UNITED STATES

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 29, 2015

 

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)

 

Minnesota 0-53713 27-0383995
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)

 

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

 

 

 

 

Item 1.01.         Entry into a Material Definitive Agreement.

 

Amendment of Otter Tail Corporation Credit Agreement

 

On October 29, 2015, Otter Tail Corporation (the “Company”) entered into an amendment dated as of October 29, 2015 (the “Third Amendment to OTC Credit Agreement”) to the Third Amended and Restated Credit Agreement dated as of October 29, 2012, as amended, (the “OTC Credit Agreement”) among the Company, U.S. Bank National Association, as Administrative Agent (the “OTC Agent”) and the banks party thereto from time to time (the “OTC Banks”). The OTC Credit Agreement provides for an unsecured revolving credit facility with a $150 million line of credit that the Company can draw on to refinance certain indebtedness and support the operations of the Company and its subsidiaries, and is described in and filed as Exhibit 4.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 2, 2012, Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on November 1, 2013 and Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on November 4, 2014.

 

The Third Amendment to OTC Credit Agreement was entered into among the Company, the OTC Agent and the OTC Banks to extend the termination date of the facility from October 29, 2019 to October 29, 2020, and to make certain other immaterial changes consistent with provisions in similar agreements. The summary in this Item 1.01 of the material terms of the Third Amendment to OTC Credit Agreement is qualified in its entirety by reference to the full text of the Third Amendment to OTC Credit Agreement, a copy of which is filed as Exhibit 4.1 hereto and incorporated herein by reference.

 

Amendment of Otter Tail Power Company Credit Agreement

 

On October 29, 2015, Otter Tail Power Company (“OTP”), a wholly owned subsidiary of the Company, entered into an amendment dated as of October 29, 2015 (the “Third Amendment to OTP Credit Agreement”) to the Second Amended and Restated Credit Agreement dated as of October 29, 2012, as amended, (the “OTP Credit Agreement”) among OTP, U.S. Bank National Association, as Administrative Agent (the “OTP Agent”), and the Banks party thereto from time to time (the “OTP Banks”). The OTP Credit Agreement provides for an unsecured revolving credit facility with a $170 million line of credit that OTP can draw on to support the working capital needs and other capital requirements of its operations, and is described in and filed as Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on November 2, 2012, Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on November 1, 2013 and Exhibit 4.2 to the Company’s Form 8-K filed with the SEC on November 4, 2014.  

 

The Third Amendment to OTP Credit Agreement was entered into among OTP, the OTP Agent and the OTP Banks to extend the termination date of the facility from October 29, 2019 to October 29, 2020, and to make certain other immaterial changes consistent with provisions in similar agreements. The summary in this Item 1.01 of the material terms of the Third Amendment to OTP Credit Agreement is qualified in its entirety by reference to the full text of the Third Amendment to OTP Credit Agreement, a copy of which is filed as Exhibit 4.2 hereto and incorporated herein by reference.

 

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Certain Relationships

 

Certain of the banks party to one or both of the OTC Credit Agreement and the OTP Credit Agreement and/or their respective affiliates have had, and may in the future have, investment banking and other commercial dealings with the Company, OTP and their other affiliates, for which such banks or their respective affiliates have received and may in the future receive customary compensation. Such dealings have included the following: (i) U.S. Bank, JPMorgan, Bank of America, N.A. (“Bank of America”), and KeyBank National Association (“KeyBank”) are parties to both credit agreements; (ii) J.P. Morgan Securities LLC (“JPMS”), an affiliate of JPMorgan, entered into a Distribution Agreement with the Company on May 11, 2015, pursuant to which the Company may offer and sell its common shares, par value $5.00 per share, from time to time through JPMS, as the Company’s distribution agent for the offer and sale of the shares, up to an aggregate sales price of $75,000,000; (iii) in connection with the offering and sale by the Company of $100,000,000 aggregate principal amount of its 9.000% Notes due 2016 in 2009, JPMS and an affiliate of Bank of America acted as joint book-running managers, an affiliate of U.S. Bank acted as lead manager, and affiliates of Bank of the West (a party to the Otter Tail Credit Agreement), KeyBank and Wells Fargo Bank, National Association (a party to the OTP Credit Agreement) acted as co-managers; (iv) Merrill Lynch, Pierce, Fenner and Smith Incorporated (an affiliate of Bank of America) acted as placement agent in connection with the 2011 issuance by OTP of its 4.63% Senior Unsecured Notes due December 1, 2021; (v) JPMS acted as sole placement agent in connection with a note purchase agreement entered into on August 14, 2013 for the private placement of $60 million aggregate principal amount of OTP’s 4.68% Series A Senior Unsecured Notes due February 27, 2029 and $90 million aggregate principal amount of OTP’s 5.47% Series B Senior Unsecured Notes due February 27, 2044, both issued on February 27, 2014; and (vi) KeyBank was the investment banker for the Company’s recently completed dispositions of Aevenia, Inc. (closed February 28, 2015) and Foley Company (closed April 30, 2015).

 

Item 2.02         Results of Operations and Financial Condition

 

On November 2, 2015 Otter Tail Corporation issued a press release concerning consolidated financial results for the third quarter of 2015. A copy of the press release is furnished herewith as Exhibit 99.1.

 

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Item 9.01         Financial Statements and Exhibits

 

(d)      Exhibits

 

4.1 Third Amendment to Third Amended and Restated Credit Agreement, dated as of October 29, 2015, among Otter Tail Corporation, U.S. Bank National Association, as Administrative Agent and as a Bank, Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as a Co-Syndication Agent and as a Bank, KeyBank National Association, as Documentation Agent and as a Bank, and Bank of the West as a Bank.

 

4.2 Third Amendment to Second Amended and Restated Credit Agreement, dated as of October 29, 2015, among Otter Tail Power Company, U.S. Bank National Association, as Administrative Agent and as a Bank, Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as a Co-Syndication Agent and as a Bank, KeyBank National Association, as Documentation Agent and as a Bank, CoBank, ACB, as a Co-Documentation Agent and as a Bank, and Wells Fargo Bank, National Association as a Bank.

 

99.1 Press Release issued November 2, 2015.

 

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 3, 2015      
       
  By /s/ Kevin G. Moug  
    Kevin G. Moug  
    Chief Financial Officer  

 

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EXHIBIT INDEX

 

Exhibit   Description of Exhibit
     
4.1   Third Amendment to Third Amended and Restated Credit Agreement, dated as of October 29, 2015, among Otter Tail Corporation, U.S. Bank National Association, as Administrative Agent and as a Bank, Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as a Co-Syndication Agent and as a Bank, KeyBank National Association, as Documentation Agent and as a Bank, and Bank of the West as a Bank.
     
4.2   Third Amendment to Second Amended and Restated Credit Agreement, dated as of October 29, 2015, among Otter Tail Power Company, U.S. Bank National Association, as Administrative Agent and as a Bank, Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as a Co-Syndication Agent and as a Bank, KeyBank National Association, as Documentation Agent and as a Bank, CoBank, ACB, as a Co-Documentation Agent and as a Bank, and Wells Fargo Bank, National Association as a Bank.
      
99.1   Press release, issued November 2, 2015

 

 

 

 

 

 

Exhibit 4.1

 

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS THIRD AMENDMENT (this "Amendment"), dated as of October 29, 2015, amends and modifies that certain Third Amended and Restated Credit Agreement, dated as of October 29, 2012 (as amended by the First Amendment thereto dated October 29, 2013 and the Second Amendment thereto dated November 3, 2014, the "Credit Agreement"), among Otter Tail Corporation (the "Borrower"), U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent (in such capacity, the "Agent"), and the Lenders, as defined therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement.

 

FOR VALUE RECEIVED, the Borrower, the Lenders and the Agent agree that the Credit Agreement is amended as follows.

 

ARTICLE I - AMENDMENTS

 

1.1           The definition of “Termination Date” appearing in Section 1.1 of the Credit Agreement is hereby amended to replace the date “October 29, 2019” with the date “October 29, 2020”.

