-----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, ONW8lB0tl4lDQKgMEb9rtM+aplURfhCtuaYoK7q0IVw8YdtyKh8HYXu85goix0vl lvg+whEqA2WZYiHKpTPw2A== /in/edgar/work/20000811/0000075129-00-000009/0000075129-00-000009.txt : 20000921 0000075129-00-000009.hdr.sgml : 20000921 ACCESSION NUMBER: 0000075129-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OTTER TAIL POWER CO CENTRAL INDEX KEY: 0000075129 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 410462685 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00368 FILM NUMBER: 694567 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 0001.txt 10-Q JUNE 2000 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, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-368 OTTER TAIL POWER COMPANY (Exact name of registrant as specified in its charter) Minnesota 41-0462685 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496 (Address of principal executive offices) (Zip Code) 218-739-8200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: August 1, 2000 - 23,849,974 Common Shares ($5 par value) OTTER TAIL POWER COMPANY ------------------------ INDEX ----- PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets - June 30, 2000 (Unaudited) and December 31, 1999 2 & 3 Consolidated Statements of Income - Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 Item 3. Quantitative and Qualitative Disclosures about Market Risk 16 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 PART I. FINANCIAL INFORMATION ------------------------------ Item 1. FINANCIAL STATEMENTS -------------------- OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS -ASSETS- JUNE 30, DECEMBER 31, 2000 1999 --------- ------------ (Unaudited) (Thousands of dollars) PLANT: Electric plant in service $ 784,116 $ 779,037 Diversified operations 112,249 99,558 --------- --------- TOTAL 896,365 878,595 Less accumulated depreciation and amortization 400,088 386,618 --------- --------- 496,277 491,977 Construction work in progress 15,422 10,979 --------- --------- NET PLANT 511,699 502,956 --------- --------- INVESTMENTS 18,181 19,502 --------- --------- INTANGIBLES -- NET 45,647 23,311 --------- --------- OTHER ASSETS 7,611 6,141 --------- --------- CURRENT ASSETS: Cash and cash equivalents 11,071 24,762 Accounts receivable: Trade - net 61,192 40,685 Other 4,562 5,616 Materials and supplies: Fuel 3,429 3,808 Inventory, materials and operating supplies 33,783 26,329 Deferred income taxes 3,084 3,123 Accrued utility revenues 7,077 9,923 Other 8,647 5,690 --------- --------- TOTAL CURRENT ASSETS 132,845 119,936 --------- --------- DEFERRED DEBITS: Unamortized debt expense and reacquisition premiums 3,019 3,251 Regulatory assets 4,030 4,111 Other 533 1,580 --------- --------- TOTAL DEFERRED DEBITS 7,582 8,942 --------- --------- TOTAL $ 723,565 $ 680,788 ========= ========= See accompanying notes to consolidated financial statements - 2 -
OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS -LIABILITIES- JUNE 30, DECEMBER 31, 2000 1999 --------- ------------ (Unaudited) (Thousands of dollars) CAPITALIZATION Common shares, par value $5 per share authorized 50,000,000 shares; outstanding 2000 and 1999 -- 23,849,974 $119,250 $119,250 Premium on common shares - - Unearned compensation (226) (301) Retained earnings 133,136 126,744 Accumulated other comprehensive income - - -------- -------- TOTAL 252,160 245,693 Cumulative preferred shares authorized 1,500,000 shares without par value; outstanding 2000 and 1999 -- 335,000 shares Subject to mandatory redemption 18,000 18,000 Other 15,500 15,500 Cumulative preference shares - authorized 1,000,000 shares without par value; outstanding - none - - Long-term debt 188,875 176,437 -------- -------- TOTAL CAPITALIZATION 474,535 455,630 -------- -------- CURRENT LIABILITIES Short-term debt 21,137 - Sinking fund requirements and current maturities 8,508 5,948 Accounts payable 42,485 39,343 Accrued salaries and wages 5,547 6,197 Federal and state income taxes accrued 9,375 8,153 Other taxes accrued 8,206 10,818 Interest accrued 3,220 3,266 Other 3,921 3,589 -------- -------- TOTAL CURRENT LIABILITIES 102,399 77,314 -------- -------- NONCURRENT LIABILITIES 26,796 26,514 -------- -------- DEFERRED CREDITS Accumulated deferred income taxes 87,302 87,972 Accumulated deferred investment tax credit 15,719 16,295 Regulatory liabilities 11,011 11,359 Other 5,803 5,704 -------- -------- TOTAL DEFERRED CREDITS 119,835 121,330 -------- -------- TOTAL $723,565 $680,788 ======== ======== 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, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (in thousands, except share and per share amounts) OPERATING REVENUES Electric $ 58,443 $ 55,232 $ 119,745 $ 117,951 Plastics 25,240 8,393 51,603 13,548 Health services 15,036 16,211 31,681 33,833 Manufacturing 16,583 17,300 30,523 30,885 Other business operations 18,427 15,261 34,932 27,665 ---------- ---------- ---------- ---------- Total operating revenues 133,729 112,397 268,484 223,882 OPERATING EXPENSES Production fuel 9,160 9,487 17,581 19,251 Purchased power 12,690 11,473 26,611 23,365 Other electric operation and maintenance expenses 17,170 17,042 34,425 34,793 Cost of goods sold 52,033 41,864 103,786 78,576 Other nonelectric expenses 15,493 8,855 29,682 17,438 Depreciation and amortization 6,816 6,269 13,621 12,509 Property taxes 2,638 2,803 5,278 5,658 ---------- ---------- ---------- ---------- Total operating expenses 116,000 97,793 230,984 191,590 OPERATING INCOME Electric 11,256 8,986 24,799 24,022 Plastics 4,068 1,073 8,818 1,342 Health services 2,411 1,519 3,459 3,532 Manufacturing 951 1,371 1,625 2,163 Other business operations (957) 1,655 (1,201) 1,233 ---------- ---------- ---------- ---------- 17,729 14,604 37,500 32,292 OTHER INCOME AND DEDUCTIONS - NET 523 317 1,207 672 INTEREST CHARGES 4,289 3,728 8,244 7,347 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 13,963 11,193 30,463 25,617 INCOME TAXES 4,803 4,047 10,886 9,222 ---------- ---------- ---------- ---------- NET INCOME 9,160 7,146 19,577 16,395 Preferred dividend requirements 469 589 939 1,179 ---------- ---------- ---------- ---------- EARNINGS AVAILABLE FOR COMMON SHARES $ 8,691 $ 6,557 $ 18,638 $ 15,216 ========== ========== ========== ========== Basic and diluted earnings per average common share: $ 0.36 $ 0.28 $ 0.78 $ 0.64 ========== ========== ========== ========== Average number of common shares outstanding 23,849,974 23,845,192 23,849,974 23,812,504 Dividends per common share $0.255 $0.2475 $0.510 $0.495 See accompanying notes to consolidated financial statements -4-
OTTER TAIL POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED JUNE 30, 2000 1999 --------- --------- (Thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $19,577 $16,395 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,834 17,719 Deferred investment tax credit - net (576) (582) Deferred income taxes (899) (1,762) Change in deferred debits and other assets (380) 536 Change in noncurrent liabilities and deferred credits 381 1,911 Allowance for equity (other) funds used during construction (189) (29) (Gains)/Losses from investments and disposal of noncurrent assets 252 36 Cash provided by (used for) current assets & current liabilities: Change in receivables, materials and supplies (19,385) 50 Change in other current assets 1,716 3,715 Change in payables and other current liabilities (2,812) (5,225) Change in interest and income taxes payable 1,177 4,411 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 17,696 37,175 CASH FLOWS FROM INVESTING ACTIVITIES: Gross capital expenditures (22,318) (14,400) Proceeds from disposal of noncurrent assets 924 314 Purchase of businesses, net of cash acquired (34,120) - Change in other investments 1,230 (4,438) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (54,284) (18,524) CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt - net 21,137 (824) Proceeds from issuance of common stock - 1,710 Proceeds from issuance of long-term debt 18,802 6,576 Payments for retirement of long-term debt (3,858) (2,416) Dividends paid (13,184) (12,965) ------- ------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 22,897 (7,919) NET CHANGE IN CASH AND CASH EQUIVALENTS (13,691) 10,732 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,762 