide funds to satisfy any other financial test applicable to, or other obligations of, any other Person.

“Impacted Interest Period” has the meaning assigned to such term in the definition of “LIBO Rate”.

“Increasing Bank” has the meaning assigned to such term in Section 2.9.

“Incremental Term Loan” has the meaning assigned to such term in Section 2.9.

“Incremental Term Loan Amendment” has the meaning assigned to such term in Section 2.9.

“Ineligible Institution” means (a) a natural person, (b) a Defaulting Bank or its parent, (c) the Borrower, any of its Subsidiaries or any of its Affiliates, or (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof.

“Indebtedness” means, without duplication, all obligations of the Borrower or any Subsidiary: (a) consisting of Interest-bearing Debt; (b) on account of deposits or advances, excluding deposits and advances received in the ordinary course of business; and (c) constituting a Guaranty by such Person in respect to indebtedness of others to the extent not included in clause (a). For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, but shall exclude trade liabilities and intercompany liabilities incurred in the ordinary course of business.

“Interest and Dividend Coverage Ratio” means the ratio, calculated for each period of four consecutive fiscal quarters of the Borrower, of: (a) EBIT for such period; to (b) the sum for such period of (i) Interest Expense, plus (ii) dividends or interest on Preferred Stock.

“Interest-bearing Debt” means, without duplication, all interest-bearing obligations of the Borrower or a Subsidiary on a consolidated basis: (a) in respect of borrowed money; (b) secured by a mortgage, pledge, security interest, lien or charge on the assets of the Borrower or a Subsidiary, whether the obligation secured is the obligation of the owner or another Person, provided that the amount of such obligation which has not been assumed by the Borrower or a Subsidiary shall be the lesser of (i) the amount of such obligation and (ii) the fair market value of such assets; (c) for the deferred purchase price of any property or services evidenced by a note, payment contract or other instrument (other than an account payable arising in the ordinary course of business), (d) constituting the principal component of obligations as lessee under any Capitalized Lease; (e) that are Guaranties by the Borrower or a Subsidiary in respect to Interest-bearing Debt of other Persons; (f) that are net liabilities under interest rate swaps, collars and other interest rate hedging agreements; (g) consisting at any time of the aggregate undrawn and unexpired amount of standby letters of credit plus the aggregate amount of drawings thereunder that have not been reimbursed; (h) constituting the principal component of obligations that are amounts calculated in respect of synthetic leases as if such leases were Capitalized Leases; (i) that are indebtedness attributable to Permitted Sales and Leasebacks; and (j) that are indebtedness attributable to Permitted Securitization Transactions (only to the extent such transactions include recourse to the Borrower or a Subsidiary). For all purposes of this Agreement, Interest-bearing Debt of any Person shall exclude trade liabilities and intercompany liabilities incurred in the ordinary course of business.

6

“Interest Expense” means, for any period of determination, the aggregate consolidated amount, without duplication, of interest paid, accrued or scheduled to be paid in respect of any Indebtedness of the Borrower and its Subsidiaries, including in all cases interest expense determined in accordance with GAAP and, to the extent not otherwise included in GAAP interest expense: (a) all but the principal component of payments in respect of conditional sale contracts, Capitalized Leases and other title retention agreements; (b) commissions, discounts and other fees and charges with respect to letters of credit and bankers’ acceptance financings; (c) net costs under any interest rate swap, collar or other interest rate hedging agreements, in each case determined in accordance with GAAP; (d) amounts calculated in respect of synthetic leases as if such leases were Capitalized Leases, and (e) discount or other yield attributable to Permitted Securitization Transactions.

“Interest Period” means, for any LIBOR Advance, the period commencing on the borrowing date of such LIBOR Advance or the date a Base Rate Advance is converted into such LIBOR Advance, or the last day of the preceding Interest Period for such LIBOR Advance, as the case may be, and ending one, two, three or six months, as selected by the Borrower pursuant to Section 2.3 or Section 2.4; provided, that:

(a) any Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day unless such next succeeding Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(c) no Interest Period shall extend beyond the Termination Date.

“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum determined by the Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBOR Screen Rate for the longest period (for which the LIBOR Screen Rate is available for the applicable currency) that is shorter than the Impacted Interest Period and (b) the LIBOR Screen Rate for the shortest period (for which the LIBOR Screen Rate is available for the applicable currency) that exceeds the Impacted Interest Period, in each case, at such time.

7

“Investment” means the acquisition, purchase, or making of any loan, advance, contribution to capital or extension of credit, and any purchase of stock or other debt or equity securities of or any interest in another Person or any integral part of any business or the assets comprising such business or part thereof.

“JPMorgan” means JPMorgan Chase Bank, N.A.

“Laws” shall mean, collectively, all applicable international, foreign, Federal, state, commonwealth and local statutes, treaties, rules, guidelines, regulations ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any governmental authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case whether or not having the force of law.

“LIBOR Advance” means an Advance designated as such in a notice of borrowing under Section 2.3 or a notice of continuation or conversion under Section 2.4.

“LIBO Rate” means, with respect to any LIBOR Advance Borrowing for any applicable Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on either of such Reuters pages, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be selected by the Agent from time to time in its reasonable discretion (in each case the “LIBOR Screen Rate”) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; provided that, if the LIBOR Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement; provided, further, that if a LIBOR Screen Rate shall not be available at such time for such Interest Period (the “Impacted Interest Period”), then the LIBO Rate for such Interest Period shall be the Interpolated Rate; provided, that, if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement. It is understood and agreed that all of the terms and conditions of this definition of “LIBO Rate” shall be subject to Section 5.2.

“LIBOR Screen Rate” has the meaning assigned to such term in the definition of “LIBO Rate”.

“Lien” means any security interest, mortgage, pledge, lien, hypothecation, judgment lien or similar legal process, charge, encumbrance, title retention agreement or analogous instrument or device (including, without limitation, the interest of the lessors under Capitalized Leases and the interest of a vendor under any conditional sale or other title retention agreement).

8

“Loan Documents” means this Agreement, the Notes and each other instrument, document, guaranty, security agreement, mortgage, or other agreement executed and delivered by the Borrower, Material Subsidiary or any other guarantor or party granting security interests in connection with this Agreement, the Loan or any collateral for the Loan.

“Loan” means the aggregate Term Loans.

“Loan Documents” means this Agreement, the Notes, each Material Subsidiary Guaranty and each other instrument, document, guaranty, security agreement, mortgage, or other agreement executed and delivered by the Borrower, a Material Subsidiary or any guarantor or party granting security interests in connection with this Agreement, the loan or any collateral for the Loan.

“Long Term Debt Rating” means the rating assigned by S&P, Moody’s or Fitch to the long term, unsecured and unsubordinated indebtedness guaranteed by the non-regulated Subsidiaries of the Borrower.

“Material Subsidiary” means (a) the Subsidiaries listed on Schedule 1.1(b) hereto, and (b) any Subsidiary acquired or formed after the date of this Agreement if at the time of such acquisition or formation or at any time thereafter either (i) the consolidated assets of such Subsidiary and its Subsidiaries shall exceed 10.00% of the consolidated assets of the Borrower and its Subsidiaries (excluding Otter Tail Power Company and its Subsidiaries), or (ii) the consolidated gross revenues of such Subsidiary and its Subsidiaries shall exceed 10.00% of the consolidated gross revenues of the Borrower and its Subsidiaries (excluding Otter Tail Power Company and its Subsidiaries). Such assets and gross revenues shall be determined on a pro forma basis at the time of such acquisition or formation, and shall be determined thereafter at the request of the Agent, but not less than one time per fiscal year of the Borrower thereafter. Notwithstanding the foregoing neither Otter Tail Power Company nor any Subsidiary of Otter Tail Power Company shall be deemed a Material Subsidiary.

“Material Subsidiary Guaranty” means the Guaranty in the form of Exhibit C hereto, duly completed and executed by each Material Subsidiary now existing or hereafter formed or acquired, except for any Subsidiary that is a Controlled Foreign Corporation.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Notes” means the promissory notes of the Borrower described in Section 2.5(a), substantially in the form of Exhibit A, issued by the Borrower to each of the Banks if it has requested such a promissory note pursuant to Section 2.5(d), as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

“Otter Tail Power Company” shall mean Otter Tail Power Company, a Minnesota corporation, and a Subsidiary of the Borrower.

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“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowings by U.S.–managed banking offices of depository institutions (as such composite rate shall be determined by the FRBNY as set forth on its public website from time to time) and published on the next succeeding Business Day by the FRBNY as an overnight bank funding rate (from and after such date as the FRBNY shall commence to publish such composite rate).

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute.

“Payment Date” means the Termination Date, plus (a) the last day of each Interest Period for each LIBOR Advance and, if such Interest Period is in excess of three months after the first day of such Interest Period, and thereafter each day three months after each succeeding Payment Date; and (b) the last day of each March, June, September and December of each year for each Base Rate Advance and for any fees.

“PBGC” means the Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof.

“Percentage” means, as to any Bank, the proportion, expressed as a percentage, that such Bank’s Commitment bears to the total Commitments of all Banks. The Percentages of the Banks as of the date of this Agreement are set forth on Schedule 1.1(a).

“Permitted Divestitures” means sales of stock or assets, transfers of stock or assets, mergers resulting in divestiture of stock or assets or other divestitures of assets of the Borrower and Subsidiaries, which, in the aggregate for all such transactions during any one fiscal year of the Borrower, shall not result in the sale, transfer or other divestiture of stock or assets having a value in excess of 10% of the consolidated assets of the Borrower and its Subsidiaries as of the beginning of such fiscal year.

“Permitted Sales and Leasebacks” means sales and leasebacks of assets of the Borrower or a Subsidiary involving a sale price of assets of the Borrower and Subsidiaries not to exceed $20,000,000 in the aggregate for all transactions after the date of this Agreement, that give rise to Interest-bearing Debt, calculated as if the relevant leases were Capitalized Leases (whether or not actually constituting Capitalized Leases).

“Permitted Securitization Transactions” means sales of accounts receivable and other securitization transactions in nominal principal amounts not to exceed $50,000,000; provided, that such transactions may include only recourse to the Borrower or a Subsidiary (a) under customary representations and warranties not constituting credit support for the assets sold, and (b) constituting credit support in an amount not exceeding 10% of the nominal principal amount of the transaction. The nominal principal amount of any Permitted Securitization Transaction, and the discount or other yield attributable thereto for purposes of determination of Interest Expense, shall each be determined on a reasonable basis by the Borrower as if each such transaction were a financing transaction and not a sale.

“Person” means any natural person, corporation, limited liability company, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity.

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“Plan” means an employee benefit plan or other plan, maintained for employees of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or Section 412 of the Code.

“Preferred Stock” means stock of the Borrower other than common stock.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Related Party” means any Person (other than a Subsidiary): (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower, (b) which beneficially owns or holds 10% or more of the equity interests of the Borrower; or (c) 10% or more of the equity interests of which is beneficially owned or held by the Borrower or a Subsidiary. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such Section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided that a failure to meet the minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable event regardless of the issuance of any such waivers in accordance with Section 412(d) of the Code.

“Required Banks” means (subject to Section 2.11 with respect to any Defaulting Bank), at any time, at least two (2) Banks whose total Percentage exceeds 50.00%, or if no Commitments remain in effect, whose share of principal of the Loan exceeds 50.00% of the aggregate outstanding principal of the Loan.

“Restricted Payments” means any expenditure by the Borrower or any Subsidiary for purchase, redemption or other acquisition for value of any shares of the Borrower’s or any Subsidiary’s stock, payment of any dividend thereon (other than stock dividends and dividends payable solely by a Subsidiary to another Subsidiary or by a Subsidiary to the Borrower), any distribution on, or payment on account of the purchase, redemption, defeasance or other acquisition or retirement for value of, any shares of the Borrower’s or any Subsidiary’s stock (other than payment to, or on account of or for the benefit of, the Borrower or any Subsidiary only).

“Sanctioned Country” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

“Sanctioned Person” means, at any time, (a) any Person or group listed in any Sanctions related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

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“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“S&P” means Standard & Poor’s Ratings Group and its successors.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board). Such reserve percentages shall include those imposed pursuant to such Regulation D of the Federal Reserve Board. LIBOR Advances shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proation, exemptions or offsets that may be available from time to time to any Bank under such Regulation D of the Federal Reserve Board or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

“Term Loan” means, with respect to any Bank, the term loan made by such Bank to the Borrower pursuant to Section 2.1.

“Termination Date” means February 5, 2018.

“Total Capitalization” means as of any date of determination, the sum of (a) the amounts set forth on the consolidated balance sheet of the Borrower as the sum of the common stock, preferred stock, additional paid-in capital and retained earnings of the Borrower (excluding treasury stock); plus (b) the principal amount of Interest-bearing Debt of the Borrower and the Subsidiaries.

Section 1.2 Accounting Terms and Calculations. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, as in effect from time to time. All financial ratios calculated pursuant to Section 9.12 shall be calculated in a manner consistent with that used in preparing the audited consolidated balance sheet of the Borrower as of December 31, 2014 and the related audited consolidated statements of operations, shareholders’ equity and cash flows for the Borrower for the fiscal years then ended for the fiscal year ended December 31, 2014, except as otherwise specifically prescribed herein. If at any time any change in GAAP would affect the computation of any financial ratio set forth in any Loan Document, and either the Borrower or the Required Banks shall so request, the Agent and the Borrower shall negotiate in good faith to amend such ratio to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Banks); provided that, until so amended, (i) such ratio shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Agent a written reconciliation in form and substance reasonably satisfactory to the Agent, between calculations of such ratio made before and after giving effect to such change in GAAP.

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Section 1.3 Computation of Time Periods. In this Agreement, in the computation of a period of time from a specified date to a later specified date, unless otherwise stated the word “from” means “from and including” and the word “to” or “until” each means “to but excluding.”

Section 1.4 Other Definitional Terms. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections, Exhibits, schedules and like references are to this Agreement unless otherwise expressly provided.

Section 1.5 References to Agreements and Laws. Unless otherwise expressly provided herein, (a) references to organizational documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

Article II TERMS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT.

Section 2.1 The Loan. Subject to the terms and conditions hereof and in reliance upon the warranties of the Borrower herein, each Bank agrees, severally and not jointly, to make a term loan (each, a “Term Loan” and, collectively, the “Term Loans”) to the Borrower in a single draw on the date hereof in a principal amount equal to its Commitment. Amounts repaid on the Term Loan may not be reborrowed. The Commitment to extend credit hereunder shall expire on the date hereof.

Section 2.2 Advance Options. The Term Loans shall be constituted of LIBOR Advances and/or Base Rate Advances, as shall be selected by the Borrower, except as otherwise provided herein. Any combination of types of Advances may be outstanding at the same time, except that the total number of outstanding LIBOR Advances shall not exceed eight (8) at any one time (or such greater number to which the Agent may from time to time agree). Each LIBOR Advance shall be in a minimum amount of $500,000. Each Base Rate Advance shall be in a minimum amount of $100,000.

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Section 2.3 Borrowing Procedures.

(a) Request by Borrower. The request by the Borrower for the Loan shall be in writing, or by telephone promptly confirmed in writing, and must be given so as to be received by the Agent not later than:

(i) 2:00 p.m., New York time, on the date of the requested Loan, if the Loan shall be comprised of Base Rate Advances; or

(ii) 1:00 p.m., New York time, three Business Days prior to the date of the requested Loan, if the Loan shall be, or shall include, a LIBOR Advance.

The request for the Loan shall specify (1) the borrowing date (which shall be a Business Day), (2) the amount of the Loan and the type or types of Advances comprising the Loan, and (3) if the Loan shall include LIBOR Advances, the initial Interest Periods for such Advances.

(b) Funding of Agent. The Agent shall promptly notify each other Bank of the receipt of such request, the matters specified therein, and the amount of such Bank’s requested Term Loan. On the date of the requested Loan, each Bank shall provide its share of the requested Loan to the Agent in immediately available funds not later than 4:00 p.m., New York time. Unless the Agent determines that any applicable condition specified in Article VI has not been satisfied, the Agent will make the requested Loan available to the Borrower at the Agent’s principal office in New York, New York in immediately available funds not later than 6:00 p.m. (New York time) on the lending date so requested, provided that the Agent shall not be required to make any amount of the requested Loan available to the Borrower unless the Agent shall have received such amount from the Banks, and provided, further, that unless the Agent shall have been notified in writing by a Bank prior to the time the requested Loan shall be made hereunder that such Bank does not intend to make its Percentage share of the requested Loan available to the Agent, the Agent may assume that such Bank has made such Percentage share available to the Agent and the Agent may in reliance on such assumption make the Loan available to the Borrower in a corresponding amount. In any case that the Agent has made a Loan to the Borrower on behalf of a Bank but has not received the amount of such Loan from such Bank by the time herein required, such Bank shall pay interest to the Agent on the amount so advanced at the overnight Federal Funds rate from the date of such Term Loan to the date funds are received by the Agent from such Bank, such interest to be payable with such remittance from such Bank of the principal amount of such Term Loan. If the Agent does not receive payment from such Bank by the next Business Day after the date of the Term Loan, the Agent shall be entitled to recover such Term Loan, with interest thereon at the rate then applicable to the such Term Loan, on demand, from the Borrower, without prejudice to the Agent’s and the Borrower’s rights against such Bank. If such Bank pays the Agent the amount herein required with interest at the overnight rate before the Agent has recovered from the Borrower, such Bank shall be entitled to the interest payable by the Borrower with respect to the Term Loan in question accruing from the date the Agent made such Term Loan.

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Section 2.4 Continuation or Conversion of the Loan. The Borrower may elect to (i) continue any outstanding LIBOR Advance from one Interest Period into a subsequent Interest Period to begin on the last day of the earlier Interest Period, or (ii) convert any outstanding Advance into another type of Advance (on the last day of an Interest Period only, in the instance of a LIBOR Advance), by giving the Agent notice in writing, or by telephone promptly confirmed in writing, given so as to be received by the Agent not later than:

(a) 2:00 p.m., New York time, on the date of the requested continuation or conversion, if the continuing or converted Advance shall be a Base Rate Advance; or

(b) 1:00 p.m., New York time, three Business Days prior to the date of the requested continuation or conversion, if the continuing or converted Advance shall be a LIBOR Advance.

Each notice of continuation or conversion of an Advance shall specify (i) the effective date of the continuation or conversion (which shall be a Business Day), (ii) the amount and the type or types of Advances following such continuation or conversion (subject to the limitation on amount set forth in Section 2.2), and (iii) for continuation as, or conversion into, LIBOR Advances, the Interest Periods for such Advances. Absent timely notice of continuation or conversion, following expiration of an Interest Period unless the LIBOR Advance is paid in full, the Agent may at any time thereafter convert the LIBOR Advance into a Base Rate Advance. Until such time as such Advance is converted into a Base Rate Advance by the Agent or the Borrower or is continued as a LIBOR Advance with a new Interest Period by notice by the Borrower as provided above, such Advance shall continue to accrue interest at a rate equal to the interest rate applicable during the expired Interest Period adjusted, however, to reflect changes in the Applicable Margin. No Advance shall be continued as, or converted into, a LIBOR Advance if the shortest Interest Period for such Advance may not transpire prior to the Termination Date or if a Default or Event of Default shall exist and the Agent has given notice to the Borrower that no such continuations or conversions may be made.

Section 2.5 Evidence of Indebtedness.

(a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Bank resulting from each Loan made by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder.

(b) The Agent, acting for this purpose as an agent of the Borrower, shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Banks and each Bank’s share thereof (the “Register”).

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(c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section 2.5 shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loan in accordance with the terms of this Agreement. The Borrower, the Agent and the Banks may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower or any Bank, at any reasonable time and from time to time upon reasonable prior notice.

(d) Any Bank may request that Loan made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Bank a Note payable to such Bank and its registered assigns.

Section 2.6 Funding Losses. In the event of (a) any failure of the Borrower to borrow, continue or convert a LIBOR Advance on a date specified in a notice thereof, or (b) any payment (including, without limitation, any payment pursuant to Section 4.2, 4.4 or 10.2), prepayment or conversion of any LIBOR Advance on a date other than the last day of the Interest Period for such Advance, the Borrower agrees to pay each Bank’s costs, expenses and Interest Differential (as determined by such Bank) incurred as a result of such event. The term “Interest Differential” shall mean that sum amount, not less than $0, equal to the financial loss incurred by each Bank resulting from such event, calculated as the difference between the amount of interest such Bank would have earned (from like investments in the Money Markets as of the first day of the Interest Period of the relevant Advance) had such event not occurred and the interest the Bank will actually earn (from like investments in the Money Markets as of the date of such event) as a result of the redeployment of funds from such event. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be discounted to its present value. The term “Money Markets” refers to one or more wholesale funding markets available to the Banks, including negotiable certificates of deposit, commercial paper, LIBOR deposits, bank notes, federal funds and others. Such determinations by each Bank of shall be conclusive in the absence of manifest error.

Section 2.7 [Intentionally Omitted].

Section 2.8 [Intentionally Omitted].

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Section 2.9 Incremental Term Loans. The Borrower may, on up to two occasions, enter into one or more tranches of term loans (each an “Incremental Term Loan”), in each case in minimum increments of $10,000,000 so long as, after giving effect thereto, the aggregate amount of all Term Loans (including such increases and all such Incremental Term Loans) does not exceed $100,000,000. The Borrower and Agent working cooperatively may arrange for any such tranche to be provided by (i) one or more existing Banks (each such existing Bank so agreeing to participate in such Incremental Term Loans, an “Increasing Bank”), or (ii) one or more new banks, financial institutions or other entities (each such new bank, financial institution or other entity, an “Augmenting Bank”; provided that no Ineligible Institution may be an Augmenting Bank), which agree to participate in such Incremental Term Loans; provided that (i) each Augmenting Bank, shall be subject to the approval of the Borrower and the Agent and (ii) the Borrower and such Augmenting Bank or Increasing Bank, as applicable, execute a joinder agreement in form and substance reasonably acceptable to the Agent. No consent of any Bank (other than the Banks participating in any Incremental Term Loan) shall be required for any Incremental Term Loan pursuant to this Section 2.9. Incremental Term Loans created pursuant to this Section 2.9 shall become effective on the date agreed by the Borrower, the Agent and the relevant Increasing Banks or Augmenting Banks, and the Agent shall notify each Bank thereof. Notwithstanding the foregoing, no tranche of Incremental Term Loans shall be come effective under this paragraph unless, (i) on the proposed date of the effectiveness of such Incremental Term Loans, (A) the conditions set forth in paragraphs (a) and (b) of Section 6.2 shall be satisfied or waived by the Required Banks and the Agent shall have received a certificate to that effect dated such date and executed by a financial officer of the Borrower and (B) the Borrower shall be in compliance (on a pro forma basis) with the covenants contained in Section 9.12 as if the Indebtedness evidenced by such Incremental Term Loans had been incurred on the first day of the four fiscal quarter period most recently ended on or prior to such date for which financial statements have been delivered pursuant to Section 8.1 (a) or (b), and (ii) the Agent shall have received documents and opinions consistent with those delivered on the date hereof as to the organizational power and authority of the Borrower to borrow hereunder after giving effect to such Incremental Term Loans. The Incremental Term Loans (a) shall rank pari passu in right of payment with the Term Loans and shall be deemed to be Term Loans hereunder; (b) shall not mature earlier than the Termination Date; provided that the terms and conditions applicable to any tranche of Incremental Term Loans maturing after the Termination Date may provide for material additional or different financial or other covenants or prepayment requirements applicable only during periods after the Termination Date. Incremental Term Loans may be made hereunder pursuant to an amendment or restatement (an “Incremental Term Loan Amendment”) of this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Increasing Bank participating in such tranche, each Augmenting Bank participating in such tranche, if any, and the Agent. The Incremental Term Loan Amendment may, without the consent of any other Banks, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Agent, to effect the provisions of this Section 2.9. Nothing contained in this Section 2.9 shall constitute, or otherwise be deemed to be, a commitment on the part of any Bank to provide Incremental Term Loans, at any time. In connection with any Incremental Term Loans pursuant to this Section 2.9, any Augmenting Bank becoming a party hereto shall (1) execute such documents and agreements as the Agent may reasonably request and (2) in the case of any Augmenting Bank that is organized under the laws of a jurisdiction outside of the United States of America, provide to the Agent, its name, address, tax identification number and/or such other information shall be necessary for the Agent to comply with “know your customer” and anti-money laundering rules and regulations, including without limitation, the Patriot Act.

Section 2.10 Purpose of the Loan. The Loan shall be used for purposes of funding working capital, capital expenditures, and other corporate purposes of the Borrower and its Subsidiaries.

Section 2.11 Defaulting Banks. Notwithstanding any provision of this Agreement to the contrary, if any Bank becomes a Defaulting Bank, then the following provisions shall apply for so long as such Bank is a Defaulting Bank (the “Default Period”):

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(a) Voting. Such Defaulting Bank shall be deemed not to be a “Bank” for purposes of voting on any matters and the outstanding Loan of such Defaulting Bank shall not be included in determining whether all Banks or the Required Banks have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 12.2).

(b) Prepayments. To the extent permitted by applicable law, until the end of the Default Period, any voluntary prepayment of the Loan shall, if Borrower so directs at the time of making such voluntary prepayment, be applied to the Term Loans of other Banks as if such Defaulting Bank had no Term Loan outstanding.

(c) Application of Payments. Subject to application of voluntary prepayments as described in Section 2.11(b), any amount otherwise payable to a Defaulting Bank hereunder (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Bank pursuant to Sections 4.1, 4.2, 4.4, 4.5 or 10.4) shall, in lieu of being distributed to such Defaulting Bank, be applied by the Agent (i) first, to the payment of any amounts owing by such Defaulting Bank to the Agent hereunder, (ii) second, to the funding of the Loan in respect of which such Defaulting Bank has failed to fund its Percentage thereof as required by this Agreement, as determined by the Agent, (iv) third, at the election of the Agent and the Borrower, to repay Borrower Obligations to the non-Defaulting Banks, in such order of application as the Agent shall designate, (v) fourth, pro rata, to the payment of any amounts owing to the Borrower or the non-Defaulting Banks as a result of any judgment of a court of competent jurisdiction obtained by the Borrower or any Bank against such Defaulting Bank as a result of such Defaulting Bank’s breach of its obligations under this Agreement, (vi) fifth, if so determined by the Agent, distributed to the Banks other than the Defaulting Bank until the ratio of the total principal amount of the Borrower Obligations owed to such Banks to the total principal amount of the Borrower Obligations owed to all Banks equals such ratio immediately prior to the Defaulting Bank’s failure to fund any portion of the Loan and (vii) sixth, to such Defaulting Bank or as otherwise directed by a court of competent jurisdiction.

(d) Non-exclusive Remedies. The rights and remedies against a Defaulting Bank under this Section 2.11 are in addition to other rights and remedies which Borrower may have against such Defaulting Bank with respect to any Funding Default and which the Agent or any Bank may have against such Defaulting Bank with respect to any Funding Default. Nothing contained in the foregoing shall be deemed to constitute a waiver by the Borrower of any of its rights or remedies (whether in equity or law) against any Bank which fails to fund its Term Loan hereunder at the time or in the amount required to be funded under the terms of this Agreement.

Section 2.12 Replacement of Banks. If the Agent or a Bank provides the Borrower with a notice pursuant to Section 5.1, 5.2 or 5.3, or if any Bank becomes a Defaulting Bank, then the Borrower may, at its sole expense and effort, upon notice to such Defaulting Bank and the Agent, require such Bank or Defaulting Bank to assign and delegate, without recourse, all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment), provided that:

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(a) The Borrower shall have paid to the Agent the assignment fee specified in Section 12.3(b)(ii);

(b) Such Defaulting Bank shall have received payment of an amount equal to the outstanding principal of its Term Loan accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts); and

(c) Such assignment does not conflict with applicable law.

Section 2.13 Authorized Representatives. The Borrower shall act hereunder through the Authorized Representatives designated from time to time and all notices and requests to be given and received by the Borrower, including requests for the Loan and designation of amounts of Advances and Interest Periods, shall be given by and directed to such Authorized Representatives.

Section 2.14 [Intentionally Omitted].

Section 2.15 Tax Matters.

(a) No Person can become a Bank unless it is either a United States Person or an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Person represents and warrants to the Agent and the Borrower that it is entitled to receive interest payments without withholding or deduction of any taxes and executes and delivers to the Agent and the Borrower a United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes. Solely for purposes of this Section 2.15(b) and Section 12.3(e), a “United States Person” shall have the meaning set out in Section 7701(a)(30) of the Code and (b) if a payment made to a Bank under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Bank were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Bank has complied with such Bank’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.15(b) and Section 12.3(e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

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Article III INTEREST AND FEES.

Section 3.1 Interest.

(a) LIBOR Advances. The unpaid principal amount of each LIBOR Advance shall bear interest prior to maturity at a rate per annum equal to the LIBO Rate in effect for each Interest Period for such LIBOR Advance plus the Applicable Margin per annum.

(b) Base Rate Advances. The unpaid principal amount of each Base Rate Advance shall bear interest prior to maturity at a rate per annum equal to the Base Rate plus the Applicable Margin per annum.

(c) Interest After Maturity. Any amount of the Loan not paid when due, whether at the date scheduled therefor or earlier upon acceleration, shall bear interest until paid in full at a rate per annum equal to the greater of (i) 2.00% in excess of the rate applicable to the unpaid principal amount immediately before it became due, or (ii) 2.00% in excess of the Base Rate in effect from time to time.

Section 3.2 [Intentionally Omitted].

Section 3.3 Computation. Interest shall be computed on the basis of actual days elapsed and a year of 360 days, provided, that any interest or fee calculated with reference to the Base Rate shall be computed on the basis of actual days elapsed and a year of 365/366 days.

Section 3.4 Payment Dates. Accrued interest under Section 3.1(a), and (b) shall be payable on the applicable Payment Dates. Accrued interest under Section 3.1(c) shall be payable on demand.

Article IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION

OF THE CREDIT AND SETOFF.

Section 4.1 Repayment. Principal of the Loan, together with all accrued and unpaid interest thereon, shall be due and payable on the Termination Date.

Section 4.2 Optional Prepayments. The Borrower may, upon at least one (1) Business Day’s (in the case of Base Rate Advances, or three (3) Business Days’ in the case of LIBOR Advances) prior written or telephonic notice received by the Bank, prepay the Loan, in whole or in part, at any time subject to the provisions of Section 2.6, without any other premium or penalty. In the event that the Loan is being refinanced, any such notice may be made contingent upon the closing of such refinancing. Any such prepayment must be accompanied by accrued and unpaid interest on the amount prepaid. Each partial prepayment shall be in an amount of $50,000 or an integral multiple thereof. Any prepayment of a LIBOR Advance shall be in an amount equal to the remaining entire principal balance of such Advance.

Section 4.3 [Intentionally Omitted].

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Section 4.4 Payments. Payments and prepayments of principal of, and interest on, the Notes and all fees, expenses and other obligations under the Loan Documents shall be made (subject only to required withholding by the Borrower in the case of non-compliance by a Bank with the requirements of Section 12.3(e)) without set-off or counterclaim in immediately available funds not later than 3:00 p.m., New York time, on the dates due at the main office of the Agent in New York, New York. Funds received on any day after such time shall be deemed to have been received on the next Business Day. The Agent shall promptly distribute in like funds to each Bank its ratable share of each such payment of principal and interest. Subject to the definition of the term “Interest Period”, whenever any payment to be made hereunder or on the Notes shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of any interest or fees. The Agent is authorized to debit the operating account of the Borrower designated by the Borrower for such purpose from time to time for all payments when due hereunder (provided that if such account shall not have sufficient available funds to pay interest when due, the Borrower shall pay such interest in immediately available funds).

Section 4.5 Proration of Payments. If any Bank or other holder of a Term Loan shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset, pursuant to the Material Subsidiary Guaranties or otherwise) on account of principal of, interest on, or fees with respect to the Loan in excess of the share of payments and other recoveries of other Banks or holders, such Bank or other holder shall purchase from the other Banks or holders, in a manner to be specified by the Agent, such ratable shares in the Loan held by such other Banks or holders as shall be necessary to cause such purchasing Bank or other holder to share the excess payment or other recovery ratably with each of such other Banks or holders; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank or holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Article V ADDITIONAL PROVISIONS RELATING TO TERM LOANS.

Section 5.1 Increased Costs. If, as a result of any change after the date hereof of any law, rule, regulation, treaty or directive or in the interpretation or administration thereof, or compliance by the Banks with any request or directive (whether or not having the force of law) from any court, central bank, governmental authority, agency or instrumentality, or comparable agency, including, notwithstanding the foregoing, all requests, rules, guidelines or directives (x) in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or (y) promulgated by the Bank for International Settlements, Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in each case of clauses (x) and (y), regardless of the date enacted, adopted or issued:

(a) any tax, duty or other charge with respect to the Loan, the Notes or the Commitments is imposed, modified or deemed applicable, or the basis of taxation of payments to any Bank of interest or principal of such Bank’s Term Loan (other than (i) taxes imposed on the overall net income of such Bank by the jurisdiction in which such Bank has its principal office and (ii) any U.S. federal withholding taxes imposed under FATCA) is changed;

(b) any reserve, special deposit, special assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank, excluding any reserve or other requirement reflected in the calculation of LIBO Rate, is imposed, modified or deemed applicable;

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(c) any increase in the amount of capital or liquidity required or expected to be maintained by any Bank or any Person controlling such Bank is imposed, modified or deemed applicable as a consequence of this Agreement or the Term Loan made by such Bank; or

(d) any other condition (other than any condition relating to taxes, duties, or other charges as set forth in clause (a) above) affecting this Agreement or the Commitments or the Term Loans is imposed on any Bank or the relevant funding markets;

and such Bank determines that, by reason thereof, the cost to such Bank of making or maintaining its Term Loan or extending its Commitment is increased, or the amount of any sum receivable by such Bank hereunder or under the Notes in respect of such Bank’s Term Loan is reduced to a level below which such Bank could have achieved but for such change (taking into consideration such Bank’s policies with respect to capital adequacy);

then, the Borrower shall pay to such Bank upon demand such additional amount or amounts as will compensate such Bank (or the controlling Person in the instance of (c) above) for such additional costs or reduction (provided that the Banks have not been compensated for such additional cost or reduction in the calculation of the Statutory Reserve Rate). Any Bank making such demand shall inform the Borrower of the basis for such demand, and provide a statement showing, in reasonable detail, calculation of the amount demanded. The Borrower will promptly notify such Bank if the Borrower does not agree to such Bank’s determination of any such amount. Any Bank’s reasonable determination of such amount shall be presumed correct, absent its manifest error or negligence in determining such amounts. In determining such amounts, the Banks may use any reasonable averaging, attribution and allocation methods. Notwithstanding the foregoing, no Bank shall charge the Borrower for additional amounts for such additional costs or reductions: (i) which additional amounts applied or accrued more than 90 days prior to the time that such Bank became aware of the event giving rise to such additional costs or reductions; or (ii) unless such Bank is generally requiring payment under comparable provisions of its agreements with similarly situated borrowers.

Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability. If the Agent determines (which determination shall be conclusive and binding on the parties hereto), or in the case of Section 5.2(b), the Agent or the Required Banks determine, that:

(a) deposits of the necessary amount for the relevant Interest Period for any LIBOR Advance are not available in the relevant markets or that, by reason of circumstances affecting such market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or

(b) that the LIBO Rate will not adequately and fairly reflect the cost to the Banks of making, maintaining or funding the LIBOR Advance for a relevant Interest Period;

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the Agent shall promptly give notice of such determination to the Borrower, and (i) any notice of a new LIBOR Advance previously given by the Borrower and not yet borrowed or converted shall be deemed to be a notice to make a Base Rate Advance, and (ii) the Borrower shall be obligated to either prepay in full any outstanding LIBOR Advances or convert any such LIBOR Advance to a Base Rate Advance, without premium or penalty on the last day of the current Interest Period with respect thereto.

Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful.  If at any time due to the adoption of any law, rule, regulation, treaty or directive, or any change therein or in the interpretation or administration thereof by any court, central bank, governmental authority, agency or instrumentality, or comparable agency charged with the interpretation or administration thereof, or for any other reason arising subsequent to the date of this Agreement, it shall become unlawful or impossible for any Bank to make or fund any LIBOR Advance, the obligation of such Bank to provide such Advance shall, upon the happening of such event, forthwith be suspended for the duration of such illegality or impossibility.  If any such event shall make it unlawful or impossible for the Bank to continue any LIBOR Advance previously made by it hereunder, such Bank shall, upon the happening of such event, notify the Agent and the Borrower thereof in writing, and the Borrower shall, at the time notified by such Bank, either convert each such unlawful Advance to a Base Rate Advance or repay such Advance in full, together with accrued interest thereon, subject to the provisions of Section 2.6.

Section 5.4 Discretion of the Banks as to Manner of Funding.  Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of the Loan in any manner it elects; it being understood, however, that for purposes of this Agreement, all determinations hereunder shall be made as if the Banks had actually funded and maintained each LIBOR Advance during the Interest Period for such Advance through the purchase of deposits having a term corresponding to such Interest Period and bearing an interest rate equal to the LIBO Rate for such Interest Period (whether or not any Bank shall have granted any participations in such Advances).

Article VI CONDITIONS PRECEDENT.

Section 6.1 Conditions of Closing.  This Agreement shall become effective, and shall govern the Loan to be made hereunder, subject to the satisfaction of the conditions precedent, in addition to the applicable conditions precedent set forth in Section 6.2 below, that the Agent shall have received all of the following, in form and substance satisfactory to the Agent, each duly executed and certified or dated as of the date of this Agreement or such other date as is satisfactory to the Agent and the following shall have occurred:

(a) The Notes (if any), duly executed by the Borrower.

