8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 28, 2004

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction
of incorporation) 0-00368
(Commission
File Number) 41-0462685
(I.R.S. Employer
Identification No.)

215 South Cascade Street, P.O. Box 496, Fergus Falls, MN
(Address of principal executive offices) 56538-0496
(Zip Code)

Registrant’s telephone number, including area code: (866) 410-8780

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     ___Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     ___Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     ___Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     ___Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01 Entry into a Material Definitive Agreement
	Item 2.02 Results of Operations and Financial Condition
	Signature
EXHIBIT INDEX
Press Release

Item 1.01 Entry into a Material Definitive Agreement

     On October 28, 2004, a Fifth Amendment to the Credit Agreement dated April 30, 2002 between Otter Tail Corporation and the following banks: U.S. Bank National Association, as Agent; Bank One, N.A.; Bank Hapoalim B.M. and Wells Fargo Bank, National Association was signed. This amendment eliminated the provision for the accelerated payment of the line of credit balance in the event that the corporation’s senior unsecured debt is rated below Baa2 (Moody’s) or BBB- (Standards & Poor’s).

Item 2.02 Results of Operations and Financial Condition

     On November 1, 2004 Otter Tail Corporation issued a press release concerning financial results for the third quarter of 2004, a copy of which is furnished herewith as Exhibit 99.1.

Signature

     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 CORPORATION
Date: November 2, 2004	By	/s/ Kevin G. Moug
		Kevin G. Moug
		Chief Financial Officer and Treasurer

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EXHIBIT INDEX

Exhibit	Description of Exhibit
99.1	Press release, dated November 1, 2004

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EX-99.1

	Exhibit 99.1
NEWS RELEASE

Contact: Amy Richardson, Director of Communications, (701) 451-3580 or (866) 410-8780
For release: November 1, 2004
Dateline: Fergus Falls, Minnesota

Otter Tail Corporation Reports Third Quarter Earnings,
Board of Directors Declares Dividend

     Otter Tail Corporation (NASDAQ: OTTR) announced unaudited financial results for the three months ended September 30, 2004. The financial highlights for the third quarter ended September 30, 2004 compared with the third quarter ended September 30, 2003 are as follows:

• Revenues were $222.3 million compared with $200.9 million.

• Consolidated net income was $11.0 million compared with $12.0 million (which included $2.3 million of net earnings from the initial adoption of mark-to-market accounting on forward energy contracts).

• Diluted earnings per share were 42 cents compared with 46 cents (which included 9 cents from the initial adoption of mark-to-market accounting on forward energy contracts).

• On August 13, 2004 the corporation issued $76 million in bridge financing to complete the Idaho Pacific Holdings, Inc. acquisition. The corporation has filed a universal shelf registration with the Securities and Exchange Commission and intends to utilize it to refinance the bridge loan.

• The corporation reaffirmed 2004 diluted earnings per share guidance of $1.45 to $1.60.

Other developments occurring since September 30, 2004:

• On November 1, the Board of Directors declared a quarterly common stock dividend of 27.5 cents per share.

• The corporation has eliminated the ratings triggers from its 6.63% senior unsecured notes and its $70 million line of credit.

• The corporation has decided to exit its telecommunications business.

• Otter Tail Power Company has announced a joint feasibility study with other regional utilities to investigate building a second generating unit at its Big Stone Plant site.

     Revenues for the nine months ended September 30, 2004 were $640.1 million compared with $553.1 million for the nine months ended September 30, 2003. For the nine months ended September 30, 2004 net income was $27.3 million compared with $30.3 million for the nine months ended September 30, 2003. Diluted earnings per share were $1.03 for the nine months ended September 30, 2004 compared with $1.15 for the nine months ended September 30, 2003.

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     “Third quarter results met our internal expectations,” said John Erickson, president and chief executive officer of Otter Tail Corporation. “All our business segments except electric showed increases in net income in the third quarter of 2004 compared with the third quarter results of 2003.”

     Erickson says improved economic conditions and productivity contributed to a $2.7 million increase in net income in the manufacturing segment between the quarters. Increased prices and profit margins on plastic pipe led to a $1.4 million increase in the plastics segment net income in the third quarter of 2004 over the third quarter of 2003. Health services net income increased slightly between the quarters. Acquisitions of Foley Company in the fourth quarter of 2003 and Idaho Pacific Holdings, Inc. in August 2004 helped improve third quarter net income from other business operations by $0.3 million in 2004 compared with the third quarter of 2003. Net income in the electric segment was down $5.4 million between the quarters primarily due to the one-time initial recognition of unrealized mark-to-market gains on forward energy contracts. In addition, there was significantly less contracted construction work performed in the third quarter of 2004.

