Otter Tail Corporation Announces Second Quarter Earnings

Otter Tail Corporation Announces Second Quarter Earnings

Narrows 2014 Earnings Guidance Range to $1.65 to $1.80 per Share

Board of Directors Declares Quarterly Dividend

FARGO, N.D., Aug. 4, 2014 (GLOBE NEWSWIRE) -- Otter Tail Corporation
(Nasdaq:OTTR) today announced financial results for the quarter ended June 30,


  *Consolidated revenues were $234.6 million compared with $212.4 million for
    the second quarter of 2013.
  *Consolidated net income and diluted earnings from continuing operations
    totaled $10.0 million and $0.27 per share, respectively, compared with
    $7.5 million and $0.21 per share for the second quarter of 2013.
  *The corporation is narrowing its 2014 earnings guidance range to $1.65 to
    $1.80 per diluted share from its previously announced range of $1.60 to
    $1.80, based on its strong performance in the first half of 2014.

CEO Overview

"Our strong 2014 first quarter performance has continued in the second
quarter," said Otter Tail Corporation CEO Jim McIntyre. "This quarter's
consolidated revenues are up more than 10% compared with second quarter last
year and consolidated net income from continuing operations is up 33%."

"We continue to see earnings growth from our capital investments at the
utility. Regulatory mechanisms in North Dakota, South Dakota, and Minnesota
allow for a return on the funds we've invested in five large regional
transmission projects and the environmental upgrade at Big Stone Plant. Those
earnings were augmented this quarter by increased electricity sales to
pipeline and commercial customers.

"We also continue to see positive results from our focus on operational
excellence at our manufacturing and infrastructure companies. I'm especially
pleased that profitability at both Foley and Aevenia continued to improve this
quarter, thanks to better project management aligned with increased
construction activity.

"On the strength of our year-to-date results, we are narrowing our overall
guidance range for 2014 diluted earnings per share to $1.65 to $1.80 from our
previously announced range of $1.60 to $1.80."

Cash Flow from Operations, Liquidity and Financing

The corporation's consolidated cash provided by continuing operations was $4.4
million for the six months ended June 30, 2014 compared with $48.8 million for
the six months ended June 30, 2013. Contributing to the $44.4 million decrease
between the periods was a $32.0 million increase in cash used for working
capital items associated with year over year revenue growth and a $10.0
million increase in discretionary contributions to the corporation's pension
plan. The following table presents the status of the corporation's lines of
credit as of June 30, 2014:

                                    In Use On  Restricted due to Available on
(in thousands)           Line Limit June 30,   Outstanding       June 30, 2014
                                    2014       Letters of Credit
Otter Tail Corporation   $ 150,000  $ 25,273   $ 309             $ 124,418
Credit Agreement
Otter Tail Power Company 170,000    2,870      2,330             164,800
Credit Agreement
Total                    $ 320,000  $ 28,143   $ 2,639           $ 289,218

During the quarter ended June 30, 2014 the corporation sold 86,909 shares of
common stock and received net proceeds of $2.5 million through its
At-the-Market offering program. Our financing plans are subject to change
depending on capital expenditures, internal cash generation and general market

Board of Directors Declared Quarterly Dividend

On August 1, 2014 the corporation's Board of Directors declared a quarterly
common stock dividend of $0.3025 per share. This dividend is payable September
10, 2014 to shareholders of record on August15, 2014.

Segment Performance Summary


Electric revenues and net income were $92.9 million and $5.2 million,
respectively, compared with $82.9million and $3.6 million for the second
quarter of 2013.

The following table shows Heating Degree Days as a percent of normal:

