-----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, Q1BAkXHHWKHsk9YgUoMQLlTL1K9OsV5gg5fygv9HuySj0zknfri7DX1embUJy9v8 +IA2yg/A8+3mA+BneHMt7w== 0000075129-97-000013.txt : 19970815 0000075129-97-000013.hdr.sgml : 19970815 ACCESSION NUMBER: 0000075129-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97663539 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 JUNE 1997 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 JUNE 30, 1997 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: August 1, 1997 - 11,651,776 Common Shares ($5 par value) OTTER TAIL POWER COMPANY ------------------------ INDEX ----- Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 (Unaudited) 2 & 3 Consolidated Statements of Income - Three and Six Months Ended June 30, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6, 7 & 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8, 9, 10 & 11 Part II. Other Information Item 2. Changes in Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
Part I. Financial Information ------------------------------ Item 1. Financial Statements -------------------- Otter Tail Power Company Consolidated Balance Sheets (Unaudited) -Assets- June 30, December 31, 1997 1996 ------ ------ (Restated) (Thousands of dollars) Plant: Electric plant in service $747,503 $742,065 Subsidiary companies 108,110 94,701 -------- -------- Total 855,613 836,766 Less accumulated depreciation and amortization 347,900 327,855 -------- -------- 507,713 508,911 Construction work in progress 20,347 11,470 -------- -------- Net plant 528,060 520,381 -------- -------- Investments 21,302 19,880 -------- -------- Intangibles -- net 21,801 21,954 -------- -------- Other assets 6,589 6,553 -------- -------- Current assets: Cash and cash equivalents 2,928 2,094 Temporary cash investments -- -- Accounts receivable: Trade - net 35,764 32,603 Other 4,233 5,021 Materials and supplies: Fuel 3,071 3,220 Inventory, materials and operating supplies 25,309 24,247 Deferred income taxes 4,780 4,550 Accrued utility revenues 3,337 5,349 Other 5,278 4,524 -------- -------- Total current assets 84,700 81,608 -------- -------- Deferred debits: Unamortized debt expense and reacquisition premiums 4,044 4,270 Regulatory assets 5,777 5,866 Other 3,989 3,655 -------- -------- Total deferred debits 13,810 13,791 -------- -------- Total $676,262 $664,167 ======== ========
See accompanying notes to consolidated financial statements - 2 -
Otter Tail Power Company Consolidated Balance Sheets (Unaudited) -Liabilities- June 30, December 31, 1997 1996 ------ ------ (Restated) (Thousands of dollars) Capitalization: Common shares, par value $5 per share - authorized 25,000,000 shares; outstanding 1997 -- 11,650,180; and 1996 -- 11,372,298 shares $ 58,251 $ 56,861 Premium on common shares 32,856 30,683 Retained earnings 112,204 106,589 -------- -------- Total 203,311 194,133 Cumulative preferred shares - authorized 1,500,000 shares without par value; outstanding 1997 and 1996, 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 162,726 160,704 -------- -------- Total capitalization 404,868 393,668 -------- -------- Current liabilities: Short-term debt 28,200 25,600 Sinking fund requirements and current maturities 46,449 42,218 Accounts payable 27,284 27,260 Accrued salaries and wages 3,168 3,847 Federal and state income taxes accrued 1,310 2,031 Other taxes accrued 8,491 12,048 Interest accrued 3,637 3,622 Other 3,334 2,822 -------- -------- Total current liabilities 121,873 119,448 -------- -------- Noncurrent liabilities 16,369 16,688 -------- -------- Deferred credits: Accumulated deferred income taxes 98,498 98,498 Accumulated deferred investment tax credit 19,264 19,818 Regulatory liabilities 12,902 13,283 Other 2,488 2,764 -------- -------- Total deferred credits 133,152 134,363 -------- -------- Total $676,262 $664,167 ======== ========
See accompanying notes to consolidated financial statements - 3 -
Otter Tail Power Company Consolidated Statements of Income (Unaudited) Three months ended Six months ended June 30 June 30 1997 1996 1997 1996 ------ ------ ------ ------ (Restated) (Restated) (Thousands of dollars) (Thousands of dollars) Operating revenues: Electric $ 45,426 $ 44,787 $103,826 $101,818 Health services 15,019 17,056 30,409 27,071 Manufacturing 20,482 17,556 35,185 33,726 Other business operations 10,169 12,117 15,965 19,111 -------- -------- -------- -------- Total operating revenues 91,096 91,516 185,385 181,726 Operating expenses: Production fuel 6,630 7,009 14,622 15,601 Purchased power 5,668 5,390 13,041 12,497 Other electric operation and maintenance expenses 18,663 15,879 35,208 32,480 Cost of goods sold 30,242 31,068 52,381 53,088 Other nonelectric expenses 11,261 10,950 22,328 19,374 Depreciation and amortization 6,349 5,618 12,684 11,190 Property taxes 2,485 3,061 5,583 5,999 -------- -------- -------- -------- Total operating expenses 81,298 78,975 155,847 150,229 Operating income: Electric 6,637 8,545 24,689 25,446 