0000075129-95-000016.txt : 19950811 0000075129-95-000016.hdr.sgml : 19950811 ACCESSION NUMBER: 0000075129-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 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: 95560807 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 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-368 OTTER TAIL POWER COMPANY (Exact name of registrant as specified in its charter) Minnesota 41-0462685 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496 (Address of principal executive offices) (Zip Code) 218-739-8200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: August 1, 1995 - 11,180,136 Common Shares ($5 par value) OTTER TAIL POWER COMPANY INDEX Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1995 and December 31, 1994 (Unaudited) 2 & 3 Consolidated Statements of Income - Three and Six Months Ended June 30, 1995 and 1994 (Unaudited) 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1995 and 1994 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 & 8 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10
Part I. Financial Information Item 1. Financial Statements OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) -ASSETS- June 30, December 31, 1995 1994 (Thousands of Dollars) PLANT: Electric Plant in Service $703,538 $698,437 Other 44,997 36,221 _________ _________ Total 748,535 734,658 Less Accumulated Depreciation and Amortization 299,473 287,902 _________ _________ 449,062 446,756 Construction Work in Progress 16,266 10,485 _________ _________ Net Plant 465,328 457,241 _________ _________ INVESTMENTS AND OTHER ASSETS: 48,307 43,944 _________ _________ CURRENT ASSETS: Cash and Cash Equivalents 1,133 1,852 Temporary Cash Investments 357 391 Accounts Receivable: Trade - Net 28,858 27,004 Other 3,704 5,172 Materials and Supplies: Fuel 2,741 3,664 Inventory, Materials and Operating Supplies 18,494 15,794 Deferred Income Taxes 4,260 4,306 Accrued Utility Revenues 3,566 4,154 Other 4,282 3,041 _________ _________ Total Current Assets 67,395 65,378 _________ _________ DEFERRED DEBITS: Unamortized Debt Expense and Reacquisition Premiums 4,923 5,174 Other 5,646 7,235 _________ _________ Total Deferred Debits 10,569 12,409 _________ _________ TOTAL $591,599 $578,972 ========= ========= See Accompanying Notes to Consolidated Financial Statements
OTTER TAIL POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) -LIABILITIES- June 30, December 31, 1995 1994 (Thousands of Dollars) CAPITALIZATION: Common Shares, Par Value $5 Per Share - Authorized 25,000,000 Shares; Outstanding 1995 and 1994, 11,180,136 Shares $55,901 $55,901 Premium on Common Shares 30,335 30,335 Retained Earnings 94,054 90,412 _________ _________ Total 180,290 176,648 Cumulative Preferred Shares - Authorized 1,500,000 Shares Without Par Value; Outstanding 1995 and 1994, 388,311 Shares: Subject to Mandatory Redemption 18,000 18,000 Other 20,831 20,831 Cumulative Preference Shares - Authorized 1,000,000 Shares Without Par Value; Outstanding - None -- -- Long-Term Debt 167,656 162,196 _________ _________ Total Capitalization 386,777 377,675 _________ _________ CURRENT LIABILITIES: Short-Term Debt 7,150 2,900 Sinking Fund Requirements and Current Maturities 13,466 8,739 Accounts Payable 18,632 22,542 Federal and State Income Taxes Accrued 1,054 2,095 Other Taxes Accrued 8,937 11,712 Interest Accrued 3,501 3,524 Other 5,126 6,369 _________ _________ Total Current Liabilities 57,866 57,881 _________ _________ NONCURRENT LIABILITIES: 10,679 8,245 _________ _________ DEFERRED CREDITS: Accumulated Deferred Income Taxes 96,981 94,911 Accumulated Deferred Investment Tax Credit 21,584 22,171 Regulatory Liability 14,908 15,197 Other 2,804 2,892 _________ _________ Total Deferred Credits 136,277 135,171 _________ _________ TOTAL $591,599 $578,972 ========= ========= See Accompanying Notes to Consolidated Financial Statements
OTTER TAIL POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 (Thousands of Dollars) (Thousands of Dollars) OPERATING REVENUES Electric $47,906 $46,881 $103,632 $101,770 Health Services 9,775 11,021 24,883 21,941 Manufacturing 8,065 3,400 15,875 5,793 Diversified Operations 8,061 7,615 13,380 12,849 _________ _________ _________ _________ Total Operating Revenues 73,807 68,917 157,770 142,353 OPERATING EXPENSES Production Fuel 7,770 7,981 16,982 16,639 Purchased Power 7,724 7,404 15,504 14,117 Electric Operation Expenses 12,039 10,991 24,346 22,694 Electric Maintenance 2,829 3,920 5,783 6,957 Cost of Goods Sold 15,712 13,638 33,272 25,265 Other Nonelectric Expenses 7,239 5,659 14,690 11,041 Depreciation and Amortization 5,451 