(b) The Material Subsidiary Guaranty, duly executed by each Material Subsidiary.

(c) A certificate or certificates of the Secretary or an Assistant Secretary of the Borrower, attesting to and attaching (i) a copy of the corporate resolution of the Borrower authorizing the execution, delivery and performance of the Loan Documents, (ii) an incumbency certificate showing the names and titles, and bearing the signatures of, the officers of the Borrower authorized to execute the Loan Documents, (iii) a copy of the Articles or Certificate of Incorporation of the Borrower with all amendments thereto, and (iv) a copy of the By-Laws of the Borrower with all amendments thereto.

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(d) A certificate or certificates of the Secretary or an Assistant Secretary of the Material Subsidiaries attesting to the incumbency of the officers of the Material Subsidiary authorized to execute the Loan Documents.

(e) A Certificate of Good Standing for the Borrower and each Material Subsidiary in the jurisdiction of its incorporation, certified by the appropriate governmental officials.

(f) An opinion of counsel to the Borrower and each Material Subsidiary, addressed to the Banks, in substantially the form of Exhibit D.

(g) The payment of all fees and reimbursements payable hereunder.

Section 6.2 Additional Conditions Precedent to the Loan.  The obligation of the Banks to make the Loan hereunder shall be subject to the satisfaction or waiver of the following additional conditions precedent (and the request for the Loan shall be deemed a representation by the Borrower that the following are satisfied):

(a) Before and after giving effect to the Loan, the representations and warranties contained in Article VII shall be true and correct in all material respects with respect to representations and warranties containing qualifications as to materiality, and true and correct in all respects with respect to representations and warranties without qualifications as to materiality, on and as of the date of the Loan, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; and

(b) Before and after giving effect to the Loan, no Default or Event of Default shall have occurred and be continuing.

Article VII REPRESENTATIONS AND WARRANTIES.

To induce the Agent and the Banks to enter into this Agreement, to grant the Commitment and to make the Loan hereunder, the Borrower represents and warrants to the Agent and the Banks:

Section 7.1 Organization, Standing, Etc.  The Borrower and each of its corporate Material Subsidiaries are corporations duly incorporated and validly existing and in good standing under the laws of the jurisdiction of their respective incorporation and have all requisite corporate power and authority to carry on their respective businesses as now conducted, to (in the instance of the Borrower) enter into the Loan Documents and to perform its obligations under the Loan Documents.  The Borrower and each of the Material Subsidiaries are duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary, and failure to so qualify or remain in good standing would constitute an Adverse Event.

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Section 7.2 Authorization and Validity.  The execution, delivery and performance by the Borrower of the Loan Documents have been duly authorized by all necessary corporate action by the Borrower, and the Loan Documents constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and subject to limitations on the availability of equitable remedies.

Section 7.3 No Conflict; No Default.  The execution, delivery and performance by the Borrower of the Loan Documents will not (a) violate any provision of any law, statute, rule or regulation or any order, writ, judgment, injunction, decree, determination or award of any court, governmental agency or arbitrator presently in effect having applicability to the Borrower, (b) violate or contravene any provisions of the Articles (or Certificate) of Incorporation or by-laws of the Borrower, or (c) result in a breach of or constitute a default under any indenture, loan or credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by which it or any of its properties may be bound or result in the creation of any Lien on any asset of the Borrower or any Material Subsidiary, which in any such case under subsection (a) or (c) would reasonably constitute an Adverse Event.  Neither the Borrower nor any Material Subsidiary is in default under or in violation of any such law, statute, rule or regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, loan or credit agreement or other agreement, lease or instrument in any case in which the consequences of such default or violation would constitute an Adverse Event.  No Default or Event of Default has occurred and is continuing.

Section 7.4 Government Consent.  No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority is required on the part of the Borrower to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, the Loan Documents, except for such orders, consents, approvals, licenses, authorizations, validations, filings, recordings, registrations or exemptions as have been made or obtained and are in full force and effect.

Section 7.5 Financial Statements and Condition.  The Borrower’s audited consolidated financial statements as of December 31, 2014, and the Borrower’s unaudited quarterly financial statements as at September 30, 2015, as heretofore furnished to the Banks, have been prepared in accordance with GAAP on a consistent basis (except, in the case of the unaudited quarterly financial statements, for the absence of footnotes and for year-end audit adjustments) and fairly present in all material respects the financial condition of the Borrower and the Subsidiaries, taken as a consolidated enterprise, as at such dates and the results of their operations for the fiscal year then ended.  As of the dates of such consolidated financial statements, neither the Borrower nor any Material Subsidiary had any material obligation, contingent liability, liability for taxes or long term lease obligation which is not reflected in such consolidated financial statements or in the notes thereto.  Since December 31, 2014, no Adverse Event has occurred.

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Section 7.6 Litigation and Contingent Liabilities.  Except as described in Schedule 7.6, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Material Subsidiary or any of their properties before any court or arbitrator, or any governmental department, board, agency or other instrumentality which, if determined adversely to the Borrower or such Material Subsidiary, would constitute an Adverse Event.  Except as described in Schedule 7.6, neither the Borrower nor any Material Subsidiary has any contingent liabilities which are material to the Borrower and the Subsidiaries as a consolidated enterprise.

Section 7.7 Compliance.  The Borrower and the Material Subsidiaries are in material compliance with all statutes and governmental rules and regulations applicable to them, except where non-compliance thereof would not constitute an Adverse Event.

Section 7.8 Environmental, Health and Safety Laws.  To the best of the Borrower’s knowledge, there does not exist any violation by the Borrower or any Material Subsidiary of any applicable federal, state or local law, rule or regulation or order of any government, governmental department, board, agency or other instrumentality relating to environmental, pollution, health or safety matters which would constitute an Adverse Event.  Neither the Borrower nor any Material Subsidiary has received any notice to the effect that any part of its operations or properties is not in material compliance with any such law, rule, regulation or order or notice that it or its property is the subject of any governmental investigation evaluating whether any remedial action is needed to respond to any release of any toxic or hazardous waste or substance into the environment, the consequences of which non compliance or remedial action would constitute an Adverse Event.

Section 7.9 ERISA.  Each Plan complies with all material applicable requirements of ERISA and the Code and with all material applicable rulings and regulations issued under the provisions of ERISA and the Code setting forth those requirements, except where non-compliance would not constitute an Adverse Event.  No Reportable Event which would be an Adverse Event, has occurred and is continuing with respect to any Plan.  As of each January 1, all of the minimum funding standards applicable to such Plans have been satisfied, except where nonsatisfaction would not constitute an Adverse Event, and there exists no event or condition which would permit the institution of proceedings to terminate any Plan under Section 4042 of ERISA, except for any event or condition which would not constitute an Adverse Event.

Section 7.10 Regulation U.  The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of the Loan will be used to purchase or carry margin stock or for any other purpose which would violate any of the margin requirements of the Board of Governors of the Federal Reserve System.

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Section 7.11 Ownership of Property; Liens.  Each of the Borrower and the Material Subsidiaries has good and marketable title to, or valid leasehold interests in or easements or other limited property interests in, its real properties necessary in the ordinary course of its business and good and sufficient title to its other material properties, except for minor defects in title that do not materially interfere with its ability to conduct its business and to utilize such assets for their intended purposes and except where the failure to have such title or other property interests described above would not constitute an Adverse Event.  None of the properties, revenues or assets of the Borrower or any of the Material Subsidiaries is subject to a Lien, except for Liens disclosed in the consolidated financial statements referred to in Section 7.5 or permitted under Section 9.8.

Section 7.12 Taxes.  Each of the Borrower and the Material Subsidiaries has filed all federal and material state and local tax returns required to be filed and has paid or made provision for the payment of all taxes due and payable pursuant to such returns and pursuant to any assessments of which it has received notice made against it or any of its property and all other taxes, fees and other charges imposed on it or any of its property by any governmental authority (other than taxes, fees, charges or assessments the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of the Borrower, and other than taxes, fees, charges or assessments with respect to which the failure to pay would not constitute an Adverse Event).  No tax Liens have been filed and no material claims are being asserted with respect to any such taxes, fees or charges, except for Liens or claims which would not constitute an Adverse Event.

Section 7.13 Trademarks, Patents.  Each of the Borrower and the Material Subsidiaries possesses or has the right, by way of ownership, license or otherwise, to use all of the patents, trademarks, trade names, service marks and copyrights, and applications therefor, and all technology, know how, processes, methods and designs used in or necessary for the conduct of its business, without known conflict with the rights of others, except where the lack of such possession or right or where the existence of such conflict would not constitute an Adverse Event.

Section 7.14 Investment Company Act.  Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an investment company within the meaning of the Investment Company Act of 1940, as amended.

Section 7.15 Subsidiaries.  Schedule 7.15 sets forth as of the date of this Agreement a list of all Subsidiaries and the number and percentage of the shares of each class of capital stock owned beneficially or of record by the Borrower or any Subsidiary therein, and the jurisdiction of incorporation of each Subsidiary.

Section 7.16 Partnerships and Joint Ventures.  Schedule 7.16 sets forth as of the date of this Agreement a list of all partnerships or joint ventures in which the Borrower or any Subsidiary is a partner (limited or general) or joint venturer.

Section 7.17 Senior Debt.  The Loan is senior unsecured Indebtedness of the Borrower, and is pari passu and of equal rank and seniority with all senior unsecured Indebtedness of the Borrower.

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Section 7.18 Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws.

(a) The Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti- Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees is a Sanctioned Person. No Loan, use of the proceeds of the Loan or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

(b) Neither the making of the Loan hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act.

Article VIII AFFIRMATIVE COVENANTS.

From the date of this Agreement and thereafter until the Loan and all other liabilities of the Borrower to the Banks hereunder and under the Notes (other than in respect of contingent indemnification and expense reimbursement obligations for which no claim has been made) have been paid in full, unless the Required Banks shall otherwise expressly agree in writing the Borrower will do, and will cause each Material Subsidiary (except in the instance of Section 8.1) to do, all of the following:

Section 8.1 Financial Statements and Reports.  Furnish to the Agent for prompt distribution to the Banks:

(a) As soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, (i) the annual audited financial statements of the Borrower and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP, consisting of at least statements of income, cash flow, and a consolidated balance sheet as at the end of such year, setting forth in each case in comparative form corresponding figures from the previous fiscal year, certified without a “going concern” or like qualification, or a qualification arising out of the scope of the audit, by independent certified public accountants of recognized standing selected by the Borrower (it being agreed that the furnishing of the Borrower’s annual report on Form 10-K for such year, as filed with the Securities and Exchange Commission, will satisfy the Borrower’s obligation under this Section 8.1(a)(i) with respect to such year except with respect to the requirement that such financial statements be reported on without a “going concern” or like qualification, or a qualification arising out of the scope of the audit), together with any related management letters, and (ii) schedules providing consolidating detailed balance sheet, income statement results and statement of cash flows for Varistar Corporation and its Subsidiaries, and a statement from an Authorized Representative that the financial statements are fairly stated in all material respects when considered in relation to the basic consolidated statements taken as a whole.

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(b) As soon as available and in any event within 45 days after the end of the first three quarters of each fiscal year, (i) a copy of the unaudited financial statements of the Borrower and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP (except for the absence of footnotes and for year-end audit adjustments), signed by a senior financial officer of the Borrower, consisting of at least consolidated statements of income and cash flow for the Borrower and its Subsidiaries for such quarter and for the period from the beginning of such fiscal year to the end of such quarter, and a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter (it being agreed that the furnishing of the Borrower’s quarterly report on Form 10-Q for such quarter, as filed with the Securities and Exchange Commission, will satisfy the Borrower’s obligation under this Section 8.1(b)(i) with respect to such quarter), and (ii) schedules providing consolidating detailed balance sheet, income statement results and statement of cash flows for Varistar Corporation and its Subsidiaries, and a statement from an Authorized Representative that the financial statements are fairly stated in all material respects when considered in relation to the basic consolidated statements taken as a whole.

(c) Together with the consolidated financial statements furnished by the Borrower under Sections 8.1(a) and 8.1(b), a Compliance Certificate signed by a senior financial officer of the Borrower, which shall confirm either that as at the date of each such financial statement there did not exist any Default or Event of Default or, that a Default or Event of Default existed, in which case it shall specify the nature and period of existence thereof and what action the Borrower proposes to take with respect thereto.

(d) Promptly upon becoming aware of any Default or Event of Default, a notice describing the nature thereof and what action the Borrower proposes to take with respect thereto.

(e) Promptly upon becoming aware of the occurrence, with respect to any Plan, of any Reportable Event or any “prohibited transaction” (as defined in Section 4975 of the Code), except for any Reportable Event or “prohibited transaction” which would not constitute an Adverse Event, a notice specifying the nature thereof and what action the Borrower proposes to take with respect thereto, and, when received, copies of any notice from PBGC of intention to terminate or have a trustee appointed for any Plan.

(f) Promptly after the same become publicly available, copies of all financial statements, reports and proxy statements mailed to the Borrower’s shareholders, and copies of all registration statements, periodic reports and other documents filed with the Securities and Exchange Commission (or any successor thereto) or any national securities exchange.

(g) Promptly upon becoming aware of the occurrence thereof, notice of the institution of any litigation, arbitration or governmental proceeding, or the rendering of a judgment or decision in such litigation or proceeding, which, in each case if adversely determined, would constitute an Adverse Event.

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(h) Promptly upon becoming aware of the occurrence thereof, notice of any violation as to any environmental matter by the Borrower or any Material Subsidiary and of the commencement of any judicial or administrative proceeding relating to health, safety or environmental matters in which such violation or an adverse determination or result in such proceeding would constitute an Adverse Event.

Documents required to be delivered pursuant to clauses (a), (b) and (f) of this Section 8.1 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such documents are filed for public availability on the Securities and Exchange Commission’s Electronic Data Gathering and Retrieval System or made available on the Borrower’s website.

(i) Promptly following request thereof, provide such information and take such actions as are reasonably requested by the Agent or any Bank in order to assist the Agent and the Banks in maintaining compliance with the PATRIOT Act.

Section 8.2 Corporate Existence.  Except as permitted by Sections 9.1, 9.2 and 9.4, maintain its corporate existence in good standing under the laws of its jurisdiction of incorporation and its qualification to transact business in each jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary and failure to so qualify or remain in good standing would constitute an Adverse Event, provided, that the Borrower may cause any Material Subsidiary to be dissolved that has substantially no assets, revenues or operations.

Section 8.3 Insurance.  Maintain with financially sound and reputable insurance companies such insurance as may be required by-law and such other insurance in such amounts and against such hazards as is customary in the case of reputable corporations engaged in the same or similar business and similarly situated.

Section 8.4 Payment of Taxes and Claims.  File all federal and material state and local tax returns and reports which are required by-law to be filed by it and pay before they become delinquent all federal and material state and local taxes, assessments and governmental charges and levies imposed upon it or its property; provided that the foregoing items need not be paid if they are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto have been set aside on the Borrower’s or such Material Subsidiary’s books in accordance with GAAP or if nonpayment thereof would not constitute an Adverse Event.

Section 8.5 Inspection.  Permit any representative of the Agent to visit and inspect any of its properties, corporate books and financial records, to examine and to make copies of its books of accounts and other financial records, and to discuss the affairs, finances and accounts of the Borrower and the Subsidiaries with, and to be advised as to the same by, its officers at such reasonable times during normal business hours of the Borrower and the Subsidiaries, upon reasonable advance notice to the Borrower and the Subsidiaries; provided that, so long as no Event of Default has occurred and is continuing, the expenses of the Agent and its representatives for such visits, inspections and examinations shall be at the expense of the Agent, but any such visits, inspections, and examinations made while any Event of Default is continuing shall be at the expense of the Borrower.

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Section 8.6 Maintenance of Properties.  Maintain its properties used or useful in the conduct of its business in good condition, repair and working order, and supplied with all necessary equipment, and make all necessary repairs, renewals, replacements, betterments and improvements thereto, all as may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, except where the failure to do so would not constitute an Adverse Event.

Section 8.7 Books and Records.  Keep adequate and proper records and books of account in which full and correct entries will be made of its dealings, business and affairs in a manner that permits the preparation of financial statements in accordance with GAAP.

Section 8.8 Compliance.  Comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards, including, without limitation, all Anti-Corruption Laws and applicable Sanctions, to which it may be subject, except where the failure so to comply would not constitute an Adverse Event.

Section 8.9 ERISA.  Maintain each Plan in compliance with all material applicable requirements of ERISA and of the Code and with all material applicable rulings and regulations issued under the provisions of ERISA and of the Code, including without limitation minimum funding standards, except where the failure so to comply would not constitute an Adverse Event.

Section 8.10 Environmental Matters.  Observe and comply with all laws, rules, regulations and orders of any government or government agency relating to health, safety, pollution, hazardous materials or other environmental matters to the extent non compliance would constitute an Adverse Event.

Section 8.11 Senior Debt.  Take all actions necessary to assure that the Loan is senior unsecured Indebtedness of the Borrower, and is and remains pari passu and of equal rank and seniority with all senior unsecured Indebtedness of the Borrower (without limiting the obligation of the Borrower to deliver cash collateral or deposits under certain circumstances, as specifically provided herein).

Section 8.12 Subsidiaries.  Within 30 days after the formation or acquisition of any Subsidiary that is a Material Subsidiary, other than a Material Subsidiary that is a Controlled Foreign Corporation or is dissolved, disposed of or merged during such 30 day period in a manner permitted under this Agreement, the Borrower will cause such Material Subsidiary to execute and deliver a Material Subsidiary Guaranty to the Agent for the benefit of the Banks, and provide (a) a certificate or certificates of the Secretary or an Assistant Secretary of such Material Subsidiaries attesting to the incumbency of the officers of such Material Subsidiary authorized to execute the Material Subsidiary Guaranty and attaching copies of the Articles or Certificate of Incorporation or By-Laws (or other governing documents); (b) a Certificate of Good Standing for such Material Subsidiary in the jurisdiction of its incorporation, certified by the appropriate governmental officials, and (c) at the request of the Agent, an opinion of counsel to such Material Subsidiary, addressed to the Banks, addressing with respect to such Material Subsidiary, the matters addressed with respect to the Material Subsidiaries in the opinion of counsel the form of Exhibit D.  At any time the Borrower determines that a Subsidiary which has executed the Material Subsidiary Guaranty is not required to be a party to the Material Subsidiary Guaranty under the definition of “Material Subsidiary,” including upon the addition of another Subsidiary as a Material Subsidiary, the Borrower shall provide the Agent with written notice thereof setting forth information in reasonable detail describing why such Subsidiary is no longer required to be a party to the Material Subsidiary Guaranty.  Upon the Agent’s reasonable determination that such Subsidiary is no longer required to be a party to the Material Subsidiary Guaranty, the Agent shall, at the Borrower’s expense, release such Subsidiary from the Material Subsidiary Guaranty pursuant to such documentation as the Borrower shall reasonably request.

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Section 8.13 Ratings.  The Borrower shall use commercially reasonable efforts to obtain and maintain Long Term Debt Ratings with S&P, Moody’s and Fitch.

Article IX NEGATIVE COVENANTS.

From the date of this Agreement and thereafter until the Loan and all other liabilities of the Borrower to the Banks hereunder and under the Notes (other than in respect of contingent indemnification and expense reimbursement obligations for which no claim has been made) have been paid in full, unless the Required Banks shall otherwise expressly agree in writing the Borrower will not, and will not permit any Material Subsidiary to, do any of the following:

Section 9.1 Merger.  Merge or consolidate or enter into an analogous reorganization or transaction with any Person; provided, however, that (a) any Subsidiary may be merged with or liquidated into the Borrower (if the Borrower is the surviving corporation) or any other wholly-owned Subsidiary (if such wholly-owned Subsidiary is the surviving corporation); (b) the Borrower and Material Subsidiaries may enter into Permitted Divestitures; (c) any wholly-owned Subsidiary may merge with any other Person in order to effect an Investment permitted pursuant to Section 9.7 so long as the continuing or surviving Person shall be a wholly-owned Subsidiary; and (d) any non-wholly-owned Subsidiary of the Borrower may merge into another Subsidiary of the Borrower to the extent permitted under Section 9.2(c).

Section 9.2 Sale of Assets.  Sell, transfer, lease or otherwise convey all or any substantial part of its assets except for:

(a) sales, subleases, leases and licensing of assets in the ordinary course of business;

(b) sales or other transfers (i) by a wholly-owned Subsidiary to the Borrower or another wholly-owned Subsidiary, (ii) by a non-wholly-owned Subsidiary of the Borrower to the Borrower or a wholly-owned Subsidiary of the Borrower and (iii) by a non-wholly-owned Subsidiary to another non-wholly-owned Subsidiary to the extent permitted under clause (c), below;

(c) Permitted Divestitures;

(d) Permitted Securitization Transactions;

(e) Permitted Sales and Leasebacks;

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(f) sales of used, obsolete, worn out or surplus property or property no longer used or useful in the conduct of its business;

(g) sales of permitted cash equivalents for cash or cash equivalents;

(h) synthetic leases described in subsection (h) of the definition of Interest-bearing Debt and subsection (d) of the definition of Interest Expense;

(i) abandonment of non-material intellectual property assets in the ordinary course of business;

(j) surrender, release or waiver of contract rights in the ordinary course of business;

(k) sales or other dispositions of property to the extent that such property is exchanged for credit against the purchase price of similar replacement property or the proceeds of such sale or other disposition are promptly applied to the purchase price of such replacement property;

(l) charitable donations in the ordinary course of business and consistent with past practices; and

(m) sales to or other dispositions of Investments or assets into joint ventures to the extent required by, or made pursuant to buy/sell arrangements between the joint venture parties set forth in, joint venture arrangements and similar binding arrangements in effect on the date hereof or pursuant to an Investment permitted by Section 9.7.

Section 9.3 Plans.  Permit any condition to exist in connection with any Plan which would constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a trustee appointed to administer such Plan, or permit any Plan to terminate under any circumstances which would cause the lien provided for in Section 4068 of ERISA to attach to any property, revenue or asset of the Borrower or any Subsidiary.

Section 9.4 Ownership of Stock.  Except as set forth on Schedule 9.4, take any action, or permit any Material Subsidiary to take any action, which would result in a decrease in the Borrower’s or any Material Subsidiary’s ownership interest in any Material Subsidiary (including, without limitation, decrease in the percentage of the shares of any class of stock owned), other than as permitted under Sections 9.1 and 9.2.

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Section 9.5 Other Agreements.  Enter into any agreement, bond, note or other instrument with or for the benefit of any Person other than the Banks or the Agent which would: (a) be violated or breached by the Borrower’s performance of its obligations under the Loan Documents, except where such violation or breach would not constitute an Adverse Event, or (b) other than this Agreement or the other Loan Documents, prohibit any Subsidiary of the Borrower from paying dividends or distributions on, or redeeming, acquiring or retiring for value, any shares of stock or other ownership interest that the Borrower holds in such Subsidiary, except for (i) any such prohibition that applies only when a default shall exist under such agreement or shall result from such payment, acquisition or retirement; (ii) as to clause (b), agreements and instruments entered into in connection with Permitted Securitization Transactions; (iii) customary prohibitions or restrictions in joint venture agreements and similar agreements that relate solely to the activities of such joint venture; (iv) as to clause (b), customary prohibitions or restrictions contained in agreements relating to any asset sale or disposition pending such sale or disposition, provided that such prohibitions and restrictions apply only to the Subsidiary or its assets to be sold or disposed of and such sale or disposition is permitted hereunder; (v) as to clause (b), restrictions and conditions imposed by any governmental authority; (vi) as to clause (b), any such prohibition contained in any agreement, bond, note or other instrument (or any refinancing thereof) with respect to any Person or the property or assets of such Person acquired by the Borrower or any Subsidiary in an acquisition permitted hereunder and existing at the time of such acquisition; provided that such prohibition is not applicable to any Person or the property or assets of any Person other than such acquired Person or the property or assets of such acquired Person; (vii) any agreement evidencing any permitted renewal, extension, replacement or refinancing of any agreement referred to in the foregoing clause (vi) so long as such renewal, extension, replacement or refinancing does not expand the scope of the restrictions described in clause (b); and (viii) as to clause (b), limitations or restrictions consisting of customary net worth, leverage or other financial covenants in each case contained in, or required by, any contractual obligation governing Indebtedness of a Subsidiary.

Section 9.6 Restricted Payments.  Either: (a) make any Restricted Payment, other than any dividend or distribution payable solely in shares or other equity interests to the holders of such shares or other equity interests, if any Default or Event of Default shall exist or shall result from the making of such Restricted Payment; or (b) directly or indirectly make any payment on, or redeem, repurchase, defease, or make any sinking fund payment on account of, or otherwise pay, acquire or retire for value any Indebtedness of the Borrower or any Subsidiary that is expressly subordinated in right of payment to the Loan, except for (i) regularly-scheduled payments of interest and principal and mandatory prepayments of principal that are not otherwise prohibited by any document or agreement stating the terms of subordination of such other Indebtedness, and (ii) refinancing of the Indebtedness of the Borrower or a Subsidiary that is expressly subordinated in right of payment to the Loan by the incurrence of Indebtedness that is similarly subordinated in right of payment to the Loan.

Section 9.7 Investments.  Acquire for value, make, have or hold any Investments in any other Person, except:

(a) Investments outstanding or contemplated on the date hereof and listed on Schedule 9.7, and any increases or decreases in the value thereof or write-ups, write-downs, write-offs, reinvestments, renewals and extensions with respect to such Investments;

(b) loans and advances to officers and employees in the ordinary course of business;

(c) Investments in readily marketable direct obligations of the United States of America having maturities of one year or less from the date of acquisition;

(d) certificates of deposit or bankers’ acceptances, each maturing within one year from the date of acquisition, issued by any commercial bank organized under the laws of the United States or any State thereof which has (i) combined capital, surplus and undivided profits of at least $100,000,000, and (ii) a credit rating with respect to its unsecured indebtedness from S&P that is rated A- (or the equivalent thereof from any other nationally recognized rating service) or higher;

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(e) commercial paper maturing within 270 days from the date of issuance and given the highest rating by a nationally recognized rating service;

(f) repurchase agreements relating to securities issued or guaranteed as to principal and interest by the United States of America;

(g) cash and demand deposits with any bank or trust company;

(h) money market funds substantially all the assets of which are comprised of securities of the types described in any of clauses (c) through (f) above;

(i) in the case of foreign Subsidiaries, short-term Investments comparable to clauses (c) through (h) above;

(j) Investments in the nature of an indebtedness owed by the Borrower to any Subsidiary or any Subsidiary to the Borrower or another Subsidiary in connection with cash management of the Borrower and its Subsidiaries in the ordinary course of business consistent with past practices;

(k) Investments by the Borrower or any Material Subsidiary (i) outstanding on the date hereof (or refinancings thereof) in Subsidiaries (other than Material Subsidiaries) and (ii) in the Borrower or any Material Subsidiary;

(l) Investments made after the date hereof in Subsidiaries that are not Material Subsidiaries, provided, that such Investments in the aggregate to such Subsidiaries that are not Material Subsidiaries shall not exceed $15,000,000 in aggregate amounts outstanding at any time (net of any repayment of loans or return of equity);

(m) Investments not otherwise permitted hereunder which shall not exceed (based on total consideration paid by the Borrower or a Material Subsidiary): (i) $40,000,000 for any single Investment or series of related Investments in any Person not engaged in one or more of the Borrower’s and Subsidiaries’ present lines of business, or (ii) $80,000,000 for any single Investment or series of related Investments in any Person that is engaged in one or more of the Borrower’s and Subsidiaries’ present lines of business or lines of business reasonably related to such present lines of business, provided, that not less than 10 Business Days prior to consummation of such Investment, the Borrower shall have provided pro forma financial statements to the Agent demonstrating that in the good faith judgment of the Borrower, the Borrower will continue to comply with the covenants of this Agreement after giving effect to such Investment, and provided, further, that consent of the Required Banks to such Investments in excess of such limits shall not be unreasonably withheld;

(n) Investments arising out of the receipt by the Borrower or any Subsidiary of noncash consideration for the sale of assets permitted under Section 9.2;

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(o) Investments consisting of hedging arrangements not otherwise prohibited hereunder relating to interest rate, commodity price or foreign exchange rate exposure not entered into for any speculative purpose;

(p) accounts receivable, notes receivable and security deposits and prepayments arising and trade credit granted in the ordinary course of business and any prepayments and other credits to suppliers made in the ordinary course of business;

(q) Investments resulting from pledges and deposits permitted by Section 9.8;

(r) Investments in the form of Guaranties permitted by Section 9.9;

(s) Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(t) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business or Investments acquired by the Borrower or a Material Subsidiary as a result of a foreclosure by the Borrower or any of the Material Subsidiaries with respect to any Investments or other transfer of title with respect to any Investment in default;

(u) Investments of a Material Subsidiary acquired after the date hereof or of a corporation merged into the Borrower or merged into or consolidated with a Material Subsidiary in accordance with Section 9.1 after the date hereof to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;

(v) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers consistent with past practices;

(w) Investments by the Borrower or any Material Subsidiary, if the Borrower or any Material Subsidiary would otherwise be permitted to make a dividend or distribution in such amount (provided that the amount of any such Investment shall also be deemed to be a distribution under the appropriate clause of Section 9.6);

(x) Investments in Otter Tail Assurance Limited, in an aggregate amount not to exceed $10,000,000 at any time outstanding;

(y) Investments in joint ventures in one or more of the Borrower’s and Subsidiaries’ present lines of business in an aggregate amount not to exceed $15,000,000 at any time outstanding; and

(z) any other Investments not otherwise permitted hereunder not to exceed $15,000,000 at any time outstanding.

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Section 9.8 Liens.  Create, incur, assume or suffer to exist any Lien with respect to any property, revenues or assets now owned or hereafter arising or acquired, except:

(a) Liens in connection with the acquisition of property by way of purchase money mortgage and security interests, conditional sale or other title retention agreement, Capitalized Lease or other deferred payment contract, and attaching only to the property being acquired (or accessions to such property, related records and proceeds thereof);

(b) Liens existing on assets of Material Subsidiaries acquired after the date of this Agreement, which existed at the time of such acquisition and attach only to the assets of such Material Subsidiaries;

(c) Liens existing on the date of this Agreement and disclosed on Schedule 9.8 hereto and Liens securing any extension, renewal, restatement or replacement of the credit facilities described on Schedule 9.8, provided, that Liens securing such extensions, renewals, restatements or replacement credit facilities shall not attach to materially different assets than the Liens disclosed on such Schedule 9.8 and shall not secure indebtedness exceeding the amount of credit facilities described on Schedule 9.8 (other than premiums, interest, fees or costs capitalized or required to be paid in connection with such extension, renewal, restatement or replacement credit facility);

(d) Deposits or pledges and other Liens to secure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations, in each case in the ordinary course of business of the Borrower or a Subsidiary;

(e) Liens of landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other like Liens arising in the ordinary course of business or imposed by-law and securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower or any Subsidiary shall have set aside on its books reserves in accordance with GAAP;

(f) Deposits and other Liens to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with public utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred by the Borrower or any Material Subsidiary in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

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(g) Liens granted to secure obligations to any other holder of senior Indebtedness of the Borrower (including without limitation obligations to insurers of bond obligations of the Borrower constituting Interest-bearing Debt), provided, that (i) such Liens were required to be granted pursuant to agreements and instruments entered into by the Borrower prior to the date of this Agreement, and (ii) the Agent is granted a pari passu Lien, not subordinate in priority (whether due to time of filing or otherwise) to such Lien attaching to either (x) the same assets and rights as the Lien in favor of such other holder of senior Indebtedness (in which case if the Agent shall so notify the Borrower, the holder of such senior Indebtedness shall enter into an inter-creditor agreement reasonably satisfactory to the Agent confirming such respective priorities of such Liens), or (y) other assets that are reasonably acceptable to the Required Banks in their sole discretion to secure all Indebtedness and obligations of the Borrower hereunder, whether then existing or thereafter arising;

(h) Liens of lessors of real property on which facilities owned or leased by the Borrower or any Subsidiary are located;

(i) Liens (to the extent falling under the definition of “Lien”) consisting of ownership interests (and protective filings respecting such ownership interests) of lessors of assets to the Borrower or any Subsidiary under any operating lease, and of licensors of intellectual property or other rights to the Borrower or any Subsidiary;

(j) Liens (to the extent falling under the definition of “Lien”) consisting of rights of lessees or sublessees of assets of the Borrower or any Subsidiary leased in the ordinary course of the Borrower’s or such Subsidiary’s business, which leases do not materially interfere with the ordinary course of business of the Borrower or such Subsidiary;

(k) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods by the Borrower or any Subsidiary in the ordinary course of business and other similar Liens arising in the ordinary course of business of the Borrower or any Subsidiary;

(l) Liens in favor of the Agent for the benefit of the Agent and the Banks under any provisions of this Agreement or any other Loan Document or any replacement, additional or successor agreement hereto or thereto, creating such Liens;

(m) Liens for taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 8.4;

(n) (i) Liens securing Indebtedness incurred to pay annual premiums for property, casualty or liability insurance policies maintained by the Borrower or any Subsidiary; provided that such Liens attach only to insurance policies and proceeds thereof, and (ii) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any Subsidiary;

(o) Liens created under any agreement relating to the sale, transfer or other disposition of assets permitted hereunder; provided that such Liens relate solely to the assets to be sold, transferred or otherwise disposed of;

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(p) survey exceptions, encroachments, protrusions, easements, restrictions, reservations, licenses, rights-of-way, sewers, electric lines, telegraphs and telephone lines and other similar minor title defects affecting the real property, or zoning or other restrictions as to the use of the real property or Liens incidental to the conduct of the business of the Borrower or any Material Subsidiary or to the ownership of its properties, in each case which were not incurred in connection with Indebtedness and which do not individually or in the aggregate materially and adversely affect the value of said properties or materially impair their use in the operation of the business of the Borrower or any Material Subsidiary;

(q) Liens securing judgments for the payment of money not constituting an Event of Default under Section 10.1(h);

(r) Liens encumbering cash collateral or other financial assets securing Investments consisting of hedging arrangements not otherwise prohibited hereunder relating to interest rate, commodity price or foreign exchange rate exposure not entered into for any speculative purpose;

(s) Liens arising under or related to any statutory or common law provisions or other customary or contractual rights (i) relating to the establishment of depository relations with banks or other financial institutions not given in connection with the issuance of Indebtedness, including banker’s liens, rights of setoff or similar rights and remedies as to deposit or securities accounts or other funds or instruments maintained or held with a depositary or other financial institution or securities intermediary, (ii) relating to pooled deposit or sweep accounts of the Borrower or any Material Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the Material Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any Material Subsidiary in the ordinary course of business;

(t) Any encumbrance or restriction with respect to the equity interests of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;

(u) Liens on securities that are the subject of repurchase agreements permitted by Section 9.7;

(v) Liens solely on any cash earnest money deposits made by the Borrower or any Material Subsidiary in connection with any letter of intent or purchase agreement permitted hereunder; and

(w) Liens not otherwise permitted by this Section securing Indebtedness or other obligations not to exceed $15,000,000 in the aggregate at any time outstanding.

In no case shall Liens permitted hereunder apply to the stock of any Subsidiary (other than Liens, if any, under clause (g)) and in no case shall Liens under clause (d), (e), (f), (i), (j), (k), (m), (o) or (p) secure any Indebtedness for borrowed money or Indebtedness constituting obligations to issuers of letters of credit.

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Section 9.9 Contingent Liabilities.  Guaranty obligations of any other Person, except for:

(a) Guaranties by the Borrower or any Material Subsidiary of obligations of the Borrower or any Subsidiary as lessee under any lease that is not a Capitalized Lease;

(b) [Intentionally omitted];

(c) Guaranties by the Borrower to assure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, or performance, surety, statutory, stay, customs or appeal bonds, performance and completion guarantees, and other similar obligations, in the ordinary course of business of the Borrower or a Material Subsidiary or consistent with past practice;

(d) [Intentionally omitted];

(e) Guaranties by the Borrower of the obligations of a Subsidiary under any Agreement involving the sale of accounts receivable permitted by Section 9.2(d), provided, that such Guaranties shall not, in the aggregate, Guaranty receivables sale arrangements involving account receivable sales at any time remaining outstanding in excess of $50,000,000;

(f) Guaranties by the Borrower or any Subsidiary of the obligations of the Borrower or any Material Subsidiary under any unsecured Interest-bearing Debt the incurrence of which does not cause a Default or Event of Default; and

(g) Other Guaranties limited as to principal of recovery to not more than $30,000,000 in the aggregate at any time outstanding.