Health services 225 1,106 1,497 1,666 Manufacturing 2,125 2,318 3,563 4,155 Other business operations 811 572 (211) 230 -------- -------- -------- -------- Total operating income 9,798 12,541 29,538 31,497 Other income and deductions - net 1,702 417 2,825 912 Interest charges 4,596 4,001 9,138 7,699 -------- -------- -------- -------- Income before income taxes 6,904 8,957 23,225 24,710 Income taxes 1,511 2,720 7,142 8,315 -------- -------- -------- -------- Net income 5,393 6,237 16,083 16,395 Preferred dividend requirements 590 589 1,179 1,179 -------- -------- -------- -------- Earnings available for common shares $ 4,803 $ 5,648 $ 14,904 $ 15,216 ======== ======== ======== ======== Earnings per average common share $0.41 $0.50 $1.29 $1.34 ======== ======== ======== ======== Average number of common shares outstanding 11,620,738 11,337,782 11,594,150 11,337,782 Dividends per common share $0.465 $0.45 $0.930 $0.90
See accompanying notes to consolidated financial statements - 4 -
Otter Tail Power Company Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 1997 1996 -------- -------- (Restated) (Thousands of dollars) Cash flows from operating activities: Net income $ 16,083 $ 16,395 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 19,895 16,265 Deferred investment tax credit - net (588) (588) Deferred income taxes (1,523) (1,424) Change in deferred debits and other assets (337) 4,109 Change in noncurrent liabilities and deferred credits (595) (779) Allowance for equity (other) funds used during construction -- (143) (Gains) from investments and disposal of noncurrent assets (1,620) (8) Cash provided by (used for) current assets & current liabilities: Change in receivables, materials and supplies (3,025) (3,962) Change in other current assets 1,265 (1,324) Change in payables and other current liabilities (3,330) (3,507) Change in interest and income taxes payable (706) 1,288 -------- -------- Net cash provided by operating activities 25,519 26,322 Cash flows from investing activities: Gross capital expenditures (22,108) (28,213) Proceeds from disposal of noncurrent assets 909 1,294 Purchase of businesses, net of cash acquired -- (7,859) Change in temporary cash investments -- 2,160 Purchases of marketable securities (5) -- Proceeds from sales of marketable securities 313 -- Change in other investments (1,131) (4,926) -------- -------- Net cash used in investing activities (22,022) (37,544) Cash flows from financing activities: Change in short-term debt - net 2,600 12,750 Proceeds from issuance of common stock 3,578 -- Proceeds from issuance of long-term debt 40,866 53,643 Payments for retirement of long-term debt (37,477) (44,243) Dividends paid (12,230) (11,404) -------- -------- Net cash provided by (used in) financing activities (2,663) 10,746 Net change in cash and cash equivalents 834 (476) Cash and cash equivalents at beginning of year 2,094 2,419 -------- -------- Cash and cash equivalents at June 30 $ 2,928 $ 1,943 Supplemental cash flow information Cash paid for interest and income taxes: Interest (net of amount capitalized) $ 8,710 $ 7,468 Income taxes $ 9,984 $ 9,591
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 1997 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, 1996, 1995, and 1994 included in the Company's 1996 Annual Report to the Securities and Exchange Commission on Form 10-K. Because of seasonal and other factors, the earnings for the three-month and six-month periods ended June 30, 1997, should not be taken as an indication of earnings for all or any part of the balance of the year. On January 2, 1997, the Company's telecommunications subsidiary, North Central Utilities, Inc., acquired all of the outstanding common stock of The Peoples Telephone Co. of Bigfork (Peoples) in exchange for 163,758 newly issued shares of the Company's common stock and $209,000 in cash in a pooling of interests transaction. The acquisition has no significant pro forma effect on the Company's balance sheet, operating revenues, net income, or earnings per share for 1996. Therefore, the 1996 financial statements included in this report have not been restated to reflect the effect of the pooling. The following table shows the effect of the pooling on the equity section of the Company's balance sheet on January 2, 1997: Common Premium Shares on Common Retained Total Outstanding Par Shares Earnings Equity ----------- ------- ------- -------- -------- (dollars in thousands) Otter Tail Power Company 11,372,298 $56,861 $30,683 $106,589 $194,133 Peoples 21 2,121 2,142 Shares Issued 163,758 819 819 Adjustments for: Par value of new shares (21) (798) (819) Cash paid for Peoples shares (209) (209) ---------- ------- ------- -------- -------- Combined 11,536,056 $57,680 $29,676 $108,710 $196,066 ========== ======= ======= ======== ======== The net amount of cash used of ($209,000) and cash acquired of $36,000 in the pooling is included in the Company's Statement of Cash Flows for the six months ended June 