3,919 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,071 $14,651 ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest and income taxes: Interest (net of amount capitalized) $ 7,823 $ 6,867 Income taxes $11,164 $ 7,153 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 2000 are subject to adjustment at the end of the year when they will be audited by independent accountants. The financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 31, 1999, 1998, and 1997 included in the Company's 1999 Annual Report to the Securities and Exchange Commission on Form 10-K. Because of seasonal and other factors, the earnings for the three-month and six-month periods ended June 30, 2000, should not be taken as an indication of earnings for all or any part of the balance of the year. Common Shares and Earnings per Share - ------------------------------------ On April 10, 2000 the Board of Directors granted 344,000 stock options to executives and key management employees and 16,000 stock options to outside directors under the 1999 Stock Incentive Plan (Incentive Plan). The exercise price of the stock options is equal to the fair market value per share at the date of the grant. The options granted to outside directors are exercisable immediately, and all other options vest over a four-year period at a rate of 25% per year. The options expire ten years after the date of the grant. In addition 11,116 shares of restricted stock were issued under the Incentive Plan during the quarter ended March 31, 2000. As of June 30, 2000 a total of 795,484 options were outstanding and a total of 13,414 shares of restricted stock had been issued under the Incentive Plan. A total of 2,600,000 shares of the Company's common stock are available for granting of awards under the Incentive Plan. The Company accounts for the Incentive Plan under Accounting Principles Board Opinion No. 25. The effect of outstanding stock options on the computation of diluted earnings per share was immaterial for the quarter and six-months ended June 30, 2000 and 1999. The Company issued 14,204 common shares in the second quarter of 1999 and 89,238 common shares for the six months ended June 30, 1999 under its Automatic Dividend Reinvestment and Share Purchase Plan. The Company currently purchases the common shares needed for this plan from the open market instead of issuing new shares. Under the 1999 Employee Stock Purchase Plan (Purchase Plan) 24,080 common shares were purchased from the open market during January 2000 to complete the first purchase period. The purchase price per share paid by the participants was $15.96. The average price paid by the Company to purchase these shares was $19.36. The Purchase Plan allows eligible participants to purchase the Company's common shares at 85% of the lower market price at either the beginning or the end of each six-month purchase period. A total of 400,000 shares of the Company's common stock are available for purchase by participants under the Purchase Plan. Comprehensive Income - -------------------- Net income of $9,160,000 and $19,577,000 was the only element of comprehensive income for the three and six-months ended June 30, 2000, respectively. Elements of comprehensive income for the three-month period ended June 30, 1999, include net income of $7,146,000 and other comprehensive income of $222,000 (net of $157,000 in deferred taxes) related to the recognition of $379,000 in unrealized gains on "available-for-sale" securities held by a Company subsidiary. Comprehensive income for the six-month period ended June 30, 1999, includes net income of $16,395,000 and other comprehensive income of $313,000 (net of $191,000 in deferred taxes) related to the recognition of $504,000 in unrealized gains on "available-for-sale" securities held by a Company subsidiary. Arbitration Settlement - ---------------------- During the second quarter of 2000, the Minnesota, South Dakota and North Dakota utility regulatory agencies approved the accounting treatment of the settlement proceeds related to the Knife River coal contract arbitration. The settlement proceeds of $3.2 million (including interest) had been recorded as a liability on the balance sheet since 1999 pending regulatory approval. The approval allowed the Company to recover arbitration costs of $1.0 million that had been previously expensed and to recognize as income $308,000 of fuel cost savings applicable to wholesale power pool sales. The remaining $1.9 million represents a reduction of fuel costs that are being returned to the Company's electric retail customers through the cost of energy adjustment clause from May 2000 through October 2000. Segment Information and Acquisitions - ------------------------------------ Effective January 1, 2000, the Company acquired the assets and operations of Vinyltech Corporation (Vinyltech) located in Phoenix, Arizona. Vinyltech is a manufacturer of polyvinyl chloride (PVC) pipe and produces approximately 90 million pounds of pipe annually. Annual revenues for 1999 were approximately $41 million. Effective June 1, 2000, the Company acquired the assets and operations of Portable X-Ray & EKG, Inc. (PXE) located in Minneapolis, Minnesota. PXE is a provider of mobile x-ray, EKG, ultrasound and echocardiogram services primarily to patients in long term care facilities in the Minneapolis/St. Paul market. Its 1999 annual revenues were approximately $2.8 million. These acquisitions were accounted for using the purchase method of accounting. The excess of the purchase price over the net assets acquired of approximately $24 million is being amortized over 15 years. The Company's business operations are broken down into five segments based on products and services. Electric operations includes the electric utility only and is based in Minnesota, North Dakota, and South Dakota. Plastics operations consists of businesses involved in the production of PVC pipe in the Upper Midwest and Southwest regions of the United States. Health services operations consists of businesses involved in the sale, service, rental, refurbishing and operation of medical imaging equipment and the sale of related supplies and accessories to various medical institutions located in 20 states. Manufacturing operations is made up of businesses involved in the production of agricultural equipment, frame-straightening equipment and accessories for the auto body shop industry, contract machining, and metal parts stamping and fabrication located primarily in the Upper Midwest. Other business operations consists of businesses diversified in such areas as electrical and telephone construction contracting, transportation, telecommunications, energy services, natural gas marketing and corporate administrative and general expenses that are not allocated to other segments. The electrical and telephone construction contracting companies, and energy services and natural gas marketing business operate primarily in the Upper Midwest. The telecommunications companies operate in central and northeast Minnesota and the transportation company operates in 48 states and 6 Canadian provinces. The Company evaluates the performance of its business segments and allocates resources to them based on earnings contribution and return on total invested capital. Operating Income ---------------- Three months ended Six months ended June 30 June 30 ------------------ ---------------- (in thousands) 2000 1999 2000 1999 - --------------------------------------------------------------------- Electric $ 11,256 $ 8,986 $ 24,799 $ 24,022 Plastics 4,068 1,073 8,818 1,342 Health Services 2,411 1,519 3,459 3,532 Manufacturing 951 1,371 1,625 2,163 Other Business Operations (957) 1,655 (1,201) 1,233 -------- -------- -------- -------- Total $ 17,729 $ 14,604 $ 37,500 $ 32,292 ======== ======== ======== ======== Identifiable Assets ------------------- As of As of June 30, December 31, (in thousands) 2000 1999 - ------------------------------------------------------ Electric $ 523,151 $ 524,012 Plastics 61,113 15,979 Health Services 33,216 29,542 Manufacturing 41,169 30,853 Other Business Operations 64,916 80,402 --------- --------- Total $ 723,565 $ 680,788 ========= ========= Substantially all sales and long-lived assets