 

1.2           The definition of “Federal Funds Effective Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the weighted average of the rates” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.3           The definition of “LIBOR Interbank Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the offered rate for deposits” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.4           The definition of “LIBOR Interbank Daily Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the offered rate for deposits” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.5           Section 1.1 of the Credit Agreement is hereby amended to insert the following definitions alphabetically therein:

 

“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.

 

“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

 

 

 

  

“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

 

“ PATRIOT Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute.

 

“ Sanctioned Country ” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

 

“ Sanctioned Person ” means, at any time, (a) any Person or group listed in any Sanctions related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

 

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

 

1.6           Section 2.15 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

Section 2.15          Tax Matters      (a) No Person can become a Bank unless it is either a United States Person or an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Person represents and warrants to the Agent and the Borrower that it is entitled to receive interest payments without withholding or deduction of any taxes and executes and delivers to the Agent and the Borrower a United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes. A “United States Person” means any citizen, national or resident of the United States, any corporation or other entity created or organized in or under the laws of the United States or any political subdivision hereof or any estate or trust, in each case that is not subject to withholding of United States Federal income taxes or other taxes on payment of interest, principal of fees hereunder, (b) if a payment made to a Bank under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Bank were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Bank has complied with such Bank’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.15(b) and Section 12.3(e) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement and (c) for purposes of determining withholding taxes imposed under FATCA, from and after October 29, 2015, the Borrower and the Agent shall treat (and the Banks hereby authorize the Agent to treat) the Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

 

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1.7           Section 5.1(a) of the Credit Agreement is hereby amended to delete the parenthetical appearing therein and to substitute the following therefor:

 

( other than (i) taxes imposed on the overall net income of such Bank by the jurisdiction in which such Bank has its principal office and (ii) any U.S. federal withholding taxes imposed under FATCA)

 

1.8          Article VII of the Credit Agreement is hereby amended to insert the following new Section 7.18 at the end thereof:

 

Section 7.18.          Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws .

 

(a) The Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti- Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees is a Sanctioned Person. No Loan or Letter of Credit, use of the proceeds of any Loan or Letter of Credit or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

 

(b) Neither the making of the Loans nor the issuance of any Letter of Credit hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act.

 

1.9           Section 8.1(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

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(a) As soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, (i) the annual audited financial statements of the Borrower and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP, consisting of at least statements of income, cash flow, and a consolidated balance sheet as at the end of such year, setting forth in each case in comparative form corresponding figures from the previous fiscal year, certified without a “going concern” or like qualification, or a qualification arising out of the scope of the audit, by independent certified public accountants of recognized standing selected by the Borrower (it being agreed that the furnishing of the Borrower’s annual report on Form 10-K for such year, as filed with the Securities and Exchange Commission, will satisfy the Borrower’s obligation under this Section 8.1(a)(i) with respect to such year except with respect to the requirement that such financial statements be reported on without a “going concern” or like qualification, or a qualification arising out of the scope of the audit), together with any related management letters, and (ii) schedules providing consolidating detailed balance sheet, income statement results and statement of cash flows for Varistar Corporation and its Subsidiaries, and a statement from an Authorized Representative that the financial statements are fairly stated in all material respects when considered in relation to the basic consolidated statements taken as a whole.

 

1.10          Section 8.1(b) of the Credit Agreement is amended to delete the phrase “supplemental schedules detailing balance sheet and income statement results” now appearing in clause (ii) thereof, and to substitute the following therefor: “schedules providing consolidating detailed balance sheet, income statement results and statement of cash flows”.

 

1.11         Section 8.1 of the Credit Agreement is hereby amended to insert the following new clause (I) at the end thereof:

 

(I)         Promptly following request thereof, provide such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining compliance with the PATRIOT Act.

 

1.12         Section 8.8 of the Credit Agreement is amended to insert immediately following the phrase “to which it may be subject” now appearing therein, the following: “, including, without limitation, all Anti-Corruption Laws and applicable Sanctions,”.

 

1.13         Section 9.11 of the Credit Agreement is hereby amended to insert immediately prior to the period (“.”) now appearing at the end thereof, the following:

 

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; or request any Loan or Letter of Credit, nor shall the Borrower use, and the Borrower shall ensure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan or Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions.

 

1.14         Section 12.3(e) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

(e) Tax Matters . No Bank shall be permitted to enter into any Assignment or Participation with any Assignee or Participant who (i) is not a United States Person or (ii) is a United States Person that the Borrower may not treat as an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Assignee or Participant represents and warrants to such Bank, the Agent and the Borrower that, as at the date of such Assignment or Participation, it is entitled to receive interest payments without withholding or deduction of any taxes and such Assignee or Participant executes and delivers to such Bank on or before the date of execution and delivery of documentation of such Participation or Assignment, a United States Internal Revenue Service Form W-8BEN, W-8BEN-E W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes. A “United States Person” means any citizen, national or resident of the United States, any corporation or other entity created or organized in or under the laws of the United States or any political subdivision hereof or any estate or trust, in each case that is not subject to withholding of United States Federal income taxes or other taxes on payment of interest, principal of fees hereunder. In addition, if a payment made to an Assignee or Participant under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Assignee or Participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Assignee or Participant shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Assignee or Participant has complied with such Assignee’s or Participant’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

 

1.15        Section 12.16 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

Section 12.16         [RESERVED].

 

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1.16         Section 13 of Exhibit E the Credit Agreement is hereby amended to amend and restate clause (b) therein in its entirety as follows:

 

(b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Assignor, the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder either U.S. Internal Revenue Service Form W-8ECI, W-8BEN or W-8BEN-E and agrees to provide new Forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and

 

ARTICLE II - REPRESENTATIONS AND WARRANTIES

 

To induce the Agent and the Lenders to enter into this Amendment and to make and maintain the Loans under the Credit Agreement as amended hereby, the Borrower hereby warrants and represents to the Agent and the Lenders that it is duly authorized to execute and deliver this Amendment, and to perform its obligations under the Credit Agreement as amended hereby, and that this Amendment constitutes the legal, valid and binding agreement of the Borrower, enforceable in accordance with its terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and subject to limitations on the availability of equitable remedies.

 

ARTICLE III - CONDITIONS PRECEDENT

 

This Amendment shall become effective on the date first set forth above, provided, however, that the effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent:

 

3.1            Warranties . Before and after giving effect to this Amendment, the representations and warranties in the Credit Agreement shall be true and correct as though made on the date hereof with respect to representations and warranties containing qualifications as to materiality, and true and correct as though made on the date hereof in all material respects with respect to representations and warranties without qualifications as to materiality, except for changes that are permitted by the terms of the Credit Agreement. The execution by the Borrower of this Amendment shall be deemed a representation that the Borrower has complied with the foregoing condition.

 

3.2            Defaults . Before and after giving effect to this Amendment, no Default and no Event of Default shall have occurred and be continuing under the Credit Agreement. The execution by the Borrower of this Amendment shall be deemed a representation that the Borrower has complied with the foregoing condition.

 

3.3            Documents . The Borrower, the Agent and the Lenders shall have executed and delivered this Amendment.

 

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3.4            Fees . The Agent shall have received all fees and other amounts due and payable on or prior to the date hereof, including, without limitation, (i) all fees set forth in that certain Fee Letter by and between the Borrower and the Agent dated as of October 29, 2015 and (ii) to the extent invoiced reasonably in advance, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement.

 

ARTICLE IV - GENERAL

 

4.1            Expenses . The Borrower agrees to reimburse the Agent upon demand for all reasonable expenses (including reasonable attorneys' fees and legal expenses) incurred by the Agent in the preparation, negotiation and execution of this Amendment and any other document required to be furnished herewith.

 

4.2            Counterparts . This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same instrument.

 

4.3            Severability . Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

 

4.4            Governing Law . This Amendment shall be a contract made under the laws of the State of Minnesota, which laws shall govern all the rights and duties hereunder.