Three Months ended June 30,
2014          2013
128%          159%

Retail electric revenues increased $11.1 million as a result of:

  oa $3.9 million increase in revenue due to a 10.6% increase in retail
    kilowatt-hour (kwh) sales mainly related to increased sales to pipeline
    and commercial customers,
  oa $3.7 million increase in fuel clause adjustment revenues and fuel and
    purchased power costs recovered in base rates driven by increased power
    purchases to meet higher retail kwh sales demand and higher purchased
    power prices,
  oa $3.5 million increase in Environmental Costs Recovery rider revenue
    related to earning a return in Minnesota and North Dakota on increasing
    amounts invested in the air quality control system (AQCS) under
    construction at Big Stone Plant, and
  oa $1.5 million increase in Transmission Cost Recovery rider revenues
    related to recovering costs and returns earned on increasing investments
    in transmission plant,

offset by:

  oan estimated $0.7 million decrease in revenues related to milder weather
    in the second quarter of 2014 compared with the second quarter of 2013,
  oa $0.4 million reduction in Big Stone II cost recovery rider revenues as
    the North Dakota share of abandoned plant costs were fully recovered by
    the end of March 2014, and
  oa $0.3 million decrease in accrued conservation improvement program
    incentives and cost recovery revenues.

Wholesale electric revenues from company-owned generation decreased $1.7
million as a result of a 49% reduction in wholesale kwh sales. The decrease in
wholesale kwh sales was related to a 12.4% decrease in kwhs generated by Otter
Tail Power Company generating units, mainly as a result of the extended
maintenance shutdown of Hoot Lake Plant, which was offline for most of the
second quarter of 2014.

Net revenue from energy trading activities, including net mark-to-market
losses and gains on forward energy contracts, decreased $0.2 million as a
result of decreased trading activity.

Other electric operating revenues increased $0.8 million mainly due to an
increase in Midcontinent Independent System Operator, Inc. (MISO) tariff
revenues resulting from increased investment in regional transmission lines
and returns on and recovery of Capacity Expansion 2020 (CapX2020) and
MISO-designated Multi-Value Project (MVP) investment costs and operating

Production fuel costs decreased $3.0 million as a result of a 14.7% decrease
in kwhs generated from Otter Tail Power Company's steam-powered and combustion
turbine generators in combination with a 5.3% decrease in the cost of fuel per
kwh generated. The decreases in kwh generation and the cost of fuel per kwh
generated were mainly due to the extended maintenance shutdown of Hoot Lake
Plant in the second quarter of 2014.

The cost of purchased power to serve retail customers increased $5.2 million
due to a 42.8% increase in kwhs purchased and a 2.6% increase in the cost per
kwh purchased. The increase in kwhs purchased was driven by the need to make
up for the reduction in generation from Hoot Lake Plant and increased demand
from retail—mainly pipeline—customers.

Electric operating and maintenance expenses increased $4.3 million as a result

  *a $3.4 million increase in contracted maintenance and material and supply
    costs at Hoot Lake Plant related to its extended maintenance shutdown in
    the second quarter of 2014,
  *a $1.0 million increase in MISO transmission tariff charges related to
    increasing investments in regional CapX2020 and MISO-designated MVP
    transmission projects,
  *a $0.6 million increase in costs for wind turbine, transformer, and Coyote
    Station maintenance,
  *a $0.5 million increase in expenditures for vegetation maintenance and
    control, and
  *a $0.4 million increase in property tax expense due to higher property
    valuations for transmission and distribution property in Minnesota and
    South Dakota,

offset by:

  *a $1.1 million reduction in labor and benefit expenses mainly due to
    decreases in pension and retirement health benefit costs resulting from
    higher discount rates on projected benefit obligations, and
  *a $0.4 million decrease in amortization of the North Dakota share of Big
    Stone II abandoned plant costs in conjunction with final recovery of those
    costs by the end of March 2014.

Interest expense increased $1.8 million as a result of the February 27, 2014
issuance of Otter Tail Power Company's $60 million aggregate principal amount
of 4.68% Series A Senior Unsecured Notes due February27, 2029 and $90 million
aggregate principal amount of its 5.47% Series B Senior Unsecured Notes due
February 27, 2044, offset by the February 27, 2014 retirement of its $40.9
million Unsecured Term Loan which bore interest at 1-Month Libor plus 0.875%.


Manufacturing revenues and net income were $53.4 million and $2.3 million,
respectively, compared with $49.8million and $2.0 million for the second
quarter of 2013.