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Section 9.10 Transactions with Related Parties.  Enter into or be a party to any transaction or arrangement, including, without limitation, the purchase, sale lease or exchange of property or the rendering of any service, with any Related Party, except upon fair and reasonable terms no less favorable to the Borrower or such Material Subsidiary than such entity would obtain in a comparable arm’s-length transaction with a Person not a Related Party, excluding (i) transactions between the Borrower and Otter Tail Power Company, a Subsidiary of Otter Tail Power Company, or a Material Subsidiary and transactions between Material Subsidiaries, (ii) transactions otherwise expressly permitted (or required) with such Related Parties under this Agreement, (iii) any issuance of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the Board of Directors of the Borrower or a Material Subsidiary, (iv) loans or advances to employees or consultants of the Borrower or any of its Subsidiaries otherwise permitted hereunder, (v) transactions among the Borrower or any Subsidiary permitted by this Agreement, (vi) the payment of fees, reasonable out-of-pocket costs and indemnities and provision of indemnification to directors, officers, consultants and employees of the Borrower and the Subsidiaries in the ordinary course of business, (vii) any employment agreement, benefit plan or arrangement or any health, disability or similar insurance plan which covers employees, entered into by the Borrower or any of the Subsidiaries in the ordinary course of business, (viii) any subscription agreement or similar agreement pertaining to the repurchase of equity interests pursuant to put/call rights or similar rights with employees, officers or directors, (ix) payments or loans (or cancellation of loans) to employees or consultants that are (A) approved by a majority of the Board of Directors of the Borrower in good faith, (B) made in compliance with applicable law and (C) otherwise permitted under this Agreement, (x) transactions with wholly-owned Subsidiaries for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business in a manner consistent with past practice, (xi) transactions between the Borrower or any of the Subsidiaries and any person, a director of which is also a director of the Borrower or a Material Subsidiary, provided, however, that (A) such director abstains from voting as a director of the Borrower or a Material Subsidiary on any matter involving such other person and (B) such person is not a Related Party for any reason other than such director’s acting in such capacity, (xii) transactions with joint ventures for the purchase or sale of goods, equipment and services entered into in the ordinary course of business and in a manner consistent with past practice, (xiii) intercompany transactions for the purpose of improving the consolidated tax efficiency of the Borrower and the Subsidiaries, (xiv) payments by the Borrower and the Subsidiaries pursuant to tax sharing agreements among the Borrower and the Subsidiaries on customary terms that require each party to make payments when such taxes are due or refunds received of amounts equal to the income tax liabilities and refunds generated by each such party calculated on a separate return basis and payments to the party generating tax benefits and credits of amounts equal to the value of such tax benefits and credits made available to the group by such party, and (xv) the payment of fees, expenses, indemnities or other payments pursuant to the agreements in existence on the date hereof and set forth on Schedule 9.10 or any amendment thereto to the extent such an amendment is not adverse to the Banks in any material respect.

Section 9.11 Use of Proceeds.  Permit any proceeds of the Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing or carrying any margin stock” within the meaning of Regulation U of the Federal Reserve Board, as amended from time to time; nor shall the Borrower use, and the Borrower shall ensure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of the Loan (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions.

Section 9.12 Financial Covenants:

Permit, at any time:

(a) the ratio, as of the last day of any fiscal quarter of the Borrower, of (i) Interest-bearing Debt, to (ii) Total Capitalization to be greater than 0.60 to 1.00; or

(b) the Interest and Dividend Coverage Ratio for any period of four consecutive fiscal quarters to be less than 1.50 to 1.00.

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Article X EVENTS OF DEFAULT AND REMEDIES.

Section 10.1 Events of Default.  The occurrence of any one or more of the following events shall constitute an Event of Default:

(a) The Borrower shall fail to make when due, whether by acceleration or otherwise, any payment of principal of the Loan, or the Borrower shall fail to make within three (3) Business Days after the same becomes due, any interest on the loan or any fee or other amount required to be made to the Banks pursuant to the Loan Documents;

(b) Any representation or warranty made or deemed to have been made by or on behalf of the Borrower or any Material Subsidiary by any of the Loan Documents or by or on behalf of the Borrower or any Material Subsidiary in any certificate, statement, report or other writing required to be furnished by or on behalf of the Borrower to the Banks pursuant to the Loan Documents shall prove to have been false or misleading in any material respect on the date as of which the facts set forth are stated or certified or deemed to have been stated or certified;

(c) The Borrower shall fail to comply with Section 8.2 or any Section of Article IX;

(d) The Borrower shall fail to comply with any agreement, covenant, condition, provision or term contained in the Loan Documents (and such failure shall not constitute an Event of Default under any of the other provisions of this Section 10.1) and such failure to comply shall continue for thirty (30) calendar days after the Borrower obtains knowledge of such non-compliance;

(e) The Borrower, any Material Subsidiary or Otter Tail Power Company shall admit in writing that it is insolvent or shall generally not pay its debts as they mature or shall apply for, shall consent to, or shall acquiesce in the appointment of a custodian, trustee or receiver of the Borrower, any Material Subsidiary or Otter Tail Power Company or for a substantial part of the property thereof or, in the absence of such application, consent or acquiescence, a custodian, trustee or receiver shall be appointed for the Borrower, any Material Subsidiary or Otter Tail Power Company or for a substantial part of the property thereof and such appointment shall not be discharged, dismissed or stayed within 60 days;

(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under any bankruptcy or insolvency law shall be instituted by or against the Borrower, any Material Subsidiary or Otter Tail Power Company, and, if instituted against the Borrower, any Material Subsidiary or Otter Tail Power Company, shall have been consented to or acquiesced in by the Borrower, such Material Subsidiary or Otter Tail Power Company, or shall remain undischarged, undismissed, unstayed or unbonded for 60 days, or an order for relief shall have been entered against the Borrower, such Material Subsidiary or Otter Tail Power Company, or the Borrower, any Material Subsidiary or Otter Tail Power Company shall take any corporate action to approve institution of, or acquiescence in, such a proceeding;

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(g) Any dissolution or liquidation proceeding shall be instituted by or against the Borrower, any Material Subsidiary or Otter Tail Power Company and, if instituted against the Borrower, any Material Subsidiary or Otter Tail Power Company, shall be consented to or acquiesced in by the Borrower, any Material Subsidiary or Otter Tail Power Company or shall remain for 30 days undismissed, undischarged, unstayed or unbonded, or the Borrower, any Material Subsidiary or Otter Tail Power Company shall consent to or acquiescence in such a proceeding; provided that any dissolution or proceeding not prohibited by Section 9.1 or Section 9.2 shall not constitute an Event of Default;

(h) A final judgment or judgments for the payment of money in excess of the sum of $20,000,000 in the aggregate (to the extent not covered by third-party insurance as to which the insurer has not denied coverage in respect thereof) shall be rendered against the Borrower or a Material Subsidiary, and there is a period of 30 consecutive days during which (i) the Borrower or such Material Subsidiary has not discharged the same or provided for its discharge in accordance with its terms, or (ii) the Borrower or such Material Subsidiary has not procured a stay of execution, prior to any execution on such judgment or (iii) such judgment has not otherwise been dismissed, vacated or bonded pending appeal;

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(i) The termination of any Plan by the Borrower or any ERISA Affiliate if in order to effectuate such termination, the Borrower or any ERISA Affiliate would be required to make a contribution to such Plan, or would incur a liability or obligation to such Plan, and the requirement to make such contribution or the incurrence of such liability or obligations shall constitute an Adverse Event, or the termination of any such Plan by the PBGC if in order to effectuate such termination, the Borrower or any ERISA Affiliate would be required to make a contribution to such Plan, or would incur a liability or obligation to such Plan, and the requirement to make such contribution or the incurrence of such liability or obligations shall constitute an Adverse Event;

(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness under this Agreement) or a Material Subsidiary in the aggregate in excess of $20,000,000 shall be accelerated, or the Borrower or a Material Subsidiary shall fail to pay any such Indebtedness (in excess of such amount) when due (beyond the applicable grace period with respect thereto) or, in the case of such Indebtedness payable on demand, when demanded (beyond the applicable grace period with respect thereto), or any other event shall occur or condition shall exist and shall continue for more than the period of grace, if any, applicable thereto and, in each case, such nonpayment or other event shall have the effect of causing, or permitting (any required notice having been given and grace period having expired) the holder of any such Indebtedness (in excess of such amount) or any trustee or other Person acting on behalf of such holder to cause, such Indebtedness to become due prior to its stated maturity; provided that this clause (j) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness, and provided further, that an Event of Default under this clause (j) caused by the occurrence of a breach or default with respect to Indebtedness in the aggregate in excess of $20,000,000 shall be cured for purposes of this Agreement upon the Person asserting such breach or default waiving such breach or default or upon the Borrower or a Material Subsidiary curing such breach or default if, at the time of such waiver or such cure the Agent has not exercised any rights or remedies with respect to an Event of Default under this clause (j);

(k) Any material provision of any Loan Document shall not be, or shall cease to be, enforceable and binding in accordance with its terms (other than as permitted hereunder or thereunder), or the Borrower or any Material Subsidiary shall disavow or contest in writing its obligations under such Loan Document (other than as permitted hereunder or thereunder; or

(l) Either (i) the Borrower shall cease to own, directly or indirectly, all of the voting stock of Varistar Corporation, or (ii) any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), that owned less than 5% of the shares of any voting class stock of the Borrower shall have acquired more than 25% of the shares of such voting stock.

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Section 10.2 Remedies.  If (a) any Event of Default described in Sections 10.1(e), (f) or (g) shall occur and be continuing with respect to the Borrower, the outstanding unpaid principal balance of the Loan, the accrued interest thereon and all other obligations of the Borrower to the Banks and the Agent under the Loan Documents shall automatically become immediately due and payable; or (b) any other Event of Default shall occur and be continuing, then the Agent may (with the consent of the Required Banks) take any or all of the following actions (and shall take any or all of the following actions on direction of the Required Banks): (i) declare that the outstanding unpaid principal balance of the Loan, the accrued and unpaid interest thereon and all other obligations of the Borrower to the Banks and the Agent under the Loan Documents to be forthwith due and payable, whereupon the Loan, all accrued and unpaid interest thereon and all such obligations shall immediately become due and payable, in each case without demand or notice of any kind, all of which are hereby expressly waived, anything in this Agreement or in any other Loan Document to the contrary notwithstanding, (ii) exercise all rights and remedies under any other Loan Document, and (iii) enforce all rights and remedies under any applicable law.

Section 10.3 [Intentionally Omitted].

Section 10.4 Setoff.  In addition to, and without limitation of, any rights of the Banks under applicable law, if any Event of Default occurs and is continuing, upon written direction by the Agent to such effect any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Bank to or for the credit or account of the Borrower may be offset and applied toward the payment of the Borrower Obligations then due and payable owing to such Bank.  Each Bank agrees to promptly notify the Borrower and the Agent after any such setoff and application made by such Bank; provided that the failure to give such notice shall not affect the validity of such setoff and application.

Article XI THE AGENT.

Section 11.1 Appointment and Grant of Authority.  Each Bank hereby appoints the Agent, and the Agent hereby agrees to act, as agent under this Agreement and the other Loan Documents.  The Agent shall have and may exercise such powers under this Agreement and the other Loan Documents as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto.  Each Bank hereby authorizes, consents to, and directs the Borrower to deal with the Agent as the true and lawful agent of such Bank to the extent set forth in this Agreement and the other Loan Documents.  The provisions of this Article are solely for the benefit of the Agent and the Banks and neither the Borrower nor any other Person shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” as used herein or in any other Loan Documents (or any similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law.  Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

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Section 11.2 Non-Reliance on Agent.   Each Bank acknowledges and agrees that the extensions of credit made hereunder are commercial loans and not investments in a business enterprise or securities.  Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement.  The Agent shall not be required to keep informed as to the performance or observance by the Borrower of this Agreement and the Loan Documents or to inspect the properties or books of the Borrower.  Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its related companies) which may come into the Agent’s possession.

Section 11.3 Responsibility of the Agent and Other Matters.

(a) The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and those duties and liabilities shall be subject to the limitations and qualifications set forth in this Section.  The duties of the Agent shall be mechanical and administrative in nature.

(b) Neither the Agent nor any of its directors, officers or employees shall be liable for any action taken or omitted (whether or not such action taken or omitted is within or without the Agent’s responsibilities and duties expressly set forth in this Agreement) under or in connection with this Agreement, or any other instrument or document in connection herewith, except for gross negligence, bad faith or willful misconduct as determined in a final, non-appealable judgment in a court of competent jurisdiction.  Without limiting the foregoing, neither the Agent nor any of its directors, officers or employees shall be responsible for, or have any duty to examine: (i) the genuineness, execution, validity, effectiveness, enforceability, value or sufficiency of the Loan Agreements; (ii) the collectability of any amounts owed by the Borrower; (iii) any recitals or statements or representations or warranties in connection with this Agreement or the Notes; (iv) any failure of any party to this Agreement to receive any communication sent; or (v) the assets, liabilities, financial condition, results of operations, business or creditworthiness of the Borrower.

(c) The Agent shall be entitled to act, and shall be fully protected in acting upon, any communication in whatever form believed by the Agent in good faith to be genuine and correct and to have been signed or sent or made by a proper person or persons or entity.  The Agent may consult counsel and shall be entitled to act, and shall be fully protected in-any action taken in good faith, in accordance with advice given by counsel.  The Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by the Agent with reasonable care.  The Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, provisions or conditions of this Agreement or the Notes on the Borrower’s part.

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(d) The Banks are not partners or co-venturers, and no Bank shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Bank.  The Agent shall have the exclusive right on behalf of the Banks to enforce the payment of the principal of and interest on the Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement.

Section 11.4 Action on Instructions.  The Agent shall be entitled to act or refrain from acting, and in all cases shall be fully protected in acting or refraining from acting under this Agreement or the Notes or any other instrument or document in connection herewith or therewith in accordance with instructions in writing from (i) the Required Banks except for instructions which under the express provisions hereof must be received by the Agent from all the Banks, and (ii) in the case of such instructions, from all the Banks.

Section 11.5 Indemnification.  To the extent the Borrower does not reimburse and save the Agent harmless according to the terms hereof for and from all costs, expenses and disbursements in connection herewith or with the other Loan Documents, such costs, expenses and disbursements to the extent reasonable shall be borne by the Banks ratably in accordance with their Percentages and the Banks hereby agree on such basis (a) to reimburse the Agent for all such reasonable costs, expenses and disbursements on request and (b) to indemnify and save harmless the Agent against and from any and all losses, obligations, penalties, actions, judgments and suits and other reasonable costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, other than as a consequence of actual gross negligence, bad faith or willful misconduct on the part of the Agent as determined by final, non-appealable judgment in a court of competent jurisdiction, arising out of or in connection with this Agreement or the Notes or any instrument or document in connection herewith or therewith, or any request of the Banks, including without limitation the reasonable and documented costs, expenses and disbursements in connection with defending itself against any claim or liability, or answering any subpoena, related to the exercise or performance of any of its powers or duties under this Agreement or the other Loan Documents or the taking of any action under or in connection with this Agreement or the Notes.

Section 11.6 JPMorgan and Affiliates.  With respect to JPMorgan’s Commitment and any Loan by JPMorgan under this Agreement and any Note and any interest of JPMorgan in any Note, JPMorgan shall have the same rights, powers and duties under this Agreement and such Note as any other Bank and may exercise the same as though it were not the Agent.  JPMorgan and its affiliates may accept deposits from, lend money to, and generally engage, and continue to engage, in any kind of business with the Borrower as if JPMorgan were not the Agent.

Section 11.7 Notice to Holder of Notes.  The Agent may deem and treat the payees of the Notes as the owners thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof has been filed with the Agent.  Any request, authority or consent of any holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note.

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Section 11.8 Successor Agent.  The Agent may resign at any time by giving at least 30 days written notice thereof to the Banks and the Borrower, with the effectiveness of such resignation subject to the appointment and acceptance of a successor Agent.  Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent (subject to the Borrower’s approval, such approval not to be unreasonably withheld or delayed).  If no successor Agent shall have been appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Agent’s giving notice of resignation, then the retiring Agent may, but shall not be required to, on behalf of the Banks, appoint a successor Agent with a combined capital and surplus of at least $500,000,000 (or an affiliate of any such bank).

Article XII MISCELLANEOUS.

Section 12.1 No Waiver and Amendment.  No failure on the part of the Banks or the holder of the Notes to exercise and no delay in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right.  The remedies herein and in any other instrument, document or agreement delivered or to be delivered to the Banks hereunder or in connection herewith are cumulative and not exclusive of any remedies provided by-law.  No notice to or demand on the Borrower not required hereunder or under the Notes shall in any event entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Banks or the holder of the Notes to any other or further action in any circumstances without notice or demand.

Section 12.2 Amendments, Etc.  No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Agent upon direction of the Required Banks (subject to Section 2.11 with respect to any Defaulting Bank) and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that Agent may, with the consent of Borrower only, amend, modify or supplement this Agreement to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not materially and adversely affect the rights of any Bank; provided further, however, that no amendment, waiver or consent shall, unless agreed to by the Agent and each of the Banks directly affected thereby (subject to Section 2.11 with respect to any Defaulting Bank):

(a) increase the amounts of or extend the terms of the Commitment of such Bank (it being understood that a waiver or modification of any condition precedent, covenant, Default, Event of Default, mandatory prepayment or mandatory reduction of the Commitment shall not constitute an extension or increase of any Commitment of any Bank);

(b) decrease or forgive the principal of, or decrease the rate of interest on, the Term Loan of such Bank, or decrease any fees or other amounts payable hereunder to such Bank;

(c) postpone any date fixed for any payment of principal of, or interest on, the Term Loan of such Bank, or any fees or other amounts payable hereunder to such Bank;

(d) release all or substantially all of the Material Subsidiaries from the Material Subsidiary Guaranty (except pursuant to a transaction or series of transactions permitted by Section 8.12, 9.1 or 9.2) or release all or substantially all of the collateral held subject to Section 10.3, except as contemplated by such Section; or

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(e) reduce the percentage in the definition of Required Banks or amend this Section 12.2.

provided, further that amendments, waivers or consents adversely affecting the rights of the Agent shall also require the consent of the Agent.  Notwithstanding the foregoing provisions of this Section 12.2, with the agreement and consents of the Persons referred to therein, and without the necessity of obtaining the approval of any other Banks hereunder, amendments may be entered into as provided in Section 2.9.

Section 12.3 Assignments and Participations.

(a) Assignments.  Each Bank shall have the right, subject to the further provisions of this Sections 12.3, to sell or assign all or any part of its Term Loan, Note, and other rights and obligations under this Agreement and related documents (such transfer, an “Assignment”) to any commercial lender, other financial institution or other entity other Ineligible Institutions (an “Assignee”).  Upon such Assignment becoming effective as provided in Section 12.3(b), the assigning Bank shall be relieved from the portion of its Commitment, obligations to indemnify the Agent and other obligations hereunder to the extent assumed and undertaken by the Assignee, and to such extent the Assignee shall have the rights and obligations of a “Bank” hereunder.  Notwithstanding the foregoing, unless otherwise consented to by the Borrower and the Agent, each Assignment shall be in the initial principal amount of not less than $10,000,000 in the aggregate for the Term Loan assigned, or an integral multiple of $1,000,000 if above such amount.  Each Assignment shall be documented by an agreement between the assigning Bank and the Assignee (an “Assignment and Assumption Agreement”) substantially in the form of Exhibit E attached hereto.

(b) Effectiveness of Assignments.  An Assignment shall become effective hereunder when all of the following shall have occurred: (i) the Agent and the Borrower (or, following occurrence and during continuance of an Event of Default, the Agent only and not the Borrower; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within five (5) Business Days after having received notice thereof) shall consent to such Assignment (which consents shall not be unreasonably withheld), by either written notice of such consent or by executing and delivering such Assignments, provided that no such consents shall be required for an assignment to one of the Banks or an affiliate of a Bank or an Approved Fund, (ii) either the assigning Bank or the Assignee shall have paid a processing fee of $3,500 to the Agent for its own account (unless waived by the Agent), (iii) the Assignee shall have submitted the Assignment and Assumption Agreement to the Agent with a copy for the Borrower, and shall have provided to the Agent information the Agent shall have reasonably requested to make payments to the Assignee, (iv) the assigning Bank and the Agent shall have agreed upon a date upon which the Assignment shall become effective, and (v) the Agent shall have recorded such Assignment in the Register (the Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitment of, and principal amount (and stated interest) of the Loan owing to, each Bank pursuant to the terms hereof from time to time; the entries in the Register shall be conclusive, and the Borrower, the Agent and the Banks shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary; the Register shall be available for inspection by the Borrower and any Bank, at any reasonable time and from time to time upon reasonable prior notice); provided that assignments pursuant to Section 2.12 shall not require the signature or agreement of the assigning Bank to become effective, and any processing fee in connection with such assignments may be paid by the Borrower.  Upon the Assignment becoming effective, (x) if requested by the assigning Bank, the Agent and the Borrower shall make appropriate arrangements so that new Notes are issued to the assigning Bank and the Assignee; and (y) the Agent shall forward all payments of interest, principal, fees and other amounts that would have been made to the assigning Bank, in proportion to the percentage of the assigning Bank’s rights transferred, to the Assignee.  Any assignment or transfer by a Bank of rights or obligations under this Agreement that does not comply with clauses 12.3(a) and (b) shall be treated for purposes of this Agreement as a sale by such Bank of a participation in such rights and obligations in accordance with Section 12.3(c).

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(c) Participations.  Each Bank shall have the right, subject to the further provisions of this Section 12.3, to grant or sell a participation in all or any part of its Term Loan, Notes and Commitments (a “Participation”) to any commercial lender, other financial institution or other entity (a “Participant”) without the consent of the Borrower, the Agent of any other party hereto.  The Borrower agrees that if amounts outstanding under this agreement and the Notes are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence and during the continuance of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its Participation in amounts owing under this Agreement and any Note to the same extent as if the amount of its Participation were owing directly to it as a Bank under this Agreement or any Note; provided, that such right of setoff shall be subject to the obligation of such Participant to share with the Banks, and the Banks agree to share with such Participant, as provided in Section 4.5.  The Borrower also agrees that each Participant shall be entitled to the benefits of Article V with respect to its Participation, provided, that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Bank would have been entitled to receive in respect of the amount of the Participation transferred by such transferor Bank to such Participant had no such transfer occurred. Each Bank that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loan or other obligations under the Loan Documents (the “Participant Register”); provided that no Bank shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loan or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.

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(d) Limitation of Rights of any Assignee or Participant.  Notwithstanding anything in the foregoing to the contrary, except in the instance of an Assignment that has become effective as provided in Section 12.3(b), (i) no Assignee or Participant shall have any direct rights hereunder, (ii) the Borrower, the Agent and the Banks other than the assigning or selling Bank shall deal solely with the assigning or selling Bank and shall not be obligated to extend any rights or make any payment to, or seek any consent of, the Assignee or Participant, (iii) no Assignment or Participation shall relieve the assigning or selling Bank from its Commitment to make its Term Loan hereunder or any of its other obligations hereunder and such Bank shall remain solely responsible for the performance hereof, the (iv) no Assignee or Participant, other than an affiliate of the assigning or selling Bank, shall be entitled to require such Bank to take or omit to take any action hereunder, except that such Bank may agree with such Assignee or Participant that such Bank will not, without such Assignee’s or Participant’s consent, take any action which would, in the case of any principal, interest or fee in which the Assignee or Participant has an ownership or beneficial interest: (x) extend the final maturity of the Loan or extend the Termination Date, (y) reduce the interest rate on the Loan, or (z) forgive any principal of, or interest on, the Loan or any fees.

(e) Tax Matters. No Bank shall be permitted to enter into any Assignment or Participation with any Assignee or Participant who (i) is not a United States Person or (ii) is a United States Person that the Borrower may not treat as an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Assignee or Participant represents and warrants to such Bank, the Agent and the Borrower that, as at the date of such Assignment or Participation, it is entitled to receive interest payments without withholding or deduction of any taxes and such Assignee or Participant executes and delivers to such Bank on or before the date of execution and delivery of documentation of such Participation or Assignment, a United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes.  In addition, if a payment made to an Assignee or Participant under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Assignee or Participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Assignee or Participant shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Assignee or Participant has complied with such Assignee’s or Participant’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

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(f) Information.  Each Bank may furnish any information concerning the Borrower in the possession of such Bank from time to time to Assignees and Participants and potential Assignees and Participants, so long as such entities agree in writing to keep such information confidential in accordance with Section 12.17.

(g) Federal Reserve Bank.  Nothing herein stated shall limit the right of any Bank to assign a security interest in all or any portion of its rights herein and in any Note to secure obligations of such Bank, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such assignment of a security interest shall release a Bank from any of its obligations hereunder or substitute any such assignee for such Bank as a party hereto.

Section 12.4 Costs, Expenses and Taxes; Indemnification.

(a) The Borrower agrees, whether or not any Advance is made hereunder, to pay promptly on written demand: (i) all reasonable and documented out-of-pocket costs and expenses of the Agent (including the reasonable fees and expenses of one counsel to the Agent and Banks taken as a whole) incurred in connection with the preparation, execution and delivery of the Loan Documents and the preparation, negotiation and execution of any and all amendments to each thereof, and (ii) all reasonable and documented out-of-pocket costs and expenses of the Agent and each of the Banks incurred after the occurrence and during the continuance of an Event of Default in connection with the enforcement of the Loan Documents.  The Borrower agrees to pay, and save the Banks harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of the Loan Documents.  The Borrower agrees to indemnify and hold the Banks harmless from any loss or expense which may arise or be created by the acceptance in good faith by the Agent of telephonic or other instructions for making Advances or disbursing the proceeds thereof, except to the extent resulting from the gross negligence or willful misconduct as determined in a final, non-appealable judgment by a court of competent jurisdiction.

(b) The Borrower agrees to defend, protect, indemnify, and hold harmless the Agent and each and all of the Banks, each of their respective affiliates and each of the respective officers, directors, employees and agents of each of the foregoing (each an “Indemnified Person” and, collectively, the “Indemnified Persons”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel to such Indemnified Persons) in connection with any investigative, administrative or judicial proceeding, whether direct, indirect or consequential and whether based on any federal or state laws or other statutory regulations, including, without limitation, securities and commercial laws and regulations, under common law or at equitable cause, or on contract or otherwise, arising out of or in connection with the Commitment, the making of, management of and participation in the Advances or the use or intended use of the proceeds of the Advances, provided that the Borrower shall have no obligation under this Section 12.4(b) to an Indemnified Person with respect to any of the foregoing to the extent resulting from the gross negligence, bad faith or willful misconduct of such Indemnified Person or arising solely from claims between one such Indemnified Person and another such Indemnified Person, in each case, as determined in a final, non-appealable judgment by a court of competent jurisdiction.  The indemnity set forth herein shall be in addition to any other obligations or liabilities of the Borrower to each Indemnified Person under the Loan Documents or at common law or otherwise.  To the extent permitted by applicable law, any Person seeking to be indemnified under this Section 12.4(b) shall, upon obtaining knowledge thereof, use commercially reasonable efforts to give prompt written notice to the Borrower of the commencement of any action or proceeding giving rise to such indemnification claim, provided that the failure to give such notice shall not relieve the Borrower of any indemnification obligations hereunder.

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(c) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Person for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet).  To the extent permitted by applicable law, except in the case of the Borrower, to the extent otherwise subject to indemnification pursuant to clause (b) alone, neither the Borrower, the Agent nor any Bank shall assert, and each hereby waives, any claim against any other party hereto for any damages on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds thereof.  

(d) The obligations of the Borrower under this Section 12.4 shall survive any termination of this Agreement.

Section 12.5 Notices.  

(a) Except when telephonic or electronic notice is expressly authorized by this Agreement, any notice or other communication to any party in connection with this Agreement shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified on the signature page hereof, or at such other address as such party shall have specified to the other party hereto in writing.  All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by facsimile transmission, from the first Business Day after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed; provided, however, that any notice to the Agent under Article II shall be deemed to have been given only when received by the Agent.

(b) Financial statements, reports and letters under Section 8.1(a), (b), (c), (f), (g) and (h) and other ordinary course requests or communications by the Borrower to the Agent may be sent by the Borrower to the Agent by e-mail, and may be distributed by the Agent to the Bank by similar means or by posting to DebtX, or other coded commercial service selected for such purpose by the Agent.

Section 12.6 [Intentionally Omitted].  

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Section 12.7 Severability.  Any provision of the Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 12.8 Subsidiary References.  The provisions of this Agreement relating to Subsidiaries shall apply only during such times as the Borrower has one or more Subsidiaries.

Section 12.9 Captions.  The captions or headings herein and any table of contents hereto are for convenience only and in no way define, limit or describe the scope or intent of any provision of this Agreement.

Section 12.10 Entire Agreement.  The Loan Documents embody the entire agreement and understanding between the Borrower, the Banks and the Agent with respect to the subject matter hereof and thereof.  This Agreement supersedes all prior agreements and understandings relating to the subject matter hereof.

Section 12.11 Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and either of the parties hereto may execute this Agreement by signing any such counterpart.  Delivery of an executed counterpart to this Agreement by facsimile transmission or in PDF or other electronic format shall be as effective as delivery of a manually signed original.  The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

Section 12.12 Governing Law.  THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

Section 12.13 Consent to Jurisdiction.  THIS AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT SITTING IN MINNESOTA; AND EACH PARTY HERETO CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT ANY PARTY HERETO COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, ANY OTHER PARTY TO SUCH ACTION AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

54

Section 12.14 Waiver of Jury Trial.  THE BORROWER, THE BANKS AND THE AGENT EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

Section 12.15 Customer Identification - USA PATRIOT Act Notice.  Each Bank (for itself and not on behalf of any other party) hereby notifies the Borrower that, pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank, as applicable, to identify the Borrower in accordance with the Act.

Section 12.16 OFAC and Asset Control Regulations.  The Borrower shall (a) ensure, and cause each Subsidiary to ensure, that no Person who owns a controlling interest in or otherwise controls the Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury, or included in any Executive Orders, and (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto.

Section 12.17 Confidentiality.  Each of the Banks and the Agent agrees that it shall maintain in confidence any information relating to the Borrower and its Subsidiaries and their respective businesses furnished to it by or on behalf of the Borrower or any of its Subsidiaries and shall not reveal the same except: (a) to its and its affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (b) to the extent requested by any governmental authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) on a confidential basis to any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided for herein, (h) with the consent of the Borrower and (i) to the extent such information (i) becomes publicly available other than as a result of a breach of this Section 12.17 or (ii) becomes available to the Agent or any Bank on a nonconfidential basis from a source other than the Borrower.  Notwithstanding the foregoing, at any time after the fifth Business Day following the date of this Agreement, the Agent and the Banks may disclose customary limited information pertaining to this Agreement routinely provided by arrangers to data service providers (which information would include borrower name, facility amount, closing and maturity date and agent and arranger titles), including league table providers, that serve the lending industry; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord to its own confidential information.

55

EACH BANK ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THE IMMEDIATELY PRECEDING PARAGRAPH FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH BANK REPRESENTS TO THE BORROWER AND THE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

Section 12.18 Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Bank holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Bank in respect of other Loan or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Bank.

56

Section 12.19 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees that: (i) (A) the arranging and other services regarding this Agreement provided by the Banks are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Banks and their Affiliates, on the other hand, (B) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Banks and their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any of its Affiliates, or any other Person and (B) no Bank or any of its Affiliates has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except, in the case of a Bank, those obligations expressly set forth herein and in the other Loan Documents; and (iii) each of the Banks and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and no Bank or any of its Affiliates has any obligation to disclose any of such interests to the Borrower or its Affiliates.  To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against each of the Banks and their Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

(signature pages follow)

57

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above.

OTTER TAIL CORPORATION
By:	/s/ Kevin Moug
Title:	Chief Financial Officer

4334 18th Avenue South
Suite 200
Fargo, North Dakota 58103
Attention:	Mr. Kevin G. Moug
	Chief Financial Officer
Telephone:  (701) 451-3562
Fax:  (701) 232-4108

Signature Page to Otter Tail Term Loan Agreement

JPMORGAN CHASE BANK, N.A.,
as Agent and a Bank
By:	/s/ Justin Martin
Name:	Justin Martin
Title:	Authorized Officer

Signature Page to Otter Tail Term Loan Agreement

U.S. BANK NATIONAL ASSOCIATION, as a Bank
By:	/s/ Jacquelyn Ness
Name:	Jacquelyn Ness
Title:	Vice President

Signature Page to Otter Tail Term Loan Agreement

BANK OF AMERICA, N.A., as a Bank
By:	/s/ Casey Klepsch
Name:	Casey Klepsch
Title:	Assistant Vice President

Signature Page to Otter Tail Term Loan Agreement

EXHIBITS
Exhibit	Contents
A	Form of Note
B	Compliance Certificate
C	Material Subsidiary Guaranty
D	Form of Legal Opinion
E	Assignment and Assumption
Schedules
1.1(a)	Commitments and Percentages
1.1(b)	Material Subsidiaries
7.15	Subsidiaries (Section 7.15)
7.16	Partnerships/Joint Ventures (Section 7.16)
9.4	Exceptions to Ownership of Material Subsidiaries (Section 9.4)
9.7	Investments (Section 9.7)
9.8	Existing Liens (Sections 7.11 and 9.8)
9.10	Certain Transactions with Related Parties (Section 9.10)

EXHIBIT A

FORM OF PROMISSORY NOTE

$[Commitment]  [_______], 20[__]

FOR VALUE RECEIVED, the undersigned OTTER TAIL CORPORATION, a Minnesota corporation (the “Borrower”), promises to pay to the order of [BANK] (the “Bank”), on the Termination Date, or other due date or dates determined under the Term Loan Agreement hereinafter referred to, the principal sum of ____________ DOLLARS ($[Commitment]), or if less, the then aggregate unpaid principal amount of the Loan (as such terms are defined in the Term Loan Agreement) as may be borrowed by the Borrower from the Bank under the Term Loan Agreement. All Loan and all payments of principal shall be recorded by the holder in its records which records shall be conclusive evidence of the subject matter thereof, absent manifest error.

The Borrower further promises to pay to the order of the Bank interest on the aggregate unpaid principal amount hereof from time to time outstanding from the date hereof until paid in full at the rates per annum which shall be determined in accordance with the provisions of the Term Loan Agreement. Accrued interest shall be payable on the dates specified in the Term Loan Agreement.

All payments of principal and interest under this Promissory Note (this “Note”) shall be made in lawful money of the United States of America in immediately available funds at the office of JPMorgan Chase Bank, N.A., at 10 South Dearborn Street, Chicago, Illinois 60603, or at such other place as may be designated by the Agent to the Borrower in writing.

This Note is the Note referred to in, and evidences indebtedness incurred under, the Term Loan Agreement dated as of February 5, 2016 (herein, as it may be amended, modified or supplemented from time to time, called the “Term Loan Agreement”) among the Borrower, the Banks, as defined therein (including the Bank) and JPMorgan Chase Bank, N.A., as Agent, to which Term Loan Agreement reference is made for a statement of the terms and provisions thereof, including those under which the Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness and under which such indebtedness may be declared to be immediately due and payable.

All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.

This Note is made under and governed by the internal laws of the State of Minnesota.

OTTER TAIL CORPORATION

By:

Title:

EXHIBIT B

Compliance Certificate

_________, 20__

JPMorgan Chase Bank, N.A.

10 South Dearborn

Chicago, Illinois 60603
Attention: Justin Martin

Telephone: 312-732-4441

Fax: 312-732-1762

Ladies/Gentlemen:

Reference is made to that certain Term Loan Agreement, dated as of February 5, 2016 (as amended from time to time, the “Term Loan Agreement”), among OTTER TAIL CORPORATION (the “Borrower”), the Banks named therein and JPMORGAN CHASE BANK, N.A., as Agent (the “Agent”). Terms not otherwise expressly defined herein shall have the meanings set forth in the Term Loan Agreement.

As required pursuant to Section 8.1(c) of the Term Loan Agreement, the Borrower hereby certifies that as of _____________, 20__, the following is true, correct and accurate in all respects:

1. The consolidated financial statements submitted herewith or as most recently filed with the Securities Exchange Commission are fairly presented in all material respects.

2. No Default and no Event of Default, has occurred and is continuing.

3. Covenant compliance is demonstrated as follows:

Section 9.12 Financial Covenants.

(a) Interest-bearing Debt to Total Capitalization.

Interest-bearing Debt:	$__________
to:

Total Capitalization: $__________

(Required: not greater than 0.60 to 1.00).

(b) Interest and Dividend Coverage Ratio. For the four-quarter period ending on the date of the enclosed consolidated financial statements:

EBIT:	$__________
to:
sum of
Interest Expense:	$_______
Dividends on Preferred Stock:	$_______
$___________
Ratio:  ___ to 1.00

(Required: not less than 1.50 to 1.00).

EXHIBIT C

GUARANTY
(Joint and Several)

FOR VALUE RECEIVED and in consideration of entry by the Banks (as defined in the Term Loan Agreement referred to below) and JPMORGAN CHASE BANK, N.A., as agent for the Banks (in such capacity, together with it successors and assigns, called the “Agent”) into that certain Term Loan Agreement, dated as of February 5, 2016 (as thereafter amended, modified, extended, renewed, restated or replaced from time to time called the “Term Loan Agreement”) among the Banks, the Agent and OTTER TAIL CORPORATION, a Minnesota corporation (hereinafter called the “Debtor”), the undersigned corporations (the “Guarantors”) hereby JOINTLY AND SEVERALLY unconditionally guarantee the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, of all obligations of the Debtor to the Banks or the Agent under the Term Loan Agreement, each Note issued thereunder, and each other Loan Document (as defined therein), including without limitation all future advances, and all obligations to reimburse the Agent for all of such obligations that arise after the filing of a petition by or against the Debtor under the Bankruptcy Code, even if the obligations do not accrue because of the automatic stay under Bankruptcy Code Section 362 or otherwise (all such obligations being hereinafter collectively called the “Liabilities”), and the Guarantors further jointly and severally agree to pay all expenses (including attorneys’ fees and legal expenses) paid or incurred by the Banks or Agent in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this guaranty.

The Guarantors agree that, in the event of the dissolution or insolvency of the Debtor or any Guarantor, or the inability of the Debtor or any Guarantor to pay debts as they mature, or an assignment by the Debtor or any Guarantor for the benefit of creditors, or the institution of any proceeding by or against the Debtor or the Guarantor alleging that the Debtor or any Guarantor is insolvent or unable to pay debts as they mature, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, the Guarantors will pay to the Agent forthwith the full amount which would be payable hereunder by the Guarantors if all Liabilities were then due and payable.