30, 1997, under "Proceeds from issuance of common stock." On June 30, 1997, the Company's subsidiary, Mid-States Development, Inc, acquired all of the outstanding common stock of Chassis Liner Corporation (Chassis Liner) in exchange for 157,646 newly issued shares of the Company's common stock. Chassis Liner is a manufacturer of auto and truck frame straightening equipment with facilities in Alexandria and Lucan, Minnesota. The acquisition has been accounted for as a pooling of interests. Because the acquisition has a significant pro forma effect on 1996 results, the Company's prior period consolidated financial statements presented herein have been restated to include Chassis Liner. The impact of Chassis Liner on the Company's consolidated statements of income and cash flows for the periods ending June 30, 1996, is presented in the table below: Otter Tail Otter Tail Power Power Chassis Company (in thousands) Company Liner Combined - ---------------------------------------------------------------------------- For the three months ended June 30, 1996: Revenue $ 89,588 $ 1,928 $ 91,516 Operating Income $ 12,293 $ 248 $ 12,541 Net income $ 5,980 $ 257 $ 6,237 For the six months ended June 30, 1996: Revenue $177,978 $ 3,748 $181,726 Operating Income $ 31,124 $ 373 $ 31,497 Net income $ 16,012 $ 383 $ 16,395 For the six months ended June 30, 1996: Net cash provided by operating activities $ 26,182 $ 140 $ 26,322 Net cash used in investing activities (37,523) (21) (37,544) Net cash provided by (used in) financing activities 10,918 (172) 10,746 -------- ------- -------- Net change in cash and cash equivalents (423) (53) (476) Cash and cash equivalents at beginning of 1996 1,867 552 2,419 -------- ------- -------- Cash and cash equivalents at June 30, 1996 $ 1,444 $ 499 $ 1,943 Prior to the acquisition, Chassis Liner was an S Corporation and, consequently, was not subject to federal or state income taxes. The pro forma income tax provision for Chassis Liner that would have been reported by the Company as an additional provision to its historical tax expense had Chassis Liner not been an S Corporation prior to the acquisition is $99,000 and $103,000 for the three month periods ended June 30, 1997 and 1996, respectively, and $281,000 and $153,000 for the six month periods ended June 30, 1997 and 1996, respectively, based on a tax rate of 40%. Additional common stock issuances in the first six months of 1997 include 80,933 shares issued under the Company's Automatic Dividend Reinvestment and Share Purchase Plan, 30,561 shares issued to the Company's leveraged employee stock ownership plan and 2,630 shares issued as a bonus to a consultant. Quadrant Co. is currently processing solid waste for three Minnesota counties under the terms of a new waste incineration agreement. If the anticipated volumes of waste needed to generate sufficient positive future cash flows do not materialize, an impairment to the carrying value of the Quadrant Plant is still possible in 1997. Spring Storm and Floods - ----------------------- An early Spring ice storm and blizzard which hit the Company's electric service territory on April 5, 6 and 7 of 1997 causing approximately $4 million worth of damage to the Company's electric transmission and distribution system did not have a significant impact on 1997 second quarter operating income. A significant portion of the costs related to replacement of damaged facilities are being capitalized to the extent such replacements are an improvement to the system. Storm related outages in portions of the Company's service territory resulted in some lost revenue, however, the impact is not believed to be material. Flooding in the Red River Valley was mostly concentrated in areas not served by the Company and, therefore, is not expected to have a significant impact on future earnings. Forward Looking Information - Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 - ---------------------------------------------------------- In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"), the Company has filed cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those discussed in forward-looking statements made by or on behalf of the Company. When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements, words such as "may", "will", "expect", "anticipate", "continue", "estimate", "project", "believes" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. Factors that might cause such differences include, but are not limited to, the factors discussed under "Factors affecting future earnings" on pages 30-32 of the Company's 1996 Annual Report to Shareholders, which is incorporated by reference in the Company's Form 10-K for the fiscal year ended December 31, 1996. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement or contained in any subsequent filings by the Company with the Securities and Exchange Commission. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Material Changes in Financial Position - -------------------------------------- Cash provided by operating activities of $25,519,000 as shown on the Consolidated Statement of Cash Flows for the six months ended June 30, 1997, combined with funds on hand of $2,094,000 at December 31, 1996, allowed the Company to pay dividends and finance the majority of its capital expenditures in the first six months of 1997. Additional cash provided by the issuance of $2,600,000 in short-term debt and $3,578,000 in common stock at the electric utility combined with the net increase in long-term debt of $3,383,000 at the subsidiaries provided the funds used to finance the remainder of the capital expenditures in the first six months of 1997. The Company's initiative to reduce capital expenditures resulted in a $6.1 million reduction in this category for the six months ended June 30, 1997, compared to the six months ended June 30, 1996. At June 30, 1997, the Company had $12,453,000 available in unused lines of credit which could be used to supplement cash needs. The Company estimates that funds internally generated, combined with funds on hand, will be sufficient to meet all sinking fund payments for First Mortgage Bonds in the next five years and to provide for its estimated 1997-2001 consolidated capital project expenditures. Additional short-term or long-term financing will be required in the period 1997-2001 in connection with the maturity of First Mortgage Bonds and a Long-Term Lease Obligation ($21,000,000), in the event the Company decides to refund or retire early any of its presently outstanding debt or cumulative preferred shares, or for other corporate purposes. Standard and Poor's reaffirmed its AA- rating of the Company's senior debt, however, it revised its ratings outlook on the Company from stable to negative sighting growth in the level of nonutility earnings relative to overall Company earnings as a reason for the revision. Moody's Investors Service reaffirmed its Aa3 rating of the Company's First Mortgage Bonds and Duff and Phelps reaffirmed its AA rating, while Fitch Investors Service has downgraded its rating from AA to AA-. The acquisition of Peoples provided $7,088,000 of the increase in subsidiary companies plant. Capital additions of $3,559,000 in the manufacturing segment and $1,064,000 at the telecommunications companies accounted for most of the remaining increase in subsidiary companies plant. The increase in construction work in progress is due to new construction and capital expenditures at the electric utility, mainly in the production, transmission and general plant areas including approximately $1.9 million for the replacement of storm damaged facilities. The increase in trade receivables reflects an increase in receivables in the manufacturing segment as a result of one of the manufacturing companies delivering product to its customers on a delayed payment plan. The decrease in other receivables is due to the timing of payments received from the Company's Big Stone Plant partners. The decrease in accrued utility revenues is reflective of a normal seasonal decline in the use of electricity in the Company's service area in June compared to December. The increase in other current assets is due to an increase in prepaid expenses in the health services segment. The net increase in common shares, par value and premium on common shares is mainly due to the issuance of the 114,124 shares of common stock under the Company's stock plans as described above. The increase in long-term debt is due to the acquisition of Peoples. The increase in sinking fund requirements and current maturities is related to increased debt combined with a shift in debt from long-term to current maturities at the subsidiary companies, mainly in the manufacturing segment where payments to certain suppliers were accelerated to take advantage of discounts not previously offered. Accrued salaries and wages decreased as a result of the payment of 1996 accrued employee incentives. The decrease in other taxes accrued is mainly due to the timing of property tax payments, most of which are paid to the State of Minnesota, with half due in the month of May. Part of the decrease in other taxes accrued is due to an adjustment to Minnesota property taxes accrued related to a reduction in statutory rates for commercial and industrial property and reduced valuations of utility property. Material Changes in Results of Operations - ----------------------------------------- The 2.0% increase in electric operating revenues for the six months ended June 30, 1997, as compared to the six months ended June 30, 1996, is due to increases of 3.0% in retail revenues and 38.6% in other electric revenue offset by a 31.2% decrease in revenue from noncontractual power pool sales. The increase in retail revenue is mainly due to a 6.2% increase in kwh sales to industrial customers and increases in cost-of-energy revenue related to recovery of the costs of power purchased for sale to retail