-----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, R9SszeTnXxJzDYmUXJLUqG4SfPbhwwaSp3B6TUDSX3ucwUDRtgRiOgTF40ZxoEOW WXX8LXqhWDx+9ClhyMFVyQ== 0000075129-97-000017.txt : 19971110 0000075129-97-000017.hdr.sgml : 19971110 ACCESSION NUMBER: 0000075129-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971107 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: SEC FILE NUMBER: 000-00368 FILM NUMBER: 97710136 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 SEPT 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-368 OTTER TAIL POWER COMPANY (Exact name of registrant as specified in its charter) Minnesota 41-0462685 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 215 South Cascade Street, Box 496, Fergus Falls, Minnesota 56538-0496 (Address of principal executive offices) (Zip Code) 218-739-8200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: October 31, 1997 - 11,695,903 Common Shares ($5 par value) OTTER TAIL POWER COMPANY ------------------------ INDEX ----- Part I. Financial Information Page No. Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1997 and December 31, 1996 (Unaudited) 2 & 3 Consolidated Statements of Income - Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6, 7 & 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8, 9, 10 & 11 Part II. Other Information Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 12
Part I. Financial Information ------------------------------ Item 1. Financial Statements -------------------- Otter Tail Power Company Consolidated Balance Sheets (Unaudited) -Assets- September 30, December 31, 1997 1996 ------ ------ (Restated) (Thousands of dollars) Plant: Electric plant in service $752,657 $742,065 Subsidiary companies 109,689 94,701 -------- -------- Total 862,346 836,766 Less accumulated depreciation and amortization 350,138 327,855 -------- -------- 512,208 508,911 Construction work in progress 15,007 11,470 -------- -------- Net plant 527,215 520,381 -------- -------- Investments 20,284 19,880 -------- -------- Intangibles -- net 21,356 21,954 -------- -------- Other assets 6,096 6,553 -------- -------- Current assets: Cash and cash equivalents 6,010 2,094 Temporary cash investments -- -- Accounts receivable: Trade - net 37,751 32,603 Other 5,150 5,021 Materials and supplies: Fuel 3,205 3,220 Inventory, materials and operating supplies 24,879 24,247 Deferred income taxes 4,887 4,550 Accrued utility revenues 2,839 5,349 Other 5,437 4,524 -------- -------- Total current assets 90,158 81,608 -------- -------- Deferred debits: Unamortized debt expense and reacquisition premiums 3,930 4,270 Regulatory assets 5,732 5,866 Other 4,004 3,655 -------- -------- Total deferred debits 13,666 13,791 -------- -------- Total $678,775 $664,167 ======== ======== See accompanying notes to consolidated financial statements - 2 -
Otter Tail Power Company Consolidated Balance Sheets (Unaudited) -Liabilities- September 30, December 31, 1997 1996 ------ ------ (Restated) (Thousands of dollars) Capitalization: Common shares, par value $5 per share - authorized 25,000,000 shares; outstanding 1997 -- 11,692,307; and 1996 -- 11,372,298 shares $ 58,462 $ 56,861 Premium on common shares 34,036 30,683 Retained earnings 113,981 106,589 -------- -------- Total 206,479 194,133 Cumulative preferred shares - authorized 1,500,000 shares without par value; outstanding 1997 and 1996, 388,311 shares Subject to mandatory redemption 18,000 18,000 Other 20,831 20,831 Cumulative preference shares - authorized 1,000,000 shares without par value; outstanding - none -- -- Long-term debt 162,687 160,704 -------- -------- Total capitalization 407,997 393,668 -------- -------- Current liabilities: Short-term debt 29,100 25,600 Sinking fund requirements and current maturities 43,905 42,218 Accounts payable 27,252 27,260 Accrued salaries and wages 3,341 3,847 Federal and state income taxes accrued 1,768 2,031 Other taxes accrued 10,172 12,048 Interest accrued 2,053 3,622 Other 3,121 2,822 -------- -------- Total current liabilities 120,712 119,448 -------- -------- Noncurrent liabilities 16,992 16,688 -------- -------- Deferred credits: Accumulated deferred income taxes 98,250 98,498 Accumulated deferred investment tax credit 18,970 19,818 Regulatory liabilities 12,712 13,283 Other 3,142 2,764 -------- -------- Total deferred credits 133,074 134,363 -------- -------- Total $678,775 $664,167 ======== ======== See accompanying notes to consolidated financial statements - 3 -