In addition to, and without limitation of, any rights of the Agent and the Banks under applicable law, if any Event of Default occurs and is continuing under the Term Loan Agreement, upon written direction by the Agent to such effect any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness (as defined in the Term Loan Agreement) at any time held or owing by the Agent or any Bank to or for the credit or account of any Guarantor may be offset and applied toward the payment of the Liabilities and all obligations of the Guarantors hereunder, whether or not the Liabilities and all obligations of the Guarantors hereunder, or any part thereof, shall then be due.

This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of any Guarantor or that at any time or from time to time all Liabilities may have been paid in full). This guaranty is a guaranty of payment and performance and not merely a guaranty of collection.

The Guarantors further agree that, if at any time all or any part of any payment theretofore applied by the Agent or the Banks to any of the Liabilities is or must be rescinded or returned by the Agent or the Banks for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or the Banks, and this guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Agent or the Banks had not been made.

The Agent and the Banks may, from time to time, at their sole discretion and without notice to any Guarantor, take any or all of the following actions: (a) be granted a security interest in any property to secure any of the Liabilities or the Guaranty Obligations, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantors, with respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Liabilities, or release or compromise any obligation of any nature of any other obligor with respect to any of the Liabilities, (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to any Guarantor for payment of any of the Liabilities, whether or not the Agent and the Banks (i) shall have resorted to any property securing any of the Liabilities or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities including without limitation any other Guarantor (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly waived by each Guarantor).

Any amounts received by the Agent and the Banks from whatsoever source on account of the Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order of application, as the Agent may from time to time elect.

Until such time as this guaranty shall have been discontinued and the Agent and the Banks shall have received payment of the full amount of all Liabilities and of all obligations of the Guarantors hereunder, no payment made by or for the account of the Guarantors pursuant to this guaranty shall entitle the Guarantors by subrogation or otherwise to any payment by the Debtor or from or out of any property of the Debtor and the Guarantors shall not exercise any right or remedy against the Debtor or any property of the Debtor by reason of any performance by the Guarantors of this guaranty.

The Guarantors hereby expressly waive: (a) notice of the acceptance by the Agent or the Banks of this guaranty, (b) notice of the existence or creation or non-payment of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, and (d) all diligence in collection or protection of or realization upon the Liabilities or any part thereof, any obligation hereunder, or any security for, or guaranty of, any of the foregoing.

2

Each Bank may from time to time without notice to the Guarantors, assign or transfer its Percentage (as defined in the Term Loan Agreement) or any or all of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this guaranty, and each and every immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Liabilities, be entitled to the benefits of this guaranty to the same extent as if such assignee or transferee were such Bank.

Unless the Agent shall otherwise consent in writing, the Agent shall have the sole right to enforce this guaranty, as Agent as provided in the Term Loan Agreement, for the benefit of the Agent and the Banks (including any transferee, as provided in the prior paragraph).

Each Guarantor hereby warrants to the Agent and the Banks that such Guarantor now has, and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Debtor. Neither the Agent nor the Bank shall have any duty or responsibility to provide the Guarantors with any credit or other information concerning the affairs, financial condition or business of the Debtor which may come into the Agent’s or the Bank’s possession.

No delay on the part of the Agent or any Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Agent or any Bank of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be binding upon the Agent or any Bank except as expressly set forth in a writing duly signed and delivered on behalf of the Agent and the Required Banks (as defined in the Term Loan Agreement). No action of the Agent or the Banks permitted hereunder shall in any way affect or impair the rights of the Agent or the Banks and the obligations of the Guarantors under this guaranty. For the purposes of this guaranty, Liabilities shall include all obligations of the Debtor to the Agent or the Banks specified as Liabilities, notwithstanding any right or power of the Debtor or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the Guarantors hereunder, and shall specifically include, without limitation, any and all interest, fees or commissions included in the Liabilities and accruing or payable after the commencement of any bankruptcy or insolvency proceedings, notwithstanding any provision or rule of law which might restrict the rights of the Bank to collect such obligations from the Debtor. The obligations of the Guarantors under this guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of any Guarantor. The Guarantors hereby acknowledge that there are no conditions to the effectiveness of this guaranty.

This guaranty shall be binding upon each Guarantor, and upon the successors and assigns of each Guarantor.

3

Wherever possible, each provision of this guaranty shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this guaranty.

To the extent that any Guarantor shall make a payment under this guaranty (a “Guarantor Payment”) which, taking into account all other Guarantor Payments then previously or concurrently made by any other Guarantor, exceeds the amount which otherwise would have been paid by or attributable to such Guarantor if each Guarantor had paid the aggregate Liabilities satisfied by such Guarantor Payment in the same proportion as such Guarantor’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Guarantors as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Guarantor Payment and the Liabilities (other than unliquidated obligations that have not yet arisen), and the Term Loan Agreement has terminated, such Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment. As of any date of determination, the “Allocable Amount” of any Guarantor shall be equal to the excess of the fair saleable value of the property of such Guarantor over the total liabilities of such Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, calculated, without duplication, assuming each other Guarantor that is also liable for such contingent liability pays its ratable share thereof), giving effect to all payments made by other Guarantors as of such date in a manner to maximize the amount of such contributions.

The preceding paragraph is intended only to define the relative rights of the Guarantors, and nothing set forth in such paragraph is intended to or shall impair the obligations of the Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this guaranty. The rights of the indemnifying Guarantors against other Guarantors under the preceding paragraph shall be exercisable upon the full and indefeasible payment of the Liabilities in cash and the termination of the Term Loan Agreement.

The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Guarantor or Guarantors to which such contribution and indemnification is owing.

THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS GUARANTY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

4

THE AGENT AND THE BANKS (BY ACCEPTING THIS GUARANTY) AND THE GUARANTORS HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

AT THE OPTION OF THE AGENT, THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT SITTING IN MINNESOTA; AND THE GUARANTORS CONSENT TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT ANY GUARANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS GUARANTY, THE AGENT, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

(signature page follows)

5

SIGNED AND DELIVERED as of February 5, 2016.

Varistar Corporation
BTD Manufacturing, Inc.
Northern Pipe Products, Inc.
Vinyltech Corporation
By:	/s/ George Koeck
Title:	Secretary

Signature Page to Guaranty

EXHIBIT D

Opinion of Counsel

[Attached]

	Fargo office: 4334 18th Avenue S. Suite 200, P. O. Box 9156 Fargo, ND 58106-9156 Fax: 701-232-4108	Fergus Falls office: 215 S. Cascade Street P. O. Box 496 Fergus Falls, MN 56538-0496 Fax: 218-998-3165
	1-866-410-8070  l  www.ottertail.com

February 5, 2016

To: The Banks party to the Term Loan
Agreement described herein

JPMorgan Chase Bank, N.A.
U.S. Bank National Association
Bank of America, N.A.

Ladies and Gentlemen:

I have acted as counsel to Otter Tail Corporation, a Minnesota corporation (the “Corporation”), in connection with entry by the Corporation into that certain Term Loan Agreement, dated as of February 5, 2016, among the Corporation, the Banks, as defined therein, and JPMorgan Chase Bank, N.A., as Agent (the “Loan Agreement”), and to the Material Subsidiaries, as defined in the Loan Agreement (the “Material Subsidiaries”), in connection with entry by the Material Subsidiaries into that certain Material Subsidiary Guaranty, dated as of February 5, 2016 (the “Material Subsidiary Guaranty”). This opinion is being delivered to you pursuant to Section 6.1 of the Loan Agreement. Capitalized terms used herein, except as otherwise specifically defined herein, are used with the same meaning as defined in the Loan Agreement.

In connection with this opinion, I have examined the following documents:

1.          The Articles or Certificate of Incorporation of the Corporation and each Material Subsidiary;

2.          The Bylaws of the Corporation and each Material Subsidiary;

3.          Resolutions of the Board of Directors of each Material Subsidiary; and

4.          An executed copy of the Loan Agreement and the Material Subsidiary Guaranty.

I also have examined such other documents and reviewed such questions of law as I have considered necessary and appropriate for the purposes of this opinion.

In rendering my opinions set forth below, I have assumed the authenticity of all documents submitted to me as originals, the genuineness of all signatures (other than the signatures of officers of the Corporation and each Material Subsidiary) and the conformity to authentic originals of all documents submitted to me as copies. I also have assumed the legal capacity for all purposes relevant hereto of all natural persons (other than officers of the Corporation and each Material Subsidiary) and, with respect to all parties to agreements or instruments relevant hereto other than the Corporation and each Material Subsidiary, that such parties had the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, that such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise), executed and delivered by such parties and that such agreements or instruments are the valid, binding and enforceable obligations of such parties. As to questions of fact material to my opinion, I have relied upon representations and certificates of officers and other employees of the Corporation and each Material Subsidiary (known by me to have authority to make such representations and certifications on behalf of the Corporation and each Material Subsidiary) and certificates of public officials.

Based on the foregoing, I am of the opinion that:

(i)          The Corporation is and each Material Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and each is duly qualified and in good standing as a foreign corporation in all other jurisdictions in which its respective present operations or properties require such qualification, except where failure so to qualify or to be in good standing would not constitute an Adverse Event.

(ii)         The Corporation and each Material Subsidiary each has full corporate power and authority to (a) own and operate its properties and assets and carry on its business as presently conducted, as described with respect to the Corporation in Otter Tail Corporation’s Annual Report or Form 10-K for the year ended December 31, 2014, and (b) enter into and perform its obligations under the Loan Documents to which it is a party.

(iii)        The execution and delivery by each of the Corporation and each Material Subsidiary of the Loan Documents to which it is a party, the borrowing by the Corporation under the Loan Agreement, and the performance by each of the Corporation and each Material Subsidiary of its respective obligations under the Loan Documents to which it is a party have been duly authorized by all necessary corporate action, and the Loan Documents have been duly executed and delivered on behalf of the Corporation and each Material Subsidiary, as applicable and constitute valid and binding obligations of the Corporation and each Material Subsidiary, as applicable, enforceable in accordance with their respective terms.

(iv)        There is no provision in (a) the Corporation’s or any Material Subsidiary’s Articles or Certificate of Incorporation or Bylaws, (b) any indenture, mortgage, contract or agreement to which the Corporation or any Material Subsidiary is a party or by which the Corporation or any Material Subsidiary or its respective properties are bound, (c) any law, statute, rule or regulation or (d) any writ, order or decision of any court or governmental instrumentality binding on the Corporation or any Material Subsidiary which would be contravened by the execution, delivery or performance by the Corporation or any Material Subsidiary of the Loan Documents to which it is a party, except in the case of clauses (b) and (d) for any such contravention which would not constitute an Adverse Event.

-2-

(v)         There are no actions, suits or proceedings pending or, to the best of my knowledge, threatened against the Corporation or any Material Subsidiary before any court or arbitrator or by or before any administrative agency or government authority, which, if adversely determined, could reasonably be expected to constitute an Adverse Event.

The opinion set forth in paragraph (iii) above is subject to the following qualifications and exceptions:

1. The opinion set forth in paragraph (iii) above is subject to the effect of any applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent transfer, statutes of limitation or other similar laws and judicial decisions affecting or relating to the rights of creditors generally.

2. The opinion set forth in paragraph (iii) above is subject to the effect of general principles of equity, including without limitation, concepts of materiality, reasonableness, good faith and, fair dealing, estoppel, election of remedies and other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or at law). In addition, the availability of specific performance, injunctive relief, the appointment of a receiver or other equitable remedies is subject to the discretion of the tribunal before which any proceeding therefor may be brought.

3. I express no opinion as to the enforceability of provisions in the Loan Documents to the extent they contain obligations of the Corporation or any Material Subsidiary to pay any prepayment premium, default interest rate or other form of liquidated damages if the payment of such premium, interest rate or damages may be construed as unreasonable in relation to the actual damages or disproportionate to actual damages suffered by the party claiming such amounts as a result of such prepayment or default.

4. I express no opinion (A) as to the validity, binding effect or enforceability of (1) any provision of the Loan Documents related to choice of law, forum selection or submission to jurisdiction (including, without limitation, any express or implied waiver of any objection to venue in any court or of any objection that a court is an inconvenient forum), (2) waivers by the Corporation or any Material Subsidiary of any statutory or constitutional rights or remedies, (3) terms which excuse any person or entity from liability for such person’s or entity’s negligence or willful misconduct, or (4) cumulative remedies to the extent such cumulative remedies purport to compensate, or would have the effect of compensating, the party entitled to the benefits thereof in an amount in excess of the actual loss suffered by such party; or (B) as to compliance or the effect of noncompliance by you with any state or federal laws or regulations applicable to you in connection with the transactions described in the Loan Documents.

5. The opinion set forth in paragraph (iii) above with respect to the Material Subsidiary Guaranty is subject to the defenses available to a guarantor under applicable law, but the waivers of such defenses set forth in the Material Subsidiary Guaranty are enforceable, subject to the other exceptions set forth herein.

-3-

I draw your attention to the fact that, under certain circumstances, the enforceability of terms to the effect that provisions may not be waived or modified except in writing may be limited.

The opinions expressed above are limited to the laws of the States of Minnesota and North Dakota and the federal laws of the United States and, with respect to my opinion in paragraphs (i), (ii) and (iv) only, the Arizona Business Corporation Act. I express no opinion as to the laws of any other jurisdiction.

The foregoing opinions are being furnished to you solely for your benefit and may not be relied upon by, nor may copies be delivered to, any other person without my prior written consent.

Very truly yours,

/s/ George Koeck

George-Koeck

Senior Vice President, General Counsel & Corporate Secretary

-4-

EXHIBIT E

Assignment and Assumption
ASSIGNMENT AND ASSUMPTION AGREEMENT

This Agreement, dated as of the date set forth in Item I (each reference to an “Item” herein shall be deemed to refer to such Item on Schedule I hereto), is made by the party named in Item II, (the “Assignor”) to the entity named in Item III (the “Assignee”).

WITNESSETH

The Assignor has entered into a Term Loan Agreement dated as of February 5, 2016, as amended thereafter (the “Term Loan Agreement”) among OTTER TAIL CORPORATION (the “Borrower”), certain lenders including the Assignor (collectively, the “Bank Group”) and JPMORGAN CHASE BANK, N.A., as Agent, under which the Assignor has agreed to make a Loan in an amount of up to the amount as set forth in Item IV (such amount equals the original commitment of the Assignor and may have been, or may be, increased by other assignments by, or to, the Assignor, and will be reduced by the assignment under this Agreement) and the Bank Group has agreed to make the Loan, in the amount as set forth in Item V. Such Loan is sometimes called the “Loans” hereinafter. Unless the context clearly indicates otherwise, all other terms used in this Agreement shall have the meanings given them by, and shall be construed as set forth in the Term Loan Agreement. In consideration of the premises and the mutual covenants contained herein, the Assignor and the Assignee hereby covenant and agree as follows:

1.          Assignment and Assumption. Subject to the terms and conditions of this Agreement, the Assignor and the Assignee agree that:

(a)          the Assignor hereby sells, transfers, assigns and delegates to the Assignee, in consideration of entry by the Assignee into this Agreement [and of payment by the Assignee to the Assignor of the amount set forth in Item VI]; and

(b)          the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as expressly provided in this Agreement)

a share equal to the percentage set forth in Item VII (expressed as a percentage of the aggregate Commitment of the Bank Group) of the Assignor’s commitment, loan, participations, rights, benefits, obligations, liabilities and indemnities under and in connection with the Term Loan Agreement, and to indemnify the Agent or any other party under the Term Loan Agreement and to pay all other amounts payable by a Bank (in such percentage of the aggregate obligations of the Bank Group) under or in connection with the Term Loan Agreement.

The interest of the Assignor under the Term Loan Agreement (including all such commitment, loan, participations, rights, benefits, obligations, liabilities and indemnities) which the Assignee purchases and assumes hereunder is hereinafter referred to as its “Assigned Share”. The day upon which the Assignee shall make the payment described in the prior paragraph is hereinafter referred to as the “Funding Date”. Upon completion of the assignment hereunder, the Assignor will have the revised share of the total Loans and Commitments of the Bank Group set forth in Item VIII.

2.          Future Payments. The Assignor shall notify the Agent to make all payments with respect to the Assigned Share after the Funding Date directly to the Assignee. The Assignor and Assignee agree and acknowledge that all payment of interest, commitment fees, and other fees accrued up to, but not including, the Funding Date are the property of the Assignor, and not the Assignee. The Assignee shall, upon payment of any interest, commitment fees, or other fees, remit to the Assignor all of such interest, commitment fees, and other fees accrued up to, but not including, the Funding Date.

3.          No Warranty or Recourse. The sale, transfer, assignment and delegation of the Assigned Share is made without warranty or recourse against the Assignor of any kind, except that the Assignor warrants that it has not sold or otherwise transferred any other interest in the Assigned Share to any other party. The Assignor may, however, have sold and may hereafter sell Participations in, or may have assigned or may hereafter assign, portions of its interest in the Term Loan Agreement that in the aggregate (together with the portion assigned hereby), do not exceed 100% of the Assignor’s interest in the Term Loan Agreement.

4.          Covenants and Warranties. To induce the other to enter into this Agreement, each of the Assignee and the Assignor warrants and covenants with respect to itself that:

(a)          Existence. It is, in the case of the Assignee, a ________________ organized under the laws of _________________ and it is, in the case of the Assignor, a ___________ duly existing under the laws of _____________;

(b)          Authority. It is duly authorized to execute, deliver and perform this Agreement;

(c)          No Conflict. The execution, delivery and performance of this Agreement do not conflict with any provision of law or of the charter or by-laws (or equivalent constituent documents) of such party, or of any agreement binding upon it; and

(d)          Valid and Binding. All acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this Agreement, and to constitute the same the legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws.

5.          Covenants and Warranties by the Assignee. To induce the Assignor to enter into this Agreement, the Assignee warrants and covenants that (a) it is purchasing and assuming the Assigned Share in the course of making loans in the ordinary course of its commercial lending business, and (b) it has, independently and without reliance upon the Assignor, and based upon such financial statements and other documents and information as it has deemed appropriate, made its own credit analysis an decision to engage in this purchase and transfer of the Assigned Share. The Assignee acknowledges that the Assignor has not made and does not make any representations or warranties or assume any responsibility with respect to the validity, genuineness, enforceability or collectability of the Term Loan, The Term Loan Agreement or any related instrument, document or agreement.

6.          Promissory Note. The Notes of the Assignor shall be delivered to the Agent or Borrower at such time and by such means as the Assignor and the Agent or Borrower shall agree, with the request by the Assignor that the Borrower issue new notes payable to the Assignor and to the Assignee to reflect the assignment of the Assigned Share hereunder.

7.          Payments to the Assignor. All amounts payable to the Assignor in U.S. Dollars shall be paid by transfer of federal funds to the Assignor, ABA No.                     , Account No.                 Attention:           Reference: [Borrower].

8.          Other Transactions. The Assignee shall have no interest in any property in the Assignor’s possession or control, or in any deposit held or other indebtedness owing by the Assignor, which may be or become collateral for or otherwise available for payment of the Loan by reason of the general description of secured obligations contained in any security agreement or other agreement or instrument held by the Assignor or by reason of the right of set-off, counterclaim or otherwise, except that if such interest is provided for in provisions of the Term Loan Agreement regarding sharing of set-off, the Assignee shall have the same rights as any other lender that is a party to the Term Loan Agreement. The Assignor and its affiliates may accept deposits from, lend money to, act as trustee under indentures for an generally engage in any kind of business with the Borrower, and any person who may do business with or own securities of the Borrower, or any of the Borrower’s subsidiaries. The Assignee shall have no interest in any property taken as security for any other loans or any other credits extended to the Borrower or any of its subsidiaries by the Assignor to the Borrower.

9.          Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Assignor and the Assignee.

10.         Expenses. In the event of any action to enforce the provisions of this Agreement against a party hereto, the prevailing party shall be entitled to recover all costs and expenses incurred in connection therewith including, without limitation, attorneys’ fees and expenses, including allocable cost of in-house legal counsel and staff.

11.         Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MINNESOTA.

12.         Amendments, Changes and Modifications. This Agreement may not be amended, changed, modified, altered, or terminated except by an agreement in writing signed by the Assignor and the Assignee or their permitted successors or assigns).

13.         Withholding Taxes. The Assignee (a) represents and warrants to the Assignor, the Agent and the Borrower that under applicable law and treaties no tax will be required to be withheld by the Assignor with respect to any payments to be made to the Assignee hereunder, (b) ) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Assignor, the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder either U.S. Internal Revenue Service Form W8ECI or W8BEN and agrees to provide new Forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

14.         Entire Agreement. This Agreement sets forth the entire understanding of the parties except for the consents contemplated hereby, and supersedes any and all prior agreements, arrangements, and understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intent has been made by any party which is not embodied in this Agreement, and no party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not expressly set forth herein.

15.         Counterparts. This Agreement may be executed by the Assignor and the Assignee in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on their behalf by their duly authorized officers as of the date and year first above written.

Address:	[Assignor]
	By:

(print name)

	Title:
Address:	[Assignee]
	By:

(print name)

Title:

[Consents required to become effective as provided in Section 12.3 of the Term Loan Agreement:

Consented to this ____ day

of _____________, 20___.

JPMORGAN CHASE BANK, N.A., as Agent

By:

(print name)

Title:

Consented to this ____ day

of _________________, 20____.

OTTER TAIL CORPORATION, as Borrower

By:

(print name)

Title: ]

Schedule I
to
Assignment and Assumption

Item I:	Date of Assignment:
Item II:	Assigning Bank (the “Assignor”):
Item III:	Assignee (the “Assignee”):
Item IV:	Initial Total Commitment of the Assignor:
	Loan:
Item V:	Bank Group’s Initial Total Commitment:
	Loan:
Item VI:	Payment to the Assignor on Funding Date:
Item VII:	Percentage Assigned:  ________%
	(Expressed as a percentage of the total aggregate Commitments of the Bank Group, carry out to 10 decimal places; upon effectiveness of the Assignment as provided in the Term Loan Agreement, this will constitute the Assignee’s “Pro Rata Share”
Item VIII:	Revised Percentage of the Assignor:  _____________%
	(carry out to 10 decimal places; upon effectiveness of the Assignment as provided in the Term Loan Agreement, this will constitute the Assignor’s “Pro Rata Share”)

Schedule 1.1(a)

Commitments and Percentages

Bank:	Initial Commitment:		Percentage:
JPMorgan Chase Bank, N.A.	$	25,000,000		50	%
U.S. Bank National Association	$	12,500,000		25	%
Bank of America, N.A.	$	12,500,000		25	%
Total:	$	50,000,000		100.000000000	%

Schedule 1.1(b)

Material Subsidiaries
(as of the date of the Term Loan Agreement)

BTD Manufacturing, Inc.

Northern Pipe Products, Inc.

Varistar Corporation

Vinyltech Corporation

2

Schedule 7.6

Litigation and Contingent Liabilities

Litigation

None.

Contingent Liabilities

None.

Schedule 7.15
Subsidiaries (Section 7.15)
Subsidiaries of Otter Tail Corporation

Company	State of Organization	Number and Class of Shares Issued and Owned by Otter Tail Corporation or its Subsidiaries	Footnote Ref.
AEV, Inc.	Minnesota	100 Shares Common	(1)
ASI, Inc.	Minnesota	100 Shares Common	(3)
BTD Manufacturing, Inc.	Minnesota	200 Shares Common	(1)
IMD, Inc.	North Dakota	980 Shares Common	(1)
Miller Welding & Iron Works, Inc.	Minnesota	1,000 Shares Common	(5)
Northern Pipe Products, Inc.	North Dakota	10,000 Shares Common	(1)
Otter Tail Assurance Limited	Cayman Islands	50,000 Shares Common	(4)
Otter Tail Energy Services Company, Inc.	Minnesota	1,000 Shares Common	(4)
Otter Tail Power Company	Minnesota	100 Shares Common	(4)
Sheridan Ridge II, LLC	Minnesota	1,000 Membership Units	(2)
Shrco, Inc.	Minnesota	100 Shares Common	(1)
T.O. Plastics, Inc.	Minnesota	100 Shares Common	(1)
Varistar Corporation	Minnesota	100 Shares Common	(4)
Vinyltech Corporation	Arizona	100 Shares Common	(1)

(1)   Subsidiary of Varistar Corporation (2)   Subsidiary of Otter Tail Energy Services Company, Inc. (3)   Subsidiary of Shrco, Inc. (4)   Subsidiary of Otter Tail Corporation (5)   Subsidiary of BTD Manufacturing, Inc.  

Schedule 7.16

Partnerships/Joint Ventures (Section 7.16)

Partnership Name	Type of Partner	Ownership Percent		Book value of Investment Dec. 31, 2015
Boston Financial Institutional Tax Credit VIII Fund	Limited		3.4	$	—
Walnut Properties Limited – Summit Group	Limited		15.7		—
WNC Institutional Tax Credit Fund II	Limited		13.3332		—
Grace Village Limited Partnership	Limited		89.0		—
The Homestead Limited Partnership	Limited		89.0		—
Lincoln Square of Alexandria Limited Partnership	Limited		89.0		—
Total				$	—

Schedule 9.4

Exceptions to Ownership of Material Subsidiaries (Section 9.4)

None.

Schedule 9.7

Investments (Section 9.7)

	As of December 31, 2015
Investment in Loan Pools (OTP)		80,650
Investments – Bank of Butterfield (OTAL)		8,093,315
CoBank (St Paul Bank for Coop’s) (VSC)		81,226
Other Miscellaneous (OTP, TOP)		28,790
Total Investments of Otter Tail Corporation and Subsidiaries	$	8,283,981

Schedule 9.8

Existing Liens (Section 9.8)

None.

Schedule 9.10

Certain Transactions with Related Parties (Section 9.10)

None.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles S. MacFarlane, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q of Otter Tail Corporation;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)          designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)          designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)          evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)          disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)          all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)          any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2016

/s/ Charles S. MacFarlane

Charles S. MacFarlane

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin G. Moug, certify that:

1.          I have reviewed this Quarterly Report on Form 10-Q of Otter Tail Corporation;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)          designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)          designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)          evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)          disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)          all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)          any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2016

/s/ Kevin G. Moug

Kevin G. Moug

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Otter Tail Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles S. MacFarlane, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles S. MacFarlane

Charles S. MacFarlane

President and Chief Executive Officer

May 9, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Otter Tail Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin G. Moug, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin G. Moug

Kevin G. Moug

Chief Financial Officer

May 9, 2016

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 30, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Otter Tail Corp
Entity Central Index Key	0001466593
Trading Symbol	ottr
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock Shares Outstanding		38,116,348
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

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Consolidated Balance Sheets (not audited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current Assets
Cash and Cash Equivalents
Accounts Receivable:
Trade - Net	$ 73,521	$ 62,974
Other	7,104	9,073
Inventories	85,410	85,416
Unbilled Revenues	16,476	17,869
Income Taxes Receivable		4,000
Regulatory Assets	18,636	18,904
Other	8,746	8,453
Total Current Assets	209,893	206,689
Investments	8,411	8,284
Other Assets	33,014	32,784
Goodwill	39,732	39,732
Other Intangibles - Net	15,266	15,673
Regulatory Assets	124,933	127,707
Plant
Electric Plant in Service	1,824,137	1,820,763
Nonelectric Operations	207,757	201,343
Construction Work in Progress	98,995	79,612
Total Gross Plant	2,130,889	2,101,718
Less Accumulated Depreciation and Amortization	728,781	713,904
Net Plant	1,402,108	1,387,814
Total Assets	1,833,357	1,818,683
Current Liabilities
Short-Term Debt	42,936	80,672
Current Maturities of Long-Term Debt	52,457	52,422
Accounts Payable	89,826	89,499
Accrued Salaries and Wages	13,192	16,182
Accrued Taxes	15,985	14,827
Other Accrued Liabilities	16,401	15,416
Liabilities of Discontinued Operations	2,098	2,098
Total Current Liabilities	232,895	271,116
Pensions Benefit Liability	95,122	104,912
Other Postretirement Benefits Liability	48,923	48,730
Other Noncurrent Liabilities	$ 23,181	$ 23,854
Commitments and Contingencies (note 9)
Deferred Credits
Deferred Income Taxes	$ 213,049	$ 207,669
Deferred Tax Credits	24,092	24,506
Regulatory Liabilities	78,007	77,432
Other	10,567	11,595
Total Deferred Credits	325,715	321,202
Capitalization
Long-Term Debt-Net	493,801	443,846
Common Shares, Par Value $5 Per Share-Authorized, 50,000,000 Shares; Outstanding, 2016-38,071,418 Shares; 2015-37,857,186 Shares	190,357	189,286
Premium on Common Shares	298,465	293,610
Retained Earnings	128,656	126,025
Accumulated Other Comprehensive Loss	(3,758)	(3,898)
Total Common Equity	613,720	605,023
Total Capitalization	1,107,521	1,048,869
Total Liabilities and Equity	$ 1,833,357	$ 1,818,683
Cumulative Preferred Shares
Capitalization
Cumulative Shares
Cumulative Preference Shares
Capitalization
Cumulative Shares

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Consolidated Balance Sheets (not audited) (Parentheticals) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Common shares, par value (in dollars per share)	$ 5	$ 5
Common shares, authorized	50,000,000	50,000,000
Common shares, outstanding	38,071,418	37,857,186
Cumulative Preferred Shares
Cumulative shares, authorized	1,500,000	1,500,000
Cumulative shares, without par value (in dollars per share)
Cumulative shares, outstanding	0	0
Cumulative Preference Shares
Cumulative shares, authorized	1,000,000	1,000,000
Cumulative shares, without par value (in dollars per share)
Cumulative shares, outstanding	0	0

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Consolidated Statements of Income (not audited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating Revenues
Electric	$ 112,985	$ 113,533
Product Sales	93,257	89,308
Total Operating Revenues	206,242	202,841
Operating Expenses
Production Fuel - Electric	15,700	14,599
Purchased Power - Electric	16,886	23,692
Electric Operation and Maintenance Expenses	40,018	37,527
Cost of Products Sold (depreciation included below)	72,639	71,498
Other Nonelectric Expenses	11,455	12,463
Depreciation and Amortization	18,289	14,535
Property Taxes - Electric	3,679	3,502
Total Operating Expenses	178,666	177,816
Operating Income	27,576	25,025
Interest Charges	7,994	7,743
Other Income	400	572
Income Before Income Taxes - Continuing Operations	19,982	17,854
Income Tax Expense - Continuing Operations	5,492	4,073
Net Income from Continuing Operations	14,490	13,781
Discontinued Operations
Income (Loss) - net of Income Tax Expense (Benefit) of $20 and ($1,376) for the respective periods	$ 30	(2,072)
Impairment Loss - net of Income Tax Benefit of $0 for the three months ended March 31, 2015		(1,000)
Gain on Disposition - net of Income Tax Expense of $4,816 for the three months ended March 31, 2015		7,226
Net Income from Discontinued Operations	$ 30	4,154
Net Income	$ 14,520	$ 17,935
Average Number of Common Shares Outstanding-Basic	37,936,943	37,243,118
Average Number of Common Shares Outstanding-Diluted	38,045,208	37,497,881
Basic Earnings Per Common Share:
Continuing Operations (in dollars per share)	$ 0.38	$ 0.37
Discontinued Operations (in dollars per share)		0.11
Earnings Per Share, Basic, Total (in dollars per share)	$ 0.38	0.48
Diluted Earnings Per Common Share:
Continuing Operations (in dollars per share)	$ 0.38	0.37
Discontinued Operations (in dollars per share)		0.11
Earnings Per Share, Diluted, Total (in dollars per share)	$ 0.38	0.48
Dividends Declared Per Common Share (in dollars per share)	$ 0.3125	$ 0.3075

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Consolidated Statements of Income (not audited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Income tax expense (benefit) on income (loss) from discontinued operation	$ 20	$ (1,376)
Income tax (benefit) expense on impairment		0
Income tax (benefit) expense on gain (loss) from disposition		$ 4,816

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Consolidated Statements of Comprehensive Income (not audited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement Of Income and Comprehensive Income [Abstract]
Net Income	$ 14,520	$ 17,935
Unrealized Gains on Available-for-Sale Securities:
Reversal of Previously Recognized Gains Realized on Sale of Investments and Included in Other Income During Period		(3)
Gains Arising During Period	73	32
Income Tax Expense	(26)	(10)
Change in Unrealized Gains on Available-for-Sale Securities - net-of-tax	47	19
Pension and Postretirement Benefit Plans:
Amortization of Unrecognized Postretirement Benefit Losses and Costs (note 11)	154	204
Income Tax Expense	(61)	(82)
Pension and Postretirement Benefit Plans - net-of-tax	93	122
Total Other Comprehensive Income	140	141
Total Comprehensive Income	$ 14,660	$ 18,076

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Consolidated Statements of Cash Flows (not audited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash Flows from Operating Activities
Net Income	$ 14,520	$ 17,935
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
Net Gain from Sale of Discontinued Operations		(7,226)
Net (Income) Loss from Discontinued Operations	(30)	3,072
Depreciation and Amortization	18,289	14,535
Deferred Tax Credits	(414)	(470)
Deferred Income Taxes	5,330	7,038
Change in Deferred Debits and Other Assets	2,825	3,538
Discretionary Contribution to Pension Plan	(10,000)	(10,000)
Change in Noncurrent Liabilities and Deferred Credits	3,363	41
Allowance for Equity/Other Funds Used During Construction	(95)	(256)
Change in Derivatives Net of Regulatory Deferral		(59)
Stock Compensation Expense-Equity Awards	489	623
Other - Net	15	206
Cash (Used for) Provided by Current Assets and Current Liabilities:
Change in Receivables	(7,478)	(11,288)
Change in Inventories	6	688
Change in Other Current Assets	(773)	1,270
Change in Payables and Other Current Liabilities	(5,840)	(20,185)
Change in Interest and Income Taxes Receivable/Payable	2,400	(1,549)
Net Cash Provided by (Used in) Continuing Operations	22,607	(2,087)
Net Cash Provided by (Used in) Discontinued Operations	30	(6,263)
Net Cash Provided by (Used in) Operating Activities	22,637	(8,350)
Cash Flows from Investing Activities
Capital Expenditures	(24,855)	(35,738)
Net Proceeds from Disposal of Noncurrent Assets	682	1,292
Cash Used for Investments and Other Assets	(1,425)	(3,492)
Net Cash Used in Investing Activities - Continuing Operations	$ (25,598)	(37,938)
Net Proceeds from Sale of Discontinued Operations		21,343
Net Cash Used in Investing Activities - Discontinued Operations		(1,759)
Net Cash Used in Investing Activities	$ (25,598)	(18,354)
Cash Flows from Financing Activities
Change in Checks Written in Excess of Cash	(666)	(1,236)
Net Short-Term (Repayments) Borrowings	(37,736)	37,798
Proceeds from Issuance of Common Stock - net of Issuance Expenses	3,415	4,697
Payments for Retirement of Capital Stock	(53)	(1,239)
Proceeds from Issuance of Long-Term Debt	50,000
Short-Term and Long-Term Debt Issuance Expenses	(58)	(4)
Payments for Retirement of Long-Term Debt	(52)	(49)
Dividends Paid and Other Distributions	(11,889)	(11,498)
Net Cash Provided by Financing Activities - Continuing Operations	$ 2,961	28,469
Net Cash Used in Financing Activities - Discontinued Operations		(1,178)
Net Cash Provided by Financing Activities	$ 2,961	27,291
Net Change in Cash and Cash Equivalents - Discontinued Operations		(430)
Net Change in Cash and Cash Equivalents		$ 157
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period		$ 157

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Revenue Recognition

Due to the diverse business operations of the Company, revenue recognition depends on the product produced and sold or service performed. The Company recognizes revenue when the earnings process is complete, evidenced by an agreement with the customer, there has been delivery and acceptance, the price is fixed or determinable and collectability is reasonably assured. In cases where significant obligations remain after delivery, revenue recognition is deferred until such obligations are fulfilled. Provisions for sales returns and warranty costs are recorded at the time of the sale based on historical information and current trends. In the case of derivative instruments, such as Otter Tail Power Company (OTP) 2015 forward energy contracts, marked-to-market and realized gains and losses are recognized on a net basis in revenue in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging. Gains and losses on forward energy contracts subject to regulatory treatment, if any, are deferred and recognized on a net basis in revenue in the period realized.

For the Company’s operating companies recognizing revenue on certain products when shipped, those operating companies have no further obligation to provide services related to such product. The shipping terms used in these instances are FOB shipping point.

Warranty Reserves

Certain products previously sold by the Company carried one to fifteen year warranties. Although the Company engaged in extensive product quality programs and processes, the Company’s warranty obligations have been and may in the future be affected by product failure rates, repair or field replacement costs and additional development costs incurred in correcting product failures. The warranty reserve balances as of March 31, 2016 and December 31, 2015 relate entirely to products that were produced by entities the Company no longer owns prior to the Company selling the assets of those companies. The warranty reserve balance is included in liabilities of discontinued operations. See note 16 to consolidated financial statements.

Fair Value Measurements

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), for recurring fair value measurements. ASC 820 provides a single definition of fair value, requires enhanced disclosures about assets and liabilities measured at fair value and establishes a hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value. The three levels defined by the hierarchy and examples of each level are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed by the New York Stock Exchange and commodity derivative contracts listed on the New York Mercantile Exchange (NYMEX).

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities.

Level 3 – Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation and may include complex and subjective models and forecasts.