 

4.5            Successors; Enforceability . This Amendment shall be binding upon the Borrower, the Agent and the Lenders and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Agent and the Lenders and the successors and assigns of the Agent and the Lenders. Except as hereby amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first written above.

 

  OTTER TAIL CORPORATION
     
  By: /s/ Kevin Moug
     
  Title: Chief Financial Officer

 

  4334 18 th Avenue South
  Suite 200
  Fargo, North Dakota 58103
  Attention: Mr. Kevin G. Moug,
    Chief Financial Officer
  Telephone:  (701) 451-3562
  Fax:  (701) 232-4108

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

 

 

  U.S. BANK NATIONAL ASSOCIATION,
  as Agent and a Bank
     
  By: /s/ Jacquelyn Ness
     
  Title: Vice President

 

  505 Second Avenue North
  Mail Code EP-ND-0630
  Fargo, ND 58102
  Attention:    Jacquelyn Ness, Vice President
  Telephone:   (701) 280-3655
  Fax:  (701) 280-3580

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

  

  BANK OF AMERICA, N.A., as Co-Syndication
Agent and as a Bank
     
  By: /s/ A. Quinn Richardson
     
  Title: Senior Vice President

 

  IL-4135-07-65
  135 S. LaSalle Street
  Chicago, IL  60603
  Attention: A. Quinn Richardson
    Senior Vice President
  Telephone:  (312) 992-2160
  Fax:  (312) 904-6546

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

 

 

  JPMORGAN CHASE BANK, N.A., as Co-
Syndication Agent and as a Bank
   
  By: /s/ Justin Martin
     
  Title: Authorized Officer
     
  10 South Dearborn, 9 th Floor, IL1-0090
  Chicago, IL  60603
  Attention:    Justin Martin
  Telephone:    (312) 732-4441
  Fax:  (312) 732-1762

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

  

  KEYBANK NATIONAL ASSOCIATION, as
Documentation Agent and as a Bank
   
  By: /s/ Keven D. Smith
     
  Title: Senior Vice President

 

  1301 5 th Avenue
  Mail Code:  WA-31-13-2514
  Seattle, WA  98101
  Attention: Keven D. Smith
  Telephone:   (206) 343-6966
  Fax:  (206) 684-6570

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

  

  BANK OF THE WEST, a California Banking
Corporation, as a Bank
     
  By: /s/ David Wang
     
  Title: Director

 

  250 Marquette Ave., Suite 575
  Minneapolis, MN  55401
  Attention:   David Wang
  Telephone:   (612) 339-1403
  Fax:  (612) 339-6362

 

(Signature Page to Third Amendment to Otter Tail Corporation Credit Agreement)

 

 

 

 

 

 

 

Exhibit 4.2

 

THIRD AMENDMENT TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT

 

THIS THIRD AMENDMENT (this "Amendment"), dated as of October 29, 2015, amends and modifies that certain Second Amended and Restated Credit Agreement, dated as of October 29, 2012 (as amended by the First Amendment thereto dated October 29, 2013 and the Second Amendment thereto dated November 3, 2014, the "Credit Agreement"), among Otter Tail power company (the "Borrower"), U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent (in such capacity, the "Agent"), and the Lenders, as defined therein. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement.

 

FOR VALUE RECEIVED, the Borrower, the Lenders and the Agent agree that the Credit Agreement is amended as follows.

 

ARTICLE I - AMENDMENTS

 

1.1           The definition of “Termination Date” appearing in Section 1.1 of the Credit Agreement is hereby amended to replace the date “October 29, 2019” with the date “October 29, 2020”.

 

1.2           The definition of “Federal Funds Effective Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the weighted average of the rates” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.3           The definition of “LIBOR Interbank Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the offered rate for deposits” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.4           The definition of “LIBOR Interbank Daily Rate” appearing in Section 1.1 of the Credit Agreement is hereby amended to insert immediately prior to the phrase “the offered rate for deposits” now appearing therein, the following: “the greater of (a) zero percent (0.0%) and (b)”.

 

1.5           Section 1.1 of the Credit Agreement is hereby amended to insert the following definitions alphabetically therein:

 

“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.

 

“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

 

 

 

  

“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

 

“ PATRIOT Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute.

 

“ Sanctioned Country ” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

 

“ Sanctioned Person ” means, at any time, (a) any Person or group listed in any Sanctions related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

 

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

 

1.6           Section 2.15 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

Section 2.15          Tax Matters    (a) No Person can become a Bank unless it is either a United States Person or an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Person represents and warrants to the Agent and the Borrower that it is entitled to receive interest payments without withholding or deduction of any taxes and executes and delivers to the Agent and the Borrower a United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes. A “United States Person” means any citizen, national or resident of the United States, any corporation or other entity created or organized in or under the laws of the United States or any political subdivision hereof or any estate or trust, in each case that is not subject to withholding of United States Federal income taxes or other taxes on payment of interest, principal of fees hereunder, (b) if a payment made to a Bank under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Bank were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Bank has complied with such Bank’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.15(b) and Section 12.3(e) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement and (c) for purposes of determining withholding taxes imposed under FATCA, from and after October 29, 2015, the Borrower and the Agent shall treat (and the Banks hereby authorize the Agent to treat) the Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

 

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1.7          Section 5.1(a) of the Credit Agreement is hereby amended to delete the parenthetical appearing therein and to substitute the following therefor:

 

( other than (i) taxes imposed on the overall net income of such Bank by the jurisdiction in which such Bank has its principal office and (ii) any U.S. federal withholding taxes imposed under FATCA)

 

1.8          Article VII of the Credit Agreement is hereby amended to insert the following new Section 7.18 at the end thereof:

 

Section 7.18.          Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws .

 

(a) The Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti- Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Subsidiary or to the knowledge of the Borrower or such Subsidiary any of their respective directors, officers or employees is a Sanctioned Person. No Loan or Letter of Credit, use of the proceeds of any Loan or Letter of Credit or other transactions contemplated hereby will violate Anti-Corruption Laws or applicable Sanctions.

 

(b) Neither the making of the Loans nor the issuance of any Letter of Credit hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act.

   

1.9           Section 8.1 of the Credit Agreement is hereby amended to insert the following new clause (I) at the end thereof:

 

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(I)         Promptly following request thereof, provide such information and take such actions as are reasonably requested by the Administrative Agent or any Lender in order to assist the Administrative Agent and the Lenders in maintaining compliance with the PATRIOT Act.

 

1.10         Section 8.8 of the Credit Agreement is amended to insert immediately following the phrase “to which it may be subject” now appearing therein, the following: “, including, without limitation, all Anti-Corruption Laws and applicable Sanctions,”.

 

1.11         Section 9.11 of the Credit Agreement is hereby amended to insert immediately prior to the period (“.”) now appearing at the end thereof, the following:

 

; or request any Loan or Letter of Credit, nor shall the Borrower use, and the Borrower shall ensure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan or Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions.

 

1.12         Section 12.3(e) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

(e) Tax Matters . No Bank shall be permitted to enter into any Assignment or Participation with any Assignee or Participant who (i) is not a United States Person or (ii) is a United States Person that the Borrower may not treat as an “exempt recipient” within the meaning of Treasury Regulations Section 1.6049-4(c) based on the indicators set forth therein, unless such Assignee or Participant represents and warrants to such Bank, the Agent and the Borrower that, as at the date of such Assignment or Participation, it is entitled to receive interest payments without withholding or deduction of any taxes and such Assignee or Participant executes and delivers to such Bank on or before the date of execution and delivery of documentation of such Participation or Assignment, a United States Internal Revenue Service Form W-8BEN, W-8BEN-E W-8ECI, W-8IMY and/or W-9 or any successor to any of such forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of all Federal Income Taxes. A “United States Person” means any citizen, national or resident of the United States, any corporation or other entity created or organized in or under the laws of the United States or any political subdivision hereof or any estate or trust, in each case that is not subject to withholding of United States Federal income taxes or other taxes on payment of interest, principal of fees hereunder. In addition, if a payment made to an Assignee or Participant under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Assignee or Participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Assignee or Participant shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Assignee or Participant has complied with such Assignee’s or Participant’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

 

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1.13         Section 12.16 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

 Section 12.16   [RESERVED].

