-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LN9ddcVv2sXQdpRTjZIxMpSAPQA2Vi0ZArP1byv1Jqly+5Gmtw2WY+E9aUK6Bawh 5UaXG+1/V3OybWfttlvJJQ== 0000075129-95-000019.txt : 19951119 0000075129-95-000019.hdr.sgml : 19951119 ACCESSION NUMBER: 0000075129-95-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OTTER TAIL POWER CO CENTRAL INDEX KEY: 0000075129 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 410462685 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00368 FILM NUMBER: 95590255 BUSINESS ADDRESS: STREET 1: 215 S CASCADE ST STREET 2: PO BOX 496 CITY: FERGUS FALLS STATE: MN ZIP: 56538-0496 BUSINESS PHONE: 2187398200 10-Q 1 10-Q SEPTEMBER 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-368 OTTER TAIL POWER COMPANY (Exact name of registrant as specified in its charter) Minnesota 41-0462685 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496 (Address of principal executive offices) (Zip Code) 218-739-8200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: November 1, 1995 - 11,180,136 Common Shares ($5 par value) OTTER TAIL POWER COMPANY INDEX Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 (Unaudited) 2 & 3 Consolidated Statements of Income - Three and Nine Months Ended September 30, 1995 and 1994 (Unaudited) 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30,1995 and 1994 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 & 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7, 8 & 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10
Part I. Financial Information Item 1. Financial Statements OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) -ASSETS- September 30, December 31, 1995 1994 (Thousands of Dollars) PLANT: Electric Plant in Service $707,394 $698,437 Other 46,948 36,221 _________ _________ Total 754,342 734,658 Less Accumulated Depreciation and Amortization 303,580 287,902 _________ _________ 450,762 446,756 Construction Work in Progress 18,814 10,485 _________ _________ Net Plant 469,576 457,241 _________ _________ INVESTMENTS AND OTHER ASSETS: 58,024 43,944 _________ _________ CURRENT ASSETS: Cash and Cash Equivalents 1,048 1,852 Temporary Cash Investments 353 391 Accounts Receivable: Trade - Net 29,251 27,004 Other 4,098 5,172 Materials and Supplies: Fuel 3,357 3,664 Inventory, Materials and Operating Supplies 17,260 15,794 Deferred Income Taxes 4,239 4,306 Accrued Utility Revenues 3,430 4,154 Other 4,256 3,041 _________ _________ Total Current Assets 67,292 65,378 _________ _________ DEFERRED DEBITS: Unamortized Debt Expense and Reacquisition Premiums 4,804 5,174 Other 6,140 7,235 _________ _________ Total Deferred Debits 10,944 12,409 _________ _________ TOTAL $605,836 $578,972 ========= =========
See Accompanying Notes to Consolidated Financial Statements - 2 - OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
-LIABILITIES- September 30, December 31, 1995 1994 (Thousands of Dollars) CAPITALIZATION: Common Shares, Par Value $5 Per Share - Authorized 25,000,000 Shares; Outstanding 1995 and 1994, 11,180,136 Shares $55,901 $55,901 Premium on Common Shares 30,335 30,335 Retained Earnings 95,898 90,412 _________ _________ Total 182,134 176,648 Cumulative Preferred Shares - Authorized 1,500,000 Shares Without Par Value; Outstanding 1995 and 1994, 388,311 Shares: Subject to Mandatory Redemption 18,000 18,000 Other 20,831 20,831 Cumulative Preference Shares - Authorized 1,000,000 Shares Without Par Value; Outstanding - None -- -- Long-Term Debt 166,352 162,196 _________ _________ Total Capitalization 387,317 377,675 _________ _________ CURRENT LIABILITIES: Short-Term Debt 14,000 2,900 Sinking Fund Requirements and Current Maturities 13,970 8,739 Accounts Payable 20,452 22,542 Accrued Salaries and Wages 2,621 3,889 Federal and State Income Taxes Accrued 1,156 2,095 Other Taxes Accrued 10,821 11,712 Interest Accrued 1,875 3,524 Other 6,116 2,480 _________ _________ Total Current Liabilities 71,011 57,881 _________ _________ NONCURRENT LIABILITIES: 11,073 8,245 _________ _________ DEFERRED CREDITS: Accumulated Deferred Income Taxes 97,921 94,911 Accumulated Deferred Investment Tax Credit 21,290 22,171 Regulatory Liability 14,763 15,197 Other 2,461 2,892 _________ _________ Total Deferred Credits 136,435 135,171 _________ _________ TOTAL $605,836 $578,972 ========= =========
See Accompanying Notes to Consolidated Financial Statements -3- OTTER TAIL POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 (Thousands of Dollars) (Thousands of Dollars) OPERATING REVENUES Electric $49,537 $45,713 $153,169 $147,483 Health Services 9,901 12,724 34,784 34,665 Manufacturing 10,040 3,708 25,915 9,501 Diversified Operations 11,570 8,997 24,950 21,846 _________ _________ _________ _________ Total Operating Revenues 81,048 71,142 238,818 213,495 OPERATING EXPENSES Production Fuel 7,090 7,417 24,072 24,056 Purchased Power 7,822 6,504 23,326 20,621 Electric Operation Expenses 12,013 11,153 36,359 33,847 Electric Maintenance 2,531 3,843 8,314 10,800 Cost of Goods Sold 20,049 17,411 53,321 42,676 Other Nonelectric Expenses 7,998 4,432 22,688 15,473 Depreciation and Amortization 5,472 5,314 16,344 15,861 Property Taxes 2,924 2,921 8,936 8,858 Income Taxes 4,127 3,204 13,266 11,746 _________ _________ _________ _________ Total Operating Expenses 