The following tables present, for each of the hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,315
Corporate Debt Securities – Held by Captive Insurance Company				3,903
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		293
Total Assets	$	2,293	$	8,218
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	107
Total Liabilities			$	107

December 31, 2015 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,235
Corporate Debt Securities – Held by Captive Insurance Company				3,858
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		196
Total Assets	$	2,196	$	8,093
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	199
Total Liabilities			$	199

The valuation techniques and inputs used for the Level 2 fair value measurements in the table above are as follows:

Forward Gasoline Purchase Contracts – These contracts are priced based on NYMEX quoted prices for Reformulated Blendstock for Oxygenate Blending (RBOB) Gasoline contracts. Prices used for the fair valuation of these contracts are based on NYMEX daily reporting date quoted prices for RBOB contracts with the same settlement periods.

Government-Backed and Government-Sponsored Enterprises’ and Corporate Debt Securities Held by the Company’s Captive Insurance Company – Fair values are determined on the basis of valuations provided by a third-party pricing service which utilizes industry accepted valuation models and observable market inputs to determine valuation. Some valuations or model inputs used by the pricing service may be based on broker quotes.

Inventories

Inventories consist of the following:

	March 31,		December 31,
(in thousands)	2016		2015
Finished Goods	$	26,440	$	25,971
Work in Process		12,110		12,821
Raw Material, Fuel and Supplies		46,860		46,624
Total Inventories	$	85,410	$	85,416

Goodwill and Other Intangible Assets

On September 1, 2015 Miller Welding & Iron Works, Inc. (BTD-Illinois), a wholly owned subsidiary of BTD Manufacturing, Inc. (BTD), acquired the assets of Impulse Manufacturing, Inc. (Impulse) of Dawsonville, Georgia. The newly acquired business operates under the name BTD-Georgia. Based on the preliminary purchase price allocation, the difference in the fair value of assets acquired and the price paid for Impulse resulted in an initial estimate of acquired goodwill of $8,244,000.

An assessment of the carrying amounts of the remaining goodwill of the Company’s reporting units reported under continuing operations as of December 31, 2015 indicated the fair values are substantially in excess of their respective book values and not impaired.

The following table summarizes changes to goodwill by business segment during 2016:

(in thousands)	Gross Balance  December 31,  2015		Accumulated  Impairments		Balance (net of  impairments)  December 31,  2015		Adjustments  to Goodwill  in 2016		Balance (net of  impairments)  March 31,  2016
Manufacturing	$	20,430	$	—	$	20,430	$	—	$	20,430
Plastics		19,302		—		19,302		—		19,302
Total	$	39,732	$	—	$	39,732	$	—	$	39,732

Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment in accordance with requirements under ASC Topic 360-10-35, Property, Plant, and Equipment—Overall—Subsequent Measurement. In the first quarter of 2015, OTP began purchasing emission allowances to apply against sulfur dioxide emissions from Hoot Lake Plant. The cost of unused emission allowances is included in intangible assets on the Company’s consolidated balance sheets.

The following table summarizes the components of the Company’s intangible assets at March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Gross Carrying  Amount		Accumulated  Amortization		Net Carrying  Amount		Remaining  Amortization  Periods
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,987	$	14,694	45-233 months
Covenant not to Compete		620		121		499	29 months
Other Intangible Assets		639		575		64	6 months
Emission Allowances		9		NA		9	Expensed as used
Total	$	22,949	$	7,683	$	15,266
December 31, 2015 (in thousands)
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,714	$	14,967	48-236 months
Covenant not to Compete		620		69		551	32 months
Other Intangible Assets		639		543		96	9 months
Emission Allowances		59		NA		59	Expensed as used
Total	$	22,999	$	7,326	$	15,673

The amortization expense for these intangible assets was:

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Amortization Expense – Intangible Assets	$	357	$	244

The estimated annual amortization expense for these intangible assets for the next five years is:

(in thousands)	2016		2017		2018		2019		2020
Estimated Amortization Expense – Intangible Assets	$	1,395	$	1,299	$	1,230	$	1,093	$	1,059

Supplemental Disclosures of Cash Flow Information

	As of March 31,
(in thousands)	2016		2015
Noncash Investing Activities:
Transactions Related to Capital Additions not Settled in Cash	$	24,618	$	25,284

Coyote Station Lignite Supply Agreement – Variable Interest Entity—In October 2012, the Coyote Station owners, including OTP, entered into a lignite sales agreement (LSA) with Coyote Creek Mining Company, L.L.C. (CCMC), a subsidiary of The North American Coal Corporation, for the purchase of lignite coal to meet the coal supply requirements of Coyote Station for the period beginning in May 2016 and ending in December 2040. The price per ton to be paid by the Coyote Station owners under the LSA will reflect the cost of production, along with an agreed profit and capital charge. CCMC was formed for the purpose of mining coal to meet the coal fuel supply requirements of Coyote Station from May 2016 through December 2040 and, based on the terms of the LSA, is considered a variable interest entity (VIE) due to the transfer of all operating and economic risk to the Coyote Station owners, as the agreement is structured so that the price of the coal would cover all costs of operations as well as future reclamation costs. The Coyote Station owners are also providing a guarantee of the value of the assets of CCMC as they would be required to buy certain assets at book value should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of CCMC in that they are required to buy the entity at the end of the contract term at equity value. Under current accounting standards, the primary beneficiary of a VIE is required to include the assets, liabilities, results of operations and cash flows of the VIE in its consolidated financial statements. No single owner of Coyote Station owns a majority interest in Coyote Station and none, individually, has the power to direct the activities that most significantly impact CCMC. Therefore, none of the owners individually, including OTP, is considered a primary beneficiary of the VIE and the Company is not required to include CCMC in its consolidated financial statements.

Under the LSA, all development period costs of the Coyote Creek coal mine incurred during the development period will be recovered from the Coyote Station owners over the full term of the production period, which commences with the initial delivery of coal to Coyote Station (anticipated in May 2016), by being included in the cost of production. The development fee and the capital charge incurred during the development period will be recovered from the Coyote Station owners over the first 52 months of the production period by being included in the cost of production during those months. The LSA was amended on March 16, 2015 to provide, among other things, that during any period between December 31, 2016 and any subsequent date on which CCMC makes initial delivery of coal, the Coyote Station owners will pay the following costs of production as advance payments for lignite: depreciation and amortization charges on capital assets and CCMC’s obligations under its loans and leases. In addition, if the LSA terminates prior to the expiration of its term or the production period terminates prior to December 31, 2040 and the Coyote Station owners purchase all of the outstanding membership interests of CCMC as required by the LSA, the owners will satisfy, or (if permitted by CCMC’s applicable lender) assume, all of CCMC’s obligations owed to CCMC’s lenders under its loans and leases. The Coyote Station owners have limited rights to assign their rights and obligations under the LSA without the consent of CCMC’s lenders during any period in which CCMC’s obligations to its lenders remain outstanding. OTP’s 35% share of development period costs, development fees and capital charges incurred by CCMC through March 31, 2016 is $60.3 million. In the event the contract is terminated because regulations or legislation render the burning of coal cost prohibitive and the assets worthless, OTP’s maximum exposure to loss as a result of its involvement with CCMC as of March 31, 2016 could be as high as $60.3 million.

New Accounting Standards

ASU 2014-09—In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASC 606). ASC 606 is a comprehensive, principles-based accounting standard which amends current revenue recognition guidance with the objective of improving revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and the timing of revenue recognition. ASC 606 also requires expanded disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

Amendments to the ASC in ASU 2014-09, as amended, are effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, but not any earlier than January 1, 2017. Application methods permitted are: (1) full retrospective, (2) retrospective using one or more practical expedients and (3) retrospective with the cumulative effect of initial application recognized at the date of initial application. The Company is currently reviewing ASU 2014-09, identifying key impacts to its businesses, reviewing revenue streams and contracts to determine areas where the amendments in ASU 2014-09 will be applicable and evaluating transition options. The Company does not plan to adopt the updated guidance prior to January 1, 2018.

ASU 2015-03—In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2015 and must be applied retrospectively to balance sheets presented for periods prior to adoption. The Company adopted the updated standards in ASU 2015-03 in the first quarter of 2016. In conjunction with implementing this update, the Company is reclassifying the remaining balance of unamortized line of credit issuance costs from the deferred debit section of its consolidated balance sheet to other assets, eliminating the deferred debits section of its consolidated balance sheet and displaying long-term regulatory assets as a separate line item on its consolidated balance sheet. The effects of applying the guidance in ASU 2015-03 retrospectively to the Company’s December 31, 2015 consolidated balance sheet and of the associated reclassification of unamortized line of credit issuance costs are shown in the following table:

(in thousands)	Previously  Stated		Adjustments			Restated
Other Assets	$	31,108	$	1,676		$	32,784
Unamortized Debt Expense		3,897		(3,897	)		—
Total Assets		1,820,904		(2,221	)		1,818,683
Current Liabilities
Current Maturities of Long-Term Debt		52,544		(122	)		52,422
Total Current Liabilities		271,238		(122	)		271,116
Capitalization
Long-Term Debt—Net		445,945		(2,099	)		443,846
Total Capitalization		1,050,968		(2,099	)		1,048,869
Total Liabilities and Equity		1,820,904		(2,221	)		1,818,683

ASU 2015-11—In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires that inventories be measured at the lower of cost or net realizable value instead of the lower of cost or market value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect the adoption of the updated standard to have a material impact on its consolidated financial statements.

ASU 2016-02—In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is a comprehensive amendment of the ASC, creating Topic 842, which will supersede the current requirements under ASC Topic 840 on leases and require the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. Topic 842 also requires qualitative and specific quantitative disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU 2016-02 is permitted. The Company is currently reviewing ASU 2016-02, identifying key impacts to its businesses to determine areas where the amendments in ASU 2016-02 will be applicable and evaluating transition options. The Company does not currently plan to apply the amendments in ASU 2016-02 to its consolidated financial statements prior to 2019.

ASU 2016-09—In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which is intended to improve and simplify accounting and reporting requirements related to stock-based compensation programs. The amendments in ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Under the updated standard, excess tax benefits related to vested awards recognized in stockholders' equity under prior guidance will be recognized in the income statement when the awards vest, and the level of shares that can be withheld to cover income taxes on awards to satisfy statutory income tax withholding obligations without triggering liability classification has been increased. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

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Business Combinations and Segment Information

3 Months Ended

Mar. 31, 2016

Acquisition And Segment Information [Abstract]

Business Combinations and Segment Information

2. Business Combinations and Segment Information

Business Combinations

On September 1, 2015 BTD-Illinois, a wholly owned subsidiary of BTD, acquired the assets of Impulse of Dawsonville, Georgia for $30.8 million in cash, subject to a post-closing adjustment. Impulse is a full-service metal fabricator located 30 miles north of Atlanta, Georgia. The newly acquired business offers a wide range of metal fabrication services ranging from simple laser cutting services and high volume stamping to complex weldments and assemblies for metal fabrication buyers and original equipment manufacturers and is operating under the name BTD-Georgia. In addition to serving some of BTD’s existing customers from a location closer to the customers’ manufacturing facilities, this acquisition will provide opportunities for growth in new and existing markets for BTD, and complementing production capabilities will expand the capacity of services offered by BTD. Pro forma results of operations have not been presented for this acquisition because the effect of the acquisition was not material to the Company.

Below is condensed balance sheet information, at the date of the business combination, disclosing the preliminary allocation of the purchase price assigned to each major asset and liability category of BTD-Georgia:

(in thousands)
Assets:
Current Assets	$	4,906
Goodwill		8,244
Other Intangible Assets		5,490
Other Amortizable Assets		1,380
Fixed Assets		13,649
Total Assets	$	33,669
Liabilities:
Current Liabilities	$	2,852
Lease Obligation		11
Total Liabilities	$	2,863
Cash Paid	$	30,806

The assignment of asset values is subject to adjustment based on determination of the final purchase price. In the fourth quarter of 2015, the Company elected to early adopt ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company currently expects purchase price adjustments subsequent to March 31, 2016, if any, will result in adjustments to acquired goodwill and not result in adjustments to the Company’s consolidated net income.

Segment Information

The Company's businesses have been classified into three segments to be consistent with its business strategy and the reporting and review process used by the Company’s chief operating decision makers. These businesses sell products and provide services to customers primarily in the United States. The three segments are: Electric, Manufacturing and Plastics.

Electric includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota by OTP. In addition, OTP is a participant in the Midcontinent Independent System Operator, Inc. (MISO) markets. OTP’s operations have been the Company’s primary business since 1907.

Manufacturing consists of businesses in the following manufacturing activities: contract machining, metal parts stamping, fabrication and painting, and production of material and handling trays and horticultural containers. These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States.

Plastics consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the upper Midwest and Southwest regions of the United States.

OTP is a wholly owned subsidiary of the Company. All of the Company’s other businesses are owned by its wholly owned subsidiary, Varistar Corporation (Varistar). The Company’s corporate operating costs include items such as corporate staff and overhead costs, the results of the Company’s captive insurance company and other items excluded from the measurement of operating segment performance. Corporate assets consist primarily of cash, prepaid expenses, investments and fixed assets. Corporate is not an operating segment. Rather, it is added to operating segment totals to reconcile to totals on the Company’s consolidated financial statements.

No single customer accounted for over 10% of the Company’s consolidated revenues in 2015. All of the Company’s long-lived assets are within the United States and 97.6% and 96.3% of its operating revenues for the respective three month periods ended March 31, 2016 and 2015 came from sales within the United States.

The Company evaluates the performance of its business segments and allocates resources to them based on earnings contribution and return on total invested capital. Information for the business segments for the three months ended March 31, 2016 and 2015 and total assets by business segment as of March 31, 2016 and December 31, 2015 are presented in the following tables:

Operating Revenue

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	112,994		$	113,547
Manufacturing		59,820			56,759
Plastics		33,437			32,552
Intersegment Eliminations		(9	)		(17	)
Total	$	206,242		$	202,841

Interest Charges

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Electric	$	6,284	$	6,121
Manufacturing		992		832
Plastics		244		246
Corporate and Intersegment Eliminations		474		544
Total	$	7,994	$	7,743

Income Taxes

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	4,612		$	4,221
Manufacturing		1,019			504
Plastics		1,367			1,264
Corporate		(1,506	)		(1,916	)
Total	$	5,492		$	4,073

Net Income (Loss)

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	12,538		$	13,178
Manufacturing		1,853			1,184
Plastics		2,152			2,120
Corporate		(2,053	)		(2,701	)
Discontinued Operations		30			4,154
Total	$	14,520		$	17,935

Identifiable Assets

	March 31,		December 31,
(in thousands)	2016		2015
Electric	$	1,528,157	$	1,520,887
Manufacturing		179,745		173,860
Plastics		87,077		81,624
Corporate		38,378		42,312
Total	$	1,833,357	$	1,818,683

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Rate and Regulatory Matters

3 Months Ended

Mar. 31, 2016

Rate and Regulatory Matters [Abstract]

Rate and Regulatory Matters

3. Rate and Regulatory Matters

Below are descriptions of OTP’s major capital expenditure projects that have had, or will have, a significant impact on OTP’s revenue requirements, rates and alternative revenue recovery mechanisms, followed by summaries of specific electric rate or rider proceedings with the Minnesota Public Utilities Commission (MPUC), the North Dakota Public Service Commission (NDPSC), the South Dakota Public Utilities Commission (SDPUC) and the Federal Energy Regulatory Commission (FERC), impacting OTP’s revenues in 2016 and 2015.

Major Capital Expenditure Projects

Big Stone Plant Air Quality Control System (AQCS)—OTP completed construction and testing of the Big Stone Plant AQCS in the fourth quarter of 2015 and placed the AQCS into commercial operation on December 29, 2015. The capitalized cost of the project, excluding Allowance for Funds Used During Construction (AFUDC) as of March 31, 2016 was approximately $368 million (OTP’s 53.9% share was approximately $198 million).

Fargo–Monticello 345 kiloVolt (kV) Capacity Expansion 2020 (CapX2020) Project (the Fargo Project)—OTP has invested approximately $81.8 million and has a 14.2% ownership interest in the jointly owned assets of this 240-mile transmission line, and owns 100% of certain assets of the project. The final phase of this project was energized on April 2, 2015.

Brookings–Southeast Twin Cities 345 kV CapX2020 Project (the Brookings Project)—OTP has invested approximately $26.7 million and has a 4.8% ownership interest in this 250-mile transmission line. The MISO granted unconditional approval of the Brookings Project as a Multi-Value Project (MVP) under the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff (MISO Tariff) in December 2011. MVPs are designed to enable the region to comply with energy policy mandates and to address reliability and economic issues affecting multiple areas within the MISO region. The cost allocation is designed to ensure the costs of transmission projects with regional benefits are properly assigned to those who benefit. The final segments of this line were energized on March 26, 2015.

The Big Stone South–Brookings MVP and CapX2020 Project—This 345 kV transmission line, currently under construction, will extend approximately 70 miles between a substation near Big Stone City, South Dakota and the Brookings County Substation near Brookings, South Dakota. OTP and Northern States Power – MN (NSP MN), a subsidiary of Xcel Energy Inc., jointly developed this project. MISO approved this project as an MVP under the MISO Tariff in December 2011. This line is expected to be in service in fall 2017. Construction began on this line in the third quarter of 2015. OTP’s capitalized costs on this project as of March 31, 2016 were approximately $29.6 million, which includes assets that are 100% owned by OTP.

The Big Stone South–Ellendale MVP—This 345 kV transmission line will extend 160 to 170 miles between a substation near Big Stone City, South Dakota and a substation near Ellendale, North Dakota. OTP is jointly developing this project with Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. (MDU). MISO approved this project as an MVP under the MISO Tariff in December 2011. On July 10, 2014 the NDPSC approved a Certificate of Corridor Compatibility and a route permit for the North Dakota section of the proposed line. On August 22, 2014 the SDPUC issued an order approving the route permit for the South Dakota section of the proposed line. A route permit amendment to shift a portion of the route in North Dakota was approved by the NDPSC on December 16, 2015. On June 12, 2015 OTP and MDU entered into agreements to construct the project. This project is expected to be completed in 2019. OTP’s capitalized costs on this project as of March 31, 2016 were approximately $20.0 million, which includes assets that are 100% owned by OTP.

Recovery of OTP’s major transmission investments is through the MISO Tariff (several as MVPs) and, currently, Minnesota, North Dakota and South Dakota Transmission Cost Recovery (TCR) Riders.

Minnesota

2016 General Rate Case—On February 16, 2016 OTP filed a request with the MPUC for an increase in revenue recoverable under general rates in Minnesota. In its filing, OTP requested an increase in annual revenue of approximately $19.3 million, or 9.8%, based on an allowed rate of return on rate base of 8.07% and an allowed rate of return on equity of 10.4% based on an equity ratio of 52.5% of total capital. Through this rate case proceeding, OTP is proposing to recover, in base rates, revenue currently subject to recovery under Minnesota TCR and Environmental Cost Recovery (ECR) riders. On February 26, 2016 the Minnesota Department of Commerce (MNDOC) concluded that the filing was complete. On April 14, 2016 the MPUC issued an order approving interim rates, as modified, based on an annualized interim rate increase of $16.8 million, or a 9.56% increase to the base rate portion of customer bills, effective for service rendered on or after April 16, 2016.

2010 General Rate Case—OTP’s most recent general rate increase in Minnesota of approximately $5.0 million, or 1.6%, was granted by the MPUC in an order issued on April 25, 2011 and effective October 1, 2011. Pursuant to the order, OTP’s allowed rate of return on rate base increased from 8.33% to 8.61% and its allowed rate of return on equity increased from 10.43% to 10.74%.

Minnesota Conservation Improvement Programs (MNCIP)—OTP recovers conservation related costs not included in base rates under the MNCIP through the use of an annual recovery mechanism approved by the MPUC. OTP requested approval for recovery of its 2014 MNCIP financial incentive and 2014 program costs not included in base rates from the MPUC in an April 1, 2015 filing. On July 9, 2015 the MPUC granted approval of OTP’s 2014 financial incentive of $3.0 million along with an updated surcharge with an effective date of October 1, 2015. Based on results from the 2015 MNCIP program year, OTP recognized a financial incentive of $4.2 million in 2015. The 2015 MNCIP program resulted in approximately a 39% increase in energy savings compared to 2014 program results.

The MNDOC has proposed changes to the MNCIP financial incentive mechanism. OTP’s position is that minimal changes to the MNCIP financial incentive are required as the incentive will naturally be reduced by lower energy savings potential and lower avoided costs. A hearing date for a decision on this docket has not been set by the MPUC. The MNDOC opened an additional docket to investigate how investor-owned utilities calculate their avoided costs pertaining to generation capacity, energy, transmission and distribution. OTP has responded to information requests and submitted comments and reply comments within this docket.

Transmission Cost Recovery Rider—The Minnesota Public Utilities Act provides a mechanism for automatic adjustment outside of a general rate proceeding to recover the costs, plus a return on investment at the level approved in a utility’s last general rate case, of new transmission facilities that meet certain criteria. On February 18, 2015 the MPUC approved OTP’s 2014 TCR rider annual update with an effective date of March 1, 2015. OTP filed an annual update to its Minnesota TCR rider on September 30, 2015 requesting revenue recovery of approximately $7.8 million. A supplemental filing to the update was made on December 21, 2015 to address an issue surrounding the proration of accumulated deferred income taxes and, in an unrelated adjustment, the TCR rider update revenue request was reduced to $7.2 million. On March 9, 2016 the MPUC issued an order approving OTP’s annual update to its TCR rider, with an effective date of April 1, 2016. OTP will be filing an update to its TCR rider on or before May 1, 2016 to incorporate the impact of bonus depreciation for income taxes, an adjusted rate of return on rate base and allocation factors to align with its 2016 general rate case request.

Environmental Cost Recovery Rider—On December 18, 2013 the MPUC granted approval of OTP’s Minnesota ECR rider for recovery of OTP’s Minnesota jurisdictional share of the revenue requirements of its investment in the Big Stone Plant AQCS effective January 1, 2014. The ECR rider recoverable revenue requirements include a current return on the project’s construction work in progress (CWIP) balance at the level approved in OTP’s most recent general rate case. The MPUC approved OTP’s 2014 ECR rider annual update request on November 24, 2014 with an effective date of December 1, 2014. OTP filed its 2015 annual update on July 31, 2015, with a request to keep the 2014 annual update rate in place. On December 21, 2015 OTP filed a supplemental filing with updated financial information. The MPUC issued an order on March 9, 2016 approving OTP’s request to leave the 2014 annual update rate in place. On April 29, 2016 OTP filed an update to its ECR rider to incorporate the impact of bonus depreciation for income taxes, an adjusted rate of return on rate base and allocation factors to align with its 2016 general rate case filing.

North Dakota

General Rates—OTP’s most recent general rate increase in North Dakota of $3.6 million, or approximately 3.0%, was granted by the NDPSC in an order issued on November 25, 2009 and effective December 2009. Pursuant to the order, OTP’s allowed rate of return on rate base was set at 8.62%, and its allowed rate of return on equity was set at 10.75%.

Renewable Resource Adjustment—OTP has a North Dakota Renewable Resource Adjustment (NDRRA) which enables OTP to recover the North Dakota share of its investments in renewable energy facilities it owns in North Dakota. This rider allows OTP to recover costs associated with new renewable energy projects as they are completed with a return on investment at the level approved in OTP's most recent general rate case. On March 25, 2015 the NDPSC approved OTP’s 2014 annual update to the NDRRA rider, including a change in rate design from an amount per kwh consumed to a percentage of a customer’s bill, with an effective date of April 1, 2015. OTP submitted its 2015 annual update to the NDRRA rider rate on December 31, 2015 with a requested implementation date of April 1, 2016. On February 25, 2016 OTP made a supplemental filing to address the impact of bonus depreciation for income taxes and related deferred tax assets on the NDRRA, as well as an adjustment to the estimated amount of PTC used. The NDPSC held a hearing on this matter on April 27, 2016. The Commission is expected to rule on the requested update before the end of the second quarter of 2016.

Transmission Cost Recovery Rider—North Dakota law provides a mechanism for automatic adjustment outside of a general rate proceeding to recover jurisdictional capital and operating costs incurred by a public utility for new or modified electric transmission facilities. For qualifying projects, the law authorizes a current return on CWIP and a return on investment at the level approved in the utility's most recent general rate case. The NDPSC approved OTP’s 2014 annual update to its TCR rider rate on December 17, 2014 with an effective date of January 1, 2015. On August 31, 2015 OTP filed its 2015 annual update to its North Dakota TCR rider rate requesting recovery of approximately $10.2 million for 2016 compared with $8.5 million for 2015, including costs assessed by the MISO as well as new costs from the Southwest Power Pool (SPP) that OTP began incurring January 1, 2016. These new costs are associated with OTP’s load connected to the transmission system of Central Power Electric Cooperative (CPEC) that will become subject to SPP transmission-related charges when CPEC transmission assets are added to the SPP. The NDPSC approved OTP’s 2015 annual update to its TCR rider rate on December 16, 2015, with an effective date of January 1, 2016.

Environmental Cost Recovery Rider— On February 8, 2013 OTP filed a request with the NDPSC for an ECR rider to recover OTP’s North Dakota jurisdictional share of the revenue requirements associated with its investment in the Big Stone Plant AQCS. On December 18, 2013 the NDPSC approved OTP’s North Dakota ECR rider based on revenue requirements through the 2013 calendar year and thereafter, with rates effective for bills rendered on or after January 1, 2014. The ECR provides for a current return on CWIP and a return on investment at the level approved in OTP’s most recent general rate case. The NDPSC approved OTP’s 2014 ECR rider annual update request on July 10, 2014 with an August 1, 2014 implementation date. On March 31, 2015 OTP filed its annual update to the ECR. This update included a request to increase the ECR rider rate from 7.531% to 9.193% of base rates. The NDPSC approved the annual update on June 17, 2015 with an effective date of July 1, 2015, along with the approval of recovery of OTP’s North Dakota jurisdictional share of Hoot Lake Plant Mercury and Air Toxics Standards (MATS) project costs. On March 31, 2016 OTP filed its annual update to the ECR rider requesting a reduction in the rate from 9.193% to 7.904% of base rates, or a revenue requirement reduction from $12.2 million to $10.4 million, effective July 1, 2016. The rate reduction request is primarily due to the Company’s 2015 bonus depreciation election for income taxes, which reduces revenue requirements.

Reagent Costs and Emission Allowances—On July 31, 2014 OTP filed a request with the NDPSC to revise its Fuel Clause Adjustment (FCA) rider in North Dakota to include recovery of new reagent and emission allowance costs. On February 25, 2015 the NDPSC approved recovery of these costs through modification of the ECR rider, instead of recovery through the FCA as OTP had proposed. The ECR rider reagent and emissions allowance charge became effective May 1, 2015.

South Dakota

2010 General Rate Case—OTP’s most recent general rate increase in South Dakota of approximately $643,000 or approximately 2.32% was granted by the SDPUC in an order issued on April 21, 2011 and effective with bills rendered on and after June 1, 2011. Pursuant to the order, OTP’s allowed rate of return on rate base was set at 8.50%.

Transmission Cost Recovery Rider—South Dakota law provides a mechanism for automatic adjustment outside of a general rate proceeding to recover jurisdictional capital and operating costs incurred by a public utility for new or modified electric transmission facilities. The SDPUC approved OTP’s 2014 annual update on February 13, 2015 with an effective date of March 1, 2015. OTP filed its 2015 annual update on October 30, 2015 with a proposed effective date of March 1, 2016. A supplemental filing was made on February 3, 2016 to true-up the filing to include the impact of bonus depreciation elected for 2015, the inclusion of a deferred tax asset relating to a net operating loss and the proration of accumulated deferred income taxes. On February 12, 2016, the SDPUC approved OTP’s annual update to its TCR rider, with an effective date of March 1, 2016. This update included the recovery of new SPP transmission costs OTP began to incur on January 1, 2016.

Environmental Cost Recovery Rider—On November 25, 2014 the SDPUC approved OTP’s ECR rider request to recover OTP’s South Dakota jurisdictional share of revenue requirements associated with its investment in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects, with an effective date of December 1, 2014. On August 31, 2015 OTP filed its annual update to the South Dakota ECR requesting recovery of approximately $2.7 million in annual revenue. The SDPUC approved the request on October 15, 2015 with an effective date of November 1, 2015.

Reagent Costs and Emission Allowances—On August 1, 2014 OTP filed a request with the SDPUC to revise its FCA rider in South Dakota to include recovery of reagent and emission allowance costs. On September 16, 2014 the SDPUC approved OTP’s request to include recovery of these costs in its South Dakota FCA rider.

Revenues Recorded under Rate Riders

The following table presents revenue recorded by OTP under rate riders in place in Minnesota, North Dakota and South Dakota for the three month periods ended March 31:

Rate Rider (in thousands)	2016		2015
Minnesota
Conservation Improvement Program Costs and Incentives1	$	2,506	$	1,928
Transmission Cost Recovery		2,276		1,615
Environmental Cost Recovery		3,082		2,557
North Dakota
Renewable Resource Adjustment		2,059		1,883
Transmission Cost Recovery		2,236		1,936
Environmental Cost Recovery		2,811		2,156
South Dakota
Transmission Cost Recovery		651		363
Environmental Cost Recovery		633		504
Conservation Improvement Program Costs and Incentives		159		140

¹Includes MNCIP costs recovered in base rates.

FERC

Multi-Value Transmission Projects—On December 16, 2010 the FERC approved the cost allocation for a new classification of projects in the MISO region called MVPs. MVPs are designed to enable the region to comply with energy policy mandates and to address reliability and economic issues affecting multiple transmission zones within the MISO region. The cost allocation is designed to ensure that the costs of transmission projects with regional benefits are properly assigned to those who benefit. On October 20, 2011 the FERC reaffirmed the MVP cost allocation on rehearing.

Effective January 1, 2012 the FERC authorized OTP to recover 100% of prudently incurred CWIP and Abandoned Plant Recovery on two projects approved by MISO as MVPs in MISO’s 2011 Transmission Expansion Plan: the Big Stone South–Brookings MVP and the Big Stone South–Ellendale MVP.

On November 12, 2013 a group of industrial customers and other stakeholders filed a complaint with the FERC seeking to reduce the return on equity (ROE) component of the transmission rates that MISO transmission owners, including OTP, may collect under the MISO Tariff. The complainants are seeking to reduce the current 12.38% ROE used in MISO’s transmission rates to a proposed 9.15%. On October 16, 2014 the FERC issued an order finding that the current MISO ROE may be unjust and unreasonable and setting the issue for hearing. An initial decision by the presiding administrative law judge (ALJ) was issued on December 22, 2015 finding that the MISO transmission owners’ ROE should be 10.32%. The FERC is expected to issue its order later in 2016. On November 6, 2014 a group of MISO transmission owners, including OTP, filed for a FERC incentive of an additional 50-basis points for Regional Transmission Organization participation (RTO Adder). On January 5, 2015 the FERC granted the request, deferring collection of the RTO Adder until the FERC issues its order in the ROE complaint proceeding.

On February 12, 2015 another group of stakeholders filed a complaint with the FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including OTP, may collect under the MISO Tariff from the current 12.38% to a proposed 8.67%. The FERC issued an order on June 18, 2015 setting the complaint for hearing and hearings were held the week of February 16, 2016. The ALJ is scheduled to issue an initial decision by June 30, 2016. A decision by the FERC is not expected until 2017.

Based on a potential reduction by the FERC in the ROE component of the MISO Tariff, OTP recorded reductions in revenue of $0.3 million and $0.6 million in the three month periods ended March 31, 2016 and 2015, respectively, and has a $1.4 million liability on its balance sheet as of March 31, 2016, representing OTP’s best estimate of a refund obligation, net of amounts that would be subject to recovery under state jurisdictional TCR riders.

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Regulatory Assets and Liabilities

3 Months Ended

Mar. 31, 2016

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

4. Regulatory Assets and Liabilities

As a regulated entity, OTP accounts for the financial effects of regulation in accordance with ASC Topic 980, Regulated Operations (ASC 980). This accounting standard allows for the recording of a regulatory asset or liability for costs that will be collected or refunded in the future as required under regulation. Additionally, ASC 980-605-25 provides for the recognition of revenues authorized for recovery outside of a general rate case under alternative revenue programs which provide for recovery of costs and incentives or returns on investment in such items as transmission infrastructure, renewable energy resources or conservation initiatives. The following tables indicate the amount of regulatory assets and liabilities recorded on the Company’s consolidated balance sheets:

	March 31, 2016						Remaining  Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	97,908	$	105,347	see below
Deferred Marked-to-Market Losses1		4,063		9,515		13,578	57 months
Conservation Improvement Program Costs and Incentives2		2,789		5,065		7,854	27 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,791		5,791	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		826		2,634		3,460	60 months
North Dakota Renewable Resource Rider Accrued Revenues2		1,501		305		1,806	21 months
Debt Reacquisition Premiums1		351		1,451		1,802	198 months
Deferred Income Taxes1		—		1,351		1,351	asset lives
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		763		227		990	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		618		718	86 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		559		—		559	12 months
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		245		—		245	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	12 months
Total Regulatory Assets	$	18,636	$	124,933	$	143,569
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	75,468	$	75,468	asset lives
Refundable Fuel Clause Adjustment Revenues		3,294		—		3,294	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,403		1,403	24 months
Deferred Income Taxes		—		1,043		1,043	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		982		—		982	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		787		—		787	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		602		—		602	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		342		—		342	12 months
Minnesota Transmission Cost Recovery Rider Accrued Refund		183		—		183	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		6		93		99	213 months
Total Regulatory Liabilities	$	6,196	$	78,007	$	84,203
Net Regulatory Asset Position	$	12,440	$	46,926	$	59,366

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

	December 31, 2015						Remaining  Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	99,293	$	106,732	see below
Deferred Marked-to-Market Losses1		4,063		10,530		14,593	60 months
Conservation Improvement Program Costs and Incentives2		4,411		4,266		8,677	18 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,672		5,672	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		942		2,620		3,562	84 months
Debt Reacquisition Premiums1		351		1,539		1,890	201 months
Deferred Income Taxes1		—		1,455		1,455	asset lives
North Dakota Renewable Resource Rider Accrued Revenues2		—		1,266		1,266	15 months
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		698		355		1,053	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		643		743	89 months
Minnesota Transmission Cost Recovery Rider Accrued Revenues2		576		—		576	12 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		291		—		291	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	see below
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		33		—		33	12 months
Total Regulatory Assets	$	18,904	$	127,707	$	146,611
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	74,948	$	74,948	asset lives
Refundable Fuel Clause Adjustment Revenues		1,834		—		1,834	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,279		1,279	see below
Deferred Income Taxes		—		1,110		1,110	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		777		—		777	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		321		—		321	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		185		—		185	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		132		—		132	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		5		95		100	216 months
North Dakota Renewable Resource Rider Accrued Refund		68		—		68	12 months
Total Regulatory Liabilities	$	3,322	$	77,432	$	80,754
Net Regulatory Asset Position	$	15,582	$	50,275	$	65,857

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

The regulatory asset related to prior service costs and actuarial losses on pensions and other postretirement benefits represents benefit costs and actuarial losses subject to recovery through rates as they are expensed over the remaining service lives of active employees included in the plans. These unrecognized benefit costs and actuarial losses are required to be recognized as components of Accumulated Other Comprehensive Income in equity under ASC Topic 715, Compensation—Retirement Benefits, but are eligible for treatment as regulatory assets based on their probable recovery in future retail electric rates.

All Deferred Marked-to-Market Losses recorded as of March 31, 2016 relate to forward purchases of energy scheduled for delivery through December 2020.

Conservation Improvement Program Costs and Incentives represent mandated conservation expenditures and incentives recoverable through retail electric rates.

The Accumulated Asset Retirement Obligation (ARO) Accretion/Depreciation Adjustment will accrete and be amortized over the lives of property with asset retirement obligations.

Big Stone II Unrecovered Project Costs – Minnesota are the Minnesota share of generation and transmission plant-related costs incurred by OTP related to its participation in the abandoned Big Stone II project.

North Dakota Renewable Resource Rider Accrued Revenues relate to qualifying renewable resource costs incurred to serve North Dakota customers that have not been billed to North Dakota customers as of March 31, 2016.

Debt Reacquisition Premiums are being recovered from OTP customers over the remaining original lives of the reacquired debt issues, the longest of which is 198 months.

The regulatory assets and liabilities related to Deferred Income Taxes result from changes in statutory tax rates accounted for in accordance with ASC Topic 740, Income Taxes.

MISO Schedule 26/26A Transmission Cost Recovery Rider True-up relates to the over/under collection of revenue based on comparison of the expected versus actual construction on eligible projects in the period. The true-up also includes the state jurisdictional portion of MISO Schedule 26/26A for regional transmission cost recovery that was included in the calculation of the state transmission riders and subsequently adjusted to reflect actual billing amounts in the schedule.

Big Stone II Unrecovered Project Costs – South Dakota are the South Dakota share of generation and transmission plant-related costs incurred by OTP related to its participation in the abandoned Big Stone II project.

Minnesota Deferred Rate Case Expenses Subject to Recovery relate to costs incurred in conjunction with OTP’s 2016 rate case in Minnesota that will be subject to recovery after new rates go into effect subsequent to the completion of the rate case.

The South Dakota Transmission Cost Recovery Rider Accrued Revenues relate to revenues earned on qualifying transmission system facilities that have not been billed to South Dakota customers as of March 31, 2016.

Minnesota Renewable Resource Rider Accrued Revenues relate to revenues earned on qualifying renewable resource costs incurred to serve Minnesota customers that have not been billed to Minnesota customers. On April 4, 2013 the MPUC approved OTP’s request to set the rider rate to zero effective May 1, 2013 and authorized that any unrecovered balance be retained as a regulatory asset to be recovered during the current interim rate period.