 

1.14         Section 13 of Exhibit E the Credit Agreement is hereby amended to amend and restate clause (b) therein in its entirety as follows:

 

(b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Assignor, the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder either U.S. Internal Revenue Service Form W-8ECI, W-8BEN or W-8BEN-E and agrees to provide new Forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and

 

ARTICLE II - REPRESENTATIONS AND WARRANTIES

 

To induce the Agent and the Lenders to enter into this Amendment and to make and maintain the Loans under the Credit Agreement as amended hereby, the Borrower hereby warrants and represents to the Agent and the Lenders that it is duly authorized to execute and deliver this Amendment, and to perform its obligations under the Credit Agreement as amended hereby, and that this Amendment constitutes the legal, valid and binding agreement of the Borrower, enforceable in accordance with its terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and subject to limitations on the availability of equitable remedies.

 

ARTICLE III - CONDITIONS PRECEDENT

 

This Amendment shall become effective on the date first set forth above, provided, however, that the effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent:

 

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3.1            Warranties . Before and after giving effect to this Amendment, the representations and warranties in the Credit Agreement shall be true and correct as though made on the date hereof with respect to representations and warranties containing qualifications as to materiality, and true and correct as though made on the date hereof in all material respects with respect to representations and warranties without qualifications as to materiality, except for changes that are permitted by the terms of the Credit Agreement. The execution by the Borrower of this Amendment shall be deemed a representation that the Borrower has complied with the foregoing condition.

 

3.2            Defaults . Before and after giving effect to this Amendment, no Default and no Event of Default shall have occurred and be continuing under the Credit Agreement. The execution by the Borrower of this Amendment shall be deemed a representation that the Borrower has complied with the foregoing condition.

 

3.3            Documents . The Borrower, the Agent and the Lenders shall have executed and delivered this Amendment.

 

3.4            Fees . The Agent shall have received all fees and other amounts due and payable on or prior to the date hereof, including, without limitation, (i) all fees set forth in that certain Fee Letter by and between the Borrower and the Agent dated as of October 29, 2015 and (ii) to the extent invoiced reasonably in advance, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement.

 

ARTICLE IV - GENERAL

 

4.1            Expenses . The Borrower agrees to reimburse the Agent upon demand for all reasonable expenses (including reasonable attorneys' fees and legal expenses) incurred by the Agent in the preparation, negotiation and execution of this Amendment and any other document required to be furnished herewith.

 

4.2            Counterparts . This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same instrument.

 

4.3            Severability . Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

 

4.4            Governing Law . This Amendment shall be a contract made under the laws of the State of Minnesota, which laws shall govern all the rights and duties hereunder.

 

4.5            Successors; Enforceability . This Amendment shall be binding upon the Borrower, the Agent and the Lenders and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Agent and the Lenders and the successors and assigns of the Agent and the Lenders. Except as hereby amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first written above.

 

  OTTER TAIL POWER COMPANY
     
  By: /s/ Kevin Moug
     
  Title: Treasurer

 

  4334 18 th Avenue South
  Suite 200
  Fargo, North Dakota 58103
  Attention: Mr. Kevin G. Moug,
    Treasurer
  Telephone:  (701) 451-3562
  Fax:  (701) 232-4108

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

  

  U.S. BANK NATIONAL ASSOCIATION,
  as Agent and a Bank
     
  By: /s/ Jacquelyn Ness
     
  Title: Vice President

 

  505 Second Avenue North
  Mail Code EP-ND-0630
  Fargo, ND 58102
  Attention:   Jacquelyn Ness, Vice President
  Telephone:    (701) 280-3655
  Fax:  (701) 280-3580

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

 

  JPMORGAN CHASE BANK, N.A., as a Co-
Syndication Agent and as a Bank
     
  By: /s/ Justin Martin
  Title:   Authorized Officer

 

  10 South Dearborn, 9th Floor, IL1-0090
  Chicago, IL 60603
  Attention:    Justine Martin
  Telephone:    (312) 732-4441
  Fax:  (312) 732-1762

  

 

 

  

  BANK OF AMERICA, N.A., as Co-
Syndication Agent and as a Bank
     
  By: /s/ A. Quinn Richardson
     
  Title:  Senior Vice President

 

  IL-4135-07-65
  135 S. LaSalle Street
  Chicago, IL  60603
  Attention: A. Quinn Richardson
    Senior Vice President
  Telephone:  (312) 992-2160
  Fax:  (312) 904-6546

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

  

  KEYBANK NATIONAL ASSOCIATION, as
Documentation Agent and as a Bank
     
  By: /s/ Keven D. Smith
     
  Title: Senior Vice President

 

  1301 5 th Avenue
  Mail Code:  WA-31-13-2514
  Seattle, WA  98101
  Attention: Keven D. Smith
  Telephone: (206) 343-6966
  Fax:  (206) 684-6570

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

  

  WELLS FARGO BANK, NATIONAL
  ASSOCIATION, as a Bank
     
  By: /s/ Jesse Tannuzzo
  Title: Assistant Vice President

 

  90 S 7 th Street, 7 th Floor
  MAC:  N9305-070
  Minneapolis, MN  55402
  Attention: Jesse Tannuzzo
  Tel:  612-667-0030
  Fax:  612-316-0506

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

  

  COBANK, ACB, as a Co-Documentation Agent and as a Bank
     
  By: /s/ John Kemper
  Title: Vice President

 

  5500 South Quebec St.
  Greenwood Village, CO  80111
  Attention:  John Kemper
  Telephone:  303-740-6576
  Fax:  303-224-2615

 

(Signature Page to Third Amendment to Otter Tail Power Company Credit Agreement)

 

 

 

 

 

 

  Exhibit 99.1
   
 
   
NEWS RELEASE  

 

Media contact: Cris Oehler, Vice President of Corporate Communications, (218) 531-0099 or (866) 410-8780
Investor contact: Loren Hanson, Manager of Investor Relations, (218) 739-8481 or (800) 664-1259

 

For release: November 2, 2015 Financial Media

 

Otter Tail Corporation Announces Third Quarter Earnings;

Reaffirms Consolidated Earnings from Continuing Operations Guidance Range to be in the Middle to Upper Half of $1.50 to $1.65 per Share,

Board of Directors Declares Quarterly Dividend

 

FERGUS FALLS, Minnesota - Otter Tail Corporation (NASDAQ: OTTR) today announced financial results for the quarter ended September 30, 2015.

 

Summary:

 

· Consolidated operating revenues from continuing operations were $200.0 million compared with $196.5 million in the third quarter of 2014.

 

· Consolidated net income and diluted earnings per share from continuing operations totaled $15.7 million and $0.42 per share, respectively, compared with $13.2 million and $0.36 per share in the third quarter of 2014.

 

· On September 1, 2015 BTD Manufacturing, Inc. (BTD), a wholly owned subsidiary of Otter Tail Corporation, announced the acquisition of the assets of Impulse Manufacturing of Dawsonville, Georgia, for $30.8 million in cash. The acquired business will operate under the name BTD–Georgia.

 

· Discontinued operations recorded a net loss of $0.3 million and diluted earnings of ($0.01) per share, compared with net income of $2.7 million and diluted earnings of $0.07 per share in the second quarter of 2014.

 

CEO Overview

“Electric segment performance drove strong results from continuing operations for the third quarter of 2015," said Otter Tail Corporation President and CEO Chuck MacFarlane. "This quarter's consolidated net income from continuing operations is up 19% compared with third quarter last year.

 

“At Otter Tail Power Company earnings from capital investments grew. Three of the five large regional transmission projects are energized and the others are on schedule to start construction. The environmental upgrade at Big Stone Plant is expected to be in commercial operation near year end. These projects are at or under budget with appropriate regulatory cost recovery mechanisms in place.