70,026 62,199 206,626 183,938 _________ _________ _________ _________ OPERATING INCOME 11,022 8,943 32,192 29,557 Allowance For Equity (Other) Funds Used During Construction 119 49 125 116 Other Income and Deductions and Applicable Taxes (116) 382 57 1,085 _________ _________ _________ _________ INCOME BEFORE INTEREST CHARGES 11,025 9,374 32,374 30,758 Interest Charges 3,875 3,491 11,277 10,150 Allowance For Borrowed Funds Used During Construction - Credit 3 (22) (94) (50) _________ _________ _________ _________ NET INCOME 7,147 5,905 21,191 20,658 Preferred Dividend Requirements 590 590 1,769 1,769 _________ _________ _________ _________ EARNINGS AVAILABLE FOR COMMON SHARES $6,557 $5,315 $19,422 $18,889 ========= ========= ========= ========= Earnings Per Average Common Share $0.59 $0.48 $1.74 $1.69 ========= ========= ========= ========= Average Number of Common Shares Outstanding 11,180,136 11,180,136 11,180,136 11,180,136 Dividends Per Common Share $0.44 $0.43 $1.32 $1.29 See Accompanying Notes to Consolidated Financial Statements -4-
OTTER TAIL POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1995 1994 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $21,191 $20,658 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 21,221 18,937 Deferred Investment Tax Credit - Net (882) (924) Deferred Income Taxes 713 1,390 Change in Deferred Debits and Other Assets 1,446 1,144 Change in Noncurrent Liabilities and Deferred Credits 2,397 1,425 Allowance for Equity (Other) Funds Used During Construction (125) (116) Loss on Disposal of Noncurrent Assets 1,149 91 Cash Provided by (Used for) Current Assets & Current Liabilities: Change in Receivables, Materials and Supplies 1,815 (4,286) Change in Other Current Assets (427) 71 Change in Payables and Other Current Liabilities (3,893) 75 Change in Interest and Income Taxes Payable (2,677) (925) ________ ________ Net Cash Provided by Operating Activities 41,928 37,540 CASH FLOWS FROM INVESTING ACTIVITIES: Gross Capital Expenditures (28,837) (24,589) Proceeds from Disposal of Noncurrent Assets 2,169 2,220 Purchase of Subsidiaries, Net of Cash Acquired (1,634) (574) Change in Temporary Cash Investments 38 (224) Change in Marketable Securities and Other Investments (8,455) (1,132) ________ ________ Net Cash Used in Investing Activities (36,719) (24,299) CASH FLOWS FROM FINANCING ACTIVITIES: Change in Short-Term Debt - Net 11,100 4,100 Proceeds from Issuance of Long-Term Debt 37,970 5,710 Payments for Retirement of Long-Term Debt (38,556) (8,349) Payments for Debt Issuance Expenses -- (56) Dividends Paid (16,527) (16,191) ________ ________ Net Cash Used in Financing Activities (6,013) (14,786) Net Change in Cash and Cash Equivalents (804) (1,545) Cash and Cash Equivalents at Beginning of Year 1,852 3,808 ________ ________ Cash and Cash Equivalents at September 30 $1,048 $2,263 ======== ======== Supplemental Cash Flow Information Cash Paid for Interest and Income Taxes: Interest $11,952 $11,418 Income Taxes $14,066 $10,633 See Accompanying Notes to Consolidated Financial Statements - 5 -
OTTER TAIL POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Company, in its opinion, has included all adjustments (including normal recurring accruals) necessary for a fair presentation of the results of operations for the periods. The financial statements for 1995 are subject to adjustment at the end of the year when they will be audited by independent accountants. The financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 31, 1994, 1993, and 1992 included in the Company's 1994 Annual Report to the Securities and Exchange Commission on Form 10-K. In January 1995 the Company acquired an additional manufacturing business and three small diagnostic imaging companies. The total revenues of these companies were $17,122,000 in 1994. These acquisitions were accounted for under the purchase method of accounting. On October 1, 1995 the company acquired another manufacturing business which had revenues of $23,378,000 for its fiscal year ended February 28, 1995. This acquisition will be accounted for under the purchase method of accounting. One of the Company's largest industrial customers has set a goal of reducing its electric energy costs by up to 25% through self-generation of electricity or by changing consumption patterns and implementing more efficient processes requiring less energy. The Company has been working with the customer toward the latter option. Though no financial impact to the Company is expected in 1995, the collaborative efforts of the customer and the Company may result in decreased electric sales to this customer in excess of $1 million in 1996. Quadrant Company's waste incineration contracts expire in September of 1996. In June of 1997, new pollution rules will be in effect which will require new operating permits and possible modifications to current plant operations and equipment. The costs to comply with the new pollution rules will have an impact on the negotiation of new waste incineration agreements and could affect the economic viability of the plant. In September of 1995, the Company recorded a $3.5 million passive investment in the form of a delayed equity contribution to a limited liability company. The $3.5 million