of the Company are within the United States. Reclassifications - ----------------- Certain prior year amounts have been reclassified to conform to 2000 presentation. Such reclassification had no impact on net income or shareholders' equity. New Accounting Standard - ----------------------- In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarized the SEC's view in applying generally accepted accounting principles to selected revenue recognition issues. The Company is required to apply SAB 101 in the fourth quarter of 2000 retroactively to the first quarter of 2000. The Company continues to review SAB 101 and at this time does not expect the adoption of SAB 101 to have any effect on its financial position or results of operations. Forward Looking Information - Safe Harbor Statement Under the Private - --------------------------------------------------------------------- Securities Litigation Reform Act of 1995 - ---------------------------------------- In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the Act), the Company has filed cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those discussed in forward-looking statements made by or on behalf of the Company. When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements, words such as "may", "will", "expect", "anticipate", "continue", "estimate", "project", "believes" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. Factors that might cause such differences include, but are not limited to, the Company's ongoing involvement in diversification efforts, the timing and scope of deregulation and open competition, growth of electric revenues, changes in the economy of the Upper Midwest, governmental and regulatory action, fuel and purchased power costs, environmental issues, weather conditions, and other factors discussed under "Factors affecting future earnings" on pages 24-25 of the Company's 1999 Annual Report to Shareholders, which is incorporated by reference in the Company's Form 10-K for the fiscal year ended December 31, 1999. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement or contained in any subsequent filings by the Company with the Securities and Exchange Commission. Item 2. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations ------------------------- MATERIAL CHANGES IN FINANCIAL POSITION - -------------------------------------- Cash provided by operating activities of $17.7 million as shown on the Consolidated Statement of Cash Flows for the six months ended June 30, 2000, combined with cash on hand of $24.8 million as of December 31, 1999 allowed the Company to pay dividends, finance its capital expenditures and partially fund acquisitions. Net cash provided by operating activities decreased $19.5 million for the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. This decrease reflects the increase in accounts receivable due to increased sales, primarily within the plastics and electric segments, and changes in other working capital items. Most of the $35.8 million increase in net cash used in investing activities was due to the acquisitions. Net cash provided by financing activities increased by $30.8 million as a result of increased line of credit borrowings and debt to finance acquisitions. The Company and its subsidiaries have bank lines of credit totaling $59.0 million. As of June 30, 2000, $37.8 million was available in unused lines of credit, which could be used to supplement cash needs. The Company estimates that funds internally generated net of forecasted dividend payments, combined with funds on hand, will be sufficient to meet sinking fund payments on First Mortgage Bonds and preferred stock redemption requirements in the next five years and to provide for its estimated 2000-2004 consolidated capital expenditures. Additional short-term or long-term financing will be required in the period 2000-2004 in connection with the maturity of long-term debt, in the event the Company decides to refund or retire early any of its presently outstanding debt or cumulative preferred shares, to fund additional acquisitions, or for other corporate purposes. Diversified operations plant increased $12.7 million as a result of the acquisitions, purchases of tractors and trailers by the transportation company and increased investments in plant at the manufacturing and plastics companies. The $4.4 million increase in construction work in progress reflects the normal seasonal increase in work in progress at the electric utility. Goodwill associated with the acquisitions during 2000 is the reason for the $22.3 million increase in intangibles. Increased sales in the plastic, manufacturing and electric segments led to most of the $20.5 million increase in trade accounts receivable. The $7.5 million increase in inventory, materials and operating supplies is due to the build up of inventory within the manufacturing and plastics segments to meet increased sales offset by a decrease in the inventory within the health services segment. The $2.8 million decrease in accrued utility revenues reflects the reduction in unbilled utility revenues due to the seasonal change in weather. The timing of prepaid expenses in the manufacturing segment combined with an increase in prepaid expenses due to acquisitions led to a majority of the $3.0 million increase in other current assets. The $15.0 million increase in long-term debt, sinking fund requirements and current maturities primarily reflects the financing for acquisitions. Normal seasonal increases in credit line usage at the Company's plastics, manufacturing and construction subsidiaries led to the $21.1 million increase in short-term debt. The $2.6 million decrease in other taxes accrued is the result of the timing of property tax payments due in the second quarter, most of which are paid to the State of Minnesota. MATERIAL CHANGES IN RESULTS OF OPERATIONS - ----------------------------------------- Comparison of the Quarters Ended June 30, 2000 and 1999 ------------------------------------------------------- Consolidated Results -------------------- The Company recorded earnings per share of $0.36 for the quarter ended June 30, 2000 as compared to earnings per share of $0.28 for the quarter ended June 30, 1999. Total operating revenues were $133.7 million for the quarter ended June 30, 2000, up $21.3 million from the $112.4 million recorded for the quarter ended June 30, 1999. Operating income increased $3.1 million from $14.6 million reported for the second quarter of 1999 to $17.7 million for the second quarter of 2000. The favorable second quarter results can be primarily attributed to strong results in the electric and plastics segments. Electric Operations ------------------- Three months ended June 30, --------------- Percentage (in thousands) 2000 1999 change - -------------------------------------------------------------------- Operating revenues $58,443 $55,232 5.8 Production fuel 9,160 9,487 (3.4) Purchased power 12,690 11,473 10.6 Other operation and maintenance expenses 17,170 17,042 .8 Depreciation and amortization 5,530 5,442 1.6 Property taxes 2,637 2,802 (5.9) ------- ------- ------ Operating income $11,256 $ 8,986 25.3 ======= ======= ====== The increase in electric operating revenues for the quarter ended June 30, 2000, as compared to the same period in 1999, is due to a $1.8 million (4.5%) increase in retail revenue, an $882,000 (6.8%) increase in revenues from power pool sales and a $486,000 (27.0%) increase in other electric revenue. The increase in retail revenue is primarily the result of a 3.6% increase in retail kwh sales combined with a 1.0% increase in revenue per kwh sold. Small commercial and industrial customers reflected the greatest increase in retail kwh sales for the quarter. The slight increase in revenue per kwh sold is due to an increase in cost-of- energy revenues as compared to the prior year's quarter offset by the partial refund of fuel costs as part of the arbitration settlement as discussed above in the notes to consolidated financial statements. The recovery of fuel and purchased power costs through the cost-of-energy adjustment mechanism in retail rates lags two to four months behind the incurrance of those costs which gave rise to the increase in cost-of- energy revenues for the