  *At BTD, revenues increased $6.0 million, mainly as a result of increased
    sales to manufacturers of energy-related, recreational, and lawn and
    garden equipment, while cost of products sold increased $5.8million, due
    in part to the increase in sales but also due to the incurrence of
    additional tooling costs to repair and refurbish several dies, resulting
    in a $0.2 million increase in gross margins. Additionally, BTD's
    operating expenses decreased $0.3 million, mainly as a result of gains
    recorded on the sale of fixed assets in the second quarter of 2014. The
    combination of increased margins and decreased operating expenses resulted
    in a $0.5million increase in quarter over quarter net income.
  *At T.O. Plastics, revenues decreased $2.4 million and net income decreased
    $0.2 million, mainly due to discontinuing a product packing process
    performed for a customer prior to 2014.


Plastics revenues and net income were $48.1 million and $3.4million,
respectively, compared with $44.8million and $3.9million for the second
quarter of 2013. The $3.3 million increase in revenues is the result of a 6.8%
increase in pounds of polyvinyl chloride (PVC) pipe sold combined with a 0.6%
increase in the price per pound of pipe sold. States with significant
increases in sales were California, Minnesota, North Dakota, Montana, New
Mexico, Nevada, and Colorado. Cost of products sold increased by $4.1 million
due to the increase in sales volume and a 4.6% increase in the cost per pound
of pipe sold related to higher PVC resin costs. The decline in net income
between the quarters is due to an increase in PVC resin costs along with a
$0.2million increase in operating expenses. The increased resin costs could
not be fully recovered through increased pipe prices due to competitive market


Construction revenues and net income were $40.2 million and $1.9 million,
respectively, compared with $35.0million and $0 for the second quarter of

  oFoley's revenue and net income increased $2.6 million and $0.6 million,
    respectively, between the quarters. Foley's improved results are
    reflective of increased construction activity, more selective bidding on
    projects and improved cost control processes in construction management,
    resulting in a $1.0 million improvement in gross margins between quarters.
  oAevenia's revenues increased $2.7 million and it recorded net income of
    $0.9 million compared to a net loss of $0.4 million in the second quarter
    of 2013. Aevenia's revenue increase is mainly due to increased electric
    transmission and distribution work in western North Dakota. Aevenia's
    costs of sales increased by only $0.8 million as a result of the increase
    in construction activity and its operating expenses were down $0.1 million
    between the quarters.


Corporate costs, net-of-tax, increased $0.8 million as a result of recording a
$1.5 million net-of-tax charge related to the early termination of an airplane
lease, as recent divestitures reduced the need for the airplane. The increase
in expense related to the lease termination charge was partially offset by a
$0.7 million net-of-tax decrease in interest expense related to the early
retirement, in November 2013, of $47.7 million of the corporation's
outstanding 9.0% notes due December 15, 2016.

2014 Business Outlook

The corporation is narrowing its consolidated diluted earnings per share
guidance for 2014 to be in the range of $1.65 to $1.80 from its previously
announced range of $1.60 to $1.80. This guidance reflects the current mix of
businesses owned by the corporation. 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.

Segment components of the corporation's 2013 earnings per share and 2014
earnings per share guidance ranges are as follows:

                      2013    February 2014   May 2014 EPS    Current 2014
                      EPS by  EPS Guidance    Guidance        EPS Guidance
                      Segment Low     High    Low     High    Low     High
Electric               $1.05   $1.19   $1.23   $1.21   $1.25   $1.23   $1.26
Manufacturing          $0.32   $0.29   $0.33   $0.29   $0.33   $0.30   $0.33
Plastics               $0.38   $0.25   $0.29   $0.27   $0.31   $0.26   $0.29
Construction           $0.04   $0.07   $0.11   $0.07   $0.11   $0.10   $0.13
Corporate              ($0.25) ($0.25) ($0.21) ($0.24) ($0.20) ($0.24) ($0.21)
Subtotal – Continuing  $1.54   $1.55   $1.75   $1.60   $1.80   $1.65   $1.80
Corporate – Loss on    ($0.17)                                    
Debt Extinguishment
Total – Continuing     $1.37   $1.55   $1.75   $1.60   $1.80   $1.65   $1.80

Contributing to the corporation's updated earnings guidance for 2014 are the
following items:

  *The corporation is raising its 2014 net income expectations for its
    Electric segment from its previously issued guidance primarily from strong
    first quarter results driven in part by colder than normal weather. Items
    affecting the corporation's 2014 Electric segment earnings guidance
    compared with 2013 earnings include:

       *Rider recovery increases, including environmental riders in Minnesota
         and North Dakota related to the Big Stone AQCS environmental upgrades
         while under construction, and
       *A decrease in pension costs of approximately $2.0 million as a result
         of an increase in the discount rate from 4.5% to 5.3%, offset by
       *An increase in interest costs as a result of $150 million of fixed
         rate long term debt put in place in the first quarter of 2014 to
         finance the Big Stone Plant AQCS and transmission projects, and
       *An increase in operating and maintenance costs primarily for
         increased labor and a planned outage for maintenance at Hoot Lake

  *The corporation is narrowing its 2014 earnings expectations for its
    Manufacturing segment, which are expected to be unchanged from 2013
    results due to the following factors:

       *An increase at BTD due to increased order volume as a result of
         expanded relationships with customers in recreational vehicle, lawn
         and garden, industrial and commercial end markets BTD serves, offset
       *A decrease in earnings from T.O. Plastics due to a reduction in sales
         of a product the customer will be producing on its own in 2014, and
       *Backlog for the manufacturing companies of approximately $86 million
         for 2014 compared with $76million one year ago.

  *The corporation is lowering its previous 2014 net income guidance for its
    Plastics segment due to an expected continued increase in PVC resin costs
    which, based on current market conditions, are not expected to be fully
    recovered through higher sales prices for PVC pipe due to current
    competitive market conditions.
  *The corporation is raising its previous 2014 net income guidance for its
    Construction segment. Segment net income for 2014 is expected to be higher
    than previous guidance and 2013 net income as a result of improved cost
    control processes in construction management and more selective bidding on
    projects with the potential for higher margins. Backlog in place for the
    construction businesses is $64 million for 2014 compared with $74million
    one year ago.
  *The corporation is narrowing it previous range for corporate costs for
    2014. Corporate costs for 2014 are still expected to be lower than 2013
    costs, despite the charge recorded to exit the airplane lease early, as a
    result of lower interest costs, the 2014 sale of an investment in
    tax-credit-qualified low income housing rental property and improved
    performance in the corporation's self-insured health plan.

The corporation reviews its portfolio of companies at least annually to see
where additional opportunities exist to improve its risk profile, improve
credit metrics and generate additional sources of cash to support the future
capital expenditure plans of its Electric segment.

The following table shows the corporation's 2013 capital expenditures,
2014-2018 projected electric utility average rate base and updated 2014-2018
anticipated capital expenditures reflecting additional expenditures in 2018
for a generation facility to replace Hoot Lake Plant, expected reductions in
costs for the Big Stone Plant AQCS and an acceleration of expenditures for
transmission line construction:

(in millions)                           2013  2014  2015  2016   2017   2018
Capital Expenditures:                                              
Electric Segment:                                                  
Transmission                                 $55  $55  $98   $63   $63
Environmental                                73    50    --     --     --
Other                                        34    43    45     41     80
Total Electric Segment                  $ 149 $ 162 $ 148 $143  $104  $143
Manufacturing and Infrastructure        15    23    19    26     20     24
Total Capital Expenditures              $ 164 $ 185 $ 167 $169  $124  $167
Total Electric Utility Average Rate          $ 885 $ 991 $1,062 $1,120 $1,152

Execution on the currently anticipated electric utility capital expenditure
plan is expected to grow rate base and be a key driver in increasing utility
earnings over the 2014 through 2018 timeframe.


The corporation will host a live webcast on Tuesday, August 5, 2014, at 10:00
a.m. CDT to discuss the company's financial and operating performance.

The presentation will be posted on the corporation's website before the
webcast. To access the live webcast go to
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 our 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.