The Accumulated Reserve for Estimated Removal Costs – Net of Salvage is reduced as actual removal costs, net of salvage revenues, are incurred.

Revenue for Rate Case Expenses Subject to Refund – Minnesota relates to revenues collected under general rates to recover costs related to prior rate case proceedings in excess of the actual costs incurred, which are subject to refund.

The Minnesota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the Minnesota share of OTP’s investment in the Big Stone Plant AQCS project that are refundable to Minnesota customers as of March 31, 2016.

The North Dakota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the North Dakota share of OTP’s investments in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects that are refundable to North Dakota customers as of March 31, 2016.

The North Dakota Transmission Cost Recovery Rider Accrued Refund relates to amounts collected for qualifying transmission system facilities and operating costs incurred to serve North Dakota customers that are refundable to North Dakota customers as of March 31, 2016.

The South Dakota Environmental Cost Recovery Rider Accrued Refund relates to amounts collected on the South Dakota share of OTP’s investments in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects that are refundable to South Dakota customers as of March 31, 2016.

Minnesota Transmission Cost Recovery Rider Accrued Refund relates to amounts collected for qualifying renewable resource costs incurred to serve Minnesota customers that are refundable to Minnesota customers as of March 31, 2016.

If for any reason OTP ceases to meet the criteria for application of guidance under ASC 980 for all or part of its operations, the regulatory assets and liabilities that no longer meet such criteria would be removed from the consolidated balance sheet and included in the consolidated statement of income as an expense or income item in the period in which the application of guidance under ASC 980 ceases.

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Open Contract Positions Subject to Legally Enforceable Netting Arrangements

3 Months Ended

Mar. 31, 2016

Open Contract Positions Subject To Legally Enforceable Netting Arrangements [Abstract]

Open Contract Positions Subject to Legally Enforceable Netting Arrangements

5. Open Contract Positions Subject to Legally Enforceable Netting Arrangements

OTP has certain derivative contracts that are designated as normal purchases. Individual counterparty exposures for these contracts can be offset according to legally enforceable netting arrangements. However, the Company does not net offsetting assets and liabilities under legally enforceable netting arrangements on the face of its consolidated balance sheet. The following table shows forward contract positions subject to legally enforceable netting arrangements as of March 31, 2016 and December 31, 2015:

(in thousands)	March 31,  2016			December 31,  2015
Open Contract Gain Positions Subject to Legally Enforceable Netting Arrangements	$	—		$	—
Open Contract Loss Positions Subject to Legally Enforceable Netting Arrangements		(18,264	)		(16,070	)
Net Balance Subject to Legally Enforceable Netting Arrangements	$	(18,264	)	$	(16,070	)

The following table provides a breakdown of OTP’s credit risk standing on forward energy contracts in loss positions as of March 31, 2016 and December 31, 2015:

Loss Position  (in thousands)	March 31, 2016		December 31,  2015
Loss Contracts Covered by Deposited Funds or Letters of Credit	$	107	$	199
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade1		18,157		15,871
Loss Contracts with No Ratings Triggers or Deposit Requirements		—		—
Loss Position	$	18,264	$	16,070
1Certain OTP derivative energy contracts contain provisions that require an investment grade credit rating from each of the major credit rating agencies on OTP’s debt. If OTP’s debt ratings were to fall below investment grade, the counterparties to these forward energy contracts could request the immediate deposit of cash to cover contracts in net liability positions.
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade	$	18,157	$	15,871
Offsetting Gains with Counterparties under Master Netting Agreements		—		—
Reporting Date Deposit Requirement if Credit Risk Feature Triggered	$	18,157	$	15,871

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share

3 Months Ended

Mar. 31, 2016

Stockholders Equity and Earnings Per Share [Abstract]

Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share

6. Reconciliation of Common Shareholders’ Equity, Common Shares and Earnings Per Share

Reconciliation of Common Shareholders’ Equity

(in thousands)	Par Value,  Common  Shares			Premium  on  Common  Shares			Retained  Earnings			Accumulated  Other  Comprehensive  Income/(Loss)			Total  Common  Equity
Balance, December 31, 2015	$	189,286		$	293,610		$	126,025		$	(3,898	)	$	605,023
Common Stock Issuances, Net of Expenses		1,080			4,410									5,490
Common Stock Retirements		(9	)		(44	)								(53	)
Net Income								14,520						14,520
Other Comprehensive Income											140			140
Employee Stock Incentive Plans Expense					489									489
Common Dividends ($0.3125 per share)								(11,889	)					(11,889	)
Balance, March 31, 2016	$	190,357		$	298,465		$	128,656		$	(3,758	)	$	613,720

Shelf Registration

The Company’s shelf registration statement filed with the Securities and Exchange Commission on May 11, 2015, under which the Company may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement, including common shares of the Company, expires on May 11, 2018. On May 11, 2015, the Company entered into a Distribution Agreement with J.P. Morgan Securities (JPMS) under which it may offer and sell its common shares from time to time in an At-the-Market offering program through JPMS, as its distribution agent, up to an aggregate sales price of $75 million.

Common Shares

Following is a reconciliation of the Company’s common shares outstanding from December 31, 2015 through March 31, 2016:

Common Shares Outstanding, December 31, 2015	37,857,186
Issuances:
Executive Stock Performance Awards (2013 and 2014 shares earned)	54,700
Automatic Dividend Reinvestment and Share Purchase Plan:
Dividends Reinvested	49,635
Cash Invested	49,281
Employee Stock Purchase Plan:
Cash Invested	21,819
Dividends Reinvested	7,153
Employee Stock Ownership Plan	23,837
Vesting of Restricted Stock Units	9,675
Retirements:
Shares Withheld for Individual Income Tax Requirements	(1,868	)
Common Shares Outstanding, March 31, 2016	38,071,418

Earnings Per Share

The numerator used in the calculation of both basic and diluted earnings per common share is net income for the three month periods ended March 31, 2016 and 2015. The denominator used in the calculation of basic earnings per common share is the weighted average number of common shares outstanding during the period excluding nonvested restricted shares granted to the Company’s directors and employees, which are considered contingently returnable and not outstanding for the purpose of calculating basic earnings per share. The denominator used in the calculation of diluted earnings per common share is derived by adjusting basic shares outstanding for the items listed in the following reconciliation for the three month periods ended March 31:

	2016		2015
Weighted Average Common Shares Outstanding – Basic		37,936,943		37,243,118
Plus Outstanding Share Awards net of Share Reductions for Unrecognized Stock-Based Compensation Expense and Excess Tax Benefits:
Shares Expected to be Awarded for Stock Performance Awards Granted to Executive Officers based on Measurement Period-to-Date Performance		46,885		137,460
Underlying Shares Related to Nonvested Restricted Stock Units Granted to Employees		39,841		42,540
Nonvested Restricted Shares		17,776		49,998
Shares Expected to be Issued Under the Deferred Compensation Program for Directors		3,763		24,277
Potentially Dilutive Stock Options		—		488
Total Dilutive Shares		108,265		254,763
Weighted Average Common Shares Outstanding – Diluted		38,045,208		37,497,881

The effect of dilutive shares on earnings per share for the three month periods ended March 31, 2016 and 2015, resulted in no differences greater than $0.01 between basic and diluted earnings per share in total or from continuing or discontinued operations in either period.

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Share-Based Payments

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Share-Based Payments

7. Share-Based Payments

Stock Incentive Awards

On February 4, 2016 the following stock incentive awards were granted to the Company’s executive officers under the 2014 Stock Incentive Plan:

Award	Shares/  Units  Granted		Weighted  Average  Grant-Date  Fair Value  per Award		Vesting
Restricted Stock Units Granted to Executive Officers		22,000	$	28.915	25% per year through February 6, 2020
Stock Performance Awards Granted to Executive Officers		81,500	$	24.03	December 31, 2018

The vesting of restricted stock units is accelerated in the event of a change in control, disability, death or retirement, subject to proration on retirement in certain cases. All restricted stock units granted to executive officers are eligible to receive dividend equivalent payments on all unvested awards over the awards’ respective vesting periods, subject to forfeiture under the terms of the restricted stock unit award agreements. The grant-date fair value of each restricted stock unit was the average of the high and low market price per share on the date of grant.

Under the 2016 performance share award agreements the aggregate award for performance at target is 81,500 shares. For target performance the Company’s executive officers would earn an aggregate of 54,333 common shares based on the Company’s total shareholder return relative to the total shareholder return of the companies that comprise the Edison Electric Institute Index over the performance measurement period of January 1, 2016 through December 31, 2018, with the beginning and ending share values based on the average closing price of a share of the Company’s common stock for the 20 trading days immediately following January 1, 2016 and the average closing price for the 20 trading days immediately preceding January 1, 2019, respectively. The Company’s executive officers would also earn an aggregate of 27,167 common shares for achieving the target set for the Company’s 3-year average adjusted return on equity. Actual payment may range from zero to 150% of the target amount, or up to an aggregate of 122,250 common shares. The executive officers have no voting or dividend rights related to these shares until the shares, if any, are issued at the end of the performance measurement period. The terms of these awards are such that the entire award will be classified and accounted for as a liability, as required under ASC Topic 718, Compensation—Stock Compensation, and will be measured over the performance period based on the fair value of the award at the end of each reporting period subsequent to the grant date.

Under the 2016 performance share award agreements, payment and the amount of payment in the event of retirement, resignation for good reason or involuntary termination without cause is to be made at the end of the performance period based on actual performance, subject to proration in certain cases, except that the payment of performance awards granted to certain officers who are parties to executive employment agreements with the Company is to be made at the target amount at the date of any such event. The vesting of these performance share award agreements is accelerated and paid out at target in the event of a change in control, disability or death (and on retirement at or after the age of 62 for certain officers who are parties to executive employment agreements with the Company).

The end of the period over which compensation expense is recognized for the above share-based awards for the individual grantees is the shorter of the indicated vesting period for the respective awards or the date the grantee becomes eligible for retirement as defined in their award agreement.

As of March 31, 2016 the remaining unrecognized compensation expense related to outstanding, unvested stock-based compensation was approximately $4.5 million (before income taxes) which will be amortized over a weighted-average period of 2.7 years.

Amounts of compensation expense recognized under the Company’s six stock-based payment programs for the three month periods ended March 31, 2016 and 2015 are presented in the table below:

	Three months ended
	March 31,
(in thousands)	2016		2015
Stock Performance Awards Granted to Executive Officers	$	537	$	1,020
Restricted Stock Units Granted to Executive Officers		245		253
Restricted Stock Granted to Executive Officers		29		157
Restricted Stock Granted to Directors		107		98
Restricted Stock Units Granted to Non-Executive Employees		64		66
Employee Stock Purchase Plan (15% discount)		44		49
Totals	$	1,026	$	1,643

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Retained Earnings Restriction

3 Months Ended

Mar. 31, 2016

Retained Earnings Restrictions [Abstract]

Retained Earnings Restriction

8. Retained Earnings Restriction

The Company is a holding company with no significant operations of its own. The primary source of funds for payments of dividends to the Company’s shareholders is from dividends paid or distributions made by the Company’s subsidiaries. As a result of certain statutory limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by the Company’s subsidiaries.

Both the Company and OTP credit agreements contain restrictions on the payment of cash dividends upon a default or event of default. An event of default would be considered to have occurred if the Company did not meet certain financial covenants. As of March 31, 2016 the Company was in compliance with these financial covenants. See note 10 to the Company’s consolidated financial statements on Form 10-K for the year ended December 31, 2015 for further information on the covenants.

Under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account. What constitutes “funds properly included in a capital account” is undefined in the Federal Power Act or the related regulations; however, FERC has consistently interpreted the provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividend is not excessive and (3) there is no self-dealing on the part of corporate officials.

The MPUC indirectly limits the amount of dividends OTP can pay to the Company by requiring an equity-to-total-capitalization ratio between 46.9% and 57.3%. OTP’s equity to total capitalization ratio including short-term debt was 52.0% as of March 31, 2016. Total capitalization for OTP cannot currently exceed $1,056,300,000.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Construction and Other Purchase Commitments

At December 31, 2015 OTP had commitments under contracts, including its share of construction program commitments extending into 2019, of approximately $89.6 million. At March 31, 2016 OTP had commitments under contracts, including its share of construction program commitments, extending into 2019, of approximately $102.9 million.

Electric Utility Capacity and Energy Requirements and Coal and Delivery Contracts

OTP has commitments for the purchase of capacity and energy requirements under agreements extending into 2040. OTP has contracts providing for the purchase and delivery of a significant portion of its current coal requirements. OTP’s current coal purchase agreements, under which OTP is committed to the minimum purchase amounts or to make payments in lieu thereof, expire in 2016, 2017 and 2040. In January 2016, OTP entered into an agreement with Cloud Peak Energy Resources LLC for the purchase of subbituminous coal for Hoot Lake Plant for the period of January 1, 2016 through December 31, 2023. OTP has no fixed minimum purchase requirements under the agreement but all of Hoot Lake Plant’s coal requirements for the period covered must be purchased under this agreement.

Operating Leases

OTP has obligations to make future operating lease payments primarily related to land leases and coal rail-car leases. The Company’s nonelectric companies have obligations to make future operating lease payments primarily related to leases of buildings and manufacturing equipment.

Contingencies

Contingencies, by their nature, relate to uncertainties that require the Company’s management to exercise judgment both in assessing the likelihood a liability has been incurred as well as in estimating the amount of potential loss. The most significant contingencies impacting the Company’s consolidated financial statements are those related to environmental remediation, risks associated with indemnification obligations under divestitures of discontinued operations and litigation matters. Should all of these known items result in liabilities being incurred, the loss could be as high as $1.0 million.

Based on a potential reduction by the FERC in the ROE component of the MISO Tariff, OTP has recorded a $1.4 million liability on its balance sheet as of March 31, 2016, representing OTP’s best estimate of a refund obligation, net of amounts that would be subject to recovery under state jurisdictional TCR riders.

In 2014, the EPA published proposed standards of performance for CO2 emissions from new fossil fuel-fired power plants, proposed CO2 emission guidelines for existing fossil fuel-fired power plants and proposed CO2 standards of performance for CO2 emissions from reconstructed and modified fossil fuel-fired power plants under section 111 of the Clean Air Act, essentially requiring that such plants install updated control technology when constructing, modifying or reconstructing to reduce their emissions. The EPA published final rules for each of these proposals on October 23, 2015. On February 9, 2016 the U.S. Supreme Court granted a stay of the CO2 emission guidelines for existing fossil fuel-fired power plants, pending disposition of petitions for review in the D.C. Circuit and disposition of a petition for a writ of certiorari seeking review by the U.S. Supreme Court, if such a writ is sought. Oral argument before the D.C. Circuit is scheduled for June 2016. Uncertainty regarding the status of the rules will likely continue for some time. OTP is actively engaged with the stakeholder processes in each of its states that have continued to move forward with planning efforts during the stay.

Other

The Company is a party to litigation and regulatory enforcement matters arising in the normal course of business. The Company regularly analyzes current information and, as necessary, provides accruals for liabilities that are probable of occurring and that can be reasonably estimated. The Company believes the effect on its consolidated results of operations, financial position and cash flows, if any, for the disposition of all matters pending as of March 31, 2016 will not be material.

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Short-Term and Long-Term Borrowings

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Short-Term and Long-Term Borrowings

10. Short-Term and Long-Term Borrowings

The following table presents the status of our lines of credit as of March 31, 2016 and December 31, 2015:

(in thousands)	Line Limit		In Use on  March 31,  2016		Restricted due to  Outstanding  Letters of Credit		Available on March 31,  2016		Available on December  31, 2015
Otter Tail Corporation Credit Agreement	$	150,000	$	20,880	$	—	$	129,120	$	90,334
OTP Credit Agreement		170,000		22,056		—		147,944		148,694
Total	$	320,000	$	42,936	$	—	$	277,064	$	239,028

Debt Issuances and Retirements

On February 5, 2016 the Company entered into a Term Loan Agreement (the Term Loan Agreement) with the Banks named therein, JPMorgan Chase Bank, N.A., as administrative agent, and JPMS, as Lead Arranger and Book Runner. The Term Loan Agreement provides for an unsecured term loan with an aggregate commitment of $50 million that the Company may use for purposes of funding working capital, capital expenditures and other corporate purposes of the Company and certain of our subsidiaries. Under the Term Loan Agreement, the Company may, on up to two occasions, enter into additional tranches of term loans in minimum increments of $10 million, subject to the consent of the lenders and so long as the aggregate amount of outstanding term loans does not exceed $100 million at any time. Borrowings under the Term Loan Agreement will bear interest at either (1) LIBOR plus 0.90% or (2) the greater of (a) the Prime Rate, (b) the Federal Reserve Bank of New York Rate plus 0.50% and (c) LIBOR multiplied by the Statutory Reserve Rate plus 1%. The applicable interest rate will depend on the Company’s election of whether to make the advance a LIBOR advance. The Term Loan Agreement terminates on February 5, 2018. The Term Loan Agreement contains a number of restrictions on the Company, Varistar and certain subsidiaries of Varistar, including restrictions on their ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party and engage in transactions with related parties. The Term Loan Agreement also contains affirmative covenants and events of default, and certain financial covenants. Specifically, the Company must not permit the ratio of its Interest-bearing Debt to Total Capitalization to be greater than 0.60 to 1.00 or permit its Interest and Dividend Coverage Ratio to be less than 1.50 to 1.00 (each measured on a consolidated basis), as provided in the Term Loan Agreement. The Term Loan Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in the Company’s credit ratings. The Company’s obligations under the Term Loan Agreement are guaranteed by Varistar and certain of its subsidiaries.

On February 5, 2016 the Company borrowed $50 million under the Term Loan Agreement at an interest rate based on the 30 day LIBOR plus 90 basis points and used the proceeds to pay down borrowings under the Otter Tail Corporation Credit Agreement that were used to fund the expansion of BTD’s Minnesota facilities in 2015 and to fund the September 1, 2015 acquisition of BTD-Georgia.

The following tables provide a breakdown of the assignment of the Company’s consolidated short-term and long-term debt outstanding as of March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	OTP		Otter Tail  Corporation		Otter Tail  Corporation  Consolidated
Short-Term Debt	$	22,056	$	20,880	$	42,936
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Term Loan, LIBOR plus 0.90%, due February 5, 2018				50,000		50,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				163		163
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				944		944
Total	$	445,000	$	103,437	$	548,437
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,457		52,457
Unamortized Long-Term Debt Issuance Costs		2,039		140		2,179
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,961	$	50,840	$	493,801
Total Short-Term and Long-Term Debt (with current maturities)	$	465,017	$	124,177	$	589,194

December 31, 2015 (in thousands)	OTP		Otter Tail  Corporation		Otter Tail  Corporation  Consolidated
Short-Term Debt	$	21,006	$	59,666	$	80,672
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				182		182
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				977		977
Total	$	445,000	$	53,489	$	498,489
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,422		52,422
Unamortized Long-Term Debt Issuance Costs		2,099		122		2,221
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,901	$	945	$	443,846
Total Short-Term and Long-Term Debt (with current maturities)	$	463,907	$	113,033	$	576,940

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Pension Plan and Other Postretirement Benefits

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Pension Plan and Other Postretirement Benefits

11. Pension Plan and Other Postretirement Benefits

Pension Plan—Components of net periodic pension benefit cost of the Company's noncontributory funded pension plan are as follows:

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	1,382		$	1,500
Interest Cost on Projected Benefit Obligation		3,522			3,325
Expected Return on Assets		(4,867	)		(4,600	)
Amortization of Prior-Service Cost:
From Regulatory Asset		47			47
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		1,227			1,633
From Other Comprehensive Income1		31			40
Net Periodic Pension Cost	$	1,343		$	1,946
1Corporate cost included in Other Nonelectric Expenses.

Cash flows—The Company made discretionary plan contributions totaling $10,000,000 in January 2016. The Company currently is not required and does not expect to make an additional contribution to the plan in 2016. The Company also made discretionary plan contributions totaling $10,000,000 in January 2015.

Executive Survivor and Supplemental Retirement Plan—Components of net periodic pension benefit cost of the Company’s unfunded, nonqualified benefit plan for executive officers and certain key management employees are as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Service Cost—Benefit Earned During the Period	$	63	$	47
Interest Cost on Projected Benefit Obligation		417		381
Amortization of Prior-Service Cost:
From Regulatory Asset		4		4
From Other Comprehensive Income1		9		10
Amortization of Net Actuarial Loss:
From Regulatory Asset		73		83
From Other Comprehensive Income2		112		151
Net Periodic Pension Cost	$	678	$	676
1Amortization of Prior Service Costs from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	4	$	4
Other Nonelectric Expenses		5		6
2Amortization of Net Actuarial Loss from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	68	$	78
Other Nonelectric Expenses		44		73

Postretirement Benefits—Components of net periodic postretirement benefit cost for health insurance and life insurance benefits for retired OTP and corporate employees, net of the effect of Medicare Part D Subsidy:

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	306		$	375
Interest Cost on Projected Benefit Obligation		541			550
Amortization of Prior-Service Cost:
From Regulatory Asset		33			51
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		—			48
From Other Comprehensive Income1		—			1
Net Periodic Postretirement Benefit Cost	$	881		$	1,026
Effect of Medicare Part D Subsidy	$	(257	)	$	(450	)
1 Corporate cost included in Other Nonelectric Expenses.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

12. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Short-Term Debt—The carrying amount approximates fair value because the debt obligations are short-term and the balances outstanding as of March 31, 2016 and December 31, 2015 related to the Otter Tail Corporation Credit Agreement and the OTP Credit Agreement were subject to variable interest rates of LIBOR plus 1.75% and LIBOR plus 1.25%, respectively, which approximate market rates.

Long-Term Debt including Current Maturities—The fair value of the Company's and OTP’s long-term debt is estimated based on the current market indications of rates available to the Company for the issuance of debt. The Company’s long-term debt subject to variable interest rates approximates fair value. The fair value measurements of the Company’s long-term debt issues fall into level 2 of the fair value hierarchy set forth in ASC 820.

	March 31, 2016						December 31, 2015
(in thousands)	Carrying  Amount			Fair Value			Carrying  Amount			Fair Value
Short-Term Debt		(42,936	)		(42,936	)		(80,672	)		(80,672	)
Long-Term Debt including Current Maturities		(546,258	)		(623,484	)		(496,268	)		(561,245	)

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Income Tax Expense Continuing Operations

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Expense - Continuing Operations

14. Income Tax Expense – Continuing Operations

The following table provides a reconciliation of income tax expense calculated at the net composite federal and state statutory rate on income from continuing operations before income taxes and income tax expense for continuing operations reported on the Company’s consolidated statements of income for the three month periods ended March 31, 2016 and 2015:

	Three Months Ended March 31,
(in thousands)	2016			2015
Income Before Income Taxes – Continuing Operations	$	19,982		$	17,854
Tax Computed at Company’s Net Composite Federal and State Statutory Rate (39%)		7,793			6,963
Increases (Decreases) in Tax from:
Federal Production Tax Credits		(1,686	)		(2,054	)
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes		(212	)		(212	)
Section 199 Domestic Production Activities Deduction		(104	)		(362	)
Employee Stock Ownership Plan Dividend Deduction		(158	)		(172	)
Corporate Owned Life Insurance		(64	)		(80	)
AFUDC Equity		(37	)		(100	)
Other Items – Net		(40	)		90
Income Tax Expense – Continuing Operations	$	5,492		$	4,073
Effective Income Tax Rate – Continuing Operations		27.5	%		22.8	%

The following table summarizes the activity related to our unrecognized tax benefits:

(in thousands)	2016		2015
Balance on January 1	$	468	$	222
Increases Related to Tax Positions for Prior Years		—		—
Increases Related to Tax Positions for Current Year		16		44
Uncertain Positions Resolved During Year		—		—
Balance on March 31	$	484	$	266

The balance of unrecognized tax benefits as of March 31, 2016 would reduce the Company’s effective tax rate if recognized. The total amount of unrecognized tax benefits as of March 31, 2016 is not expected to change significantly within the next 12 months. The Company classifies interest and penalties on tax uncertainties as components of the provision for income taxes in its consolidated statement of income. There was no amount accrued for interest on tax uncertainties as of March 31, 2016.

The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of March 31, 2016, with limited exceptions, the Company is no longer subject to examinations by taxing authorities for tax years prior to 2012 for federal and North Dakota state income taxes and for tax years prior to 2013 for Minnesota state income taxes.

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Discontinued Operations

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

16. Discontinued Operations

On April 30, 2015 the Company sold Foley Company (Foley), its former water, wastewater, power and industrial construction contractor. On February 28, 2015 the Company sold the assets of AEV, Inc. its former energy and electrical construction contractor. On February 8, 2013 the Company completed the sale of substantially all the assets of its former dock and boat lift company and on November 30, 2012 the Company completed the sale of the assets of its former wind tower manufacturing business. The Company’s Construction and Wind Energy segments were eliminated as a result of the sales of Foley, AEV, Inc. and its former wind tower manufacturing business. The financial position, results of operations and cash flows of Foley, AEV, Inc., the Company’s former dock and boatlift company and its former wind tower manufacturing business are reported as discontinued operations in the Company’s consolidated financial statements. Following are summary presentations of the results of discontinued operations for the three month periods ended March 31:

(in thousands)	2016			2015
Operating Revenues	$	—		$	18,724
Operating Expenses		(50	)		22,141
Goodwill Impairment Charge		—			1,000
Operating Income (Loss)		50			(4,417	)
Other Deductions		—			(31	)
Income Tax Expense (Benefit)		20			(1,376	)
Net Income (Loss) from Operations		30			(3,072	)
Gain on Disposition Before Taxes		—			12,042
Income Tax Expense on Disposition		—			4,816
Net Gain on Disposition		—			7,226
Net Income	$	30		$	4,154

Foley and AEV, Inc.entered into fixed-price construction contracts. Revenues under these contracts were recognized on a percentage-of-completion basis. The method used to determine the percentage of completion was based on the ratio of costs incurred to total estimated costs on construction projects in progress. In the first quarter of 2015, an increase in estimated costs in excess of previous period cost estimates on one large job in progress at Foley resulted in pretax charges of $2.3 million. Foley also recorded a $1.0 million goodwill impairment charge based on adjustments to its carrying value in the first quarter of 2015.

Following are summary presentations of the major components of liabilities of discontinued operations as of March 31, 2016 and December 31, 2015:

(in thousands)	March 31,  2016		December 31, 2015
Current Liabilities	$	2,098	$	2,098
Liabilities of Discontinued Operations	$	2,098	$	2,098

Included in current liabilities of discontinued operations are warranty reserves. Details regarding the warranty reserves follow:

(in thousands)	2016		2015
Warranty Reserve Balance, January 1	$	2,103	$	2,527
Additional Provision for Warranties Made During the Year		—		—
Settlements Made During the Year		—		(6	)
Decrease in Warranty Estimates for Prior Years		—		—
Warranty Reserve Balance, March 31	$	2,103	$	2,521

The warranty reserve balances as of March 31, 2016 relate entirely to products produced by the Company’s former wind tower and dock and boatlift manufacturing companies. Expenses associated with remediation activities of these companies could be substantial. Although the assets of these companies have been sold and their operating results are reported under discontinued operations in the Company’s consolidated statements of income, the Company retains responsibility for warranty claims related to the products they produced prior to the sales of these companies.

For wind towers, the potential exists for multiple claims based on one defect repeated throughout the production process or for claims where the cost to repair or replace the defective part is highly disproportionate to the original cost of the part. For example, if the Company is required to cover remediation expenses in addition to regular warranty coverage, the Company could be required to accrue additional expenses and experience additional unplanned cash expenditures which could adversely affect the Company’s consolidated results of operations and financial condition.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition

Due to the diverse business operations of the Company, revenue recognition depends on the product produced and sold or service performed. The Company recognizes revenue when the earnings process is complete, evidenced by an agreement with the customer, there has been delivery and acceptance, the price is fixed or determinable and collectability is reasonably assured. In cases where significant obligations remain after delivery, revenue recognition is deferred until such obligations are fulfilled. Provisions for sales returns and warranty costs are recorded at the time of the sale based on historical information and current trends. In the case of derivative instruments, such as Otter Tail Power Company (OTP) 2015 forward energy contracts, marked-to-market and realized gains and losses are recognized on a net basis in revenue in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging. Gains and losses on forward energy contracts subject to regulatory treatment, if any, are deferred and recognized on a net basis in revenue in the period realized.

For the Company’s operating companies recognizing revenue on certain products when shipped, those operating companies have no further obligation to provide services related to such product. The shipping terms used in these instances are FOB shipping point.

Warranty Reserves

Warranty Reserves

Certain products previously sold by the Company carried one to fifteen year warranties. Although the Company engaged in extensive product quality programs and processes, the Company’s warranty obligations have been and may in the future be affected by product failure rates, repair or field replacement costs and additional development costs incurred in correcting product failures. The warranty reserve balances as of March 31, 2016 and December 31, 2015 relate entirely to products that were produced by entities the Company no longer owns prior to the Company selling the assets of those companies. The warranty reserve balance is included in liabilities of discontinued operations. See note 16 to consolidated financial statements.

Fair Value Measurements

Fair Value Measurements

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), for recurring fair value measurements. ASC 820 provides a single definition of fair value, requires enhanced disclosures about assets and liabilities measured at fair value and establishes a hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value. The three levels defined by the hierarchy and examples of each level are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed by the New York Stock Exchange and commodity derivative contracts listed on the New York Mercantile Exchange (NYMEX).

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities.

Level 3 – Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation and may include complex and subjective models and forecasts.

The following tables present, for each of the hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,315
Corporate Debt Securities – Held by Captive Insurance Company				3,903
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		293
Total Assets	$	2,293	$	8,218
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	107
Total Liabilities			$	107

December 31, 2015 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,235
Corporate Debt Securities – Held by Captive Insurance Company				3,858
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		196
Total Assets	$	2,196	$	8,093
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	199
Total Liabilities			$	199

The valuation techniques and inputs used for the Level 2 fair value measurements in the table above are as follows:

Forward Gasoline Purchase Contracts – These contracts are priced based on NYMEX quoted prices for Reformulated Blendstock for Oxygenate Blending (RBOB) Gasoline contracts. Prices used for the fair valuation of these contracts are based on NYMEX daily reporting date quoted prices for RBOB contracts with the same settlement periods.

Government-Backed and Government-Sponsored Enterprises’ and Corporate Debt Securities Held by the Company’s Captive Insurance Company – Fair values are determined on the basis of valuations provided by a third-party pricing service which utilizes industry accepted valuation models and observable market inputs to determine valuation. Some valuations or model inputs used by the pricing service may be based on broker quotes.

Inventories

Inventories

Inventories consist of the following:

	March 31,		December 31,
(in thousands)	2016		2015
Finished Goods	$	26,440	$	25,971
Work in Process		12,110		12,821
Raw Material, Fuel and Supplies		46,860		46,624
Total Inventories	$	85,410	$	85,416

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

On September 1, 2015 Miller Welding & Iron Works, Inc. (BTD-Illinois), a wholly owned subsidiary of BTD Manufacturing, Inc. (BTD), acquired the assets of Impulse Manufacturing, Inc. (Impulse) of Dawsonville, Georgia. The newly acquired business operates under the name BTD-Georgia. Based on the preliminary purchase price allocation, the difference in the fair value of assets acquired and the price paid for Impulse resulted in an initial estimate of acquired goodwill of $8,244,000.

An assessment of the carrying amounts of the remaining goodwill of the Company’s reporting units reported under continuing operations as of December 31, 2015 indicated the fair values are substantially in excess of their respective book values and not impaired.

The following table summarizes changes to goodwill by business segment during 2016:

(in thousands)	Gross Balance  December 31,  2015		Accumulated  Impairments		Balance (net of  impairments)  December 31,  2015		Adjustments  to Goodwill  in 2016		Balance (net of  impairments)  March 31,  2016
Manufacturing	$	20,430	$	—	$	20,430	$	—	$	20,430
Plastics		19,302		—		19,302		—		19,302
Total	$	39,732	$	—	$	39,732	$	—	$	39,732

Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment in accordance with requirements under ASC Topic 360-10-35, Property, Plant, and Equipment—Overall—Subsequent Measurement. In the first quarter of 2015, OTP began purchasing emission allowances to apply against sulfur dioxide emissions from Hoot Lake Plant. The cost of unused emission allowances is included in intangible assets on the Company’s consolidated balance sheets.

The following table summarizes the components of the Company’s intangible assets at March 31, 2016 and December 31, 2015:

March 31, 2016 (in thousands)	Gross Carrying  Amount		Accumulated  Amortization		Net Carrying  Amount		Remaining  Amortization  Periods
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,987	$	14,694	45-233 months
Covenant not to Compete		620		121		499	29 months
Other Intangible Assets		639		575		64	6 months
Emission Allowances		9		NA		9	Expensed as used
Total	$	22,949	$	7,683	$	15,266
December 31, 2015 (in thousands)
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,714	$	14,967	48-236 months
Covenant not to Compete		620		69		551	32 months
Other Intangible Assets		639		543		96	9 months
Emission Allowances		59		NA		59	Expensed as used
Total	$	22,999	$	7,326	$	15,673

The amortization expense for these intangible assets was:

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Amortization Expense – Intangible Assets	$	357	$	244

The estimated annual amortization expense for these intangible assets for the next five years is:

(in thousands)	2016		2017		2018		2019		2020
Estimated Amortization Expense – Intangible Assets	$	1,395	$	1,299	$	1,230	$	1,093	$	1,059

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Cash Flow Information

	As of March 31,
(in thousands)	2016		2015
Noncash Investing Activities:
Transactions Related to Capital Additions not Settled in Cash	$	24,618	$	25,284

Coyote Station Lignite Supply Agreement - Variable Interest Entity

Coyote Station Lignite Supply Agreement – Variable Interest Entity—In October 2012, the Coyote Station owners, including OTP, entered into a lignite sales agreement (LSA) with Coyote Creek Mining Company, L.L.C. (CCMC), a subsidiary of The North American Coal Corporation, for the purchase of lignite coal to meet the coal supply requirements of Coyote Station for the period beginning in May 2016 and ending in December 2040. The price per ton to be paid by the Coyote Station owners under the LSA will reflect the cost of production, along with an agreed profit and capital charge. CCMC was formed for the purpose of mining coal to meet the coal fuel supply requirements of Coyote Station from May 2016 through December 2040 and, based on the terms of the LSA, is considered a variable interest entity (VIE) due to the transfer of all operating and economic risk to the Coyote Station owners, as the agreement is structured so that the price of the coal would cover all costs of operations as well as future reclamation costs. The Coyote Station owners are also providing a guarantee of the value of the assets of CCMC as they would be required to buy certain assets at book value should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of CCMC in that they are required to buy the entity at the end of the contract term at equity value. Under current accounting standards, the primary beneficiary of a VIE is required to include the assets, liabilities, results of operations and cash flows of the VIE in its consolidated financial statements. No single owner of Coyote Station owns a majority interest in Coyote Station and none, individually, has the power to direct the activities that most significantly impact CCMC. Therefore, none of the owners individually, including OTP, is considered a primary beneficiary of the VIE and the Company is not required to include CCMC in its consolidated financial statements.

Under the LSA, all development period costs of the Coyote Creek coal mine incurred during the development period will be recovered from the Coyote Station owners over the full term of the production period, which commences with the initial delivery of coal to Coyote Station (anticipated in May 2016), by being included in the cost of production. The development fee and the capital charge incurred during the development period will be recovered from the Coyote Station owners over the first 52 months of the production period by being included in the cost of production during those months. The LSA was amended on March 16, 2015 to provide, among other things, that during any period between December 31, 2016 and any subsequent date on which CCMC makes initial delivery of coal, the Coyote Station owners will pay the following costs of production as advance payments for lignite: depreciation and amortization charges on capital assets and CCMC’s obligations under its loans and leases. In addition, if the LSA terminates prior to the expiration of its term or the production period terminates prior to December 31, 2040 and the Coyote Station owners purchase all of the outstanding membership interests of CCMC as required by the LSA, the owners will satisfy, or (if permitted by CCMC’s applicable lender) assume, all of CCMC’s obligations owed to CCMC’s lenders under its loans and leases. The Coyote Station owners have limited rights to assign their rights and obligations under the LSA without the consent of CCMC’s lenders during any period in which CCMC’s obligations to its lenders remain outstanding. OTP’s 35% share of development period costs, development fees and capital charges incurred by CCMC through March 31, 2016 is $60.3 million. In the event the contract is terminated because regulations or legislation render the burning of coal cost prohibitive and the assets worthless, OTP’s maximum exposure to loss as a result of its involvement with CCMC as of March 31, 2016 could be as high as $60.3 million.

New Accounting Standards

New Accounting Standards

ASU 2014-09—In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASC 606). ASC 606 is a comprehensive, principles-based accounting standard which amends current revenue recognition guidance with the objective of improving revenue recognition requirements by providing a single comprehensive model to determine the measurement of revenue and the timing of revenue recognition. ASC 606 also requires expanded disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

Amendments to the ASC in ASU 2014-09, as amended, are effective for fiscal years beginning after December 15, 2017. Early adoption is permitted, but not any earlier than January 1, 2017. Application methods permitted are: (1) full retrospective, (2) retrospective using one or more practical expedients and (3) retrospective with the cumulative effect of initial application recognized at the date of initial application. The Company is currently reviewing ASU 2014-09, identifying key impacts to its businesses, reviewing revenue streams and contracts to determine areas where the amendments in ASU 2014-09 will be applicable and evaluating transition options. The Company does not plan to adopt the updated guidance prior to January 1, 2018.