second quarter. The increase in revenues from power pool sales resulted from an 8.8% increase in revenue per kwh sold offset by a 4.9% decrease in kwh sold. Gross margins on power pool sales were 28.8% for the second quarter of 2000 as compared to 18.8% during 1999. The gross margin on power pool sales contributed $4.0 million to operating income for the quarter ended June 30, 2000 as compared to $2.4 million for the quarter ended June 30, 1999. The increase in other electric revenue primarily relates to the arbitration settlement. Production fuel expenses decreased in the three months ended June 30, 2000, as compared to the three months ended June 30, 1999, primarily due to the arbitration settlement. The cost of purchased power increased due to a $1.9 million increase in the cost of purchased power for system use offset by a $661,000 decrease in the cost of purchased power for resale. Generation at the Company's steam generating plants declined 3.7% in the second quarter of 2000 as compared to 1999, due to scheduled overhauls at two of the steam generating plants. Due to continued favorable investment results from the electric utility's funded pension plan, the Company recognized during the second quarter of 2000 a credit to expense of approximately $1.1 million for net periodic pension cost under Statement of Financial Accounting Standard No. 87 - Employers' Accounting for Pensions. In addition a credit of $1.0 million was recorded to other operation and maintenance expenses as part of the arbitration settlement that recovered previously recorded arbitration expenses. These credits to expense partially offset the increases in other electric operation and maintenance expenses primarily due to increased labor costs and plant maintenance expenses related to the scheduled overhauls. Plastics Operations ------------------- Three months ended June 30 ----------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 25,240 $ 8,393 200.7 Cost of goods sold 18,740 6,281 198.4 Operating expenses 2,432 1,039 134.1 -------- -------- --------- Operating income $ 4,068 $ 1,073 279.1 ======== ======== ========= The increases in operating revenues, cost of goods sold, operating expenses and operating income are primarily due to the added volume associated with the acquisition of Vinyltech on January 1, 2000. The increase in operating revenue also reflects a 52.5% increase in average sales price per pound of pipe and an increase in pounds of pipe sold at the Company's other PVC pipe plant. Health Services Operations -------------------------- Three months ended June 30, ----------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 15,036 $ 16,211 (7.2) Cost of goods sold 10,638 12,725 (16.4) Operating expenses 1,987 1,967 1.0 -------- -------- --------- Operating income $ 2,411 $ 1,519 58.7 ======== ======== ========= The primary reason for the decrease in Health Services operating revenues and cost of goods sold for the quarter ended June 30, 2000 as compared to the same quarter in 1999, was the decline in equipment installations between the periods combined with a 7.2% decrease in the number of imaging scans performed this quarter as compared to the previous year's quarter. The average fee per scan remained basically unchanged between the periods. Manufacturing Operations ------------------------ Three months ended June 30, ----------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 16,583 $ 17,300 (4.1) Cost of goods sold 13,020 13,383 (2.7) Operating expenses 2,612 2,546 2.6 -------- -------- --------- Operating income $ 951 $ 1,371 (30.6) ======== ======== ========= The decrease in operating revenues was primarily caused by one of the Company's manufacturing subsidiaries due to the depressed agricultural economy. The decrease in operating revenues at this subsidiary was partially offset by increases at the other manufacturing subsidiaries. Cost of goods sold did not decrease proportionally to operating revenues due to tightening margins at the metal parts stamping companies. Other Business Operations ------------------------- Three months ended June 30, ----------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 18,427 $ 15,261 20.7 Cost of goods sold 9,635 9,475 1.7 Operating expenses 9,749 4,131 136.0 -------- -------- --------- Operating (loss ) $ (957) $ 1,655 -- ======== ======== ========= The primary reason for the increase in Other Business operating revenues for the quarter ended June 30, 2000, as compared to the same quarter in 1999, is the acquisition of a transportation company in September 1999. The increase in operating expenses is due to the acquisition of the transportation company and an increase in unallocated corporate administrative and general expenses. Offsetting these revenue and expense increases is the absence of the operations in 2000 related to the radio stations, which were sold in October 1999 and a decrease in operating income from the Company's construction subsidiaries due to lower volumes of contract work between the quarters. Other Income and Deductions, Interest Charges, and Income Taxes --------------------------------------------------------------- For the three months ended June 30, 2000, as compared to the same period in 1999, the majority of the $206,000 (65.0%) increase in other income and deductions is due to the awarding of Minnesota Conservation Improvement Program (CIP) financial incentives. The $561,000 (15.0%) increase in interest charges is due to an increase in long-term debt, higher average borrowing levels under the line of credit and higher interest rates on the line of credit between the periods. The increase in income taxes of $756,000 (18.7%) for the quarter ended June 30, 2000, as compared to the quarter ended June 30, 1999 is primarily due to the $2.8 million (24.7%) increase in income before taxes for the same comparable periods. Comparison of the Six Months Ended June 30, 2000 and 1999 --------------------------------------------------------- Consolidated Results -------------------- The Company recorded earnings per share of $0.78 for the six months ended June 30, 2000 as compared to earnings per share of $0.64 for the six months ended June 30, 1999. Total operating revenues were $268.5 million for the six months ended June 30, 2000, up $44.6 million from the $223.9 million recorded for the six months ended June 30, 1999. Operating income increased $5.2 million from $32.3 million for the first half of 1999 to $37.5 million for the first half of 2000. Increased demand in the PVC pipe industry combined with the Company's January acquisition of Vinyltech more than offset the reduction in the operating income for manufacturing, health services and other business operations segments. Electric Operations ------------------- Six months ended June 30, --------------------- Percentage (in thousands) 2000 1999 change - ---------------------------------------------------------------------- Operating revenues $119,745 $117,951 1.5 Production fuel 17,581 19,251 (8.7) Purchased power 26,611 23,365 13.9 Other operation and maintenance 34,425 34,793 (1.1) expenses Depreciation and amortization 11,052 10,864 1.7 Property taxes 5,277 5,656 (6.7) -------- -------- ------- Operating income $ 24,799 $ 24,022 3.2 ======== ======== ======= The increase in electric operating revenues for the six months ended June 30, 2000, as compared to the same period in 1999, is due to a $1.5 million (1.7%) increase in retail revenue combined with a $586,000 (17.3%) increase in other electric revenue offset by a decrease of $344,000 (1.5%) in revenues from power pool sales. A 2.8% increase in retail kwh sales reduced by the partial refund of fuel costs as part of the arbitration settlement led to the increase in retail revenues. The increases in retail kwh sales came from the small commercial and industrial category. The increase in other electric revenue relates to the arbitration settlement combined with an increase in contract work done for other utilities. The decrease in revenues from power pool sales is due to a 9.3% decrease in kwh sold partially offset by an 8.6% increase in revenue per kwh sold. Even though the quantity of power pool sales was lower for the six months ended June 30, 2000 compared to the same period in 