obligation related to the investment is reflected in Other Current Liabilities on the Company's balance sheet as of September 30, 1995. The objective of this investment is not only to generate investment income but also to promote economic development and increased electric sales in the Company's service territory. The breakdown of Cost of Goods Sold and Other Nonelectric Expenses by business segments is as follows: Three Months Ended September 30 Cost of Goods Sold Other Nonelectric Expenses 1995 1994 1995 1994 (in thousands) Health Services $5,749 $9,595 $3,965 $2,128 Manufacturing 7,407 2,627 1,546 297 Diversified Operations 6,893 5,189 2,487 2,007 -------- -------- ------- ------- Total $20,049 $17,411 $7,998 $4,432 Nine Months Ended September 30 Cost of Goods Sold Other Nonelectric Expenses 1995 1994 1995 1994 (in thousands) Health Services $20,427 $23,496 $12,085 $8,753 Manufacturing 19,526 6,728 3,681 832 Diversified Operations 13,368 12,452 6,922 5,888 -------- ------- ------- ------- Total $53,321 $42,676 $22,688 $15,473 Because of seasonal and other factors, the earnings for the three-month and nine-month periods ended September 30, 1995, should not be taken as an indication of earnings for all or any part of the balance of the year. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Material Changes in Financial Position Cash provided by operating activities of $41,928,000 as shown on the Consolidated Statement of Cash Flows for the nine months ended September 30, 1995, combined with funds on hand of $2,243,000 at December 31, 1994, allowed the Company to pay dividends, invest in additional nonutility businesses and passive investments, and finance the majority of its construction expenditures. At September 30, 1995, the Company had $27,175,000 available in unused lines of credit and $15,541,000 in marketable securities included in Investments and Other Assets which will be sold in the fourth quarter of 1995 to supplement cash needs. Proceeds from Issuance of Long-Term Debt and Payments for Retirement of Long-Term Debt for the nine months ended September 30, 1995, reflect refinancing activity by the Company's subsidiaries. The Company estimates that funds internally generated, combined with funds on hand, will be sufficient to meet all sinking fund payments for First Mortgage Bonds in the next five years and to provide for the majority of its 1995-1999 construction program expenditures. Additional short- or long-term financing will be required in the period 1995-1999 in connection with the Company's construction program, maturity of First Mortgage Bonds and a Long-Term Lease Obligation ($21,000,000), in the event the Company decides to refund or retire early any of its presently outstanding debt or cumulative preferred shares, complete its common stock repurchase program or for other corporate purposes. The bulk of the increases in Plant - Other, Accounts Receivable - Trade, Inventory, Materials and Operating Supplies, Long-Term Debt, and Sinking Fund Requirements and Current Maturities are due to the acquisitions of an additional manufacturing company and three small diagnostic imaging companies in the first quarter of fiscal 1995. Investments and Other Assets increased as a result of investments held by the businesses acquired in the first quarter and further passive investments. The decrease in Accounts Receivable - Other is the result of the timing of operating payments from the Big Stone Plant Partners. The increase in Construction Work in Progress is due to new electric construction principally in transmission, distribution, and general plant. The increase in Other Current Assets reflects an increase in prepaid insurance resulting from the timing of premium payments at one of the Company's health services subsidiaries. The decrease in Other Deferred Debits is mainly due to the amortization of previously deferred and currently recoverable Conservation Improvement Program costs. The increase in Short-Term Debt reflects the issuance of notes and commercial paper to provide for current cash requirements. The decrease in Accrued Salaries and Wages reflects the payment in 1995 of an employee incentive plan liability accrued as of December 31, 1994. The decrease in Federal and State Income Taxes Accrued was due to the timing of tax payments. The reduction in Interest Accrued resulted from interest payments on the Company's outstanding bonds, the majority of which are due in the first and third quarters. The increase in Other Current Liabilities reflects the recording of a $3.5 million obligation referred to in the Notes to Consolidated Financial Statements. Material Changes in Results of Operations The 8.4% increase in Electric Operating Revenues for the quarter ended September 30, 1995, as compared to the same period in 1994, was due to increases in retail revenues of 6.4%, noncontractual power pool sales of 20.3% and contractual and wholesale power pool sales of 43%. The 3.9% increase in Electric Operating Revenues for the nine months ended September 30, 1995 compared to the nine months ended September 30, 1994, was due to a 2.1% increase in retail revenues and a 29.1% increase in noncontractual power pool sales. Noncontractual power pool sales increased for the quarter