5,314 10,872 10,547 Property Taxes 2,956 2,955 6,012 5,937 Income Taxes 3,515 2,788 9,139 8,542 _________ _________ _________ _________ Total Operating Expenses 65,235 60,650 136,600 121,739 _________ _________ _________ _________ OPERATING INCOME 8,572 8,267 21,170 20,614 Allowance For Equity (Other) Funds Used During Construction 4 36 6 67 Other Income and Deductions and Applicable Taxes 374 391 173 703 _________ _________ _________ _________ INCOME BEFORE INTEREST CHARGES 8,950 8,694 21,349 21,384 Interest Charges 3,668 3,311 7,402 6,659 Allowance For Borrowed Funds Used During Construction - Credit (55) (14) (97) (28) _________ _________ _________ _________ NET INCOME 5,337 5,397 14,044 14,753 Preferred Dividend Requirements 590 589 1,179 1,179 _________ _________ _________ _________ EARNINGS AVAILABLE FOR COMMON SHARES $4,747 $4,808 $12,865 $13,574 ========= ========= ========= ========= Earnings Per Average Common Share $0.42 $0.43 $1.15 $1.21 ========= ========= ========= ========= Average Number of Common Shares Outstanding 11,180,136 11,180,136 11,180,136 11,180,136 Dividends Per Common Share $0.44 $0.43 $0.88 $0.86 See Accompanying Notes to Consolidated Financial Statements
OTTER TAIL POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1995 1994 ________ ________ (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $14,044 $14,753 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 14,098 12,603 Deferred Investment Tax Credit - Net (588) (616) Deferred Income Taxes 534 1,187 Change in Deferred Debits and Other Assets 2,566 1,117 Change in Noncurrent Liabilities and Deferred Credits 2,346 785 Allowance for Equity (Other) Funds Used During Construction (6) (67) Loss on Disposal of Noncurrent Assets 795 68 Cash Provided by (Used for) Current Assets & Current Liabilities: Change in Receivables, Materials and Supplies 2,259 (5,004) Change in Other Current Assets (598) 990 Change in Payables and Other Current Liabilities (7,676) (4,034) Change in Interest and Income Taxes Payable (1,153) 1,804 ________ ________ Net Cash Provided by Operating Activities 26,621 23,586 CASH FLOWS FROM INVESTING ACTIVITIES: Gross Capital Expenditures (17,708) (16,169) Proceeds from Disposal of Noncurrent Assets 1,635 1,579 Purchase of Subsidiaries, Net of Cash Acquired (1,634) (574) Change in Temporary Cash Investments 34 122 Change in Marketable Securities and Other Investments (3,121) (618) ________ ________ Net Cash Used in Investing Activities (20,794) (15,660) CASH FLOWS FROM FINANCING ACTIVITIES: Change in Short-Term Debt - Net Issuances 4,250 800 Proceeds from Issuance of Long-Term Debt 23,380 2,917 Payments for Retirement of Long-Term Debt (23,158) (3,072) Payments for Debt Issuance Expenses -- (56) Dividends Paid (11,018) (10,794) ________ ________ Net Cash Used in Financing Activities (6,546) (10,205) Net Change in Cash and Cash Equivalents (719) (2,279) Cash and Cash Equivalents at Beginning of Year 1,852 3,808 ________ ________ Cash and Cash Equivalents at June 30 $1,133 $1,529 ======== ======== Supplemental Cash Flow Information Cash Paid for Interest and Income Taxes: Interest $6,486 $6,458 Income Taxes $9,590 $6,630 See Accompanying Notes to Consolidated Financial Statements
OTTER TAIL POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Company, in its opinion, has included all adjustments (including normal recurring accruals) necessary for a fair presentation of the results of operations for the periods. The financial statements for 1995 are subject to adjustment at the end of the year when they will be audited by independent accountants. The financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 31, 1994, 1993, and 1992 included in the Company's 1994 Annual Report to the Securities and Exchange Commission on Form 10-K. In January 1995 the Company acquired an additional manufacturing business and three small diagnostic imaging companies. The total revenues of these companies were $17,122,000 in 1994. These acquisitions were accounted for under the purchase method of accounting. In June of 1995, the original ten-year terms of the steam sales contracts between the Company's subsidiary, Quadrant Co., and Quadrant's two industrial steam customers expired. The contracts provide that they shall continue to remain in effect until terminated by either party upon one year's prior written notice. As of August 1, 1995, none of the parties had provided notice of termination. Quadrant is in the process of negotiating new steam sales contracts with these two customers while continuing to sell steam under terms of the original contracts The breakdown