     “We are reaffirming our 2004 diluted earnings per share guidance of $1.45 to $1.60 and anticipate solid performance across all our operating segments in the fourth quarter,” Erickson said.

Quarterly Performance Summary

Electric

Net income in the electric segment for the quarter ended September 30, 2004 was $6.6 million compared with $12.0 million for the quarter ended September 30, 2003. Electric retail revenues were $52.0 million for the quarter ended September 30, 2004 compared with $51.0 million for the quarter ended September 30, 2003. Wholesale electric sales from company-owned generation decreased to $6.3 million from $7.8 million for the same period last year on a 30% decrease in megawatt hour sales. Factors contributing to the decrease in wholesale sales were decreased demand related to a 77% decrease in cooling degree-days in the region between the quarters combined with decreased plant availability in July and August 2004 related to a turbine blade failure at the electric company’s Hoot Lake Plant. Net revenue from the resale of purchased power decreased to $0.6 million in the third quarter of 2004 from $6.8 million in the third quarter of 2003. The decrease between periods is due to $1.4 million of lower margins on settled contracts. In addition, the electric utility’s third quarter 2003 revenues included the initial recognition of $3.9 million in unrealized mark-to-market gains on forward energy contracts which also accounted for $2.3 million in net income and 9 cents in earnings per share. Other electric revenues decreased to $3.8 million in the third quarter of 2004 from $8.6 million in the third quarter of 2003 when the electric company completed most of its contracted construction work on a large wind energy project. Electric operating and maintenance expense declined $4.7 million between the periods due to significantly less contracted construction work and lower employee benefit expenses during the third quarter of 2004.

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Plastics

Net income for the plastics segment was $1.2 million for the quarter ended September 30, 2004 compared with a net loss of $0.2 million for the quarter ended September 30, 2003. Plastics revenues increased $4.2 million despite a 10.7% decrease in the volume of PVC pipe sold as the price per pound of pipe sold increased 31.9%. The increase in revenue per pound of pipe sold was offset by an 18.9% increase in the average cost per pound of PVC pipe sold resulting in a $2.8 million increase in gross margins between the periods.

Manufacturing

The manufacturing segment’s improved performance in the third quarter is due to certain companies within this segment being able to offset increases in commodity prices with product pricing increases and increased productivity and capacity utilization. The manufacturing segment’s net income was $2.3 million for the quarter ended September 30, 2004 compared with a net loss of $0.4 million for the quarter ended September 30, 2003. Revenues were $57.8 million for the quarter ended September 30, 2004 compared with $49.8 million for the quarter ended September 30, 2003. The corporation’s wind tower manufacturer recorded net income of $0.4 million in the third quarter of 2004 against a net loss of $0.9 million in the third quarter of 2003 due to improved performance. Net income from the corporation’s metal parts stamping and fabrication company increased $0.7 million on $5.4 million in increased sales revenue. Net income from the corporation’s manufacturer of thermoformed plastics and horticultural products increased $0.6 million on $2.8 million in increased sales related to a 23.4% increase in the volume of units sold between the quarters.

Health Services

Net income in the health services segment was $0.9 million for both the quarters ended September 30, 2004 and 2003. Net income from the imaging business increased $0.5 million on a $2.5 million increase in revenues between the quarters, reflecting a $0.5 million increase in scan revenues and a $1.9 million increase in miscellaneous service revenues. Net income from the company that sells and services imaging equipment decreased $0.5 million between the quarters due to lower sales between the quarters.

Other Business Operations

The other business operations had revenues of $47.2 million for the quarter ended September 30, 2004 compared with $27.9 million for the quarter ended September 30, 2003. The other business operations had net income of $33,000 for the quarter ended September 30, 2004 compared with a net loss of $297,000 for the quarter ended September 30, 2003. These increases relate to the acquisitions of Foley Company in November 2003 and Idaho Pacific Holdings in August 2004, offset by net losses at the corporation’s other construction company. These net losses were caused by certain jobs with losses, lower volumes of work and lower margins on the work due to excess capacity in the construction marketplace.

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2004 Outlook

Otter Tail Corporation reaffirms its 2004 diluted earnings per share guidance of $1.45 to $1.60.

Electric

Assuming normal weather patterns, the corporation expects the electric utility to have a stronger fourth quarter in 2004 than the fourth quarter of 2003. In a joint announcement on October 11, 2004, officials from Otter Tail Power Company, Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Hutchinson Utilities Commission, and Missouri River Energy Services reported that the companies are investigating the feasibility of another electric generating plant on the site of the existing Big Stone Plant near Milbank, South Dakota. The group is exploring the feasibility of building an approximately 600-megawatt coal-based generating unit designed with the best available emissions technology as prescribed by federal and state environmental regulations. The decision whether to proceed with construction of the plant is expected in 2005. If built, Big Stone II is projected to come online in 2011 and serve the utilities’ native customer loads. The electric utility would expect to be the plant operator of this facility and its plant ownership is not expected to exceed 25%.