Otter Tail Power Company Consolidated Statements of Income (Unaudited) Three months ended Nine months ended September 30 September 30 1997 1996 1997 1996 ------ ------ ------ ------ (Restated) (Restated) (Thousands of dollars) (Thousands of dollars) Operating revenues: Electric $ 47,418 $ 45,261 $151,244 $147,079 Health services 17,868 16,527 48,277 43,598 Manufacturing 22,088 17,407 57,273 51,133 Other business operations 14,484 15,722 30,449 34,833 -------- -------- -------- -------- Total operating revenues 101,858 94,917 287,243 276,643 Operating expenses: Production fuel 7,900 6,031 22,522 21,632 Purchased power 4,543 6,513 17,584 19,010 Other electric operation and maintenance expenses 18,115 16,774 53,323 49,254 Cost of goods sold 35,232 31,501 87,613 84,589 Other nonelectric expenses 13,155 12,671 35,483 32,045 Depreciation and amortization 6,380 5,769 19,064 16,986 Property taxes 2,780 2,864 8,363 8,863 -------- -------- -------- -------- Total operating expenses 88,105 82,150 243,952 232,379 Operating income: Electric 8,747 8,099 33,436 33,545 Health services 1,095 1,490 2,592 3,156 Manufacturing 2,857 1,893 6,420 6,048 Other business operations 1,054 1,285 843 1,515 -------- -------- -------- -------- Total operating income 13,753 12,767 43,291 44,264 Other income and deductions - net 2,572 189 5,397 1,101 Interest charges 4,729 4,308 13,867 12,007 -------- -------- -------- -------- Income before income taxes 11,596 8,648 34,821 33,358 Income taxes 3,811 1,946 10,953 10,261 -------- -------- -------- -------- Net income 7,785 6,702 23,868 23,097 Preferred dividend requirements 590 590 1,769 1,769 -------- -------- -------- -------- Earnings available for common shares $ 7,195 $ 6,112 $ 22,099 $ 21,328 ======== ======== ======== ======== Earnings per average common share $0.62 $0.54 $1.90 $1.88 ======== ======== ======== ======== Average number of common shares outstanding 11,660,523 11,337,782 11,616,274 11,337,782 Dividends per common share $0.465 $0.45 $1.395 $1.35 See accompanying notes to consolidated financial statements - 4 -
Otter Tail Power Company Consolidated Statements of Cash Flows (Unaudited) Nine months ended September 30, 1997 1996 -------- -------- (Restated) (Thousands of dollars) Cash flows from operating activities: Net income $ 23,867 $ 23,097 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 29,937 25,599 Deferred investment tax credit - net (882) (882) Deferred income taxes (2,331) (2,609) Change in deferred debits and other assets 491 4,578 Change in noncurrent liabilities and deferred credits 682 831 Allowance for equity (other) funds used during construction -- (225) (Gains)/Losses from investments and disposal of noncurrent assets (1,445) 496 Cash provided by (used for) current assets & current liabilities: Change in receivables, materials and supplies (5,632) 3,905 Change in other current assets 1,603 (970) Change in payables and other current liabilities (1,587) (2,341) Change in interest and income taxes payable (1,831) (1,797) -------- -------- Net cash provided by operating activities 42,872 49,682 Cash flows from investing activities: Gross capital expenditures (33,849) (50,662) Proceeds from disposal of noncurrent assets 3,664 4,136 Purchase of businesses, net of cash acquired -- (7,859) Change in temporary cash investments -- 2,161 Purchases of marketable securities (5) -- Proceeds from sales of marketable securities 786 -- Change in other investments (578) (8,741) -------- -------- Net cash used in investing activities (29,982) (60,965) Cash flows from financing activities: Change in short-term debt - net 3,500 20,350 Proceeds from issuance of common stock 4,969 -- Proceeds from issuance of long-term debt 72,597 90,930 Payments for retirement of long-term debt (71,801) (81,957) Dividends paid (18,239) (17,254) -------- -------- Net cash (used in) provided by financing activities (8,974) 12,069 Net change in cash and cash equivalents 3,916 786 Cash and cash equivalents at beginning of year 2,094 2,419 -------- -------- Cash and cash equivalents at September 30 $ 6,010 $ 3,205 Supplemental cash flow information Cash paid for interest and income taxes: Interest (net of amount capitalized) $ 15,096 $ 13,254 Income taxes $ 14,439 $ 14,494 See accompanying notes to consolidated financial statements - 5 -