of Cost of Goods Sold and Other Nonelectric Expenses by business segments are as follows: Three Months Ended June 30 Cost of Goods Sold Other Nonelectric Expenses 1995 1994 1995 1994 (in thousands) Health Services $5,399 $7,077 $3,833 $3,401 Manufacturing 5,894 2,315 1,125 280 Diversified Operations 4,419 4,246 2,281 1,978 -------- -------- ------- ------- Total $15,712 $13,638 $7,239 $5,659 ======== ======== ======= ====== Six Months Ended June 30 Cost of Goods Sold Other Nonelectric Expenses 1995 1994 1995 1994 (in thousands) Health Services $14,678 $13,901 $8,120 $6,625 Manufacturing 12,119 4,101 2,135 535 Diversified Operations 6,475 7,263 4,435 3,881 -------- -------- ------- ------- Total $33,272 $25,265 $14,690 $11,041 ======== ======== ======= ======= Because of seasonal and other factors, the earnings for the three-month and six-month periods ended June 30, 1995, should not be taken as an indication of earnings for all or any part of the balance of the year. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Material Changes in Financial Position Cash provided by operating activities of $26,621,000 as shown on the Consolidated Statement of Cash Flows for the six months ended June 30, 1995, combined with funds on hand of $2,243,000 at December 31, 1994, allowed the Company to pay dividends, invest in additional nonutility businesses and passive investments, and finance the majority of its construction expenditures. At June 30, 1995, the Company had $36,140,000 available in unused lines of credit and $17,742,000 in marketable securities included in Investments and Other Assets which could be used to supplement cash needs. Proceeds from Issuance of Long-Term Debt and Payments for Retirement of Long-Term Debt for the six months ended June 30, 1995, reflect refinancing activity by the Company's subsidiaries. The Company estimates that funds internally generated, combined with funds on hand, will be sufficient to meet all sinking fund payments for First Mortgage Bonds in the next five years and to provide for most of its 1995-1999 construction program expenditures (including allowance for funds used during construction). Additional short- or long-term financing will be required in the period 1995-1999 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, complete its common stock repurchase program or for other corporate purposes. The bulk of the increases in Plant - Other, Investments and Other Assets, Accounts Receivable - Trade, Inventory, Materials and Operating Supplies, Long-Term Debt, and Sinking Fund Requirements and Current Maturities are due to the acquisitions of an additional manufacturing company and three small diagnostic imaging companies in the first quarter of fiscal 1995. In addition, Investments and Other Assets also increased because of further passive investments. The decrease in Accounts Receivable - Other is the result of the timing of operating payments from the Big Stone Plant Partners. Inventory, Materials and Operating Supplies also increased to support increased summer construction activity and expanded operations at one of the manufacturing companies. The increase in Construction Work in Progress is due to new electric construction principally in transmission, distribution, and general plant. The decrease in Other Deferred Debits is mainly due to the amortization of previously deferred and currently recoverable Conservation Improvement Program costs. The increase in Short-Term Debt reflects the issuance of notes and commercial paper to provide for short term cash requirements. The decrease in Accounts Payable reflects a reduction in purchases by the electric utility in June of 1995 compared to December of 1994. The decrease in Federal and State Income Taxes Accrued was due to the timing of tax payments. The reduction in Other Taxes Accrued is mainly due to the timing of property tax payments. Material Changes in Results of Operations The 2.2% increase in Electric Operating Revenues for the quarter ended June 30, 1995, as compared to the same period in 1994, was due to increases in retail revenues of 3.7% and noncontractual power pool sales of 8.2% offset by a 91.3% decrease ($883,000) in contractual and wholesale power pool sales. The 1.8% increase in Electric Operating Revenues for the six months ended June 30, 1995 compared to the six months ended June 30, 1994, was primarily due to a 32.3% increase in noncontractual power pool sales offset by an 81.3% decrease in contractual and wholesale power pool sales. Noncontractual power pool sales increased for both the three and six month periods because the Company had more