ASU 2015-03—In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2015 and must be applied retrospectively to balance sheets presented for periods prior to adoption. The Company adopted the updated standards in ASU 2015-03 in the first quarter of 2016. In conjunction with implementing this update, the Company is reclassifying the remaining balance of unamortized line of credit issuance costs from the deferred debit section of its consolidated balance sheet to other assets, eliminating the deferred debits section of its consolidated balance sheet and displaying long-term regulatory assets as a separate line item on its consolidated balance sheet. The effects of applying the guidance in ASU 2015-03 retrospectively to the Company’s December 31, 2015 consolidated balance sheet and of the associated reclassification of unamortized line of credit issuance costs are shown in the following table:

(in thousands)	Previously  Stated		Adjustments			Restated
Other Assets	$	31,108	$	1,676		$	32,784
Unamortized Debt Expense		3,897		(3,897	)		—
Total Assets		1,820,904		(2,221	)		1,818,683
Current Liabilities
Current Maturities of Long-Term Debt		52,544		(122	)		52,422
Total Current Liabilities		271,238		(122	)		271,116
Capitalization
Long-Term Debt—Net		445,945		(2,099	)		443,846
Total Capitalization		1,050,968		(2,099	)		1,048,869
Total Liabilities and Equity		1,820,904		(2,221	)		1,818,683

ASU 2015-11—In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires that inventories be measured at the lower of cost or net realizable value instead of the lower of cost or market value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect the adoption of the updated standard to have a material impact on its consolidated financial statements.

ASU 2016-02—In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is a comprehensive amendment of the ASC, creating Topic 842, which will supersede the current requirements under ASC Topic 840 on leases and require the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. Topic 842 also requires qualitative and specific quantitative disclosures by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in ASU 2016-02 is permitted. The Company is currently reviewing ASU 2016-02, identifying key impacts to its businesses to determine areas where the amendments in ASU 2016-02 will be applicable and evaluating transition options. The Company does not currently plan to apply the amendments in ASU 2016-02 to its consolidated financial statements prior to 2019.

ASU 2016-09—In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which is intended to improve and simplify accounting and reporting requirements related to stock-based compensation programs. The amendments in ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Under the updated standard, excess tax benefits related to vested awards recognized in stockholders' equity under prior guidance will be recognized in the income statement when the awards vest, and the level of shares that can be withheld to cover income taxes on awards to satisfy statutory income tax withholding obligations without triggering liability classification has been increased. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Schedule of assets and liabilities that are measured at fair value on a recurring basis

March 31, 2016 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,315
Corporate Debt Securities – Held by Captive Insurance Company				3,903
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		293
Total Assets	$	2,293	$	8,218
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	107
Total Liabilities			$	107

December 31, 2015 (in thousands)	Level 1		Level 2		Level 3
Assets:
Current Assets – Other:
Money Market Escrow Accounts – AEV, Inc. and Foley Company Dispositions	$	2,000
Investments:
Government-Backed and Government-Sponsored Enterprises’ Debt Securities – Held by Captive Insurance Company			$	4,235
Corporate Debt Securities – Held by Captive Insurance Company				3,858
Other Assets:
Money Market and Mutual Funds – Nonqualified Retirement Savings Plan		196
Total Assets	$	2,196	$	8,093
Liabilities:
Other Accrued Liabilities:
Derivative Liabilities – Forward Gasoline Purchase Contracts			$	199
Total Liabilities			$	199

Schedule of inventories

	March 31,		December 31,
(in thousands)	2016		2015
Finished Goods	$	26,440	$	25,971
Work in Process		12,110		12,821
Raw Material, Fuel and Supplies		46,860		46,624
Total Inventories	$	85,410	$	85,416

Schedule of changes to goodwill by business segment

(in thousands)	Gross Balance  December 31,  2015		Accumulated  Impairments		Balance (net of  impairments)  December 31,  2015		Adjustments  to Goodwill  in 2016		Balance (net of  impairments)  March 31,  2016
Manufacturing	$	20,430	$	—	$	20,430	$	—	$	20,430
Plastics		19,302		—		19,302		—		19,302
Total	$	39,732	$	—	$	39,732	$	—	$	39,732

Schedule of components of intangible assets

March 31, 2016 (in thousands)	Gross Carrying  Amount		Accumulated  Amortization		Net Carrying  Amount		Remaining  Amortization  Periods
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,987	$	14,694	45-233 months
Covenant not to Compete		620		121		499	29 months
Other Intangible Assets		639		575		64	6 months
Emission Allowances		9		NA		9	Expensed as used
Total	$	22,949	$	7,683	$	15,266
December 31, 2015 (in thousands)
Amortizable Intangible Assets:
Customer Relationships	$	21,681	$	6,714	$	14,967	48-236 months
Covenant not to Compete		620		69		551	32 months
Other Intangible Assets		639		543		96	9 months
Emission Allowances		59		NA		59	Expensed as used
Total	$	22,999	$	7,326	$	15,673

Schedule of amortization expense for intangible assets

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Amortization Expense – Intangible Assets	$	357	$	244

Schedule of estimated annual amortization expense for intangible assets

(in thousands)	2016		2017		2018		2019		2020
Estimated Amortization Expense – Intangible Assets	$	1,395	$	1,299	$	1,230	$	1,093	$	1,059

Schedule of supplemental disclosure of cash flow information

	As of March 31,
(in thousands)	2016		2015
Noncash Investing Activities:
Transactions Related to Capital Additions not Settled in Cash	$	24,618	$	25,284

Schedule of effects of applying the guidance and reclassification of unamortized line of credit issuance costs

(in thousands)	Previously  Stated		Adjustments			Restated
Other Assets	$	31,108	$	1,676		$	32,784
Unamortized Debt Expense		3,897		(3,897	)		—
Total Assets		1,820,904		(2,221	)		1,818,683
Current Liabilities
Current Maturities of Long-Term Debt		52,544		(122	)		52,422
Total Current Liabilities		271,238		(122	)		271,116
Capitalization
Long-Term Debt—Net		445,945		(2,099	)		443,846
Total Capitalization		1,050,968		(2,099	)		1,048,869
Total Liabilities and Equity		1,820,904		(2,221	)		1,818,683

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Business Combinations and Segment Information (Tables)

3 Months Ended

Mar. 31, 2016

Acquisition And Segment Information [Abstract]

Schedule of business combination disclosing the preliminary allocation of purchase price to each major asset and liability

(in thousands)
Assets:
Current Assets	$	4,906
Goodwill		8,244
Other Intangible Assets		5,490
Other Amortizable Assets		1,380
Fixed Assets		13,649
Total Assets	$	33,669
Liabilities:
Current Liabilities	$	2,852
Lease Obligation		11
Total Liabilities	$	2,863
Cash Paid	$	30,806

Schedule of information by business segments

Operating Revenue

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	112,994		$	113,547
Manufacturing		59,820			56,759
Plastics		33,437			32,552
Intersegment Eliminations		(9	)		(17	)
Total	$	206,242		$	202,841

Interest Charges

	Three Months Ended
	March 31,
(in thousands)	2016		2015
Electric	$	6,284	$	6,121
Manufacturing		992		832
Plastics		244		246
Corporate and Intersegment Eliminations		474		544
Total	$	7,994	$	7,743

Income Taxes

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	4,612		$	4,221
Manufacturing		1,019			504
Plastics		1,367			1,264
Corporate		(1,506	)		(1,916	)
Total	$	5,492		$	4,073

Net Income (Loss)

	Three Months Ended
	March 31,
(in thousands)	2016			2015
Electric	$	12,538		$	13,178
Manufacturing		1,853			1,184
Plastics		2,152			2,120
Corporate		(2,053	)		(2,701	)
Discontinued Operations		30			4,154
Total	$	14,520		$	17,935

Identifiable Assets

	March 31,		December 31,
(in thousands)	2016		2015
Electric	$	1,528,157	$	1,520,887
Manufacturing		179,745		173,860
Plastics		87,077		81,624
Corporate		38,378		42,312
Total	$	1,833,357	$	1,818,683

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Rate and Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2016

Rate and Regulatory Matters [Abstract]

Schedule of revenues recorded under rate riders

Rate Rider (in thousands)	2016		2015
Minnesota
Conservation Improvement Program Costs and Incentives1	$	2,506	$	1,928
Transmission Cost Recovery		2,276		1,615
Environmental Cost Recovery		3,082		2,557
North Dakota
Renewable Resource Adjustment		2,059		1,883
Transmission Cost Recovery		2,236		1,936
Environmental Cost Recovery		2,811		2,156
South Dakota
Transmission Cost Recovery		651		363
Environmental Cost Recovery		633		504
Conservation Improvement Program Costs and Incentives		159		140

¹Includes MNCIP costs recovered in base rates.

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Regulatory Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Regulatory Assets and Liabilities Disclosure [Abstract]

Schedule of amount of regulatory assets and liabilities

	March 31, 2016						Remaining  Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	97,908	$	105,347	see below
Deferred Marked-to-Market Losses1		4,063		9,515		13,578	57 months
Conservation Improvement Program Costs and Incentives2		2,789		5,065		7,854	27 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,791		5,791	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		826		2,634		3,460	60 months
North Dakota Renewable Resource Rider Accrued Revenues2		1,501		305		1,806	21 months
Debt Reacquisition Premiums1		351		1,451		1,802	198 months
Deferred Income Taxes1		—		1,351		1,351	asset lives
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		763		227		990	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		618		718	86 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		559		—		559	12 months
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		245		—		245	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	12 months
Total Regulatory Assets	$	18,636	$	124,933	$	143,569
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	75,468	$	75,468	asset lives
Refundable Fuel Clause Adjustment Revenues		3,294		—		3,294	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,403		1,403	24 months
Deferred Income Taxes		—		1,043		1,043	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		982		—		982	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		787		—		787	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		602		—		602	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		342		—		342	12 months
Minnesota Transmission Cost Recovery Rider Accrued Refund		183		—		183	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		6		93		99	213 months
Total Regulatory Liabilities	$	6,196	$	78,007	$	84,203
Net Regulatory Asset Position	$	12,440	$	46,926	$	59,366

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

	December 31, 2015						Remaining  Recovery/
(in thousands)	Current		Long-Term		Total		Refund Period
Regulatory Assets:
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits1	$	7,439	$	99,293	$	106,732	see below
Deferred Marked-to-Market Losses1		4,063		10,530		14,593	60 months
Conservation Improvement Program Costs and Incentives2		4,411		4,266		8,677	18 months
Accumulated ARO Accretion/Depreciation Adjustment1		—		5,672		5,672	asset lives
Big Stone II Unrecovered Project Costs – Minnesota1		942		2,620		3,562	84 months
Debt Reacquisition Premiums1		351		1,539		1,890	201 months
Deferred Income Taxes1		—		1,455		1,455	asset lives
North Dakota Renewable Resource Rider Accrued Revenues2		—		1,266		1,266	15 months
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up2		698		355		1,053	24 months
Big Stone II Unrecovered Project Costs – South Dakota2		100		643		743	89 months
Minnesota Transmission Cost Recovery Rider Accrued Revenues2		576		—		576	12 months
Minnesota Deferred Rate Case Expenses Subject to Recovery1		291		—		291	12 months
Minnesota Renewable Resource Rider Accrued Revenues2		—		68		68	see below
South Dakota Transmission Cost Recovery Rider Accrued Revenues2		33		—		33	12 months
Total Regulatory Assets	$	18,904	$	127,707	$	146,611
Regulatory Liabilities:
Accumulated Reserve for Estimated Removal Costs – Net of Salvage	$	—	$	74,948	$	74,948	asset lives
Refundable Fuel Clause Adjustment Revenues		1,834		—		1,834	12 months
Revenue for Rate Case Expenses Subject to Refund – Minnesota		—		1,279		1,279	see below
Deferred Income Taxes		—		1,110		1,110	asset lives
Minnesota Environmental Cost Recovery Rider Accrued Refund		777		—		777	12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund		321		—		321	12 months
South Dakota Environmental Cost Recovery Rider Accrued Refund		185		—		185	12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund		132		—		132	12 months
Deferred Gain on Sale of Utility Property – Minnesota Portion		5		95		100	216 months
North Dakota Renewable Resource Rider Accrued Refund		68		—		68	12 months
Total Regulatory Liabilities	$	3,322	$	77,432	$	80,754
Net Regulatory Asset Position	$	15,582	$	50,275	$	65,857

¹Costs subject to recovery without a rate of return.

²Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

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Open Contract Positions Subject to Legally Enforceable Netting Arrangements (Tables)

3 Months Ended

Mar. 31, 2016

Open Contract Positions Subject To Legally Enforceable Netting Arrangements [Abstract]

Schedule of derivative asset and liability balances subject to legally enforceable netting arrangements

(in thousands)	March 31,  2016			December 31,  2015
Open Contract Gain Positions Subject to Legally Enforceable Netting Arrangements	$	—		$	—
Open Contract Loss Positions Subject to Legally Enforceable Netting Arrangements		(18,264	)		(16,070	)
Net Balance Subject to Legally Enforceable Netting Arrangements	$	(18,264	)	$	(16,070	)

Schedule of breakdown of OTP's credit risk standing on forward energy contracts in marked-to-market loss positions

Loss Position  (in thousands)	March 31, 2016		December 31,  2015
Loss Contracts Covered by Deposited Funds or Letters of Credit	$	107	$	199
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade1		18,157		15,871
Loss Contracts with No Ratings Triggers or Deposit Requirements		—		—
Loss Position	$	18,264	$	16,070
1Certain OTP derivative energy contracts contain provisions that require an investment grade credit rating from each of the major credit rating agencies on OTP’s debt. If OTP’s debt ratings were to fall below investment grade, the counterparties to these forward energy contracts could request the immediate deposit of cash to cover contracts in net liability positions.
Contracts Requiring Cash Deposits if OTP’s Credit Falls Below Investment Grade	$	18,157	$	15,871
Offsetting Gains with Counterparties under Master Netting Agreements		—		—
Reporting Date Deposit Requirement if Credit Risk Feature Triggered	$	18,157	$	15,871

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Stockholders Equity and Earnings Per Share [Abstract]

Schedule of reconciliation of common shareholders' equity

(in thousands)	Par Value,  Common  Shares			Premium  on  Common  Shares			Retained  Earnings			Accumulated  Other  Comprehensive  Income/(Loss)			Total  Common  Equity
Balance, December 31, 2015	$	189,286		$	293,610		$	126,025		$	(3,898	)	$	605,023
Common Stock Issuances, Net of Expenses		1,080			4,410									5,490
Common Stock Retirements		(9	)		(44	)								(53	)
Net Income								14,520						14,520
Other Comprehensive Income											140			140
Employee Stock Incentive Plans Expense					489									489
Common Dividends ($0.3125 per share)								(11,889	)					(11,889	)
Balance, March 31, 2016	$	190,357		$	298,465		$	128,656		$	(3,758	)	$	613,720

Schedule of common shares outstanding from December 31, 2015 through March 31, 2016

Common Shares Outstanding, December 31, 2015	37,857,186
Issuances:
Executive Stock Performance Awards (2013 and 2014 shares earned)	54,700
Automatic Dividend Reinvestment and Share Purchase Plan:
Dividends Reinvested	49,635
Cash Invested	49,281
Employee Stock Purchase Plan:
Cash Invested	21,819
Dividends Reinvested	7,153
Employee Stock Ownership Plan	23,837
Vesting of Restricted Stock Units	9,675
Retirements:
Shares Withheld for Individual Income Tax Requirements	(1,868	)
Common Shares Outstanding, March 31, 2016	38,071,418

Schedule of reconciliation of weighted average common shares outstanding - basic to weighted average common shares outstanding - diluted

	2016		2015
Weighted Average Common Shares Outstanding – Basic		37,936,943		37,243,118
Plus Outstanding Share Awards net of Share Reductions for Unrecognized Stock-Based Compensation Expense and Excess Tax Benefits:
Shares Expected to be Awarded for Stock Performance Awards Granted to Executive Officers based on Measurement Period-to-Date Performance		46,885		137,460
Underlying Shares Related to Nonvested Restricted Stock Units Granted to Employees		39,841		42,540
Nonvested Restricted Shares		17,776		49,998
Shares Expected to be Issued Under the Deferred Compensation Program for Directors		3,763		24,277
Potentially Dilutive Stock Options		—		488
Total Dilutive Shares		108,265		254,763
Weighted Average Common Shares Outstanding – Diluted		38,045,208		37,497,881

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Share-Based Payments (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of stock incentive awards granted

Award	Shares/  Units  Granted		Weighted  Average  Grant-Date  Fair Value  per Award		Vesting
Restricted Stock Units Granted to Executive Officers		22,000	$	28.915	25% per year through February 6, 2020
Stock Performance Awards Granted to Executive Officers		81,500	$	24.03	December 31, 2018

Schedule of compensation expense under stock-based payment programs

	Three months ended
	March 31,
(in thousands)	2016		2015
Stock Performance Awards Granted to Executive Officers	$	537	$	1,020
Restricted Stock Units Granted to Executive Officers		245		253
Restricted Stock Granted to Executive Officers		29		157
Restricted Stock Granted to Directors		107		98
Restricted Stock Units Granted to Non-Executive Employees		64		66
Employee Stock Purchase Plan (15% discount)		44		49
Totals	$	1,026	$	1,643

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Short-Term and Long-Term Borrowings (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of lines of credit

(in thousands)	Line Limit		In Use on  March 31,  2016		Restricted due to  Outstanding  Letters of Credit		Available on March 31,  2016		Available on December  31, 2015
Otter Tail Corporation Credit Agreement	$	150,000	$	20,880	$	—	$	129,120	$	90,334
OTP Credit Agreement		170,000		22,056		—		147,944		148,694
Total	$	320,000	$	42,936	$	—	$	277,064	$	239,028

Schedule of short-term and long-term debt outstanding

March 31, 2016 (in thousands)	OTP		Otter Tail  Corporation		Otter Tail  Corporation  Consolidated
Short-Term Debt	$	22,056	$	20,880	$	42,936
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Term Loan, LIBOR plus 0.90%, due February 5, 2018				50,000		50,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				163		163
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				944		944
Total	$	445,000	$	103,437	$	548,437
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,457		52,457
Unamortized Long-Term Debt Issuance Costs		2,039		140		2,179
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,961	$	50,840	$	493,801
Total Short-Term and Long-Term Debt (with current maturities)	$	465,017	$	124,177	$	589,194

December 31, 2015 (in thousands)	OTP		Otter Tail  Corporation		Otter Tail  Corporation  Consolidated
Short-Term Debt	$	21,006	$	59,666	$	80,672
Long-Term Debt:
9.000% Notes, due December 15, 2016			$	52,330	$	52,330
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000				33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000				140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000				30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000				42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029		60,000				60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000				50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044		90,000				90,000
North Dakota Development Note, 3.95%, due April 1, 2018				182		182
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021				977		977
Total	$	445,000	$	53,489	$	498,489
Less: Current Maturities net of Unamortized Debt Issuance Costs				52,422		52,422
Unamortized Long-Term Debt Issuance Costs		2,099		122		2,221
Total Long-Term Debt net of Unamortized Debt Issuance Costs	$	442,901	$	945	$	443,846
Total Short-Term and Long-Term Debt (with current maturities)	$	463,907	$	113,033	$	576,940

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Pension Plan and Other Postretirement Benefits (Tables)

3 Months Ended

Mar. 31, 2016

Pension Plan

Schedule of components of net periodic postretirement benefit cost

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	1,382		$	1,500
Interest Cost on Projected Benefit Obligation		3,522			3,325
Expected Return on Assets		(4,867	)		(4,600	)
Amortization of Prior-Service Cost:
From Regulatory Asset		47			47
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		1,227			1,633
From Other Comprehensive Income1		31			40
Net Periodic Pension Cost	$	1,343		$	1,946
1Corporate cost included in Other Nonelectric Expenses.

Executive Survivor and Supplemental Retirement Plan

Schedule of components of net periodic postretirement benefit cost

	Three Months Ended March 31,
(in thousands)	2016		2015
Service Cost—Benefit Earned During the Period	$	63	$	47
Interest Cost on Projected Benefit Obligation		417		381
Amortization of Prior-Service Cost:
From Regulatory Asset		4		4
From Other Comprehensive Income1		9		10
Amortization of Net Actuarial Loss:
From Regulatory Asset		73		83
From Other Comprehensive Income2		112		151
Net Periodic Pension Cost	$	678	$	676
1Amortization of Prior Service Costs from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	4	$	4
Other Nonelectric Expenses		5		6
2Amortization of Net Actuarial Loss from Other Comprehensive Income Charged to:
Electric Operation and Maintenance Expenses	$	68	$	78
Other Nonelectric Expenses		44		73

Postretirement Benefits

Schedule of components of net periodic postretirement benefit cost

	Three Months Ended March 31,
(in thousands)	2016			2015
Service Cost—Benefit Earned During the Period	$	306		$	375
Interest Cost on Projected Benefit Obligation		541			550
Amortization of Prior-Service Cost:
From Regulatory Asset		33			51
From Other Comprehensive Income1		1			1
Amortization of Net Actuarial Loss:
From Regulatory Asset		—			48
From Other Comprehensive Income1		—			1
Net Periodic Postretirement Benefit Cost	$	881		$	1,026
Effect of Medicare Part D Subsidy	$	(257	)	$	(450	)
1 Corporate cost included in Other Nonelectric Expenses.

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of long-term debt including current maturities

	March 31, 2016						December 31, 2015
(in thousands)	Carrying  Amount			Fair Value			Carrying  Amount			Fair Value
Short-Term Debt		(42,936	)		(42,936	)		(80,672	)		(80,672	)
Long-Term Debt including Current Maturities		(546,258	)		(623,484	)		(496,268	)		(561,245	)

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Income Tax Expense - Continuing Operations (Tables)

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of income from continuing operations before income taxes and income tax expense

	Three Months Ended March 31,
(in thousands)	2016			2015
Income Before Income Taxes – Continuing Operations	$	19,982		$	17,854
Tax Computed at Company’s Net Composite Federal and State Statutory Rate (39%)		7,793			6,963
Increases (Decreases) in Tax from:
Federal Production Tax Credits		(1,686	)		(2,054	)
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes		(212	)		(212	)
Section 199 Domestic Production Activities Deduction		(104	)		(362	)
Employee Stock Ownership Plan Dividend Deduction		(158	)		(172	)
Corporate Owned Life Insurance		(64	)		(80	)
AFUDC Equity		(37	)		(100	)
Other Items – Net		(40	)		90
Income Tax Expense – Continuing Operations	$	5,492		$	4,073
Effective Income Tax Rate – Continuing Operations		27.5	%		22.8	%

Schedule of activity related to unrecognized tax benefits

(in thousands)	2016		2015
Balance on January 1	$	468	$	222
Increases Related to Tax Positions for Prior Years		—		—
Increases Related to Tax Positions for Current Year		16		44
Uncertain Positions Resolved During Year		—		—
Balance on March 31	$	484	$	266

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Income and Gains and Losses from Disposition of Discontinued Operations and Schedule of Major Components of Assets and Liabilities of Discontinued Operations

(in thousands)	2016			2015
Operating Revenues	$	—		$	18,724
Operating Expenses		(50	)		22,141
Goodwill Impairment Charge		—			1,000
Operating Income (Loss)		50			(4,417	)
Other Deductions		—			(31	)
Income Tax Expense (Benefit)		20			(1,376	)
Net Income (Loss) from Operations		30			(3,072	)
Gain on Disposition Before Taxes		—			12,042
Income Tax Expense on Disposition		—			4,816
Net Gain on Disposition		—			7,226
Net Income	$	30		$	4,154

(in thousands)	March 31,  2016		December 31, 2015
Current Liabilities	$	2,098	$	2,098
Liabilities of Discontinued Operations	$	2,098	$	2,098

Schedule of warranty reserves

(in thousands)	2016		2015
Warranty Reserve Balance, January 1	$	2,103	$	2,527
Additional Provision for Warranties Made During the Year		—		—
Settlements Made During the Year		—		(6	)
Decrease in Warranty Estimates for Prior Years		—		—
Warranty Reserve Balance, March 31	$	2,103	$	2,521

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Summary of Significant Accounting Policies - Assets and liabilities measured at fair value on recurring basis (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Liabilities:
Derivative Liabilities	$ 107,000	$ 199,000
Fair Value, Measurements, Recurring | Level 1
Assets:
Total Assets	2,293,000	2,196,000
Fair Value, Measurements, Recurring | Level 1 | Money Market Deposit Escrow
Assets:
Money Market Escrow Accounts - AEV, Inc. and Foley Company Sales	2,000,000	2,000,000
Fair Value, Measurements, Recurring | Level 1 | Money Market and Mutual Funds
Assets:
Other Assets - Nonqualified Retirement Savings Plan	293,000	196,000
Fair Value, Measurements, Recurring | Level 2
Assets:
Total Assets	8,218,000	8,093,000
Liabilities:
Total Liabilities	107,000	199,000
Fair Value, Measurements, Recurring | Level 2 | Government-Backed and Government-Sponsored Enterprises' Debt Securities
Assets:
Investments - Held by Captive Insurance Company	4,315,000	4,235,000
Fair Value, Measurements, Recurring | Level 2 | Corporate Debt Securities
Assets:
Investments - Held by Captive Insurance Company	3,903,000	3,858,000
Fair Value, Measurements, Recurring | Level 2 | Forward Gasoline Purchase Contracts
Liabilities:
Derivative Liabilities	$ 107,000	$ 199,000

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Summary of Significant Accounting Policies - Inventories (Details 1) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Finished Goods	$ 26,440	$ 25,971
Work in Process	12,110	12,821
Raw Material, Fuel and Supplies	46,860	46,624
Total Inventories	$ 85,410	$ 85,416

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Summary of Significant Accounting Policies - Summary of changes to goodwill by business segment (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Goodwill [Roll Forward]
Gross Balance December 31, 2015	$ 39,732
Accumulated Impairments
Balance (net of impairments) December 31, 2015	$ 39,732
Adjustments to Goodwill in 2016
Balance (net of impairments) March 31, 2016	$ 39,732
Manufacturing
Goodwill [Roll Forward]
Gross Balance December 31, 2015	$ 20,430
Accumulated Impairments
Balance (net of impairments) December 31, 2015	$ 20,430
Adjustments to Goodwill in 2016
Balance (net of impairments) March 31, 2016	$ 20,430
Plastics
Goodwill [Roll Forward]
Gross Balance December 31, 2015	$ 19,302
Accumulated Impairments
Balance (net of impairments) December 31, 2015	$ 19,302
Adjustments to Goodwill in 2016
Balance (net of impairments) March 31, 2016	$ 19,302

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Summary of Significant Accounting Policies - Components of intangible assets (Details 3) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Amortizable Intangible Assets:
Gross Carrying Amount	$ 22,949	$ 22,999
Accumulated Amortization	7,683	7,326
Net Carrying Amount	15,266	15,673
Customer Relationships
Amortizable Intangible Assets:
Gross Carrying Amount	21,681	21,681
Accumulated Amortization	6,987	6,714
Net Carrying Amount	$ 14,694	$ 14,967
Customer Relationships | Minimum
Amortizable Intangible Assets:
Remaining Amortization Periods	45 months	48 months
Customer Relationships | Maximum
Amortizable Intangible Assets:
Remaining Amortization Periods	233 months	236 months
Covenant not to Compete
Amortizable Intangible Assets:
Gross Carrying Amount	$ 620	$ 620
Accumulated Amortization	121	69
Net Carrying Amount	$ 499	$ 551
Remaining Amortization Periods	29 months	32 months
Other Intangible Assets Including Contracts
Amortizable Intangible Assets:
Gross Carrying Amount	$ 639	$ 639
Accumulated Amortization	575	543
Net Carrying Amount	$ 64	$ 96
Remaining Amortization Periods	6 months	9 months
Emission Allowances
Amortizable Intangible Assets:
Gross Carrying Amount	$ 9	$ 59
Net Carrying Amount	$ 9	$ 59

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Summary of Significant Accounting Policies - Amortization expense for intangible assets (Details 4) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accounting Policies [Abstract]
Amortization Expense - Intangible Assets	$ 357	$ 244

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Summary of Significant Accounting Policies - Estimated amortization expense for intangible assets (Details 5) $ in Thousands	Mar. 31, 2016 USD ($)
Accounting Policies [Abstract]
2016	$ 1,395
2017	1,299
2018	1,230
2019	1,093
2020	$ 1,059

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Summary of Significant Accounting Policies - Supplemental disclosure of cash flow information (Details 6) - USD ($) $ in Thousands	Mar. 31, 2016	Mar. 31, 2015
Noncash Investing Activities:
Transactions Related to Capital Additions not Settled in Cash	$ 24,618	$ 25,284

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Summary of Significant Accounting Policies - Effect of applying the guidance in ASU 2015-17 retrospectively to consolidated balance sheet (Details 7) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other Assets	$ 33,014	$ 32,784
Unamortized Debt Expense
Total Assets	1,833,357	$ 1,818,683
Current Liabilities
Current Maturities of Long-Term Debt	52,457	52,422
Total Current Liabilities	232,895	271,116
Capitalization
Long-Term Debt - Net	493,801	443,846
Total Capitalization	1,107,521	1,048,869
Total Liabilities and Equity	$ 1,833,357	1,818,683
Previously Stated
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other Assets		31,108
Unamortized Debt Expense		3,897
Total Assets		1,820,904
Current Liabilities
Current Maturities of Long-Term Debt		52,544
Total Current Liabilities		271,238
Capitalization
Long-Term Debt - Net		445,945
Total Capitalization		1,050,968
Total Liabilities and Equity		1,820,904
Adjustments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other Assets		1,676
Unamortized Debt Expense		(3,897)
Total Assets		(2,221)
Current Liabilities
Current Maturities of Long-Term Debt		(122)
Total Current Liabilities		(122)
Capitalization
Long-Term Debt - Net		(2,099)
Total Capitalization		(2,099)
Total Liabilities and Equity		$ (2,221)

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Summary of Significant Accounting Policies (Detail Textuals)	3 Months Ended
	Mar. 31, 2016
Minimum
Significant Accounting Policies [Line Items]
Product warranty period (in years)	1 year
Maximum
Significant Accounting Policies [Line Items]
Product warranty period (in years)	15 years

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Summary of Significant Accounting Policies (Detail Textuals 1)	3 Months Ended
	Mar. 31, 2016 USD ($)
Significant Accounting Policies [Line Items]
Acquired goodwill	$ 8,244,000
Coyote Creek Mining Company, L.L.C. (CCMC) | Lignite Sales Agreement | Otter Tail Power Company
Significant Accounting Policies [Line Items]
Amortization period	52 months
Percentage of development period costs, development fees and capital charge incurred by CCMC	35.00%
Amount of development period costs, development fees and capital charges incurred by CCMC	$ 60,300,000
Maximum exposure to loss as a result of involvement with CCMC	$ 60,300,000

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Business Combinations and Segment Information - Summary of major asset and liability category of BTD Georgia (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Sep. 01, 2015
Assets:
Goodwill	$ 39,732	$ 39,732
BTD-Georgia
Assets:
Current Assets			$ 4,906
Goodwill			8,244
Other Intangible Assets			5,490
Other Amortizable Assets			1,380
Fixed Assets			13,649
Total Assets			33,669
Liabilities:
Current Liabilities			2,852
Lease Obligation			11
Total Liabilities			2,863
Cash Paid			$ 30,806

XML

Business Combinations and Segment Information - Information on continuing operations for business segments (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Operating Revenue	$ 206,242	$ 202,841
Interest Charges	7,994	7,743
Income Taxes	5,492	4,073
Net Income (Loss)	14,520	17,935
Intersegment Eliminations
Segment Reporting Information [Line Items]
Operating Revenue	(9)	(17)
Corporate and Intersegment Eliminations
Segment Reporting Information [Line Items]
Interest Charges	474	544
Corporate
Segment Reporting Information [Line Items]
Income Taxes	(1,506)	(1,916)
Net Income (Loss)	(2,053)	(2,701)
Discontinued Operations
Segment Reporting Information [Line Items]
Net Income (Loss)	30	4,154
Electric | Operating Segments
Segment Reporting Information [Line Items]
Operating Revenue	112,994	113,547
Interest Charges	6,284	6,121
Income Taxes	4,612	4,221
Net Income (Loss)	12,538	13,178
Manufacturing | Operating Segments
Segment Reporting Information [Line Items]
Operating Revenue	59,820	56,759
Interest Charges	992	832
Income Taxes	1,019	504
Net Income (Loss)	1,853	1,184
Plastics | Operating Segments
Segment Reporting Information [Line Items]
Operating Revenue	33,437	32,552
Interest Charges	244	246
Income Taxes	1,367	1,264
Net Income (Loss)	$ 2,152	$ 2,120

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Business Combinations and Segment Information - Total assets by business segment (Details 2) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Assets	$ 1,833,357	$ 1,818,683
Corporate
Segment Reporting Information [Line Items]
Assets	38,378	42,312
Electric | Operating Segments
Segment Reporting Information [Line Items]
Assets	1,528,157	1,520,887
Manufacturing | Operating Segments
Segment Reporting Information [Line Items]
Assets	179,745	173,860
Plastics | Operating Segments
Segment Reporting Information [Line Items]
Assets	$ 87,077	$ 81,624

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Business Combinations and Segment Information (Detail Textuals) - USD ($) $ in Millions		3 Months Ended
	Sep. 01, 2015	Mar. 31, 2016	Mar. 31, 2015
Operating revenues | UNITED STATES
Business Acquisition [Line Items]
Operating revenues, percentage		97.60%	96.30%
BTD-Georgia
Business Acquisition [Line Items]
Cash	$ 30.8

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Business Combinations and Segment Information (Detail Textuals 1)	3 Months Ended
	Mar. 31, 2016 Segment
Acquisition And Segment Information [Abstract]
Number of reportable segments	3

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Rate and Regulatory Matters - Summary of revenues recorded under rate riders (Details 1) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Regulatory Matters [Line Items]
Revenues recorded under rate riders		$ 206,242	$ 202,841
Otter Tail Power Company | Minnesota | Conservation Improvement Program Costs and Incentives
Regulatory Matters [Line Items]
Revenues recorded under rate riders	[1]	2,506	1,928
Otter Tail Power Company | Minnesota | Transmission Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		2,276	1,615
Otter Tail Power Company | Minnesota | Environmental Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		3,082	2,557
Otter Tail Power Company | North Dakota | Renewable Resource Adjustment
Regulatory Matters [Line Items]
Revenues recorded under rate riders		2,059	1,883
Otter Tail Power Company | North Dakota | Transmission Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		2,236	1,936
Otter Tail Power Company | North Dakota | Environmental Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		2,811	2,156
Otter Tail Power Company | South Dakota | Conservation Improvement Program Costs and Incentives
Regulatory Matters [Line Items]
Revenues recorded under rate riders		159	140
Otter Tail Power Company | South Dakota | Transmission Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		651	363
Otter Tail Power Company | South Dakota | Environmental Cost Recovery Rider
Regulatory Matters [Line Items]
Revenues recorded under rate riders		$ 633	$ 504

[1] Includes MNCIP costs recovered in base rates.