OTTER TAIL POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Company, in its opinion, has included all adjustments (including normal recurring accruals) necessary for a fair presentation of the results of operations for the periods. The financial statements for 1997 are subject to adjustment at the end of the year when they will be audited by independent accountants. The financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 31, 1996, 1995, and 1994 included in the Company's 1996 Annual Report to the Securities and Exchange Commission on Form 10-K. Because of seasonal and other factors, the earnings for the three-month and nine-month periods ended September 30, 1997, should not be taken as an indication of earnings for all or any part of the balance of the year. On January 2, 1997, the Company's telecommunications subsidiary, North Central Utilities, Inc., acquired all of the outstanding common stock of The Peoples Telephone Co. of Bigfork (Peoples) in exchange for 163,758 newly issued shares of the Company's common stock and $209,000 in cash in a pooling of interests transaction. The acquisition has no significant pro forma effect on the Company's balance sheet, operating revenues, net income, or earnings per share for 1996. Therefore, the 1996 financial statements included in this report have not been restated to reflect the effect of the pooling. The following table shows the effect of the pooling on the equity section of the Company's balance sheet on January 2, 1997: Common Premium Shares on Common Retained Total Outstanding Par Shares Earnings Equity ----------- ------- ------- -------- -------- (dollars in thousands) Otter Tail Power Company 11,372,298 $56,861 $30,683 $106,589 $194,133 Peoples 21 2,121 2,142 Shares Issued 163,758 819 819 Adjustments for: Par value of new shares (21) (798) (819) Cash paid for Peoples shares (209) (209) ---------- ------- ------- -------- -------- Combined 11,536,056 $57,680 $29,676 $108,710 $196,066 ========== ======= ======= ======== ======== The net amount of cash used of ($209,000) and cash acquired of $36,000 in the pooling is included in the Company's Statement of Cash Flows for the nine months ended September 30, 1997, under "Proceeds from issuance of common stock." On June 30, 1997, the Company's subsidiary, Mid-States Development, Inc., acquired all of the outstanding common stock of Chassis Liner Corporation (Chassis Liner) in exchange for 157,646 newly issued shares of the Company's common stock. Chassis Liner is a manufacturer of auto and truck frame straightening equipment with facilities in Alexandria and Lucan, Minnesota. The acquisition has been accounted for as a pooling of interests. Because the acquisition has a significant pro forma effect on 1996 results, the Company's prior period consolidated financial statements presented herein have been restated to include Chassis Liner. The impact of Chassis Liner on the Company's consolidated statements of income and cash flows for the periods ending September 30, 1996, is presented in the table below: Otter Tail Otter Tail Power Power Chassis Company (in thousands) Company Liner Combined - -------------------------------------------------------------------------- For the three months ended September 30, 1996: Revenue $ 92,866 $ 2,051 $ 94,917 Operating Income $ 12,273 $ 494 $ 12,767 Net income $ 6,207 $ 495 $ 6,702 For the nine months ended September 30, 1996: Revenue $270,844 $ 5,799 $276,643 Operating Income $ 43,397 $ 867 $ 44,264 Net income $ 22,219 $ 878 $ 23,097 For the nine months ended September 30, 1996: Net cash provided by operating activities $ 49,034 $ 648 $ 49,682 Net cash used in investing activities (60,916) (49) (60,965) Net cash provided by (used in) financing activities 12,492 (423) 12,069 -------- ------- -------- Net change in cash and cash equivalents 610 176 786 Cash and cash equivalents at beginning of 1996 1,867 552 2,419 -------- ------- -------- Cash and cash equivalents at September 30, 1996 $ 2,477 $ 728 $ 3,205 Prior to the acquisition, Chassis Liner was an S Corporation and, consequently, was not subject to federal or state income taxes. The pro forma income tax provision for Chassis Liner that would have been reported by the Company as an additional provision to its historical tax expense had Chassis Liner not been an S Corporation prior to the acquisition is $198,000 and $351,000 for the three and nine month periods ended September 30, 1996, respectively, and $366,000 for the nine month period ended September 30, 1997, based on a tax rate of 40%. Additional common stock issuances in the first nine months of 1997 include 123,060 shares issued under the Company's Automatic Dividend