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

The information in this release includes certain forward-looking information,
including 2014 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:

  oFederal and state environmental regulation could require the corporation
    to incur substantial capital expenditures and increased operating costs.
  oVolatile 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.
  oThe 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.
  oDisruptions, 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
  oThe corporation made $20.0 million in discretionary contributions to its
    defined benefit pension plan in January 2014. 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
  oAny significant impairment of the corporation's goodwill would cause a
    decrease in its asset values and a reduction in its net operating income.
  oDeclines 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.
  oThe corporation currently has $7.3 million of goodwill and a $1.1 million
    indefinite-lived trade name recorded on its consolidated balance sheet
    related to the acquisition of Foley in 2003. Foley net earnings improved
    $10.4million between 2012 and 2013. If future expected operating profits
    do not meet the corporation's projections, the reductions in anticipated
    cash flows from Foley may indicate its fair value is less than its book
    value, resulting in an impairment of some or all of the goodwill and
    indefinite-lived intangible assets associated with Foley along with a
    corresponding charge against earnings.
  oThe 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.
  oEconomic conditions could negatively impact the corporation's businesses.
  oIf the corporation is unable to achieve the organic growth it expects, its
    financial performance may be adversely affected.
  oThe 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.
  oThe 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.
  oThe corporation's plans to grow and operate its manufacturing and
    infrastructure businesses could be limited by state law.
  oSignificant 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.
  oThe corporation is subject to risks associated with energy markets.
  oThe 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.
  oThe 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
  oThe 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.
  oActions by the regulators of the corporation's electric operations could
    result in rate reductions, lower revenues and earnings or delays in
    recovering capital expenditures.
  oOtter 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.
  oChanges to regulation of generating plant emissions, including but not
    limited to carbon dioxide (CO[2]) emissions, could affect Otter Tail Power
    Company's operating costs and the costs of supplying electricity to its
  oCompetition from foreign and domestic manufacturers, the price and
    availability of raw materials and general economic conditions could affect
    the revenues and earnings of our manufacturing businesses.
  oThe 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
    regions, 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.
  oThe 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.
  oChanges 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.
  oA significant failure or an inability to properly bid or perform on
    projects or contracts by the corporation's construction businesses could
    lead to adverse financial results and could lead to the possibility of
    delay or liquidated damages.
  oThe corporation's construction subsidiaries enter into contracts which
    could expose them to unforeseen costs and costs not within their control,
    which may not be recoverable and could adversely affect the corporation's
    results of operations and financial condition.

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

About The Corporation: Otter Tail Corporation has interests in diversified
operations that include an electric utility and manufacturing and
infrastructure businesses consisting of its Manufacturing, Plastics and
Construction segments. Otter Tail Corporation stock trades on the NASDAQ
Global Select Market under the symbol OTTR. The latest investor and corporate
information is available at Corporate offices are located
in Fergus Falls, Minnesota, and Fargo, North Dakota.

See Otter Tail Corporation's results of operations for the three and six
months ended June 30, 2014 and 2013 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. For a further discussion of other risk factors and
cautionary statements, refer to reports the corporation files with the
Securities and Exchange Commission.

Otter Tail Corporation
Consolidated Statements of Income
In thousands, except share and per share amounts
(not audited)