customers in early 1997. The increase in other electric revenue reflects the recognition of Minnesota Conservation Improvement Program (CIP) lost margins recovery approved by the Minnesota Public Utilities Commission (MNPUC) in the second quarter of 1997. Increases in transmission service charge revenue and electric property rental income also contributed to the increase in other electric revenue. The decrease in revenue from noncontractual power pool sales is the result of the Company having less energy to market as a result of delayed coal shipments caused by the blizzards of 1997 and to the shutdown of the Coyote Plant for its first scheduled major overhaul in three years that lasted from March 27, 1997, until June 6, 1997. The cutbacks in generation due to the delays in coal shipments and the shutdown of the Coyote Plant were also the main factors contributing to the decreases in production fuel expense and increases in purchased power for the three and six month periods ended June 30, 1997, as compared to the same periods in 1996. The increases in electric operation and maintenance expenses for the three and six month periods ended June 30, 1997, as compared to the three and six month periods ended June 30, 1996, are mainly related to the Coyote Plant overhaul which lasted three weeks longer than originally scheduled. The breakdown of cost of goods sold and other nonelectric expenses by business segments other than electric are as follows: Three months ended June 30 Cost of goods sold Other nonelectric expenses ------------------ -------------------------- 1997 1996 1997 1996 ------ ------ ------ ------ (in thousands) Health services $ 8,759 $10,461 $ 5,903 $ 5,342 Manufacturing 15,869 12,612 2,339 2,499 Other business operations 5,614 7,995 3,019 3,109 ------- ------- ------- ------- Total $30,242 $31,068 $11,261 $10,950 ======= ======= ======= ======= Six months ended June 30 Cost of goods sold Other nonelectric expenses ------------------ -------------------------- 1997 1996 1997 1996 ------ ------ ------ ------ (in thousands) Health services $16,739 $15,730 $11,909 $ 9,399 Manufacturing 26,821 24,706 4,503 4,610 Other business operations 8,821 12,652 5,916 5,365 ------- ------- ------- ------- Total $52,381 $53,088 $22,328 $19,374 ======= ======= ======= ======= Reclassifications of $1,100,000 and $1,869,000 in health services cost of goods sold to health services other nonelectric expenses were made for the three and six month periods ended June 30, 1996, respectively, related to the medical imaging services companies acquired in 1996 in order to report these costs and expenses in a manner consistent with previously acquired medical imaging services companies. The decreases in health services operating revenue of 11.9% and cost of goods sold of 16.3% for the three months ended June 30, 1997, as compared to the same period in 1996, is due to a reduction in sales of medical equipment at Diagnostic Medical Systems attributed to increased competition in this industry segment. The increase in other nonelectric expenses in the health services segment for the three months ended June 30, 1997, as compared to the same period in 1996, is related to increased sales efforts at the medical imaging services companies. The increase in health services operating revenue for the six month period ended June 30, 1997, as compared to the same period a year ago reflects additional revenues in 1997 related to the acquisitions of Radiographic Supply in February 1996, and Northern Medical Imaging (NMI) in April 1996. While revenue from health services is up 12.3%, the cost of goods sold in this segment shows an increase of only 6.4% for the six months ended June 30, 1997, as compared to the same period in 1996, due to an increase in the proportion of revenues related to diagnostic imaging services compared to equipment sales mainly as a result of the acquisition of NMI. The 27% increase in health services other nonelectric expenses in the first half of 1997 over the first half of 1996 is primarily associated with the 1996 acquisitions. The increases in manufacturing operating revenue of 16.7% and 4.3% for the three and six month periods ended June 30, 1997, as compared to the three and six month periods ended June 30, 1996, are mainly due to increased sales at two of the Company's manufacturing subsidiaries offset by a decrease in recorded sales at a third manufacturing subsidiary due to the delayed shipment of finished goods to a major customer of this subsidiary in order to accommodate that customer's delivery and production schedule. This third manufacturing company maintained its production schedule in order to optimize the use of its plant capacity. Manufacturing cost of goods sold increased in the three and six month periods ended June 30, 1997, as compared to the same periods in 1996, mainly as a result of increased prices for resins used in the manufacture of PVC pipe. The increases in manufacturing cost of goods