Reinvestment and Share Purchase Plan (the Plan), 30,561 shares issued to the Company's leveraged employee stock ownership plan and 2,630 shares issued as a bonus to a consultant. Of the 123,060 shares issued in 1997 under the Plan, 4,707 shares were issued in conjunction with a program initiated in July of 1997 whereby customers of the electric utility can purchase shares of the Company's common stock by remitting additional funds with their monthly electric service bill payments. In 1997, Quadrant Co. (Quadrant) began processing solid waste for three Minnesota counties under the terms of a new waste incineration agreement. Since operating under the new agreement, Quadrant has experienced a reduction in revenue of approximately fifty percent, as compared to 1996. However, Quadrant's cash flows from operations for the first nine months of 1997 were positive. The Company intends to continue operating the Quadrant plant as long as positive cash flows can be maintained. Forward Looking Information - Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 - ---------------------------------------------------------- In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"), the Company has filed cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those discussed in forward-looking statements made by or on behalf of the Company. When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements, words such as "may", "will", "expect", "anticipate", "continue", "estimate", "project", "believes" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. Factors that might cause such differences include, but are not limited to, the factors discussed under "Factors affecting future earnings" on pages 30-32 of the Company's 1996 Annual Report to Shareholders, which is incorporated by reference in the Company's Form 10-K for the fiscal year ended December 31, 1996. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement or contained in any subsequent filings by the Company with the Securities and Exchange Commission. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Material Changes in Financial Position - -------------------------------------- Cash provided by operating activities of $42,872,000 as shown on the Consolidated Statement of Cash Flows for the nine months ended September 30, 1997, combined with funds on hand of $2,094,000 at December 31, 1996, allowed the Company to pay dividends and finance the majority of its capital expenditures in the first nine months of 1997. Additional cash provided by the issuance of $3,500,000 in short-term debt and $4,969,000 in common stock provided the funds used to finance the remainder of the capital expenditures in the first nine months of 1997. The Company's initiative to reduce capital expenditures has resulted in a $16.8 million reduction in this category over the first nine months of 1997, as compared to the same period in 1996. At September 30, 1997, the Company had $22,421,000 available in unused lines of credit which could be used to supplement cash needs. The Company estimates that funds internally generated, combined with funds on hand, will be sufficient to meet all sinking fund payments for First Mortgage Bonds in the next five years and to provide for its estimated 1997-2001 consolidated capital project expenditures. Additional short-term or long-term financing will be required in the period 1997-2001 in connection with the maturity of First Mortgage Bonds and a long-term lease obligation ($21,000,000), in the event the Company decides to refund or retire early any of its presently outstanding debt or cumulative preferred shares, or for other corporate purposes. In the second quarter of 1997, Standard and Poor's reaffirmed its AA- rating of the Company's senior debt, however, it revised its ratings outlook on the Company from stable to negative sighting growth in the level of nonutility earnings relative to overall Company earnings as a reason for the revision. Also in the second quarter of 1997, Moody's Investors Service reaffirmed its Aa3 rating of the Company's First Mortgage Bonds and Duff and Phelps reaffirmed its AA rating, while Fitch Investors Service downgraded its rating from AA to AA-. Subsequent to September 30, 1997, the Company's subsidiary, Mid-States Development, Inc. (Mid-States), borrowed $22,500,000 under a term note for 10 years with a fixed interest rate of 7.8%. The proceeds will be loaned to various subsidiaries of Mid-States to be used to repay certain variable and