1999, the gross margins on power pool sales increased from 15.2% to 23%. The increase in the gross margins was due to the increase in revenue per kwh sold combined with a reduction in cost of power sold. The gross margins on power pool sales contributed $5.2 million to operating income for the six months ended June 30, 2000 as compared to $3.5 million for the six months ended June 30, 1999. Production fuel expenses decreased during the six months ended June 30, 2000, as compared to the same period in the prior year, primarily due to an 11.0% reduction in generation at the Company's plants due to maintenance outages. The cost of purchased power increased due to a $5.3 million increase in the cost of purchased power for system use offset by a $2.1 million decrease in the cost of purchased power for resale. The increase in purchased power for system use was to supplement the decrease in Company generation. During the first six months of 2000 other electric operation and maintenance expenses reflect a credit of approximately $2.2 million for net periodic pension cost. In addition other electric operation and maintenance expenses reflects a credit of $1.0 million as part of the arbitration settlement that recovered previously recorded arbitration expenses. These credits to expense offset increases in other electric operation and maintenance expenses, primarily increased labor costs and plant maintenance costs due to scheduled overhauls. Plastics Operations ------------------- Six months ended June 30 ------------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 51,603 $ 13,548 280.9 Cost of goods sold 38,035 10,478 263.0 Operating expenses 4,750 1,728 174.9 -------- -------- --------- Operating income $ 8,818 $ 1,342 557.1 ======== ======== ========= The acquisition of Vinyltech on January 1, 2000 is the primary driver behind the increases in operating revenues, cost of goods sold, operating expenses and operating income for the six months ended June 30, 2000 as compared to the same period in 1999. Strong demand within the PVC pipe industry also led to increased pipe sales at the Company's other pipe subsidiary. The average sales price per pound of pipe between the periods also increased 53.8%. Health Services Operations -------------------------- Six months ended June 30, ------------------------ Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 31,681 $ 33,833 (6.4) Cost of goods sold 24,016 26,261 (8.5) Operating expenses 4,206 4,040 4.1 -------- -------- --------- Operating income $ 3,459 $ 3,532 (2.1) ======== ======== ========= Operating revenues and cost of goods sold decreased for the six months ended June 30, 2000 as compared to the six months ended June 30, 1999 due to the decline in equipment installations between the periods. Offsetting slightly the decline in equipment installations was a 5.4% increase in the number of imaging scans performed. The increase in the number of scans completed is due to the addition of more routes. The average fee per scan remained consistent between the two periods. Manufacturing Operations ------------------------ Six months ended June 30, ------------------------ Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 30,523 $ 30,885 (1.2) Cost of goods sold 23,469 23,660 (0.8) Operating expenses 5,429 5,062 7.3 -------- -------- --------- Operating income $ 1,625 $ 2,163 (24.9) ======== ======== ========= The depressed agricultural economy is responsible for the overall decline in manufacturing operating income for the six months ended June 30, 2000 as compared to the same period in the prior year. Increased operating income for the manufacturing subsidiaries involved in metal stamping and the production of products for the auto body industry helped to offset the overall decline in operating income. Volume increases in sales are responsible for the increase in operating income at the metal stamping subsidiary and an increase in the average sales price per unit in the product produced for the auto body industry led to the increase in operating income for that subsidiary. Other Business Operations ------------------------- Six months ended June 30, ----------------------- Percentage (in thousands) 2000 1999 change - ------------------------------------------------------------ Operating revenues $ 34,932 $ 27,665 26.3 Cost of goods sold 18,266 18,177 0.5 Operating expenses 17,867 8,255 116.4 -------- -------- --------- Operating (loss) income $ (1,201) $ 1,233 -- ======== ======== ========= The primary reason for the increase in Other Business operating revenues for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999, is the acquisition of a transportation company in September 1999. The increase in operating expense is due to the acquisition of the transportation company and an increase in unallocated corporate administrative and general expenses. Partially offsetting these revenue and expense increases is the absence of operations in 2000 related to the radio stations, which were sold in October 1999. Other Income and Deductions, Interest Charges, and Income Taxes --------------------------------------------------------------- For the six months ended June 30, 2000, as compared to the same period in 1999, other income and deductions increased $535,000 (79.6%) as a result of increased investment income and the awarding of CIP financial incentives. The $897,000 (12.2%) increase in interest charges is due to an increase in long-term debt, higher average borrowing levels under the line of credit and higher interest rates on the line of credit between the periods. The increase in income taxes of $1.7 million (18.0%) for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999 is primarily due to the $4.8 million (18.9%) increase in income before taxes for the same comparable periods. Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The Company does not have material market risk exposure related to foreign currency exchange rate risk, commodity price risk or interest rate risk. PART II. OTHER INFORMATION -------------------------- Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- The annual meeting of Shareholders of the Company was held on April 10, 2000, for the purpose of electing three nominees to the Board of Directors with terms expiring in 2003 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 9,783,729 117,790 Maynard D. Helgaas 9,794,408 107,111 Robert N. Spolum 9,801,348 100,171 Shares Shares Shares Approval of Auditors Voted For Voted Against Voted Abstain -------------------- --------- ------------- ------------- Deloitte & Touche LLP 9,732,657 65,375 103,487 Item 6. Exhibits and Reports on Form 8-K. --------------------------------- a) Exhibits: 10 Deferred Compensation Plan for Directors, as amended and restated, June 21, 2000. 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, 2000. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OTTER TAIL POWER COMPANY By: /S/John Erickson -------------------------------- John Erickson Executive Vice President, Chief Financial Officer, and Treasurer (Chief Financial Officer/Authorized Officer) Dated: August 11, 2000 --------------- EX-10 2 0002.txt EXHIBIT 10 OTTER TAIL POWER COMPANY DEFERRED COMPENSATION PLAN FOR DIRECTORS As Amended and Restated June 21, 2000 TABLE OF CONTENTS Page Number ------ 1. PURPOSE 1 2. PLAN PERIODS 1 3. ADMINISTRATION 1 4. PARTICIPATION 1 5. DEFERRED COMPENSATION ACCOUNTS 2 6. PAYMENT 4 7. ASSIGNMENT 7 8. TERMINATION AND AMENDMENT 8 SCHEDULE A SCHEDULE B OTTER TAIL POWER COMPANY DEFERRED COMPENSATION PLAN FOR DIRECTORS As Amended and Restated June 21, 2000 1. PURPOSE. The Plan is designed to provide a method of deferring payment to non-employee Directors of all or part of their retainer and/or meeting fees, as fixed from time to time by the Board of Directors, until termination of their services on the Board. 2. PLAN PERIODS. The first Plan Period shall commence upon the election of Directors at the 1984 Annual Stockholders' Meeting and terminate on December 31, 1984. An additional Plan Period will commence on July 1, 2000 and continue through December 31, 2000 for which a Director may elect to defer all or part of his or her retainer and/or meeting fees for that period in the form of restricted stock units, as provided in Section 5 hereof. Subsequent Plan Periods shall relate to successive calendar years. 