Plastics

While sales volumes and margins typically decline in the fourth quarter due to normal slowdown in construction activities as the winter season approaches, the corporation expects the plastics segment will have a good performance in the fourth quarter due to continuing strong demand in the southwestern region of the country.

Manufacturing

As anticipated, results for this segment improved in the third quarter and there are objective signs of improved activity for the rest of the year. Increasing commodity prices, such as steel, are being offset through product pricing increases and increases in productivity and capacity utilization. The manufacturing businesses continue, however, to be affected by the uncertainty with regard to the pricing and availability of steel and other commodities.

Health Services

Revenues from the company that sells and services medical diagnostic and monitoring equipment are expected to be strong for the fourth quarter based on current backlog and produce financial results consistent with 2003. Management continues to address the cost structure of the diagnostic imaging operations with a continued emphasis on improving nonperforming assets. As the changes are being implemented, it is expected that diagnostic imaging operations will continue to show improved earnings in the fourth quarter.

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Other Business Operations

The corporation expects other business operations to have stronger results for the fourth quarter of 2004 compared to 2003. The outlook for other business operations includes the following considerations:

• Foley Company will continue to generate net earnings through 2004 with strong bidding activity and good backlog in place for the remainder of the year.

• The corporation’s other construction company continues to face lower volumes of work and tight margins.

• The acquisition of Idaho Pacific Holdings is expected to generate additional net earnings for the remainder of 2004.

• The corporation’s transportation and telecommunications businesses are also expected to have improved performance over the fourth quarter of 2003.

Amendments to Loan Agreements

In October 2004, the corporation renegotiated terms on its $90 million, 6.63% senior notes and its $70 million line of credit to remove ratings triggers that would require repayment of the debt if the corporation’s senior unsecured debt is rated below Baa3 (Moody’s) or BBB- (Standards & Poor’s).

Exiting Telecommunications Business

As part of an ongoing evaluation of the prospects and growth opportunities of its business operations, the corporation has decided to exit its telecommunications business (Midwest Information Systems, Inc.) and focus on growing other parts of the corporation’s business operations. The corporation has engaged Robert W. Baird & Co. as its financial advisor to assist in the marketing process. This business is expected to generate $5.1 million in earnings before interest, taxes and depreciation for the year ending December 31, 2004 and has shareholder’s equity of $13.6 million.

Board Declares Quarterly Dividend

Otter Tail Corporation’s Board of Directors has declared a quarterly common stock dividend of 27.5 cents per share. This dividend is payable on December 10, 2004 to shareholders of record on November 15, 2004. The board also declared quarterly dividends on the corporation’s four series of preferred stock, payable on December 1, 2004 to shareholders of record on November 15, 2004.

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About The Corporation

Otter Tail Corporation has interests in diversified operations that include an electric utility, plastics, manufacturing, health services and other businesses. Otter Tail Corporation stock trades on NASDAQ under the symbol OTTR. The latest investor and corporate information is available at www.ottertail.com. Corporate offices are located in Fergus Falls, Minnesota, and Fargo, North Dakota.

Forward-looking statements

Forward-looking statements in this news release are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to a number of factors including, but not limited to, the corporation’s ongoing involvement in diversification efforts, the timing and scope of deregulation and open competition, market valuations of forward energy contracts, growth of electric revenues, impact of the investment performance of the utility’s pension plan, changes in the economy, governmental and regulatory action, weather conditions, fuel and purchased power costs, environmental issues, resin prices, the availability of off-grade potatoes due to poor growing conditions, a loss of key growers and other factors discussed from time to time in reports the corporation files with the Securities and Exchange Commission.

Unaudited results for the three and nine months ended September 30, 2004 are in the attached financial statements:

Consolidated Statements of Income, Consolidated Balance Sheets – Assets, Consolidated Balance Sheets – Liabilities and Equity

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Otter Tail Corporation
Consolidated Statements of Income
For the three and nine months ended September 30, 2004 and 2003
In thousands, except share and per share amounts
Unaudited