                              Quarter Ended June 30,  Year-to-Date June 30,
                              2014        2013        2014        2013
Operating Revenues by Segment                                   
Electric                       $92,911   $82,862   $211,999  $183,872
Manufacturing                  53,370     49,793     108,805    102,959
Plastics                       48,090     44,761     88,573     82,161
Construction                   40,247     34,994     65,753     61,419
Corporate Revenue and          (7)         (21)        (47)        (68)
Intersegment Eliminations
Total Operating Revenues       234,611    212,389    475,083    430,343
Operating Expenses                                              
Fuel and Purchased Power       29,079     26,848     72,894     61,440
Nonelectric Cost of Goods Sold 114,059    103,937    210,360    195,999
(depreciation included below)
Electric Operating and         43,161     38,814     80,754     74,177
Maintenance Expense
Nonelectric Operating and      15,104     12,176     28,665     25,954
Maintenance Expense
Depreciation and Amortization  14,969     14,835     29,749     29,755
Total Operating Expenses       216,372    196,610    422,422    387,325
Operating Income (Loss) by                                      
Electric                       9,745      6,528      36,662     26,952
Manufacturing                  4,435      4,232      9,826      10,581
Plastics                       5,801      6,808      11,572     13,525
Construction                   3,246      149        2,028      (1,550)
Corporate                      (4,988)     (1,938)     (7,427)     (6,490)
Total Operating Income         18,239     15,779     52,661     43,018
Interest Charges               7,627      6,877      14,222     13,857
Other Income                   858        696        2,681      1,557
Income Tax Expense –           1,486      2,094      9,774      7,980
Continuing Operations
Net Income (Loss) by Segment –                                  
Continuing Operations
Electric                       5,242      3,583      21,895     15,514
Manufacturing                  2,300      2,045      5,196      5,363
Plastics                       3,433      3,925      6,893      7,812
Construction                   1,853      24         1,233      (1,068)
Corporate                      (2,844)     (2,073)     (3,871)     (4,883)
Net Income from Continuing     9,984      7,504      31,346     22,738
Discontinued Operations                                         
Income - net of Income Tax
Expense (Benefit) of           9          197        77         116
$1, $131, $50 and ($74) for
the respective periods
Gain on Disposition - net of
Income Tax Expense of          --         --         --         210
$6 for the six months ended
June 30, 2013
Net Income from Discontinued   9          197        77         326
Net Income                     9,993      7,701      31,423     23,064
Preferred Dividend Requirement --         --         --         513
and Other Adjustments
Balance for Common             $9,993    $7,701    $31,423   $22,551
Average Number of Common                                        
Shares Outstanding
Basic                          36,409,753 36,170,353 36,325,052 36,122,742
Diluted                        36,652,684 36,373,606 36,568,030 36,325,527
Basic Earnings Per Common                                       
Continuing Operations (net of
preferred dividend requirement $0.27     $0.21     $0.87     $0.61
and other adjustments)
Discontinued Operations        --         --         --         0.01
                              $0.27     $0.21     $0.87     $0.62
Diluted Earnings Per Common                                     
Continuing Operations (net of
preferred dividend requirement $0.27     $0.21     $0.86     $0.61
and other adjustments)
Discontinued Operations        --         --         --         0.01
                              $0.27     $0.21     $0.86     $0.62

Otter Tail Corporation
Consolidated Balance Sheets
in thousands
(not audited)
                                                  June 30,     December 31,
                                                  2014         2013
Current Assets                                                 
Cash and Cash Equivalents                          $--        $ 1,150
Accounts Receivable:                                           
Trade—Net                                          101,088     83,572
Other                                              11,531      9,790
Inventories                                        82,698      72,681
Deferred Income Taxes                              43,342      35,452
Unbilled Revenues                                  16,222      18,157
Costs and Estimated Earnings in Excess of Billings 5,505       4,063
Regulatory Assets                                  18,423      17,940
Other                                              13,528      7,747
Assets of Discontinued Operations                  10          38
Total Current Assets                               292,347     250,590
Investments                                        8,875       9,362
Other Assets                                       30,056      28,834
Goodwill                                           38,808      38,971
Other Intangibles—Net                              12,839      13,328
Deferred Debits                                                
Unamortized Debt Expense                           4,330       4,188
Regulatory Assets                                  77,168      83,730
Total Deferred Debits                              81,498      87,918
Electric Plant in Service                          1,507,065   1,460,884
Nonelectric Operations                             195,302     194,872
Construction Work in Progress                      210,960     187,461
Total Gross Plant                                  1,913,327   1,843,217
Less Accumulated Depreciation and Amortization     695,276     676,201
Net Plant                                          1,218,051   1,167,016
Total                                              $ 1,682,474 $ 1,596,019

Otter Tail Corporation
Consolidated Balance Sheets
in thousands
(not audited)
                                                  June 30,     December 31,
                                                  2014         2013
Current Liabilities                                            
Short-Term Debt                                    $28,143    $51,195
Current Maturities of Long-Term Debt               194         188
Accounts Payable                                   108,589     113,457
Accrued Salaries and Wages                         17,436      19,903
Billings In Excess Of Costs and Estimated Earnings 4,717       13,707
Accrued Taxes                                      9,652       12,491
Derivative Liabilities                             5,513       11,782
Other Accrued Liabilities                          8,695       6,532
Liabilities of Discontinued Operations             3,353       3,637
Total Current Liabilities                          186,292     232,892
Pensions Benefit Liability                         50,516      69,743
Other Postretirement Benefits Liability            45,683      45,221
Other Noncurrent Liabilities                       22,248      25,209
Deferred Credits                                               
Deferred Income Taxes                              218,981     195,603
Deferred Tax Credits                               27,381      28,288
Regulatory Liabilities                             78,695      73,926
Other                                              754         718
Total Deferred Credits                             325,811     298,535
Long-Term Debt, Net of Current Maturities          498,591     389,589
Cumulative Preferred Shares                        --          --
Cumulative Preference Shares                       --          --
Common Equity                                                  
Common Shares, Par Value $5 Per Share              183,117     181,358
Premium on Common Shares                           263,048     255,759
Retained Earnings                                  108,834     99,441
Accumulated Other Comprehensive Loss               (1,666)      (1,728)
Total Common Equity                                553,333     534,830
Total Capitalization                               1,051,924   924,419
Total                                              $ 1,682,474 $ 1,596,019