energy to market due to a warmer winter season and greater plant availability in 1995. In May and June of 1994, the Company had a firm contract to sell 40 megawatts of power to a wholesale customer. In 1995, the Company had no firm sales contracts which resulted in the decrease in contractual and wholesale power pool sales for the three and six month periods ended June 30, 1995, compared to the same periods in 1994. The increase in Purchased Power for the six months ended June 30, 1995, as compared to the same period in 1994, was due to increased kwh purchases for resale of 24.7% which correlates to the increase in noncontractual power pool sales. The increase in Electric Operation Expenses for both the quarter and six months ended June 30, 1995, as compared to the same periods in 1994, is primarily due to a settlement with the Minnesota Public Utilities Commission. The settlement required recovery of Conservation Improvement Program costs in current rates starting in 1995. General wage and salary increases for nonunion employees in April of 1995 and storm related expenses in June of 1995 also contributed to the increases in Electric Operation Expenses. The decrease in Electric Maintenance Expenses for the three and six months ended June, 30, 1995, compared to the same periods in 1994, is primarily due to significant reductions in production plant maintenance expenses. Most of these reductions are attributable to the Coyote plant which had a major overhaul in the Spring of 1994 but had no major overhaul during the first half of 1995. Health Services Operating Revenues decreased in the second quarter of 1995 compared to the second quarter of 1994 due to a decrease in sales volume. The increase in Health Services Operating Revenues for the six months ended June 30, 1995, as compared to the same period a year ago, resulted principally from the acquisition of three additional mobile imaging companies and the sale of three scanners in the first quarter of 1995. Increases in Cost of Health Services Sold and Other Health Services Expenses for the first six months of 1995, compared to the same period in 1994, correspond to the increase in operating revenue for the same period, while the decrease in Cost of Health Services Sold for the second quarter of 1995, compared to the second quarter of 1994, corresponds to the decrease in Health Services Operating Revenues for the same comparative period. The increase in Manufacturing Operating Revenues for the three and six month periods ended June 30, 1995, as compared to the same periods in 1994, resulted chiefly from an acquisition of a new company, as well as continued expansion of existing product lines. The increases in Manufacturing Cost of Goods Sold and Other Manufacturing Expenses for the same comparative periods were directly related to the acquisition and expanded product lines. The increase in Income Taxes for the quarter and six months ended June 30, 1995 compared to same periods in 1994, is related primarily to increases in Operating Income before Income Taxes for the same comparative periods. The decrease in Other Income and Deductions and Applicable Taxes for the six months ended June 30, 1995, as compared to the first six months of 1994, primarily resulted from the timing of the realization of net investment earnings in marketable securities owned by the Company. 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, 1995, for the purpose of electing three nominees to the Board of Directors with terms expiring in 1998 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 Dayle Deitz 9,683,716 96,051 John C. MacFarlane 9,701,972 77,795 Arvid R. Liebe 9,634,840 144,927 Shares Shares Shares Approval of Auditors Voted For Voted Against Voted Abstain Deloitte & Touche LLP 9,577,593 55,088 147,086 Item 6. Exhibits and Reports on Form 8-K. a) Exhibits: 27 Financial Data Schedule b) Report on Form 8-K. No reports on Form 8-K were filed during the fiscal quarter ended June 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OTTER TAIL POWER COMPANY By: Jeff Legge Jeff Legge Controller (Chief Accounting Officer/Authorized Officer) Dated: August 10, 1995 EX-27 2
UT This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of June 30, 1995, and the Consolidated Statement of Income for the six months ended June 30, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JUN-30-1995 PER-BOOK 434,353 79,282 67,395 10,569 0 591,599 55,901 30,335 94,054 180,290 18,000 20,831 167,656 4,150 0 3,000 13,466 0 0 0 184,206 591,599 157,770 9,139 127,461 136,600 21,170 179 21,349 7,305 14,044 1,179 12,865 9,839 7,180 26,621 1.15 1.15