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Rate and Regulatory Matters (Detail Textuals) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016 USD ($) kVs mi	Dec. 31, 2011 kVs mi
Otter Tail Power Company | Big Stone South - Brookings MVP
Regulatory Matters [Line Items]
Project costs incurred to date	$ 29.6
Percentage of assets of project	100.00%
Expanded capacity of projects | kVs	345
Extended distance of transmission line | mi	70
Otter Tail Power Company | Big Stone South - Ellendale MVP | Minimum
Regulatory Matters [Line Items]
Extended distance of transmission line | mi		160
Otter Tail Power Company | Big Stone South - Ellendale MVP | Maximum
Regulatory Matters [Line Items]
Extended distance of transmission line | mi		170
Otter Tail Power Company | Big Stone South - Ellendale MVP | Federal Energy Regulatory Commission
Regulatory Matters [Line Items]
Project costs incurred to date	$ 20.0
Percentage of assets of project	100.00%
Expanded capacity of projects | kVs		345
Big Stone AQCS Project BART - compliant AQCS
Regulatory Matters [Line Items]
Project costs incurred to date	$ 368.0
Big Stone AQCS Project BART - compliant AQCS | Otter Tail Power Company
Regulatory Matters [Line Items]
Project costs incurred to date	$ 198.0
Percentage of projected cost	53.90%
Capacity Expansion 2020 | Otter Tail Power Company | Brookings Project
Regulatory Matters [Line Items]
Investment to acquire ownership interest	$ 26.7
Percentage of ownership interest acquired in transmission line	4.80%
Distance of transmission line | mi	250
Capacity Expansion 2020 | Otter Tail Power Company | Fargo-Monticello Project
Regulatory Matters [Line Items]
Investment to acquire ownership interest	$ 81.8
Percentage of ownership interest acquired in transmission line	14.20%
Distance of transmission line | mi	240
Percentage of assets of project	100.00%

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Rate and Regulatory Matters (Detail Textuals 1) - Otter Tail Power Company - Minnesota Public Utilities Commission - USD ($)	1 Months Ended				12 Months Ended
	Feb. 16, 2016	Dec. 21, 2015	Sep. 30, 2015	Apr. 25, 2011	Dec. 31, 2015	Apr. 14, 2016	Jul. 09, 2015
Conservation Improvement Program
Regulatory Matters [Line Items]
Financial incentives recognized during period					$ 4,200,000
Percentage Increase In Energy Savings					39.00%
Conservation Improvement Program | Fiscal Year 2014
Regulatory Matters [Line Items]
Financial incentive request approved							$ 3,000,000
Transmission Cost Recovery Rider
Regulatory Matters [Line Items]
Seeking revenue recovery		$ 7,200,000	$ 7,800,000
2010 General Rate Case
Regulatory Matters [Line Items]
General rate revenue increase requested				$ 5,000,000
Percentage of increase in base rate revenue requested				1.60%
Public Utilities Allowed Rate Of Return On Rate Base	8.07%
Public Utilities Allowed Rate Of Return On Equity Increase In Base Rate	10.40%
Percentage Of Capital	52.50%
Public utilities allowed rate of return on rate base prior to approval of increase in base rate				8.33%
Public utilities allowed rate of return on rate base subsequent to approval of increase in base rate				8.61%
Public utilities allowed rate of return on equity prior to approval of increase in base rate				10.43%
Public utilities allowed rate of return on equity subsequent to approval of increase in base rate				10.74%
2016 General Rate Case
Regulatory Matters [Line Items]
General rate revenue increase requested	$ 19,300
Percentage of increase in base rate revenue requested	9.80%
Annualized interim rate increase						$ 16,800,000
Increase to base rate portion of customer bills						9.56%

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Rate and Regulatory Matters (Detail Textuals 2) - Otter Tail Power Company - North Dakota Public Service Commission - USD ($) $ in Millions		1 Months Ended	3 Months Ended
	Jul. 01, 2015	Aug. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Nov. 25, 2009
Transmission Cost Recovery Rider
Regulatory Matters [Line Items]
Jurisdictional capital and operating costs recovery		$ 8.5
Transmission Cost Recovery Rider | Fiscal Year 2016
Regulatory Matters [Line Items]
Jurisdictional capital and operating costs recovery		$ 10.2
Environmental Cost Recovery Rider
Regulatory Matters [Line Items]
Percentage of ECR rider rate	9.193%		7.904%	7.531%
Revenue requirement	$ 12.2		$ 10.4
2010 General Rate Case
Regulatory Matters [Line Items]
Revenue increase approved by rate authority					$ 3.6
Percentage of increase in base rate revenue requested					3.00%
Percentage of allowed rate of return on rate base					8.62%
Percentage of allowed rate of return on equity					10.75%

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Rate and Regulatory Matters (Detail Textuals 3) - USD ($)				1 Months Ended			3 Months Ended
	Feb. 12, 2015	Nov. 06, 2014	Nov. 12, 2013	Dec. 22, 2015	Aug. 31, 2015	Apr. 21, 2011	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Jan. 01, 2012
Regulatory Matters [Line Items]
Regulatory Liabilities							$ 84,203,000		$ 80,754,000
Otter Tail Power Company | South Dakota Public Utilities Commission | Environmental Cost Recovery Rider
Regulatory Matters [Line Items]
Annual revenue requesting recovery					$ 2,700,000
Otter Tail Power Company | South Dakota Public Utilities Commission | 2010 General Rate Case
Regulatory Matters [Line Items]
Revenue increase approved by rate authority						$ 643,000
Percentage of increase in base rate revenue requested						2.32%
Otter Tail Power Company | South Dakota Public Utilities Commission | 2010 General Rate Case | Big Stone II Cost Recovery
Regulatory Matters [Line Items]
Public utilities allowed rate of return on rate base subsequent to approval of increase in base rate						8.50%
Otter Tail Power Company | Federal Energy Regulatory Commission
Regulatory Matters [Line Items]
Percentage of prudently incurred costs of construction work in progress, authorized for recovery by formula transmission rate										100.00%
Current return on equity used in transmission rates			12.38%	10.32%
Proposed reduced return on equity used in transmission rates	8.67%		9.15%
Additional Incentive Basis Point		50-basis points
Reductions in revenue							300,000	$ 600,000
Estimated liability of refund obligation							1,400,000
Regulatory Liabilities							$ 1,400,000

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Regulatory Assets and Liabilities - Amount of regulatory assets and liabilities recorded on consolidated balance sheet (Details) - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
		Mar. 31, 2016		Dec. 31, 2015
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current		$ 18,636		$ 18,904
Regulatory Liability - Current		6,196		3,322
Net Regulatory Assets Position - Current		12,440		15,582
Regulatory Assets - Long-Term		124,933		127,707
Regulatory Liabilities - Long-Term		78,007		77,432
Net Regulatory Asset Position - Long-Term		46,926		50,275
Regulatory Assets - Total		143,569		146,611
Regulatory Liabilities - Total		84,203		80,754
Net Regulatory Asset Position - Total		59,366		65,857
Prior Service Costs and Actuarial Losses on Pensions and Other Postretirement Benefits
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]	7,439		7,439
Regulatory Assets - Long-Term	[1]	97,908		99,293
Regulatory Assets - Total	[1]	$ 105,347		$ 106,732
Regulatory Assets - Remaining Recovery/Refund Period	[1]	see below		see below
Deferred Marked-to-Market Loss
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current		$ 4,063	[1]	$ 4,063
Regulatory Assets - Long-Term		9,515	[1]	10,530
Regulatory Assets - Total		$ 13,578	[1]	$ 14,593
Regulatory Assets - Remaining Recovery/Refund Period		57 months	[1]	60 months
Conservation Improvement Program Costs and Incentives
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]	$ 2,789		$ 4,411
Regulatory Assets - Long-Term	[2]	5,065		4,266
Regulatory Assets - Total	[2]	$ 7,854		$ 8,677
Regulatory Assets - Remaining Recovery/Refund Period	[2]	27 months		18 months
Accumulated ARO Accretion/Depreciation Adjustment
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]
Regulatory Assets - Long-Term	[1]	$ 5,791		$ 5,672
Regulatory Assets - Total	[1]	$ 5,791		$ 5,672
Regulatory Assets - Remaining Recovery/Refund Period	[1]	asset lives		asset lives
Big Stone II Unrecovered Project Costs - Minnesota
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]	$ 826		$ 942
Regulatory Assets - Long-Term	[1]	2,634		2,620
Regulatory Assets - Total	[1]	$ 3,460		$ 3,562
Regulatory Assets - Remaining Recovery/Refund Period	[1]	60 months		84 months
Minnesota Transmission Cost Recovery Rider Accrued Revenues
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]			$ 576
Regulatory Assets - Long-Term	[2]
Regulatory Assets - Total	[2]			$ 576
Regulatory Assets - Remaining Recovery/Refund Period	[2]			12 months
North Dakota Renewable Resource Rider Accrued Revenues
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]	$ 1,501
Regulatory Assets - Long-Term	[2]	305		$ 1,266
Regulatory Assets - Total	[2]	$ 1,806		$ 1,266
Regulatory Assets - Remaining Recovery/Refund Period	[2]	21 months		15 months
Debt Reacquisition Premiums
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]	$ 351		$ 351
Regulatory Assets - Long-Term	[1]	1,451		1,539
Regulatory Assets - Total	[1]	$ 1,802		$ 1,890
Regulatory Assets - Remaining Recovery/Refund Period	[1]	198 months		201 months
Deferred Income Taxes
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]
Regulatory Liability - Current
Regulatory Assets - Long-Term	[1]	$ 1,351		$ 1,455
Regulatory Liabilities - Long-Term		1,043		1,110
Regulatory Assets - Total	[1]	1,351		1,455
Regulatory Liabilities - Total		$ 1,043		$ 1,110
Regulatory Assets - Remaining Recovery/Refund Period	[1]	asset lives		asset lives
Regulatory Liabilities - Remaining Recovery/Refund Period		asset lives		asset lives
MISO Schedule 26/26A Transmission Cost Recovery Rider True-up
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]	$ 763		$ 698
Regulatory Assets - Long-Term	[2]	227		355
Regulatory Assets - Total	[2]	$ 990		$ 1,053
Regulatory Assets - Remaining Recovery/Refund Period	[2]	24 months		24 months
Big Stone II Unrecovered Project Costs - South Dakota
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]	$ 100		$ 100
Regulatory Assets - Long-Term	[2]	618		643
Regulatory Assets - Total	[2]	$ 718		$ 743
Regulatory Assets - Remaining Recovery/Refund Period	[2]	86 months		89 months
Minnesota Environmental Cost Recovery Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 982		$ 777
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 982		$ 777
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months		12 months
Minnesota Renewable Resource Rider Accrued Revenues
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]
Regulatory Assets - Long-Term	[2]	$ 68		$ 68
Regulatory Assets - Total	[2]	$ 68		$ 68
Regulatory Assets - Remaining Recovery/Refund Period	[2]			see below
Regulatory Assets - Remaining Recovery/Refund Period	[2]	12 months
Accumulated Reserve for Estimated Removal Costs - Net of Salvage
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current
Regulatory Liabilities - Long-Term		$ 75,468		$ 74,948
Regulatory Liabilities - Total		$ 75,468		$ 74,948
Regulatory Liabilities - Remaining Recovery/Refund Period		asset lives		asset lives
North Dakota Renewable Resource Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current				$ 68
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total				$ 68
Regulatory Liabilities - Remaining Recovery/Refund Period				12 months
Revenue for Rate Case expenses Subject to Refund - Minnesota
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current
Regulatory Liabilities - Long-Term		$ 1,403		$ 1,279
Regulatory Liabilities - Total		$ 1,403		$ 1,279
Regulatory Liabilities - Remaining Recovery/Refund Period				see below
Regulatory Liabilities - Remaining Recovery/Refund Period		24 months
Deferred Gain on Sale of Utility Property - Minnesota Portion
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 6		$ 5
Regulatory Liabilities - Long-Term		93		95
Regulatory Liabilities - Total		$ 99		$ 100
Regulatory Liabilities - Remaining Recovery/Refund Period		213 months		216 months
South Dakota Environmental Cost Recovery Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 342		$ 185
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 342		$ 185
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months		12 months
Minnesota Deferred Rate Case Expenses Subject to Recovery
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[1]	$ 559		$ 291
Regulatory Assets - Long-Term	[1]
Regulatory Assets - Total	[1]	$ 559		$ 291
Regulatory Assets - Remaining Recovery/Refund Period	[1]	12 months		12 months
South Dakota Transmission Cost Recovery Rider Revenues
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Asset - Current	[2]	$ 245		$ 33
Regulatory Assets - Long-Term	[2]
Regulatory Assets - Total	[2]	$ 245		$ 33
Regulatory Assets - Remaining Recovery/Refund Period	[2]	12 months		12 months
Refundable Fuel Clause Adjustment Revenues
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 3,294		$ 1,834
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 3,294		$ 1,834
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months		12 months
North Dakota Transmission Cost Recovery Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 602		$ 132
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 602		$ 132
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months		12 months
North Dakota Environmental Cost Recovery Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 787		$ 321
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 787		$ 321
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months		12 months
Minnesota Transmission Cost Recovery Rider Accrued Refund
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory Liability - Current		$ 183
Regulatory Liabilities - Long-Term
Regulatory Liabilities - Total		$ 183
Regulatory Liabilities - Remaining Recovery/Refund Period		12 months

[1] Costs subject to recovery without a rate of return.

[2] Amount eligible for recovery under an alternative revenue program which includes an incentive or rate of return.

XML

Regulatory Assets and Liabilities (Detail Textuals)	3 Months Ended
	Mar. 31, 2016
Debt Reacquisition Premiums
Schedule of Regulatory Assets and Liabilities [Line Items]
Regulatory assets - long term, remaining recovery/refund period	198 months

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Open Contract Positions Subject to Legally Enforceable Netting Arrangements - Amount of derivative asset and derivative liability balances subject to legally enforceable netting arrangements (Details) - Legally enforceable netting arrangements - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Open Contract Gain Positions Subject to Legally Enforceable Netting Arrangements
Open Contract Loss Positions Subject to Legally Enforceable Netting Arrangements	$ (18,264)	$ (16,070)
Net Balance Subject to Legally Enforceable Netting Arrangements	$ (18,264)	$ (16,070)

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Open Contract Positions Subject to Legally Enforceable Netting Arrangements - Breakdown of OTP's credit risk standing on forward energy contracts in marked-to-market loss positions (Details 4) - Otter Tail Power Company - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Current Liability - Marked-to-Market Loss (in thousands)
Loss Contracts Covered by Deposited Funds or Letters of Credit		$ 107	$ 199
Contracts Requiring Cash Deposits if OTP's Credit Falls Below Investment Grade	[1]	$ 18,157	$ 15,871
Loss Contracts with No Ratings Triggers or Deposit Requirements
Loss Position		$ 18,264	$ 16,070

[1] Certain OTP derivative energy contracts contain provisions that require an investment grade credit rating from each of the major credit rating agencies on OTP's debt. If OTP's debt ratings were to fall below investment grade, the counterparties to these forward energy contracts could request the immediate deposit of cash to cover contracts in net liability positions. Contracts Requiring Cash Deposits if OTP's Credit Falls Below Investment Grade $ 18,157 $ 15,871 Offsetting Gains with Counterparties under Master Netting Agreements -- -- Reporting Date Deposit Requirement if Credit Risk Feature Triggered $ 18,157 $ 15,871

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Open Contract Positions Subject to Legally Enforceable Netting Arrangements - Breakdown of OTP's credit risk standing on forward energy contracts in marked-to-market loss positions (Parenthetical) (Details 1) - Otter Tail Power Company - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Credit Derivatives [Line Items]
Contracts Requiring Cash Deposits if OTP's Credit Falls Below Investment Grade	[1]	$ 18,157	$ 15,871
Offsetting Gains with Counterparties under Master Netting Agreements
Reporting Date Deposit Requirement if Credit Risk Feature Triggered		$ 18,157	$ 15,871

[1] Certain OTP derivative energy contracts contain provisions that require an investment grade credit rating from each of the major credit rating agencies on OTP's debt. If OTP's debt ratings were to fall below investment grade, the counterparties to these forward energy contracts could request the immediate deposit of cash to cover contracts in net liability positions. Contracts Requiring Cash Deposits if OTP's Credit Falls Below Investment Grade $ 18,157 $ 15,871 Offsetting Gains with Counterparties under Master Netting Agreements -- -- Reporting Date Deposit Requirement if Credit Risk Feature Triggered $ 18,157 $ 15,871

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, Beginning of Period	$ 605,023
Common Stock Issuances, Net of Expenses	5,490
Common Stock Retirements	(53)
Net Income	14,520	$ 17,935
Other Comprehensive Income	140
Employee Stock Incentive Plans Expense	489
Common Dividends ($0.3125 per share)	(11,889)
Balance, End of Period	613,720
Common Shares
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, Beginning of Period	189,286
Common Stock Issuances, Net of Expenses	1,080
Common Stock Retirements	(9)
Balance, End of Period	190,357
Premium on Common Shares
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, Beginning of Period	293,610
Common Stock Issuances, Net of Expenses	4,410
Common Stock Retirements	(44)
Employee Stock Incentive Plans Expense	489
Balance, End of Period	298,465
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, Beginning of Period	126,025
Net Income	14,520
Common Dividends ($0.3125 per share)	(11,889)
Balance, End of Period	128,656
Accumulated Other Comprehensive Income/(Loss)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, Beginning of Period	(3,898)
Other Comprehensive Income	140
Balance, End of Period	$ (3,758)

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share (Parenthetical) (Details 1) - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stockholders Equity and Earnings Per Share [Abstract]
Dividends Declared Per Common Share (in dollars per share)	$ 0.3125	$ 0.3075

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share - Reconciliation of common shares outstanding (Details 1)	3 Months Ended
	Mar. 31, 2016 shares
Schedule Of Common Stock Outstanding [Roll Forward]
Common Shares Outstanding, December 31, 2015	37,857,186
Issuances:
Executive Stock Performance Awards (2013 and 2014 shares earned)	54,700
Automatic Dividend Reinvestment and Share Purchase Plan:
Dividends Reinvested	49,635
Cash Invested	49,281
Employee Stock Purchase Plan:
Cash Invested	21,819
Dividends Reinvested	7,153
Employee Stock Ownership Plan	23,837
Vesting of Restricted Stock Units	9,675
Retirements:
Shares Withheld for Individual Income Tax Requirements	(1,868)
Common Shares Outstanding, March 31, 2016	38,071,418

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share - Reconciliation of weighted average common shares outstanding - basic to weighted average common shares outstanding - diluted (Details 2) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stockholders Equity and Earnings Per Share [Abstract]
Weighted Average Common Shares Outstanding - Basic	37,936,943	37,243,118
Plus Outstanding Share Awards net of Share Reductions for Unrecognized Stock-Based Compensation Expense and Excess Tax Benefits:
Shares Expected to be Awarded for Stock Performance Awards Granted to Executive Officers based on Measurement Period-to-Date Performance	46,885	137,460
Underlying Shares Related to Nonvested Restricted Stock Units Granted to Employees	39,841	42,540
Nonvested Restricted Shares	17,776	49,998
Shares Expected to be Issued Under the Deferred Compensation Program for Directors	3,763	24,277
Potentially Dilutive Stock Options		488
Total Dilutive Shares	108,265	254,763
Weighted Average Common Shares Outstanding - Diluted	38,045,208	37,497,881

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Reconciliation of Common Shareholders' Equity, Common Shares and Earnings Per Share (Detail Textuals) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	May. 11, 2015
Stockholders Equity Note [Line Items]
Maximum per share differences between basic and diluted earnings per share in total or from continuing or discontinued operations	$ 0.01	$ 0.01
Distribution Agreement | J.P. Morgan Securities Inc. (JPMS)
Stockholders Equity Note [Line Items]
Agreement To Sell Shares Value			$ 75

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Share-Based Payments - Stock incentive awards to executive officers (Details) - Executive Officers	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares/Units Granted | shares	22,000
Weighted Average Grant-Date Fair Value per Award | $ / shares	$ 28.915
Vesting Percentage	25.00%
Vesting Date	February 6, 2020
Stock Performance Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares/Units Granted | shares	81,500
Weighted Average Grant-Date Fair Value per Award | $ / shares	$ 24.03
Vesting Date	December 31, 2018

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Share-Based Payments - Amounts of compensation expense recognized under stock-based payment programs (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 1,026	$ 1,643
Stock Performance Awards | Executive Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	537	1,020
Restricted Stock Units (RSUs) | Executive Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	245	253
Restricted Stock Units (RSUs) | Nonexecutive Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	64	66
Restricted Stock | Executive Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	29	157
Restricted Stock | Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	107	98
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 44	$ 49

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Share-Based Payments - Amounts of compensation expense recognized under stock-based payment programs (Parentheticals) (Details 2)	3 Months Ended
	Mar. 31, 2016
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense, discount rate	15.00%

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Share-Based Payments (Detail Textuals) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to stock-based compensation | $	$ 4.5
Weighted-average period of amortization	2 years 8 months 12 days
Stock Performance Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Targeted aggregate common shares award	81,500
Stock Performance Awards | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of target amount as actual payment	0.00%
Stock Performance Awards | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate common shares award	122,250
Percentage of target amount as actual payment	150.00%
Stock Performance Awards | Executive Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate common shares award	81,500
Targeted aggregate common shares award total shareholder return component	54,333
Targeted aggregate common shares award return on equity component	27,167
Period specified for average adjusted return	3 years

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Retained Earnings Restriction (Detail Textuals) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Retained Earnings Restriction [Line Items]
Total Capitalization	$ 1,107,521,000	$ 1,048,869,000
OTP
Retained Earnings Restriction [Line Items]
Equity to total capitalization ratio	52.00%
OTP | Minimum
Retained Earnings Restriction [Line Items]
Equity to total capitalization ratio	46.90%
OTP | Maximum
Retained Earnings Restriction [Line Items]
Equity to total capitalization ratio	57.30%
Total Capitalization	$ 1,056,300,000

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Commitments and Contingencies (Detail Textuals) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Line Items]
Loss contingency, range of possible loss, maximum	$ 1.0
Otter Tail Power Company | Federal Energy Regulatory Commission
Commitments and Contingencies Disclosure [Line Items]
Estimated liability of refund obligation	$ 1.4
Otter Tail Power Company | Coal Purchase Commitments
Commitments and Contingencies Disclosure [Line Items]
Contracts expiration year	2016, 2017 and 2040
Otter Tail Power Company | Construction Programs
Commitments and Contingencies Disclosure [Line Items]
Commitment under contracts aggregate amount	$ 102.9	$ 89.6

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Short-Term and Long-Term Borrowings - Status of lines of credit (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Line of Credit Facility [Line Items]
Line Limit	$ 320,000
In Use	$ 42,936
Restricted due to Outstanding Letters of Credit
Available	$ 277,064	$ 239,028
Otter Tail Corporation Credit Agreement
Line of Credit Facility [Line Items]
Line Limit	150,000
In Use	$ 20,880
Restricted due to Outstanding Letters of Credit
Available	$ 129,120	90,334
OTP Credit Agreement
Line of Credit Facility [Line Items]
Line Limit	170,000
In Use	$ 22,056
Restricted due to Outstanding Letters of Credit
Available	$ 147,944	$ 148,694

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Short-Term and Long-Term Borrowings - Breakdown of assignment of consolidated short-term and long-term debt outstanding (Details 1) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Short-Term Debt	$ 42,936	$ 80,672
Long-Term Debt	548,437	498,489
Less: Current Maturities net of Unamortized Debt Issuance Costs	52,457	52,422
Unamortized Debt Issuance Costs	2,179	2,221
Long-Term Debt-Net	493,801	443,846
Total Short-Term and Long-Term Debt (with current maturities)	589,194	576,940
9.000% Notes, due December 15, 2016
Debt Instrument [Line Items]
Long-Term Debt	52,330	52,330
Term Loan, LIBOR plus 0.90%, due February 5, 2018
Debt Instrument [Line Items]
Long-Term Debt	50,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017
Debt Instrument [Line Items]
Long-Term Debt	33,000	33,000
Senior Unsecured Notes 4.63%, due December 1, 2021
Debt Instrument [Line Items]
Long-Term Debt	140,000	140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022
Debt Instrument [Line Items]
Long-Term Debt	30,000	30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027
Debt Instrument [Line Items]
Long-Term Debt	42,000	42,000
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029
Debt Instrument [Line Items]
Long-Term Debt	60,000	60,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037
Debt Instrument [Line Items]
Long-Term Debt	50,000	50,000
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044
Debt Instrument [Line Items]
Long-Term Debt	90,000	90,000
North Dakota Development Note, 3.95%, due April 1, 2018
Debt Instrument [Line Items]
Long-Term Debt	163	182
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021
Debt Instrument [Line Items]
Long-Term Debt	944	977
OTP
Debt Instrument [Line Items]
Short-Term Debt	22,056	21,006
Long-Term Debt	445,000	445,000
Unamortized Debt Issuance Costs	2,039	2,099
Long-Term Debt-Net	442,961	442,901
Total Short-Term and Long-Term Debt (with current maturities)	465,017	463,907
OTP | Senior Unsecured Notes 5.95%, Series A, due August 20, 2017
Debt Instrument [Line Items]
Long-Term Debt	33,000	33,000
OTP | Senior Unsecured Notes 4.63%, due December 1, 2021
Debt Instrument [Line Items]
Long-Term Debt	140,000	140,000
OTP | Senior Unsecured Notes 6.15%, Series B, due August 20, 2022
Debt Instrument [Line Items]
Long-Term Debt	30,000	30,000
OTP | Senior Unsecured Notes 6.37%, Series C, due August 20, 2027
Debt Instrument [Line Items]
Long-Term Debt	42,000	42,000
OTP | Senior Unsecured Notes 4.68%, Series A, due February 27, 2029
Debt Instrument [Line Items]
Long-Term Debt	60,000	60,000
OTP | Senior Unsecured Notes 6.47%, Series D, due August 20, 2037
Debt Instrument [Line Items]
Long-Term Debt	50,000	50,000
OTP | Senior Unsecured Notes 5.47%, Series B, due February 27, 2044
Debt Instrument [Line Items]
Long-Term Debt	90,000	90,000
Otter Tail Corporation
Debt Instrument [Line Items]
Short-Term Debt	20,880	59,666
Long-Term Debt	103,437	53,489
Less: Current Maturities net of Unamortized Debt Issuance Costs	52,457	52,422
Unamortized Debt Issuance Costs	140	122
Long-Term Debt-Net	50,840	945
Total Short-Term and Long-Term Debt (with current maturities)	124,177	113,033
Otter Tail Corporation | 9.000% Notes, due December 15, 2016
Debt Instrument [Line Items]
Long-Term Debt	52,330	52,330
Otter Tail Corporation | Term Loan, LIBOR plus 0.90%, due February 5, 2018
Debt Instrument [Line Items]
Long-Term Debt	50,000
Otter Tail Corporation | North Dakota Development Note, 3.95%, due April 1, 2018
Debt Instrument [Line Items]
Long-Term Debt	163	182
Otter Tail Corporation | Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021
Debt Instrument [Line Items]
Long-Term Debt	$ 944	$ 977

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Short-Term and Long-Term Borrowings - Breakdown of assignment of consolidated short-term and long-term debt outstanding (Parentheticals) (Details 1)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
9.000% Notes, due December 15, 2016
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	9.00%	9.00%
Long-Term Debt, Due Date	Dec. 15, 2016	Dec. 15, 2016
Term Loan, LIBOR plus 0.90%, due February 5, 2018
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	0.90%
Long-Term Debt, Due Date	Feb. 05, 2018
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	5.95%	5.95%
Long-Term Debt, Due Date	Aug. 20, 2017	Aug. 20, 2017
Senior Unsecured Notes 4.63%, due December 1, 2021
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	4.63%	4.63%
Long-Term Debt, Due Date	Dec. 01, 2021	Dec. 01, 2021
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.15%	6.15%
Long-Term Debt, Due Date	Aug. 20, 2022	Aug. 20, 2022
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.37%	6.37%
Long-Term Debt, Due Date	Aug. 20, 2027	Aug. 20, 2027
Senior Unsecured Notes 4.68%, Series A, due February 27, 2029
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	4.68%	4.68%
Long-Term Debt, Due Date	Feb. 27, 2029	Feb. 27, 2029
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.47%	6.47%
Long-Term Debt, Due Date	Aug. 20, 2037	Aug. 20, 2037
Senior Unsecured Notes 5.47%, Series B, due February 27, 2044
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	5.47%	5.47%
Long-Term Debt, Due Date	Feb. 27, 2044	Feb. 27, 2044
North Dakota Development Note, 3.95%, due April 1, 2018
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	3.95%	3.95%
Long-Term Debt, Due Date	Apr. 01, 2018	Apr. 01, 2018
Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	2.54%	2.54%
Long-Term Debt, Due Date	Mar. 18, 2021	Mar. 18, 2021
OTP | Senior Unsecured Notes 5.95%, Series A, due August 20, 2017
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	5.95%	5.95%
Long-Term Debt, Due Date	Aug. 20, 2017	Aug. 20, 2017
OTP | Senior Unsecured Notes 4.63%, due December 1, 2021
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	4.63%	4.63%
Long-Term Debt, Due Date	Dec. 01, 2021	Dec. 01, 2021
OTP | Senior Unsecured Notes 6.15%, Series B, due August 20, 2022
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.15%	6.15%
Long-Term Debt, Due Date	Aug. 20, 2022	Aug. 20, 2022
OTP | Senior Unsecured Notes 6.37%, Series C, due August 20, 2027
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.37%	6.37%
Long-Term Debt, Due Date	Aug. 20, 2027	Aug. 20, 2027
OTP | Senior Unsecured Notes 4.68%, Series A, due February 27, 2029
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	4.68%	4.68%
Long-Term Debt, Due Date	Feb. 27, 2029	Feb. 27, 2029
OTP | Senior Unsecured Notes 6.47%, Series D, due August 20, 2037
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	6.47%	6.47%
Long-Term Debt, Due Date	Aug. 20, 2037	Aug. 20, 2037
OTP | Senior Unsecured Notes 5.47%, Series B, due February 27, 2044
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	5.47%	5.47%
Long-Term Debt, Due Date	Feb. 27, 2044	Feb. 27, 2044
Otter Tail Corporation | 9.000% Notes, due December 15, 2016
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	9.00%	9.00%
Long-Term Debt, Due Date	Dec. 15, 2016	Dec. 15, 2016
Otter Tail Corporation | Term Loan, LIBOR plus 0.90%, due February 5, 2018
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	0.90%
Long-Term Debt, Due Date	Feb. 05, 2018
Otter Tail Corporation | North Dakota Development Note, 3.95%, due April 1, 2018
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	3.95%	3.95%
Long-Term Debt, Due Date	Apr. 01, 2018	Apr. 01, 2018
Otter Tail Corporation | Partnership in Assisting Community Expansion (PACE) Note, 2.54%, due March 18, 2021
Debt Instrument [Line Items]
Long-Term Debt, Interest Rate	2.54%	2.54%
Long-Term Debt, Due Date	Mar. 18, 2021	Mar. 18, 2021

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Short-Term and Long-Term Borrowings (Detail Textuals) $ in Thousands	Feb. 05, 2016 USD ($)	Mar. 31, 2016 USD ($)
Subsequent Event [Line Items]
Aggregate commitment of loan		$ 320,000
Term Loan Agreement | JPMorgan
Subsequent Event [Line Items]
Aggregate commitment of loan	$ 50,000
Minimum increments tranches of term loans	10,000
Maximum amount of debt outstanding	100,000
Borrowed amount	$ 50,000
Interest rate base	LIBOR plus 0.90
Term Loan Agreement | JPMorgan | LIBOR
Subsequent Event [Line Items]
Line of credit facility, description of variable rate basis	LIBOR
Basis spread on variable rate	0.90%
Term Loan Agreement | JPMorgan | Prime Rate
Subsequent Event [Line Items]
Line of credit facility, description of variable rate basis	Prime Rate
Term Loan Agreement | JPMorgan | Federal Reserve Bank of New York Rate
Subsequent Event [Line Items]
Line of credit facility, description of variable rate basis	Federal Reserve Bank of New York Rate
Basis spread on variable rate	0.50%
Term Loan Agreement | JPMorgan | Statutory Reserve Rate
Subsequent Event [Line Items]
Line of credit facility, description of variable rate basis	LIBOR multiplied by the Statutory Reserve Rate
Basis spread on variable rate	1.00%
Term Loan Agreement | Minimum | JPMorgan
Subsequent Event [Line Items]
Debt to total capitalization ratio	0.60
Interest and dividend coverage ratio	1.00
Term Loan Agreement | Maximum | JPMorgan
Subsequent Event [Line Items]
Debt to total capitalization ratio	1.00
Interest and dividend coverage ratio	1.50

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Pension Plan and Other Postretirement Benefits - Components of net periodic pension benefit cost (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Service Cost - Benefit Earned During the Period		$ 1,382	$ 1,500
Interest Cost on Projected Benefit Obligation		3,522	3,325
Expected Return on Assets		(4,867)	(4,600)
Amortization of Prior-Service Cost:
From Regulatory Asset		47	47
From Other Comprehensive Income	[1]	1	1
Amortization of Net Actuarial Loss:
From Regulatory Asset		1,227	1,633
From Other Comprehensive Income	[1]	31	40
Net Periodic Postretirement Benefit Cost		1,343	1,946
Executive Survivor and Supplemental Retirement Plan
Defined Benefit Plan Disclosure [Line Items]
Service Cost - Benefit Earned During the Period		63	47
Interest Cost on Projected Benefit Obligation		417	381
Amortization of Prior-Service Cost:
From Regulatory Asset		4	4
From Other Comprehensive Income	[2]	9	10
Amortization of Net Actuarial Loss:
From Regulatory Asset		73	83
From Other Comprehensive Income	[3]	(112)	(151)
Net Periodic Postretirement Benefit Cost		678	676
Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Service Cost - Benefit Earned During the Period		306	375
Interest Cost on Projected Benefit Obligation		541	550
Amortization of Prior-Service Cost:
From Regulatory Asset		33	51
From Other Comprehensive Income	[1]	$ 1	1
Amortization of Net Actuarial Loss:
From Regulatory Asset			48
From Other Comprehensive Income	[1]		1
Net Periodic Postretirement Benefit Cost		$ 881	1,026
Effect of Medicare Part D Subsidy		$ (257)	$ (450)

[1] Corporate cost included in Other Nonelectric Expenses.

[2] Amortization of Prior Service Costs from Other Comprehensive Income Charged to: Electric Operation and MaintenanceExpenses $ 4 $ 4 Other Nonelectric Expenses 5 6

[3] Amortization of Net Actuarial Loss from Other Comprehensive Income Charged to: Electric Operation and Maintenance Expenses $ 68 $ 78 Other Nonelectric Expenses 44 73

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Pension Plan and Other Postretirement Benefits - Components of net periodic pension benefit cost (Parentheticals) (Details) - Executive Survivor and Supplemental Retirement Plan - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Amortization of Prior-Service Cost - From Other Comprehensive Income	[1]	$ 9	$ 10
Amortization of Net Actuarial Loss - From Other Comprehensive Income	[2]	112	151
Electric operation and maintenance expenses
Defined Benefit Plan Disclosure [Line Items]
Amortization of Prior-Service Cost - From Other Comprehensive Income		4	4
Amortization of Net Actuarial Loss - From Other Comprehensive Income		68	78
Other nonelectric expenses
Defined Benefit Plan Disclosure [Line Items]
Amortization of Prior-Service Cost - From Other Comprehensive Income		5	6
Amortization of Net Actuarial Loss - From Other Comprehensive Income		$ 44	$ 73

[1] Amortization of Prior Service Costs from Other Comprehensive Income Charged to: Electric Operation and MaintenanceExpenses $ 4 $ 4 Other Nonelectric Expenses 5 6

[2] Amortization of Net Actuarial Loss from Other Comprehensive Income Charged to: Electric Operation and Maintenance Expenses $ 68 $ 78 Other Nonelectric Expenses 44 73

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Pension Plan and Other Postretirement Benefits (Detail Textuals) - USD ($)	1 Months Ended
	Jan. 31, 2016	Jan. 31, 2015
Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Discretionary plan contributions	$ 10,000,000	$ 10,000,000

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Fair Value of Financial Instruments - Summary of fair value of financial instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Carrying Amount
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Short-Term Debt	$ (42,936)	$ (80,672)
Long-Term Debt including Current Maturities	(546,258)	(496,268)
Fair Value
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Short-Term Debt	(42,936)	(80,672)
Long-Term Debt including Current Maturities	$ (623,484)	$ (561,245)

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Fair Value of Financial Instruments (Detail Textuals)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Otter Tail Corporation Credit Agreement
Fair Value Of Financial Instruments [Line Items]
Line of credit facility, description of variable rate basis	LIBOR	LIBOR
Basis spread on variable rate	1.75%	1.75%
OTP Credit Agreement
Fair Value Of Financial Instruments [Line Items]
Line of credit facility, description of variable rate basis	LIBOR	LIBOR
Basis spread on variable rate	1.25%	1.25%

XML

Income Tax Expense - Continuing operations effective income tax rate (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Income Before Income Taxes - Continuing Operations	$ 19,982	$ 17,854
Tax Computed at Company's Net Composite Federal and State Statutory Rate (39%)	7,793	6,963
Increases (Decreases) in Tax from:
Federal Production Tax Credits	(1,686)	(2,054)
North Dakota Wind Tax Credit Amortization - Net of Federal Taxes	(212)	(212)
Section 199 Domestic Production Activities Deduction	(104)	(362)
Employee Stock Ownership Plan Dividend Deduction	(158)	(172)
Corporate Owned Life Insurance	(64)	(80)
AFUDC Equity	(37)	(100)
Other Items - Net	(40)	90
Income Tax Expense - Continuing Operations	$ 5,492	$ 4,073
Effective Income Tax Rate - Continuing Operations	27.50%	22.80%

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Income Tax Expense - Continuing operations effective income tax rate (Parentheticals) (Details)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Composite Federal and State Statutory Rate	39.00%	39.00%

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Income Tax Expense - Continuing Operations - Summary of Activity Related to Unrecognized Tax benefit (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Balance on January 1	$ 468	$ 222
Increases Related to Tax Positions for Prior Years
Increases Related to Tax Positions for Current Year	$ 16	$ 44
Uncertain Positions Resolved During Year
Balance on March 31	$ 484	$ 266

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Discontinued Operations - Results of discontinued operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net Income (Loss) from Operations	$ 30	$ (3,072)
Income Tax Expense on Disposition		4,816
Net Gain on Disposition		7,226
Net Income	$ 30	4,154
Disposal groups held for sale or disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Operating Revenues		18,724
Operating Expenses	$ (50)	22,141
Goodwill Impairment Charge		1,000
Operating Income (Loss)	$ 50	(4,417)
Other Deductions		(31)
Income Tax Expense (Benefit)	$ 20	(1,376)
Net Income (Loss) from Operations	$ 30	(3,072)
Gain on Disposition Before Taxes		12,042
Income Tax Expense on Disposition		4,816
Net Gain on Disposition		7,226
Net Income	$ 30	$ 4,154

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Discontinued Operations - Major components of assets and liabilities of discontinued operations (Details 1) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Liabilities of Discontinued Operations	$ 2,098	$ 2,098
Disposal groups held for sale or disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Current Liabilities	2,098	2,098
Liabilities of Discontinued Operations	$ 2,098	$ 2,098

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Discontinued Operations - Warranty Reserves (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Movement in Standard Product Warranty Accrual [Roll Forward]
Warranty Reserve Balance, January 1	$ 2,103	$ 2,527
Additional Provision for Warranties Made During the Year
Settlements Made During the Year		$ (6)
Decrease in Warranty Estimates for Prior Years
Warranty Reserve Balance, March 31	$ 2,103	$ 2,521

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Discontinued Operations (Detail Textuals) - Disposal groups held for sale or disposed of by sale - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Goodwill Impairment Charge		$ 1,000
Foley
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cost estimates pretax charges		2,300
Goodwill Impairment Charge		$ 1,000