 

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“Otter Tail Power Company continues to work through its analysis of the EPA’s Clean Power Plan to regulate carbon dioxide from existing power plants. We will not know the rule’s impact to our plants and customers until the states formulate their implementation plans.

 

“BTD, our custom metal fabricator, continued to experience a decline in sales within the agriculture and energy markets and reduced scrap-metal revenue related to lower commodity prices, as did manufacturers across the nation. We expect the expansion of BTD’s Minnesota facilities, when complete, will enable BTD to improve sales by expanding services to its customers. BTD’s customers include some of the world's best known recreational, agricultural and industrial brands. We are pleased to report the first customer production jobs have run through the new paint line in Lakeville.

 

“In addition, on September 1, 2015 BTD acquired Impulse Manufacturing, a metal fabricator located 30 miles north of Atlanta, for $30.8 million. Now called BTD-Georgia, the new addition brings strong fabrication capabilities and allows BTD to accelerate its plans to expand into the Southeast to serve its growing customer base. Impulse had revenues of $27 million in 2014. Earnings from this acquisition are expected to be accretive for 2016.

 

“Third quarter 2015 earnings from our two PVC pipe companies and our manufacturer of custom plastic parts and containers, T.O. Plastics, were in line with our expectations.

 

“We are reaffirming our overall guidance for 2015 diluted earnings per share from continuing operations to be in the middle to upper half of the range of $1.50 to $1.65. This range is expected to provide a return on equity in the range of approximately 9.5% to 10.4%.”

 

Cash Flow from Operations and Liquidity

The corporation’s consolidated cash provided by continuing operations for the nine months ended September 30, 2015 was $81.8 million compared with $68.3 million for the nine months ended September 30, 2014. Contributing to the $13.5 million increase in cash provided by continuing operations between the periods were a $10.0 million decrease in discretionary contributions to the corporation’s pension plan and changes in non-cash items affecting net income from continuing operations, including a $5.7 million change in noncurrent liabilities and deferred credits, mainly related to long-term benefit costs which were down in 2014 and up in 2015, a $1.1 million change in deferred taxes and other long term assets and a $1.0 million increase in depreciation expense, offset by a $4.4 million increase in cash used for working capital items.

 

The following table shows the status of the corporation’s lines of credit as of September 30, 2015:

 

(in thousands)   Line Limit     In Use on
September 30,
2015 		    Restricted due to
Outstanding
Letters of Credit 		    Available on
September 30,
2015 		 
Otter Tail Corporation Credit Agreement   $ 150,000     $ 75,881     $ --     $ 74,119  
Otter Tail Power Company Credit Agreement     170,000       11,071       310       158,619  
Total   $ 320,000     $ 86,952     $ 310     $ 232,738  

 

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On October 29, 2015 both the Otter Tail Corporation and the Otter Tail Power Company credit agreements were amended to extend the expiration dates by one year from October 29, 2019 to October 29, 2020.

 

Board of Directors Declared Quarterly Dividend

On November 2, 2015 the corporation’s Board of Directors declared a quarterly common stock dividend of $0.3075 per share. This dividend is payable December 10, 2015 to shareholders of record on November 13, 2015.

 

Segment Performance Summary

Electric

Electric revenues and net income were $100.6 million and $12.9 million, respectively, compared with $89.4 million and $8.6 million for the third quarter of 2014.

 

The following table shows Degree Days for the electric utility business as a percent of normal:

 

  Three Months ended September 30,
  2015 2014
Cooling Degree Days 111.5% 75.5%

 

Retail electric revenues increased $10.2 million due to the following:

 

· A $5.1 million increase in fuel and purchased power costs being recovered in revenue related to an 11.4% increase in the combined cost of fuel and purchased power per kilowatt-hour (kwh) generated and purchased for retail use and a 7.8% increase in retail kwh sales. The increase in the combined cost of fuel and purchased power per kwh is a function of a reduction in the availability of Otter Tail Power Company’s generation resources.

 

· A $2.1 million increase in Environmental Cost Recovery (ECR) rider revenues related to: (1) earning a return in North Dakota and Minnesota on increasing amounts invested in the new air quality control system (AQCS) at Big Stone Plant, (2) earning a return on the Hoot Lake Plant Mercury and Air Toxics Standards (MATS) project in North Dakota beginning in 2015, and (3) the initiation of an ECR rider in South Dakota in December 2014 to recover costs and earn returns on amounts invested in the Big Stone Plant AQCS and Hoot Lake Plant MATS projects.

 

· A $1.4 million increase in revenues related to increased retail kwh sales to residential and commercial customers driven by warmer weather in the third quarter of 2015 compared with the third quarter of 2014, evidenced by a 51.1% increase in cooling degree days between the quarters.

 

· A $0.8 million increase in revenues recoverable under Conservation Improvement Program (CIP) riders related to increases in CIP accrued incentives and recoverable expenditures.

 

· A $0.7 million increase in revenues mainly related to increased sales to pipeline customers.

 

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Wholesale electric revenues from company-owned generation decreased $1.4 million as a result of a 62.5% reduction in wholesale kwh sales combined with a 43.2% decrease in revenue per wholesale kwh sold. The decrease in wholesale kwh sales was mainly due to Otter Tail Power Company having fewer resources available for selling into the wholesale market in the third quarter of 2015 as Big Stone Plant was off line for the entire month of July for an extended maintenance outage that required off-site turbine blade replacements and repairs and Coyote Station was operating at reduced load due to ongoing repairs related to a December 2014 boiler feed pump failure and ensuing fire. Hoot Lake Plant was curtailed due to low wholesale market prices for electricity, which was a factor contributing to a strategic decision to shut down Hoot Lake Plant’s Unit 3 for preventative maintenance in September 2015. The decrease in wholesale prices for electricity is mainly due to lower prices for natural gas used in the generation of electricity in the third quarter of 2015 compared with the third quarter of 2014.

 

A $2.5 million increase in other electric revenues includes:

 

· A $2.0 million increase in Midcontinent Independent System Operator, Inc. (MISO) transmission tariff revenues related to increased investment in regional transmission lines including returns on and recovery of CapX2020 and MISO designated Multi-Value Project (MVP) investment costs and operating expenses.

 

· A $0.5 million increase in revenue related to work performed for other regional transmission owners between the periods.

 

Production fuel costs to serve retail customers decreased $3.2 million and $0.8 million for wholesale sales as a result of a 34.5% decrease in kwhs generated from Otter Tail Power Company’s steam-powered and combustion turbine generators primarily due to the factors discussed above.

 

The cost of purchased power to serve retail customers increased $8.0 million, reflecting an $8.9 million volume variance due to a 90.0% increase in kwhs purchased, partially offset by a $0.9 million price variance due to an 8.0% decrease in the cost per kwh purchased. The increase in power purchases for retail sales was necessitated by the reduced availability of Otter Tail Power Company generating capacity discussed above. The decreased cost per kwh purchased was driven by lower prices for natural gas used in the generation of electricity.

 

Electric operating and maintenance expenses decreased $0.3 million mainly as a result of:

 

· A $1.7 million net reduction in generation plant maintenance costs mainly related to Hoot Lake Plant being down for major maintenance in the third quarter of 2014.

 

· A $1.0 million decrease in other operating and maintenance expense, mostly vegetation control costs.

 

Offset by:

 

· A $1.0 million increase in labor related benefit costs, mainly due to increases in pension and other benefit costs.

 

· A $0.5 million increase in costs related to work performed for other regional transmission owners between the periods.

 

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· A $0.5 million increase in MISO transmission tariff charges related to increasing investments in regional transmission lines by other transmission owners including CapX2020 and MISO-designated MVP transmission projects.

 

· A $0.4 million increase in property tax expense due to higher assessed values of property in Minnesota and South Dakota in combination with increasing investments in transmission and distribution property, mainly in Minnesota.