fixed-rate debt. Mid-States also secured a new line of credit of $17,500,000, which it intends to use to finance its subsidiaries' working capital needs; interest on the borrowings will be based on LIBOR plus 1.75% (7.6% at October 15, 1997). The note and credit line borrowings are secured by a pledge of the common stock of the companies owned by Mid-States. Subsequent to September 30, 1997, Mid-States' medical imaging services subsidiary entered into a sale/leaseback transaction whereby $17,000,000 of diagnostic medical equipment was sold and leased back under two operating leases. The leases have terms of three and four years with annual lease payments of approximately $700,000 and $3,760,000, respectively. This transaction will result in a reduction in fixed assets and debt and transfer technology risk in this equipment to the lessor. The increases in electric plant in service and construction work in progress are due to new construction and capital expenditures at the electric utility, mainly in the production, transmission and general plant areas including the Company's share of capital expenditures at the Coyote Plant for boiler retubing, and approximately $2.3 million for the replacement of facilities damaged in the April 1997 storm. The acquisition of Peoples provided $7.1 million of the increase in subsidiary companies plant. Capital additions of $3.8 million in the manufacturing segment, along with additions of approximately $4.1 million at the other subsidiaries accounted for the remaining increase in subsidiary companies plant. The increase in trade receivables reflects a $6.6 million increase in receivables in the manufacturing segment coinciding with an increase in the level of sales in this segment. The increase in trade receivables in the manufacturing segment was partially offset by a $1.3 million seasonal decline in trade receivables at the electric utility. The decrease in accrued utility revenues is reflective of a normal seasonal decline in the use of electricity in the Company's service area in the latter part of September compared to December. The increase in other current assets is due to an increase in prepaid expenses in the health services and manufacturing segments. The combined increase in common shares, par value and premium on common shares of $4,954,000 is mainly due to the issuance of the 156,251 shares of common stock under the Company's stock plans as described in the notes to consolidated financial statements. The increase in long-term debt is due to the acquisition of Peoples. The increase in short-term debt is related to the timing of bond interest payments and estimated income tax payments totaling $8.5 million in August and September of 1997. Accrued salaries and wages decreased as a result of the payment of 1996 accrued employee incentives. The decrease in other taxes accrued is partly due to the timing of property tax payments in Minnesota, North Dakota and South Dakota, 85% of which are due within the first nine months of the year following accrual. Part of the decrease in other taxes accrued is due to an adjustment to Minnesota property taxes accrued related to a reduction in statutory class rates for commercial and industrial property and reduced valuations of utility property. The decrease in interest accrued is due to the timing of bond interest payments, the majority of which are due in the first and third quarters of the calendar year. Material Changes in Results of Operations - ----------------------------------------- The 4.8% increase in electric operating revenue for the quarter ended September 30, 1997, as compared to the same period in 1996, is due to increases of 3.6% in retail revenue and 54.7% in other electric revenue. The 2.8% increase in electric operating revenue for the nine months ended September 30, 1997, as compared to the nine months ended September 30, 1996, is due to increases of 3.2% in retail revenue and 45.2% in other electric revenue offset by a 21% decrease in revenue from power pool sales. The increases in retail revenue for the three and nine month periods ended September 30, 1997, as compared to the same periods in 1996, are mainly due to increases in kwh sales to industrial customers and increases in cost-of- energy revenue related to recovery of the costs of power purchased for sale to retail customers in the first six months of 1997. The increases in other electric revenue reflect the recognition of Minnesota Conservation Improvement Program (CIP) lost margins recovery approved by the Minnesota Public Utilities Commission (MNPUC) in the second quarter of 1997. Increases in transmission service charge revenue and electric property rental income also contributed to the increases in other electric revenue. The decrease in revenue from power pool sales for the nine month period ended September 30, 1997, as compared to the same period in 1996, is the result of the Company having less energy to market as a result of delayed coal shipments caused by the blizzards of 1997 and to the shutdown of the Coyote Plant for its first scheduled major overhaul in three years that lasted from March 27, 1997, until June 6, 1997. The net reduction in production fuel and purchased power expenses for the nine months ended September 30, 1997, as compared to the nine months ended September 30, 1996, is commensurate with the reduction in power pool sales for the comparable periods. The primary contributors to the increases in other electric operation and maintenance expenses for the three and nine month periods ended September 30, 1997, as compared to the three and nine month periods ended September 30, 1996, are the overhaul of the Coyote Plant in the second quarter of 1997, and increased expenditures for outside and contracted services. The breakdown of cost of goods sold and other nonelectric expenses by business segments other than electric are as follows: Three months ended September 30 Cost of goods sold Other nonelectric expenses ------------------ -------------------------- 1997 1996 1997 1996 ------ ------ ------ ------ (in thousands) Health services $10,418 $ 8,428 $ 6,177 $ 6,462 Manufacturing 15,963 12,720 3,169 2,636 Other business operations 8,851 10,353 3,809 3,573 ------- ------- ------- ------- Total $35,232 $31,501 $13,155 $12,671 ======= ======= ======= ======= Nine months ended September 30 Cost of goods sold Other nonelectric expenses ------------------ -------------------------- 1997 1996 1997 1996 ------ ------ ------ ------ (in thousands) Health services $27,157 $24,158 $18,086 $15,861 Manufacturing 42,784 37,426 7,672 7,246 Other business operations 17,672 23,005 9,725 8,938 ------- ------- ------- ------- Total $87,613 $84,589 $35,483 $32,045 ======= ======= ======= ======= Reclassifications of $2,233,000 and $4,102,000 in health services cost of goods sold to health services other nonelectric expenses were made for the three and nine month periods ended September 30, 1996, respectively, related to the medical imaging services companies acquired in 1996 in order to report these costs and expenses in a manner consistent with previously acquired medical imaging services companies. The increase in health services operating revenue of 8.1% for the three months ended September 30, 1997, as compared to the same period in 1996, is due to increased sales of medical imaging services. The increases in cost of goods sold in the health services segment for the three and nine month periods ended September 30, 1997, as compared to the same periods in 1996, are due to valuation adjustments related to refurbished and trade-in equipment and increased costs associated with long-term customer service contracts. The 10.7% increase in health services operating revenue and the increase in other nonelectric expenses for the nine month period ended September 30, 1997, as compared to the same period a year ago, is due to the acquisitions of Radiographic Supply in February 1996, and Northern Medical Imaging in April 1996. The increases in manufacturing operating revenue of 26.9% and 12.0% for the three and nine month periods ended September 30, 1997, as compared to the three and nine month periods ended September 30, 1996, reflect increased sales at five of the Company's six manufacturing subsidiaries. One of the manufacturing subsidiaries showed an increase in third quarter operating revenues but a decrease in year-to-date operating revenues in 1997, as compared to 1996, due to the delayed shipment of finished goods to a major customer of this subsidiary in order to accommodate that customer's delivery and production schedule. This manufacturing company maintained its production schedule in order to optimize the use of its plant capacity. Manufacturing cost of goods sold increased in the three and nine month periods ended September 30, 1997, as compared to the same periods in 1996, in conjunction with the increased sales over the same comparable periods and also as a result of increased prices