Otter Tail Corporation
Consolidated Statements of Cash Flows
In thousands
(not audited)
                                                     For the Six Months Ended
                                                      June 30,
In thousands                                          2014        2013
Cash Flows from Operating Activities                             
Net Income                                            $31,423   $23,064
Adjustments to Reconcile Net Income to Net Cash                  
Provided by Operating Activities:
Net Gain from Sale of Discontinued Operations         --         (210)
Net Income from Discontinued Operations               (77)        (116)
Depreciation and Amortization                         29,749     29,755
Deferred Tax Credits                                  (907)       (955)
Deferred Income Taxes                                 14,850     9,882
Change in Deferred Debits and Other Assets            129        7,519
Discretionary Contribution to Pension Plan            (20,000)    (10,000)
Change in Noncurrent Liabilities and Deferred Credits (936)       4,971
Allowance for Equity/Other Funds Used During          (759)       (567)
Change in Derivatives Net of Regulatory Deferral      95         486
Stock Compensation Expense – Equity Awards            736        786
Other—Net                                             (1,264)     867
Cash (Used for) Provided by Current Assets and                   
Current Liabilities:
Change in Receivables                                 (18,148)    (10,126)
Change in Inventories                                 (10,057)    (4,075)
Change in Other Current Assets                        (2,673)     (783)
Change in Payables and Other Current Liabilities      (20,469)    (1,362)
Change in Interest and Income Taxes                   2,664      (313)
Net Cash Provided by Continuing Operations            4,356      48,823
Net Cash Used in Discontinued Operations              (185)       (1,971)
Net Cash Provided by Operating Activities             4,171      46,852
Cash Flows from Investing Activities                             
Capital Expenditures                                  (80,749)    (51,153)
Proceeds from Disposal of Noncurrent Assets           3,184      1,603
Net Increase in Other Investments                     (1,639)     (25)
Net Cash Used in Investing Activities - Continuing    (79,204)    (49,575)
Net Proceeds from Sale of Discontinued Operations     --         12,842
Net Cash Provided by Investing Activities -           7          193
Discontinued Operations
Net Cash Used in Investing Activities                 (79,197)    (36,540)
Cash Flows from Financing Activities                             
Change in Checks Written in Excess of Cash            2,785      --
Net Short-Term (Repayments) Borrowings                (23,051)    1,117
Proceeds from Issuance of Common Stock                8,452      1,462
Common Stock Issuance Expenses                        (310)       --
Payments for Retirement of Capital Stock              (459)       (15,723)
Proceeds from Issuance of Long-Term Debt              150,000    40,900
Short-Term and Long-Term Debt Issuance Expenses       (516)       (52)
Payments for Retirement of Long-Term Debt             (40,993)    (25,222)
Dividends Paid and Other Distributions                (22,029)    (22,097)
Net Cash Provided by (Used in) Financing Activities - 73,879     (19,615)
Continuing Operations
Net Cash Used in Financing Activities - Discontinued  (11)        --
Net Cash Provided by (Used in) Financing Activities   73,868     (19,615)
Net Change in Cash and Cash Equivalents –             8          (784)
Discontinued Operations
Net Change in Cash and Cash Equivalents               (1,150)     (10,087)
Cash and Cash Equivalents at Beginning of Period      1,150      52,362
Cash and Cash Equivalents at End of Period            $--      $ 42,275

CONTACT: 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

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