as a result of greater sales opportunities due to warmer weather in the summer of 1995 compared to 1994. Noncontractual power pool sales for the nine months ended September 30, 1995, compared to the same period in 1994, were higher due to the warmer summer weather and because the Company had more energy to market due to a warmer winter season and greater plant availability in 1995. In July of 1995, the Company entered into a firm sales contract to sell 40 megawatts of power to a wholesale customer which resulted in an increase in contractual and wholesale power pool sales for the three months ended September 30, 1995, compared to the same period in 1994. The increase in Purchased Power for the three and nine month periods ended September 30, 1995, as compared to the same periods in 1994, was due to increased kwh purchases for both system use and resale, which correlates to the increases in retail and noncontractual power pool sales. The increase in Electric Operation Expenses for both the quarter and nine months ended September 30, 1995, as compared to the same periods in 1994, was primarily due to a settlement with the Minnesota Public Utilities Commission. The settlement required recovery of Conservation Improvement Program costs in current rates starting in 1995. General wage and salary increases for nonunion employees in April of 1995 and storm related expenses in the summer of 1995 also contributed to the increases in Electric Operation Expenses. The decreases in Electric Maintenance Expenses for the three and nine months ended September, 30, 1995, compared to the same periods in 1994, were primarily due to significant reductions in production plant maintenance expenses. Most of the reductions in the third quarter were attributable to Hoot Lake Plant Unit #2 which was out of service for major repairs through all of July and most of August of 1994. Coyote plant, which had a major overhaul in the Spring of 1994 but no major overhaul or repairs during 1995, contributed significantly to the reduction in Electric Maintenance Expenses in the first nine months of 1995 compared to the same period in 1994. Health Services Operating Revenues decreased in the third quarter of 1995 compared to the third quarter of 1994 as a result of the timing of production and delivery of product from the supplier. Increases in Other Health Services Expenses for the three and nine months ended September 30, 1995, compared to the same periods in 1994, were due to the acquisition of three additional diagnostic imaging companies and increased sales efforts in 1995. The decrease in Cost of Health Services Sold for the third quarter of 1995, compared to the third quarter of 1994, corresponds to the decrease in Health Services Operating Revenues for the same comparative period. The increase in Manufacturing Operating Revenues for the three and nine month periods ended September 30, 1995, as compared to the same periods in 1994, resulted mainly from the acquisition of a new company in January of 1995, as well as continued expansion of existing product lines. The increases in Manufacturing Cost of Goods Sold and Other Manufacturing Expenses for the same comparative periods were directly related to the acquisition and expanded product lines. The increase in revenues from Diversified Operations for the three and nine months ended September 30, 1995, compared to the same periods in 1994, was the result of increased construction revenues in the summer of 1995 which was primarily reflective of increased material costs billed on larger projects. Increases in Costs of Goods Sold and Other Nonelectric Expenses from Diversified Operations for the quarter and nine months ended September 30, 1995, compared to the same periods in 1994, were directly related to increased construction revenues for the same comparative periods. The increase in Income Taxes for the quarter and nine months ended September 30, 1995 compared to same periods in 1994, was related primarily to increases in Operating Income before Income Taxes for the same comparative periods. The decrease in Other Income and Deductions and Applicable Taxes for the three and nine months ended September 30, 1995, as compared to the same periods in 1994, primarily resulted from losses on investments in marketable securities related to the Company's preferred stock investment program. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. a) Exhibits: 27 Financial Data Schedule b) Report on Form 8-K. No reports on Form 8-K were filed during the fiscal quarter ended September 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OTTER TAIL POWER COMPANY By: Jeff Legge Jeff Legge Controller (Chief Accounting Officer/Authorized Officer) Dated: November 13, 1995 EX-27 2
UT This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of September 30, 1995, and the Consolidated Statement of Income for the nine months ended September 30, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 437,583 90,017 67,292 10,944 0 605,836 55,901 30,335 95,898 182,134 18,000 20,831 166,352 5,000 0 9,000 13,970 0 0 0 190,549 605,836 238,818 13,266 193,360 206,626 32,192 182 32,374 11,183 21,191 1,769 19,422 14,758 10,820 41,928 1.74 1.74
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