for resins used in the manufacture of PVC pipe. The increases in manufacturing revenues more than offset the increases in manufacturing cost of goods sold and other nonelectric expenses resulting in increases in manufacturing operating income for both the three and nine month periods ended September 30, 1997, as compared to the same periods in 1996. The decreases in other business operations revenue for the quarter and nine months ended September 30, 1997, as compared to the quarter and nine months ended September 30, 1996, are due to a decline in revenue and reductions in material cost pass through billings at the Company's construction subsidiaries, offset slightly by increases in media and telecommunications revenue due to the acquisition of several radio stations in 1996, and the acquisition of Peoples in January of 1997. The decreases in construction activity and material cost pass through billings are the main factors contributing to the decreases in cost of goods sold from other business operations for the comparable periods. Other nonelectric expenses for other business operations increased for the three and nine month periods ended September 30, 1997, as compared to the same periods a year ago, as a result of the radio stations and Peoples acquisitions. The increases in depreciation and amortization expense for the three and nine month periods ended September 30, 1997, as compared to the same periods in 1996, are related to electric utility property additions including upgrades made to Big Stone Plant in 1996, accelerated depreciation at Quadrant , and the acquisition of Peoples in 1997. The decrease in property taxes for the nine month period ended September 30, 1997, as compared to the same period in 1996, is due to reductions in Minnesota property taxes accrued as a result of legislative action affecting Minnesota commercial and industrial property class rates for 1997, and lower assessed values on Minnesota utility property. A gain on the sale of a Direct Broadcast Satellite franchise, in which the Company's telecommunications subsidiary, Midwest Information Systems, Inc., held a one-third ownership interest, accounted for $1.8 million of the increase in other income and deductions - net for the quarter and nine months ended September 30, 1997, as compared to the quarter and nine months ended September 30, 1996. Realized gains on sales of investments of $141,000 and increases in miscellaneous nonoperating income of $442,000 also contributed to the increases in other income and deductions - net for same comparable periods. The remainder of the increase in other income and deductions - net for the nine months ended September 30, 1997, as compared to the nine months ended September 30, 1996, reflects the recognition of $610,000 in realized gains on the sale of marketable securities, the recognition of $880,000 in compensation for the abandonment of certain microwave frequencies licensed to the Company, and an increase in revenue recognition of $405,000 related to Minnesota CIP financial incentives. The increases in interest charges for the three and nine month periods ended September 30, 1997, as compared to the three and nine month periods ended September 30, 1996, are directly related to the increased level of short-term debt at the parent company and an increase in the average level of long-term debt and current maturities at the subsidiary companies for the comparable periods. Increases in income taxes for the three and nine month periods ended September 30, 1997, as compared to the three and nine month periods ended September 30, 1996, are mainly due to increases in income before income taxes for the same comparable periods. However, income before income taxes for the third quarter of 1996 includes Chassis Liner's third quarter net income of $495,000 which was not subject to income tax. Also, income taxes for the third quarter of 1996 reflects reductions related to deferred tax adjustments. PART II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings ----------------- Patricia C. Reimel v. John C. MacFarlane, et al, and Otter Tail Power Company - --------------------------------------------------------------------- This suit was filed on July 1, 1997 in United States District Court for the District of Minnesota by Patricia C. Reimel, individually and derivatively as a shareholder of the Company. The suit names as defendants the Company, each member of the Company's Board of Directors and certain executive officers of the Company. The allegations made by the plaintiff relate to the Company's Shareholder Rights Plan, which was adopted by the Company's Board of Directors in January 1997. Claims for relief include modification or elimination of the Company's Shareholder Rights Plan, as well as damages in an unspecified amount. The Company believes the suit is procedurally inappropriate and has requested that the Court dismiss the suit because the plaintiff failed to make a demand on the Board of Directors of the Company prior to seeking to resolve the alleged claims through litigation. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- a) Exhibits: 27 Financial Data Schedule 27.1 Restated Financial Data Schedules The acquisition of Chassis Liner on June 30, 1997, was accounted for under the pooling of interests method. Accordingly, the Company's 1996 interim and year end, and 1997 first quarter consolidated financial statements previously filed with the Securities and Exchange Commission on Forms 10-Q and 10-K for the corresponding periods have been restated to include Chassis Liner. Exhibit 27.1 contains restated summary financial information extracted from the restated consolidated financial statements for the affected periods. b) Reports on Form 8-K. No reports on Form 8-K were filed during the fiscal quarter ended September 30, 1997. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OTTER TAIL POWER COMPANY By: Jeff Legge --------------------- Jeff Legge Controller (Chief Accounting Officer/Authorized Officer) Dated: November 7, 1997 ---------------- EX-27 2
UT This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of September 30, 1997, and the Consoidated Statement of Income for the nine months ended September 30, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1997 SEP-30-1997 PER-BOOK 456,926 118,025 90,158 13,666 0 678,775 58,462 34,036 113,981 206,479 18,000 20,831 162,687 4,400 0 24,700 43,905 0 0 0 197,773 678,775 287,243 10,953 243,952 254,905 32,338 5,397 37,735 13,867 23,868 1,769 22,099 16,058 12,679 42,872 1.90 1.90
EX-27.1 3
UT Restated summary financial information extracted from the restated Consoli- dated Balance Sheets as of 3-31-96, 6-30-96, 9-30-96, 12-31-96, and 3-31-97, and the restated Consolidated Statements of Income for the 3, 6, 9, 12, and 3-month periods ended 3-31-96, 6-30-96, 9-30-96, 12-31-96, and 3-31-97, re- spectively. 1,000 3-MOS 6-MOS 9-MOS 12-MOS 3-MOS DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1997 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996 MAR-31-1997 PER-BOOK PER-BOOK PER-BOOK PER-BOOK PER-BOOK 440,439 447,250 449,718 452,155 453,025 81,655 102,480 111,351 116,613 120,910 84,655 85,810 80,774 81,608 86,170 12,069 11,514 11,428 13,791 12,633 0 0 0 0 0 618,828 647,054 653,271 664,167 672,738 56,689 56,689 56,689 56,861 58,052 29,747 29,747 29,747 30,683 31,788 102,925 103,417 104,268 106,589 112,915 189,361 189,853 190,704 194,133 202,755 18,000 18,000 18,000 18,000 18,000 20,831 20,831 20,831 20,831 20,831 170,676 181,750 187,606 160,704 164,862 0 2,450 4,650 7,200 800 0 0 0 0 0 0 10,300 15,700 18,400 16,400 19,716 24,868 18,597 42,219 48,076 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 200,244 199,002 197,183 202,680 201,014 618,828 647,054 653,271 664,167 672,738 90,210 181,726 276,643 369,440 94,289 5,595 8,315 10,262 14,040 5,631 71,254 150,229 232,379 310,133 74,548 76,849 158,544 242,641 324,173 80,179 13,361 23,182 34,002 45,267 14,110 495 912 1,101 2,412 1,122 13,856 24,094 35,103 47,679 15,232 3,698 7,699 12,006 16,675 4,542 10,158 16,395 23,097 31,004 10,690 590 1,179 1,179 2,358 589 9,568 15,216 21,918 28,646 10,101 5,031 10,062 15,093 20,124 5,309 3,675 7,635 11,774 16,026 4,187 14,602 26,322 49,682 68,448 16,080 0.84 1.34 1.88 2.53 0.87 0.84 1.34 1.88 2.53 0.87 On June 30, 1997, the Company's subsidiary, Mid-States Development, Inc. acquired Chassis Liner Corporation (Chassis Liner). The acquisition has been accounted for as a pooling of interests. Accordingly the Company's 1996 interim and year end, and 1997 first quarter financial statements have been restated to include Chassis Liner. The summary financial information included in this exhibit reflect those restatements. The Company has not provided restated financial information prior to 1996 because the impact of Chassis Liner on those periods was determined to be immaterial and of insignificant value to warrant restatement.
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