 

Manufacturing

Manufacturing revenues and net income were $52.5 million and $1.7 million, respectively, compared with $55.5 million and $2.9 million for the third quarter of 2014.

 

At BTD, revenues decreased $4.3 million reflecting:

 

· A $4.0 million decrease in sales to manufacturers of agricultural equipment related to continued softness in the agricultural industry.

 

· A $1.0 million decrease in sales to manufacturers of oil and gas exploration and extraction equipment as a result of a reduction in drilling activity related to current low oil prices.

 

· A $0.9 million decrease in revenue from sales of scrap metal due to a reduction in scrap metal prices between quarters.

 

· A $0.4 million reduction in tooling revenues.

 

· BTD’s third quarter 2015 results include the operations of BTD–Georgia for the month of September 2015. BTD–Georgia generated $2 million in revenues and as expected generated a small net loss during the month.

 

Cost of products sold at BTD decreased $2.3 million, reflecting a decrease in costs, mainly labor and material, related to decreased sales. BTD’s operating expenses decreased $0.5 million mainly related to a decrease in incentive and benefit expenses. BTD’s net income decreased $1.4 million between quarters.

 

At T.O. Plastics, revenues increased $1.2 million reflecting:

 

· A $0.6 million increase in sales of custom products.

 

· A $0.3 million increase in sales of horticultural containers.

 

· A $0.3 million increase in sales of various other products to industrial customers.

 

Cost of products sold at T.O. Plastics increased $0.9 million due to increases in material, labor and freight costs related to the increase in sales. T.O. Plastic’s net income increased approximately $0.2 million between quarters.

 

Plastics

Plastics revenues and net income were $47.0 million and $3.5 million, respectively, compared with $51.6 million and $3.1 million for the third quarter of 2014. The $4.6 million decrease in Plastics segment revenues is the result of a 9.4% decrease in the price per pound of polyvinyl chloride (PVC) pipe sold related to lower resin prices. Pounds of PVC pipe sold was flat between the quarters. Costs of products sold decreased $5.6 million due to a 13.6% decrease in the cost per pound of pipe sold mainly related to a decrease in material costs due to lower resin prices. Plastics operating expenses increased $0.2 million as a result of an increase in labor and benefit costs.

 

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Corporate

 

Corporate costs, net-of-tax, increased $1.0 million reflecting:

 

· A $0.7 million net-of-tax increase in health and casualty insurance costs.

 

· A $0.3 million net-of-tax increase in other corporate costs.

 

Discontinued Operations

On February 28, 2015 the corporation sold the assets of AEV, Inc. its former energy and electric construction contractor headquartered in Moorhead, Minnesota for $22.3 million in cash, plus $0.6 million in adjustments for working capital and fixed assets received in October 2015. On April 30, 2015 the corporation completed the sale of Foley Company, its former water, wastewater, power and industrial construction contractor headquartered in Kansas City, Missouri, for $12.0 million in cash, plus $6.3 million in adjustments for working capital and other related items expected to be received in the fourth quarter of 2015.

 

The following summary presentation of the results of discontinued operations for the three-month periods ended September 30, 2015 and 2014, include operating results for Foley Company and AEV, Inc., and residual expenses from the corporation’s former wind tower and waterfront equipment manufacturers which were sold in 2012 and 2013, respectively:

 

    For the Three Months Ended
September 30, 		 
(in thousands)   2015     2014  
Operating Revenues   $ --     $ 45,847  
Operating Expenses     420       42,035  
Operating (Loss) Income     (420 )     3,812  
Interest Charges     --       (1 )
Other Income     --       277  
Income Tax (Benefit) Expense     (168 )     1,437  
Net (Loss) Income from Operations     (252 )     2,653  
Loss on Disposition Before Taxes     (108 )     --  
Income Tax Benefit on Disposition     (43 )     --  
Net Loss on Disposition     (65 )     --  
Net (Loss) Income   $ (317 )   $ 2,653  

 

The above results for the three months ended September 30, 2015 include a net loss from operations of $0.2 million for Foley Company. Included in net income from operations for the three months ended September 30, 2014 are $1.3 million from AEV, Inc., $1.1 million for Foley Company and $0.2 million from the corporation’s former waterfront equipment manufacturer related to a gain on the sale of residual assets.

 

  6  

 

 

 2015 Business Outlook

 

The corporation is reaffirming its consolidated diluted earnings per share guidance for 2015 to be in the middle to upper half of the range of $1.50 to $1.65. This guidance reflects the current mix of businesses owned by the corporation and is based on current tax laws. It considers the cyclical nature of some of the corporation’s businesses and reflects challenges, as well as the corporation’s plans and strategies for improving future operating results. Should the federal government change current tax law before the end of 2015, the corporation’s consolidated earnings guidance could be negatively impacted in the range of $0.02 to $0.04 per share.

 

Segment components of the corporation’s 2014 diluted earnings per share and 2015 diluted earnings per share guidance range for continuing operations are as follows:

 

 

      Diluted Earnings Per Share

2014

Actual

Initial 2015 Guidance

February 9, 2015

2015 Guidance

August 3, 2015

2015 Guidance

November 2, 2015

Low High Low High Low High
    Electric $1.19 $1.26 $1.29 $1.23 $1.26 $1.26 $1.29
    Manufacturing $0.25 $0.37 $0.41 $0.21 $0.25 $0.15 $0.19
    Plastics $0.33 $0.25 $0.29 $0.29 $0.33 $0.31 $0.35
    Corporate ($0.22) ($0.23) ($0.19) ($0.23) ($0.19) ($0.22) ($0.18)
   Total – Continuing Operations $1.55 $1.65 $1.80 $1.50 $1.65 $1.50 $1.65
     Expected Return on Equity       9.5% 10.4% 9.5% 10.4%

 

Contributing to the corporation’s earnings guidance for 2015 are the following items:

 

· The corporation expects 2015 net income from its Electric segment to be improved from its previous guidance and better than 2014 net income due to stronger results during the first nine months of 2015. Items affecting the increase over 2014 net income include:

 

o Rider recovery increases, including environmental riders in Minnesota, North Dakota and South Dakota related to the Big Stone AQCS environmental upgrades while under construction.

 

o Increased in sales to pipeline customers.

 

o A decrease in plant maintenance costs, as unanticipated maintenance issues encountered during the 2014 Hoot Lake Plant shutdown are not expected to occur in 2015.

 

offset by:

 

o Lower retail sales due to milder than normal weather in the first nine months of 2015.

 

o Higher than expected claim costs and more participants associated with the long-term disability plans.

 

o An increase in coal plant reagent costs that were determined unrecoverable under rider by the Minnesota Public Utilities Commission in March 2015.

 

o A decrease in transmission revenues for a potential reduction in the rate of return on equity granted by the Federal Energy Regulatory Commission under the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff.
  7  

 

  

o An increase in pension costs as a result of an increase in projected benefit obligations based on a decrease in the discount rate from 5.30% to 4.35% and adoption of new mortality tables which have longer life expectancy assumptions.

 

o Higher depreciation and property tax expense due to increased investment in transmission, generation, distribution and general plant placed in service in 2014 and 2015.

 

o Higher short-term interest costs as major projects continue to be funded under Otter Tail Power Company’s credit agreement.

 

· The corporation expects 2015 net income from its Manufacturing segment to be below its previous segment guidance for 2015 and below 2014 net income due to:

 

o Continued softness in the agriculture, energy, mining and oil and gas equipment end markets served by BTD’s customers, declining commodity prices for scrap metal and increased costs of manufacturing due to lower productivity.

 

o Expectations for earnings from T.O. Plastics in 2015 have also been reduced from previous guidance due to recent reductions in sales forecasts as certain end-market customers of T.O. Plastics are experiencing delayed or unsuccessful product launches and certain products are now being produced in house by customers.

 

o Backlog for the manufacturing companies of approximately $45 million for 2015 compared with $50 million one year ago.

 

· The corporation is raising its guidance for 2015 net income from its Plastics segment based on strong results during the first nine months of 2015 which are in line with 2014 results for the same time frame.