sold more than offset the increases in manufacturing revenues and decreases in manufacturing other nonelectric expenses resulting in the decreases in manufacturing operating income for both the three and six month periods ended June 30, 1997, as compared to the same periods in 1996. The decreases in other business operations revenue for the quarter and six months ended June 30, 1997, as compared to the quarter and six months ended June 30, 1996, are due to a decline in revenue and reductions in material cost pass through billings at the Company's construction subsidiaries offset slightly by increases in media and telecommunications revenue due to the acquisitions of several radio stations in 1996 and Peoples in January 1997. The decreases in construction activity and material cost pass through billings are the main factors contributing to the decreases in cost of goods sold from other business operations for the comparable periods. Other nonelectric expenses for other business operations increased for the six months ended June 30, 1997, as compared to the same period a year ago, as a result of the radio stations and Peoples acquisitions. The increases in depreciation and amortization expense for the three and six month periods ended June 30, 1997, as compared to the same periods in 1996, are related to electric utility property additions including upgrades made to Big Stone Plant in 1996, increased depreciation at Quadrant Co. and the acquisition of Peoples in 1997. The decreases in property taxes for the three and six month periods ended June 30, 1997, as compared to the same periods in 1996, are due to reductions in Minnesota property taxes accrued as a result of legislative action affecting Minnesota commercial and industrial property class rates for 1997, and lower assessed values on Minnesota utility property. The increase in other income and deductions - net for the quarter and six months ended June 30, 1997, as compared to the quarter and six months ended June 30, 1996, reflects the recognition of $250,000 in realized gains on the sale of marketable securities classified as available-for-sale and the recognition of $360,000 in unrealized gains on marketable securities classified as trading in the first quarter of 1997, the recognition of $880,000 in compensation for the abandonment of certain microwave frequencies licensed to the Company, and an increase in revenue recognition of $405,000 related to Minnesota CIP financial incentives. The increases in interest charges for the three and six month periods ended June 30, 1997, as compared to the three and six month periods ended June 30, 1996, is directly related to the increase in the level of short-term debt at the parent company and increases in long-term debt and current maturities at the subsidiary companies. PART II. OTHER INFORMATION -------------------------- Item 2. Changes in Securities --------------------- On June 30, 1997, the Company issued 157,646 shares of common stock in connection with the acquisition of Chassis Liner. The issuance of such shares did not involve a public offering and therefore was exempt from registration pursuant to section 4(2) of the Securities Act of 1933, as amended (the "Act"). Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- The annual meeting of Shareholders of the Company was held on April 14, 1997, for the purpose of electing three nominees to the Board of Directors with terms expiring in 2000 and approving the appointment of auditors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, and there was no solicitation in opposition to management's solicitations. All nominees for directors as listed in the proxy statement were elected. The voting results were as follows: Shares Shares Voted Election of Directors Voted For Withheld Authority - --------------------- --------- ------------------ Thomas M. Brown 9,740,050 126,065 Maynard D. Helgaas 9,755,451 110,663 Robert M. Spolum 9,755,221 110,893 Shares Shares Shares Approval of Auditors Voted For Voted Against Voted Abstain - -------------------- --------- ------------- ------------- Deloitte & Touche LLP 9,688,556 68,286 109,291 Item 6. Exhibits and Reports on Form 8-K. --------------------------------- a) Exhibits: 27 Financial Data Schedule b) Reports on Form 8-K. No reports on Form 8-K were filed during the fiscal quarter ended June 30, 1997. 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: August 14, 1997 --------------- EX-27 2
UT This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of June 30, 1997, and the Consolidated Statement of Income for the six months ended June 30, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1997 JUN-30-1997 PER-BOOK 456,082 121,670 84,700 13,810 0 676,262 58,251 32,856 112,204 203,311 18,000 20,831 162,726 2,400 0 25,800 46,449 0 0 0 196,745 676,262 185,385 7,142 155,847 162,989 22,396 2,825 25,221 9,138 16,083 1,179 14,904 10,637 8,414 25,519 1.29 1.29
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