3. ADMINISTRATION. The Plan shall be administered by a committee of the Board of Directors designated by the Board to administer the Plan (the "Committee"). The Committee shall be composed solely of two or more "Non-Employee Directors," within the meaning of Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934. The Committee shall have the power to interpret the Plan and, subject to its provisions, to make all determinations necessary or desirable for the Plan's administration. 4. PARTICIPATION. (a) An individual who serves as Director and is not otherwise employed by the Company or any of its subsidiaries shall be eligible to participate in the Plan if the Director elects to have payment of his or her retainer and/or meeting fees in respect of a Plan Period deferred as provided herein. (b) The election shall be made by written notice on Schedule A to the Plan filed with the Committee prior to the first day of such Plan Period or, in the case of a Director who first becomes eligible during a Plan Period, not later than 30 days after the Director first becomes eligible. In the case of a Director who first becomes eligible during a Plan Period, the election to participate shall apply only to compensation subsequent to making the election. Each such election shall be irrevocable. An election on Schedule A shall remain in effect until changed or rescinded. Prior to the beginning of any subsequent Plan Period, a Participant may irrevocably elect in writing, by completing a new Schedule A, to change an earlier election. Such new election shall become effective on the first business day of the Plan Period following receipt by the Committee of the new Schedule A. Notwithstanding the foregoing, a Participant may elect, prior to July 1, 2000, to convert all or part of his or her Deferred Cash Account into the Deferred Stock Account, as such Accounts are described in Section 5 below. The number of whole and fractional restricted stock units (computed to four decimal places) shall be determined as of July 3, 2000 by dividing the amount of the Deferred Cash Account to be converted by the average of the high and low sale prices of a Common Share of Otter Tail Power Company as reported on the NASDAQ National Market System on July 3, 2000. 5. DEFERRED COMPENSATION ACCOUNTS. (a) An account shall be established for each eligible, electing Director (a "Participant") which shall be designated as the Participant's Deferred Compensation Account. A Participant's Deferred Compensation Account shall include a Deferred Cash Account and/or a Deferred Stock Account. The Deferred Cash Account means the bookkeeping account of this Plan to which a Participant's deemed cash allocations are credited and the Deferred Stock Account means the bookkeeping account of this Plan to which a Participant's deemed restricted stock unit allocations are credited pursuant to this Plan. If a Participant elects to have payment deferred of his or her retainer and/or meeting fees, the amount of the retainer and/or meeting fees payable with respect to a Plan Period shall be credited, (i) in monthly installments as of the last day of each month in the Plan Period to which such retainer and/or meeting fees relate, for amounts credited to the Participant's Deferred Cash Account and (ii) in quarterly installments as of the last day of each calendar quarter in the Plan Period to which such retainer and/or meeting fees relate, for amounts credited to the Participant's Deferred Stock Account, subject to the provisions of Section 5(d). The Company shall not be required to segregate any amounts credited to the Deferred Compensation Accounts, which shall be established merely as an accounting convenience. Amounts credited to the Deferred Compensation Accounts shall at all times remain solely the property of the Company subject to the claims of its general creditors and available for the Company's use for whatever purpose desired. (b) The amounts credited to a Deferred Cash Account shall, in order to alleviate the adverse effects of an inflationary economy, accrue interest each month at an annual rate equal to the rate charged for prime commercial loans of 90-day maturity (based on actual numbers of days, 360 days to the year), plus 1% as of the last business day of the month. Such interest shall be computed on the average daily balance in the Deferred Cash Account during such month and shall be credited to such Account and compounded as of the last day of such month. Interest shall continue to accrue and be compounded on the unpaid balance in the Deferred Cash Account until such Account is fully distributed. (c) The amounts credited to a Deferred Stock Account shall be credited in the form of restricted stock units as of the last day of the calendar quarter. The number of whole and fractional restricted stock units (computed to four decimal places) credited to the Account shall be determined by dividing the amount deferred to the Deferred Stock Account during the quarter by the average of the high and low sale prices of a Common Share of Otter Tail Power Company as reported on the NASDAQ National Market System on the last business day of the quarter. At such times as cash dividends are declared by the Company on its outstanding Common Shares, an amount shall be credited to the Participant's Deferred Stock Account on the record date for such dividend equal to the amount of dividends that would be paid if the restricted stock units (including a fractional unit) were outstanding Common Shares on such date ("Dividend Equivalents"). At the end of the calendar quarter in which such Dividend Equivalents are credited to the Participant's Deferred Stock Account, the Dividend Equivalents shall be converted to additional whole and fractional restricted stock units (computed to four decimal places) in an amount determined by dividing the amount of the Dividend Equivalents by the average of the high and low sale prices of a Common Share of the Company as reported on the NASDAQ National Market System on the last business day of the quarter. In the event of a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Shares or other securities of the Company, issuance of warrants or other rights to purchase Common Shares or other securities of the Company or other similar corporate transaction or event that affects the Common Shares, the Committee shall make such adjustments as it deems appropriate in the number of restricted stock units credited to a Participant's Deferred Stock Account in order to prevent dilution or enlargement of the Participant's benefits under the Plan. (d) If, prior to the end of a Plan Period, a Participant becomes an employee of the Company or one of its subsidiaries or dies or ceases for any reason to be a Director, or if the effective date of participation by a Participant for any Plan Period shall be other than the first day thereof, the Participant will be entitled to be credited with that proportion of the annual retainer for the full Plan Period which the number of days of his or her participation in the Plan during such Plan Period bears to the total number of days in such Plan Period. 