 

· Corporate costs in 2015 are expected to be in line with or slightly lower than 2014 costs.

 

CONFERENCE CALL AND WEBCAST

The corporation will host a live webcast on Tuesday, November 3, 2015, at 9:00 a.m. CT to discuss its financial and operating performance.

 

The presentation will be posted on the corporation’s website before the webcast. To access the live webcast go to www.ottertail.com/presentations.cfm and select “Webcast”. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the webcast. An archived copy of the webcast will be available on the corporation’s website shortly following the call.

 

If you are interested in asking a question during the live webcast, the Dial-In Number is: 877-312-8789.

 

  8  

 

  

Risk Factors and Forward-Looking Statements that Could Affect Future Results

The information in this release includes certain forward-looking information, including 2015 expectations, made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the corporation believes its expectations are based on reasonable assumptions, actual results may differ materially from those expectations. The following factors, among others, could cause actual results for the corporation to differ materially from those discussed in the forward-looking statements:

 

· Federal and state environmental regulation could require the corporation to incur substantial capital expenditures and increased operating costs.

 

· Volatile financial markets and changes in the corporation’s debt ratings could restrict its ability to access capital and could increase borrowing costs and pension plan and postretirement health care expenses.

 

· The corporation relies on access to both short- and long-term capital markets as a source of liquidity for capital requirements not satisfied by cash flows from operations. If the corporation is not able to access capital at competitive rates, its ability to implement its business plans may be adversely affected.

 

· Disruptions, uncertainty or volatility in the financial markets can also adversely impact the corporation’s results of operations, the ability of its customers to finance purchases of goods and services, and its financial condition, as well as exert downward pressure on stock prices and/or limit its ability to sustain its current common stock dividend level.

 

· The corporation made a $10.0 million discretionary contribution to its defined benefit pension plan in January 2015. The corporation could be required to contribute additional capital to the pension plan in the future if the market value of pension plan assets significantly declines, plan assets do not earn in line with the corporation’s long-term rate of return assumptions or relief under the Pension Protection Act is no longer granted.

 

· Any significant impairment of the corporation’s goodwill would cause a decrease in its asset values and a reduction in its net operating income.

 

· Declines in projected operating cash flows at any of the corporation’s reporting units may result in goodwill impairments that could adversely affect its results of operations and financial position, as well as financing agreement covenants.

 

· The inability of the corporation’s subsidiaries to provide sufficient earnings and cash flows to allow the corporation to meet its financial obligations and debt covenants and pay dividends to its shareholders could have an adverse effect on the corporation.

 

· Economic conditions could negatively impact the corporation’s businesses.

 

· If the corporation is unable to achieve the organic growth it expects, its financial performance may be adversely affected.

 

· The corporation’s plans to grow and realign its business mix through capital projects, acquisitions and dispositions may not be successful, which could result in poor financial performance.

 

· The corporation may, from time to time, sell assets to provide capital to fund investments in its electric utility business or for other corporate purposes, which could result in the recognition of a loss on the sale of any assets sold and other potential liabilities. The sale of any of the corporation’s businesses could expose the corporation to additional risks associated with indemnification obligations under the applicable sales agreements and any related disputes.

 

· The corporation’s plans to grow and operate its nonutility businesses could be limited by state law.

 

· Significant warranty claims and remediation costs in excess of amounts normally reserved for such items could adversely affect the corporation’s results of operations and financial condition.

 

· We are subject to risks associated with energy markets.

 

· The corporation is subject to risks and uncertainties related to the timing and recovery of deferred tax assets which could have a negative impact on the corporation’s net income in future periods.

 

  9  

 

  

· The corporation relies on its information systems to conduct its business and failure to protect these systems against security breaches or cyber-attacks could adversely affect its business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, the corporation’s business could be harmed.

 

· The corporation may experience fluctuations in revenues and expenses related to its electric operations, which may cause its financial results to fluctuate and could impair its ability to make distributions to its shareholders or scheduled payments on its debt obligations, or to meet covenants under its borrowing agreements.

 

· Actions by the regulators of the corporation’s electric operations could result in rate reductions, lower revenues and earnings or delays in recovering capital expenditures.

 

· Otter Tail Power Company’s electric generating facilities are subject to operational risks that could result in unscheduled plant outages, unanticipated operation and maintenance expenses and increased power purchase costs.

 

· Changes to regulation of generating plant emissions, including but not limited to carbon dioxide emissions, could affect Otter Tail Power Company’s operating costs and the costs of supplying electricity to its customers.

 

· Competition from foreign and domestic manufacturers, the price and availability of raw materials and general economic conditions could affect the revenues and earnings of the corporation’s manufacturing businesses.

 

· The corporation’s Plastics segment is highly dependent on a limited number of vendors for PVC resin, many of which are located in the Gulf Coast region of the United States, and a limited supply of resin. The loss of a key vendor, or an interruption or delay in the supply of PVC resin, could result in reduced sales or increased costs for this segment.

 

· The corporation’s plastic pipe companies compete against a large number of other manufacturers of PVC pipe and manufacturers of alternative products. Customers may not distinguish the pipe companies’ products from those of its competitors.

 

· Changes in PVC resin prices can negatively impact PVC pipe prices, profit margins on PVC pipe sales and the value of PVC pipe held in inventory.

 

For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the Securities and Exchange Commission.

 

About The Corporation: Otter Tail Corporation has interests in diversified operations that include an electric utility and manufacturing businesses. Otter Tail Corporation stock trades on the NASDAQ Global Select Market 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.

 

See Otter Tail Corporation’s results of operations for the three and nine months ended September 30, 2015 and 2014 in the following financial statements: Consolidated Statements of Income, Consolidated Balance Sheets – Assets, Consolidated Balance Sheets – Liabilities and Equity, and Consolidated Statements of Cash Flows.

# # #

 

  10  

 

  

Otter Tail Corporation

Consolidated Statements of Income

In thousands, except share and per share amounts

(not audited)

 

    Quarter Ended
September 30, 		    Year-to-Date
September 30, 		 
    2015     2014     2015     2014  
Operating Revenues by Segment                                
Electric   $ 100,567     $ 89,410     $ 305,078     $ 301,409  
Manufacturing     52,460       55,536       160,492       164,341  
Plastics     47,025       51,613       125,531       140,186  
Intersegment Eliminations     (29 )     (34 )     (84 )     (81 )
Total Operating Revenues     200,023       196,525       591,017       605,855  
Operating Expenses                                
Fuel and Purchased Power     29,849       25,831       92,007       98,725  
Nonelectric Cost of Goods Sold (depreciation included below)     78,428       85,384       224,912       239,501  
Electric Operating and Maintenance Expense     36,208       36,524       118,253       117,278  
Nonelectric Operating and Maintenance Expense     10,771       9,707       32,057       32,380  
Depreciation and Amortization     15,141       14,557       44,337       43,296  
Total Operating Expenses     170,397       172,003       511,566       531,180  
Operating Income (Loss) by Segment                                
Electric     23,320       16,022       61,427       52,684  
Manufacturing     3,469       4,847       9,890       14,673  
Plastics     5,988       5,238       16,824       16,810  
Corporate     (3,151 )     (1,585 )     (8,690 )     (9,492 )
Total Operating Income     29,626       24,522       79,451       74,675  
Interest Charges     7,730       7,688       23,175       21,909  
Other Income     334       494       1,473       2,873  
Income Tax Expense – Continuing Operations     6,521       4,156       14,602       12,802  
Net Income (Loss) by Segment – Continuing Operations                                
Electric     12,921       8,612       34,351       30,507  
Manufacturing     1,714       2,899       4,810       8,095  
Plastics     3,534       3,092       9,919       9,985  
Corporate     (2,460 )     (1,431 )     (5,933 )     (5,750 )
Net Income from Continuing Operations     15,709       13,172       43,147       42,837  
Discontinued Operations                                
(Loss) Income - net of Income Tax (Benefit) Expense of
($168), $1,437, ($2,873) and $2,614 for the respective periods 		    (252 )     2,653       (4,316 )     4,411  
Impairment Loss - net of Income Tax Benefit of $0 for the nine months ended September 30, 2015     --       --       (1,000 )     --  
(Loss) Gain on Disposition - net of Income Tax (Benefit) Expense of ($43) and $4,493 for the three and nine months ended September 30, 2015     (65 )     --       6,932       --  
   Net (Loss) Income from Discontinued Operations     (317 )     2,653       1,616       4,411  
Net Income   $ 15,392     $ 15,825     $ 44,763     $ 47,248  
Average Number of Common Shares Outstanding                                
Basic     37,575,413       36,596,396       37,417,283       36,415,500  
Diluted     37,794,543       36,838,990       37,636,413       36,658,257  
                                 