	Quarter Ended September 30						Year to date - September 30,
	2004			2003			2004			2003
Operating revenues by segment:
Electric	$	62,640		$	74,128		$	195,944		$	201,298
Plastics		27,574			23,414			86,646			65,996
Manufacturing		57,760			49,793			160,656			133,350
Health services		27,741			25,908			80,014			73,138
Other business operations		47,215			27,883			118,706			79,869
Intersegment eliminations		(667	)		(231	)		(1,910	)		(550	)
Total operating revenues		222,263			200,895			640,056			553,101
Operating expenses:
Fuel and purchased power		22,527			19,978			69,142			62,965
Nonelectric cost of goods sold		123,297			101,320			346,849			269,698
Electric operating and maintenance expense		21,880			26,607			70,207			73,113
Nonelectric operating and maintenance expense		22,263			18,964			67,469			57,596
Depreciation and amortization		11,585			11,718			33,990			34,208
Total operating expenses		201,552			178,587			587,657			497,580
Operating income (loss) by segment:
Electric		12,219			20,944			38,630			45,760
Plastics		2,138			(205	)		7,459			4,356
Manufacturing		4,478			(56	)		8,574			6,188
Health services		1,813			1,874			2,769			3,451
Other business operations		63			(249	)		(5,033	)		(4,234	)
Total operating income		20,711			22,308			52,399			55,521
Interest charges		4,640			4,526			13,439			13,338
Other income		125			9			944			1,277
Income taxes		5,170			5,830			12,587			13,203
Net income (loss) by segment:
Electric		6,600			11,962			21,313			26,535
Plastics		1,161			(197	)		4,090			2,264
Manufacturing		2,296			(433	)		4,076			2,658
Health services		936			926			1,210			1,577
Other business operations		33			(297	)		(3,372	)		(2,777	)
Total net income		11,026			11,961			27,317			30,257
Preferred stock dividend		184			184			552			552
Balance for common:	$	10,842		$	11,777		$	26,765		$	29,705
Average common shares outstanding:
Basic		26,010,252			25,708,199			25,898,244			25,657,717
Diluted		26,121,911			25,868,975			26,019,550			25,810,697
Earnings per share:
Basic	$	0.42		$	0.46		$	1.03		$	1.16
Diluted	$	0.42		$	0.46		$	1.03		$	1.15

Otter Tail Corporation
Consolidated Balance Sheets
Assets
In thousands
(Unaudited)

	September 30,		December 31,
	2004		2003
Current assets
Cash and cash equivalents	$	—	$	7,305
Accounts receivable:
Trade—net		115,028		107,634
Other		4,356		7,830
Inventories		78,187		56,966
Deferred income taxes		2,928		3,532
Accrued utility revenues		10,586		14,866
Costs and estimated earnings in excess of billings		19,680		4,591
Other		10,229		10,385
Total current assets		240,994		213,109
Investments and other assets		45,452		35,987
Goodwill—net		95,952		72,556
Other intangibles—net		21,211		7,096
Deferred debits:
Unamortized debt expense and reacquisition premiums		7,516		8,081
Regulatory assets		14,228		14,669
Other		1,671		1,600
Total deferred debits		23,415		24,350
Plant
Electric plant in service		883,682		875,364
Nonelectric operations		233,679		193,858
Total		1,117,361		1,069,222
Less accumulated depreciation and amortization		454,413		453,791
Plant—net of accumulated depreciation and amortization		662,948		615,431
Construction work in progress		25,049		17,894
Net plant		687,997		633,325
Total	$	1,115,021	$	986,423

Otter Tail Corporation
Consolidated Balance Sheets
Liabilities and Equity
In thousands
(Unaudited)

	September 30,			December 31,
	2004			2003
Current liabilities
Short-term debt	$	115,757		$	30,000
Current maturities of long-term debt		8,723			9,718
Accounts payable		76,389			83,338
Accrued salaries and wages		16,374			14,677
Accrued federal and state income taxes		7,415			4,152
Other accrued taxes		9,241			10,491
Other accrued liabilities		10,365			10,003
Total current liabilities		244,264			162,379
Pensions benefit liability		18,451			16,919
Other postretirement benefits liability		25,001			23,230
Other noncurrent liabilities		11,931			11,102
Deferred credits
Deferred income taxes		120,625			101,596
Deferred investment tax credit		10,766			11,630
Regulatory liabilities		57,482			42,926
Other		1,781			2,061
Total deferred credits		190,654			158,213
Capitalization
Long-term debt, net of current maturities		261,271			265,193
Class B stock options of subsidiary		1,832			—
Cumulative preferred shares		15,500			15,500
Cumulative preference shares — authorized 1,000,000 shares without par value; outstanding — none		—			—
Common shares, par value $5 per share		130,278			128,619
Premium on common shares		31,226			26,515
Unearned compensation		(2,902	)		(3,313	)
Retained earnings		191,902			186,495
Accumulated other comprehensive loss		(4,387	)		(4,429	)
Total common equity		346,117			333,887
Total capitalization		624,720			614,580
Total	$	1,115,021		$	986,423