6. PAYMENT. (a) Following termination of a Participant's service on the Board, the Company shall distribute the entire amount accumulated in the Participant's Deferred Compensation Account. (b) By written notice on Schedule A to the Plan filed with the Committee, a Participant may elect to have distribution of his or her Deferred Cash Account commence either (i) within 30 days after the date the Participant ceases to be a Director of the Company, (ii) 12 months after the Participant ceases to be a Director of the Company, or (iii) 24 months after the Participant ceases to be a Director of the Company. Any such election, or any change in such election (by such subsequent written notice to the Committee), shall apply only to future deferrals. In the event no election is made as to the commencement of a distribution, such distribution shall commence within 30 days after the date the Participant ceases to be a Director of the Company. The actual date that distribution shall commence shall be a date within the appropriate period determined by the Committee in its sole discretion. (c) By written notice on Schedule A to the Plan filed with the Committee, a Participant may choose to receive the distribution of his or her Deferred Cash Account in the form of (i) one lump-sum payment or (ii) monthly distributions over a period selected by the Participant of up to 10 years. In the event a lump-sum payment is made under the Plan, the amount then standing to the Participant's credit in his or her Deferred Cash Account, including interest at the rate provided in Section 5(b) to the date of distribution, shall be paid to the Participant on the date determined under Section 6(b). In the case of a distribution over a period of years, the Company shall pay to the Participant, commencing on the date determined under Section 6(b), monthly installments from the amount then standing to the Participant's credit in his or her Deferred Cash Account, including interest on the unpaid balance at the rate provided in Section 5(b) to the date of distribution. The amount of each installment shall be determined by dividing the then unpaid balance, plus accrued interest, in the Participant's Deferred Cash Account by the number of installments remaining to be paid. If a Participant does not make a choice as to the manner of distribution of his or her Deferred Cash Account, such distribution shall be made in the form of monthly installments paid over a five-year period. Notwithstanding the above and subject to approval by the Committee, a Participant may at any time request, by written notice to the Committee, to have the monthly payments scheduled to be made to him or her within a tax year paid to him or her in one installment within such year. (d) Distributions from the Deferred Stock Account shall be in Common Shares of the Company. The Common Shares available for issuance under this Plan shall be issued under, and in accordance with the terms of, the Otter Tail Power Company 1999 Stock Incentive Plan. Upon distribution, one Common Share shall be issued for each restricted stock unit, except that no fractional shares shall be issued, and the Participant shall receive a cash payment in lieu of any fractional share. By written notice on Schedule A to the Plan filed with the Committee, a Participant may elect to have a distribution of his or her Deferred Stock Account to be made (i) within 30 days after the date the Participant ceases to be a Director of the Company, (ii) 12 months after the Participant ceases to be a Director of the Company or (iii) 24 months after the Participant ceases to be a Director of the Company. Any such election, or any change in such election (by subsequent written notice to the Committee), shall apply only to future deferrals. In the event no election is made as to the timing of the distribution, such distribution shall be within 30 days after the date the Participant ceases to be a Director of the Company. The actual date of the distribution shall be a date within the appropriate period determined by the Committee in its sole discretion. A distribution from a Participant's Deferred Stock Account shall be in one lump-sum payment, and a certificate representing the Common Shares shall be delivered to the Participant or the Participant's Beneficiary, as the case may be, along with cash in payment of any fractional share. The value of the fractional share shall be based upon the average of the high and low sale prices of a Common Share of the Company as reported on the NASDAQ National Market System on the business day preceding the distribution date. The Participant or the Participant's Beneficiary, as the case may be, shall have no rights as a holder of Common Shares unless and until a certificate for the shares is issued by the Company. (e) In the event of a Participant's death, the balance of a Participant's Deferred Cash Account shall be distributed to the Participant's Beneficiary(ies) over a period of not more than five years, in accordance with the Participant's choice on Schedule B to the Plan filed with the Committee. Such distribution shall be made in a manner consistent with Section 6(c) of the Plan and shall commence within 30 days after the Participant's death, on a date within such month to be determined by the Committee in its sole discretion. Additional annual payments for distributions made over a period of more than one year shall be made on the yearly anniversaries of such date. In the event of a Participant's death after distribution of the Deferred Cash Account has commenced, any choice under this Section 6(d) shall not extend the time of payment of the Participant's Deferred Cash Account beyond the time when distribution would have been completed if the Participant had lived. A Participant may change Beneficiary designations by filing a subsequent Schedule B with the Committee. If a Participant does not make a choice as to the manner of distribution of his or her Deferred Cash Account in the event of death, any such distribution shall be made as a lump-sum payment to his or her estate within 30 days after the Participant's death. (f) In the event of a Participant's death, the balance of a Participant's Deferred Stock Account shall be distributed to the Participant's Beneficiary(ies) in one lump-sum payment within 30 days after the Participant's death, on a date within such month to be determined by the Committee in its sole discretion, in accordance with the provisions of Section 6(d) of the Plan. (g) Notwithstanding any other provision of the Plan, if the Committee shall determine in its sole discretion that the time of payment of a Participant's Deferred Compensation Account should be advanced because of protracted illness or other undue hardship, then the Committee may advance the time or times of payment (whether before or after the Director's retirement date) only if the Committee determines that an emergency beyond the control of the Participant exists and which would cause such Participant severe financial hardship if the payment of such benefits were not approved. Any such distribution for hardship shall be limited to the amount needed to meet such emergency. A Participant who receives a hardship distribution may not reenter the Plan for 12 months after the date of such distribution. Any distribution for hardship under this Section 6(g) shall commence or be made within 30 days after the Committee determines to make such hardship distribution. 7. ASSIGNMENT. No benefit under the Plan shall in any manner or to any extent be assigned, alienated, or transferred by any Participant or Beneficiary or subject to attachment, garnishment, or other legal process. 8. TERMINATION AND AMENDMENT. The Committee may terminate the Plan at any time so that no further amounts shall be credited to Deferred Compensation Accounts or may, from time to time, amend the Plan, without the consent of Participants or Beneficiaries; provided, however, that no such amendment or termination shall impair any rights which have accrued under the Plan. OTTER TAIL POWER COMPANY DEFERRED COMPENSATION PLAN FOR DIRECTORS As Amended and Restated June 21, 2000 ONE-TIME ELECTION TO CONVERT AMOUNTS IN DEFERRED CASH ACCOUNT TO DEFERRED STOCK ACCOUNT SECTION 1. CONVERSION ELECTION. I hereby irrevocably elect to convert___________% of the amount in my Deferred Cash Account to the Deferred Stock Account, in accordance with the terms of the Otter Tail Power Company Deferred Compensation Plan for Directors, As Amended and Restated June 21, 2000. I understand that, in accordance with Section 4(b) of the Plan, as of July 3, 2000, whole and fractional restricted stock units (computed to four decimal places) will be credited to my Deferred Stock Account in an amount determined by dividing the amount of cash to be converted by the average of the high and low sale prices of a Common Share of Otter Tail Power Company as reported on the NASDAQ National Market on July 3, 2000. I understand that no actual shares will be issued in my name until I receive a distribution from the Plan and, until such time, my Deferred Stock Account will be credited with Dividend Equivalents, which will be converted into additional restricted stock units, as described in the Plan. I further understand that the distribution