Basic Earnings (Loss) Per Common Share:                                
Continuing Operations   $ 0.42     $ 0.36     $ 1.15     $ 1.18  
Discontinued Operations     (0.01 )     0.07       0.05       0.12  
    $ 0.41     $ 0.43     $ 1.20     $ 1.30  
Diluted Earnings (Loss) Per Common Share:                                
Continuing Operations   $ 0.42     $ 0.36     $ 1.15     $ 1.17  
Discontinued Operations     (0.01 )     0.07       0.04       0.12  
    $ 0.41     $ 0.43     $ 1.19     $ 1.29  

 

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Otter Tail Corporation

Consolidated Balance Sheets

Assets

in thousands

(not audited)

 

    September 30,     December 31,  
    2015     2014  
             
Current Assets                
Cash and Cash Equivalents   $ 548     $ --  
Accounts Receivable:                
Trade—Net     76,502       60,172  
Other     17,614       13,179  
Inventories     83,167       85,203  
Deferred Income Taxes     53,515       49,482  
Unbilled Revenues     14,973       17,996  
Regulatory Assets     18,250       25,273  
Other     9,311       7,187  
Assets of Discontinued Operations     110       48,657  
Total Current Assets     273,990       307,149  
                 
Investments     7,875       8,582  
Other Assets     31,009       30,111  
Goodwill     38,419       31,488  
Other Intangibles—Net     16,047       11,251  
                 
Deferred Debits                
Unamortized Debt Expense     3,772       4,300  
Regulatory Assets     123,903       129,868  
Total Deferred Debits     127,675       134,168  
                 
Plant                
Electric Plant in Service     1,590,287       1,545,112  
Nonelectric Operations     195,127       175,159  
Construction Work in Progress     284,700       248,677  
Total Gross Plant     2,070,114       1,968,948  
Less Accumulated Depreciation and Amortization     708,627       700,418  
Net Plant     1,361,487       1,268,530  
Total   $ 1,856,502     $ 1,791,279  

 

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Otter Tail Corporation

Consolidated Balance Sheets

Liabilities and Equity

in thousands

(not audited)

 

    September 30,     December 31,  
    2015     2014  
             
Current Liabilities                
Short-Term Debt   $ 86,952     $ 10,854  
Current Maturities of Long-Term Debt     221       201  
Accounts Payable     96,434       107,013  
Accrued Salaries and Wages     15,839       19,256  
Accrued Taxes     11,987       13,793  
Derivative Liabilities     15,922       14,230  
Other Accrued Liabilities     7,466       8,793  
Liabilities of Discontinued Operations     2,330       27,559  
Total Current Liabilities     237,151       201,699  
                 
Pensions Benefit Liability     93,926       102,711  
Other Postretirement Benefits Liability     54,503       53,638  
Other Noncurrent Liabilities     24,043       26,794  
                 
Deferred Credits                
Deferred Income Taxes     246,691       230,810  
Deferred Tax Credits     24,976       26,384  
Regulatory Liabilities     77,868       77,013  
Other     1,099       975  
Total Deferred Credits     350,634       335,182  
                 
Capitalization                
Long-Term Debt, Net of Current Maturities     498,330       498,489  
                 
Cumulative Preferred Shares     --       --  
                 
Cumulative Preference Shares     --       --  
                 
  Common Equity                
Common Shares, Par Value $5 Per Share     188,631       186,090  
Premium on Common Shares     290,520       278,436  
Retained Earnings     123,059       112,903  
Accumulated Other Comprehensive Loss     (4,295 )     (4,663 )
Total Common Equity     597,915       572,766  
Total Capitalization     1,096,245       1,071,255  
Total   $ 1,856,502     $ 1,791,279  

 

  13  

 

  

Otter Tail Corporation

Consolidated Statements of Cash Flows

In thousands

(not audited)

 

    For the Nine Months Ended
September 30, 		 
    2015     2014  
Cash Flows from Operating Activities                
Net Income   $ 44,763     $ 47,248  
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:                
Net Gain from Sale of Discontinued Operations     (6,932 )     --  
Net Loss (Gain) from Discontinued Operations     5,316       (4,411 )
Depreciation and Amortization     44,337       43,296  
Deferred Tax Credits     (1,408 )     (1,361 )
Deferred Income Taxes     12,244       20,690  
Change in Deferred Debits and Other Assets     13,839       4,299  
Discretionary Contribution to Pension Plan     (10,000 )     (20,000 )
Change in Noncurrent Liabilities and Deferred Credits     4,345       (1,336 )
Allowance for Equity/Other Funds Used During Construction     (944 )     (1,180 )
Change in Derivatives Net of Regulatory Deferral     (28 )     214  
Stock Compensation Expense– Equity Awards     1,428       1,126  
Other–Net     (27 )     437  
Cash (Used for) Provided by Current Assets and Current Liabilities:                
Change in Receivables     (14,020 )     (16,023 )
Change in Inventories     5,721       (6,312 )
Change in Other Current Assets     2,163       3,231  
Change in Payables and Other Current Liabilities     (17,490 )     (2,645 )
Change in Interest and Income Taxes Receivable/Payable     (1,499 )     1,028  
Net Cash Provided by Continuing Operations     81,808       68,301  
Net Cash Used in Discontinued Operations     (11,581 )     (21,273 )
Net Cash Provided by Operating Activities     70,227       47,028  
Cash Flows from Investing Activities                
Capital Expenditures     (115,321 )     (123,731 )
Proceeds from Disposal of Noncurrent Assets     2,956       1,419  
Acquisition     (30,806 )     --  
Cash used for Investments and Other Assets     (7,297 )     (2,148 )
Net Cash Used in Investing Activities – Continuing Operations     (150,468 )     (124,460 )
Net Proceeds from Sale of Discontinued Operations     32,765       --  
Net Cash (Used in) Provided by Investing Activities – Discontinued Operations     (1,769 )     694  
Net Cash Used in Investing Activities     (119,472 )     (123,766 )
Cash Flows from Financing Activities                
Changes in Checks Written in Excess of Cash     (1,236 )     106  
Net Short-Term Borrowings (Repayments)     76,098       (12,195 )
Proceeds from Issuance of Common Stock     11,340       13,331  
Common Stock Issuance Expenses     (361 )     (412 )
Payments for Retirement of Capital Stock     (1,596 )     (459 )
Proceeds from Issuance of Long-Term Debt     --       150,000  
Short-Term and Long-Term Debt Issuance Expenses     (7 )     (516 )
Payments for Retirement of Long-Term Debt     (149 )     (41,039 )
Common Dividends Paid     (34,607 )     (33,119 )
Net Cash Provided by Financing Activities – Continuing Operations     49,482       75,697  
Net Cash Provided by (used in) Financing Activities – Discontinued Operations     321       (106 )
Net Cash Provided by Financing Activities     49,803       75,591  
 Net Change in Cash and Cash Equivalents – Discontinued Operations     (10 )     (860 )
 Net Change in Cash and Cash Equivalents     548       (2,007 )
 Cash and Cash Equivalents at Beginning of Period     --       2,007  
 Cash and Cash Equivalents at End of Period   $ 548     $ --  

  

  14