from my Deferred Stock Account will be made in a lump-sum payment in the form of Common Shares of Otter Tail Power Company. SECTION 2. TIMING OF DISTRIBUTION. I hereby irrevocably elect, in accordance with the terms of the Plan, to have the distribution from my Deferred Stock Account to be made as follows: _____within 30 days after I cease to be a Director of the Company _____12 months after I cease to be a Director of the Company _____24 months after I cease to be a Director of the Company I understand that if no election is made, my distribution will be made within 30 days after I cease to be a Director of the Company. I further understand that the above election as to the timing of the distribution will not take effect until January 1, 2001, and that if I cease to be a Director prior to that date, my distribution will be made in Common Shares of Otter Tail Power Company in one lump-sum payment within 30 days, 12 months or 24 months after I cease to be a Director, whichever period or date is in accordance with my prior election under the Plan as to the commencement of my distribution. SECTION 3. SIGNATURE. I understand that the above elections are subject to the terms of the Plan. I acknowledge receipt of a copy of the Plan. I certify that my elections are not being made in reliance upon any financial or tax advice given by the Company. I understand that I should consult my own tax advisor as to the tax consequences of my elections. - ------------------------- ------------------------- Witness Participant's Signature June______, 2000 SCHEDULE A IRREVOCABLE ELECTION under the Otter Tail Power Company Deferred Compensation Plan for Directors As Amended and Restated June 21, 2000 THIS IRREVOCABLE ELECTION is being made pursuant to the Otter Tail Power Company Deferred Compensation Plan for Directors, As Amended and Restated June 21, 2000 (the "Plan"). Any election under any Section specified below which changes a prior election under the Plan shall apply only to subsequent Plan Periods, as defined in the Plan. Terms used herein shall have the meanings given to them in the Plan. SECTION 1. DEFERRAL ELECTION. I hereby irrevocably elect to defer receipt of all or part of my retainer and/or meeting fees pursuant to the terms of the Plan and this Irrevocable Election, as indicated below: _____ % of retainer _____ % of meeting fees SECTION 2. FORM OF PAYMENT. I hereby irrevocably elect to receive payment of the amounts deferred in accordance with my election above and the terms of the Plan, in the form indicated below: _____ Cash _____ Common Shares of Otter Tail Power Company. I understand that no actual shares will be issued in my name until I receive a distribution from the Plan and, until such time, my Deferred Stock Account will be credited with restricted stock units and Dividend Equivalents, which will be converted into additional restricted stock units, as described in the Plan. SECTION 3. TIMING OF DISTRIBUTION. I hereby irrevocably elect, in accordance with the terms of the Plan, to have the distribution from my Deferred Cash Account and/or Deferred Stock Account to commence or be made as follows: _____ within 30 days after I cease to be a Director of the Company _____ 12 months after I cease to be a Director of the Company _____ 24 months after I cease to be a Director of the Company I understand that if no election is made, my distribution will commence or be made within 30 days after I cease to be a Director of the Company. I further understand that payment from my Deferred Stock Account, if any, will be in the form of Common Shares of the Company and will be made only in one lump-sum payment. SECTION 4. NUMBER OF DISTRIBUTIONS FROM DEFERRED CASH ACCOUNT. Note: This election applies only to cash distributions under the Plan from my Deferred Cash Account, if any. I hereby elect, in accordance with the terms of the Plan, to receive my cash distributions from my Deferred Cash Account under the Plan, as indicated below: _____ In one lump sum _____ In monthly installments over a period of years (not to exceed 10 years). I understand that if no election is made, my cash distribution will be made in monthly installments over a period of five years. SECTION 5. SIGNATURE. I understand that the above elections are subject to the terms of the Plan. I acknowledge receipt of a copy of the Plan. I certify that my elections are not being made in reliance upon any financial or tax advice given by the Company. I understand that I should consult my own tax advisor as to the tax consequences of my elections. - ------------------------- ------------------------- Witness Participant's Signature ------------------------- Date SCHEDULE B OTTER TAIL POWER COMPANY DEFERRED COMPENSATION PLAN FOR DIRECTORS As Amended and Restated June 21, 2000 SECTION 1. METHOD OF DISTRIBUTION IN CASE OF DEATH. Deferred Cash Account. In case of my death, I hereby elect, in accordance with the terms of the Plan, to have the distribution of my Deferred Cash Account, if any, paid over a period of _____ year(s) (not to exceed five years) to my Beneficiary(ies) designated in Section 2 hereof. I understand that if no election is made, a lump-sum payment will be made to my Beneficiary(ies) or estate within 30 days of my death. Deferred Stock Account. In case of my death, I hereby elect, in accordance with the terms of the Plan, to have the distribution from my Deferred Stock Account, if any, paid to my Beneficiary(ies) designated in Section 2 hereof. I understand that any payments from my Deferred Stock Account will be in the form of Common Shares of Otter Tail Power Company and will be made in a lump sum to my Beneficiary(ies) or estate within 30 days of my death, in accordance with the terms of the Plan. SECTION 2. DESIGNATION OF BENEFICIARY(IES). In the event of my death, I hereby designate the following individuals, fiduciaries or other entities, either in their own right or in their representative capacity, in the proportions and in the priority of interest designated, to be the beneficiaries of any benefits owing to me, under the Plan. PRIMARY BENEFICIARIES - The following beneficiary(ies) shall receive all benefits payable under the Plan in the event of my death in the proportions designated hereunder. If any one or more of the primary beneficiaries designated hereunder shall predecease me, such beneficiary's share(s) shall be divided equally among the remaining primary beneficiaries. NAME AND PRESENT ADDRESS PROPORTIONATE OF PRIMARY INTEREST OF PRIMARY RELATIONSHIP BENEFICIARY(IES) BENEFICIARY(IES) TO EMPLOYEE - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------------- Date Participant's Initials SECONDARY BENEFICIARIES - The following beneficiary(ies) shall receive all benefits payable under the Plan in the event of my death in the proportions designated hereunder only if all of my Primary Beneficiaries have predeceased me. If all Primary Beneficiaries have predeceased me and if any one or more of the Secondary Beneficiaries designated hereunder shall predecease me, such Secondary Beneficiary's share(s) shall be divided equally among the Secondary Beneficiaries. PROPORTIONATE NAME AND PRESENT ADDRESS INTEREST OF OF SECONDARY SECONDARY RELATIONSHIP BENEFICIARY(IES) BENEFICIARY(IES) TO EMPLOYEE - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- - ------------------------- ------------------% ------------- ESTATE - In the event I have declined to designate a Beneficiary hereunder or if all of the Beneficiaries that I have designated predecease me, then all benefits payable under the Plan shall be payable to my Estate. - ------------------------- ------------------------- Witness Participant's Signature ------------------------- Date EX-27 3 0003.txt
UT EXHIBIT 27 This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of June 30, 2000, and the Consolidated Statement of Income for the six months ended June 30, 2000, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-2000 JUN-30-2000 PER-BOOK 447,081 136,057 132,845 7,582 0 723,565 119,250 (226) 133,136 252,160 18,000 15,500 188,875 21,137 0 0 8,508 0 0 0 219,385 723,565 268,484 10,886 230,984 241,870 26,614 1,207 27,821 8,244 19,577 939 18,638 12,163 8,105 17,696 .78 .78
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