##### 



Selected Consolidated Financial Data
 (thousands, except number of shareholders and per-share data)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003RevenuesElectric
    
    $
    323,478
    
    
    $
    306,014
    
    
    $
    312,985
    
    
    $
    266,385
    
    
    $
    267,494Plastics
    
    
    149,012
    
    
    
    163,135
    
    
    
    158,548
    
    
    
    115,426
    
    
    
    86,009Manufacturing
    
    
    381,599
    
    
    
    311,811
    
    
    
    244,311
    
    
    
    201,615
    
    
    
    157,401Health Services
    
    
    130,670
    
    
    
    135,051
    
    
    
    123,991
    
    
    
    114,318
    
    
    
    100,912Food Ingredient Processing
    
    
    70,440
    
    
    
    45,084
    
    
    
    38,501
    
    
    
    14,023
    
    
    
    Other Business Operations (1)
    
    
    185,730
    
    
    
    145,603
    
    
    
    105,821
    
    
    
    102,516
    
    
    
    78,094Corporate Revenues and Intersegment Eliminations (1)
    
    
    (2,042
    )
    
    
    (1,744
    )
    
    
    (2,288
    )
    
    
    (1,247
    )
    
    
    (921
    )Total Operating Revenues
    
    $
    1,238,887
    
    
    $
    1,104,954
    
    
    $
    981,869
    
    
    $
    813,036
    
    
    $
    688,989Net Income from Continuing Operations
    
    
    53,961
    
    
    
    50,750
    
    
    
    53,902
    
    
    
    40,502
    
    
    
    38,297Net Income from Discontinued Operations
    
    
    
    
    
    
    362
    
    
    
    8,649
    
    
    
    1,693
    
    
    
    1,359Net Income
    
    
    53,961
    
    
    
    51,112
    
    
    
    62,551
    
    
    
    42,195
    
    
    
    39,656Operating Cash Flow from Continuing Operations
    
    
    84,812
    
    
    
    79,207
    
    
    
    90,348
    
    
    
    54,410
    
    
    
    76,464Operating Cash Flow  Continuing and Discontinued Operations
    
    
    84,812
    
    
    
    80,246
    
    
    
    95,800
    
    
    
    56,301
    
    
    
    76,955Capital Expenditures  Continuing Operations
    
    
    161,985
    
    
    
    69,448
    
    
    
    59,969
    
    
    
    49,484
    
    
    
    48,783Total Assets
    
    
    1,454,754
    
    
    
    1,258,650
    
    
    
    1,181,496
    
    
    
    1,134,148
    
    
    
    986,423Long-Term Debt
    
    
    342,694
    
    
    
    255,436
    
    
    
    258,260
    
    
    
    261,805
    
    
    
    262,311Redeemable Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic Earnings Per Share  Continuing Operations (2)
    
    
    1.79
    
    
    
    1.70
    
    
    
    1.82
    
    
    
    1.53
    
    
    
    1.47Basic Earnings Per Share  Total (2)
    
    
    1.79
    
    
    
    1.71
    
    
    
    2.12
    
    
    
    1.59
    
    
    
    1.52Diluted Earnings Per Share  Continuing Operations (2)
    
    
    1.78
    
    
    
    1.69
    
    
    
    1.81
    
    
    
    1.52
    
    
    
    1.46Diluted Earnings Per Share  Total (2)
    
    
    1.78
    
    
    
    1.70
    
    
    
    2.11
    
    
    
    1.58
    
    
    
    1.51Return on Average Common Equity
    
    
    10.5
    %
    
    
    10.6
    %
    
    
    13.9
    %
    
    
    12.0
    %
    
    
    12.2
    %Dividends Per Common Share
    
    
    1.17
    
    
    
    1.15
    
    
    
    1.12
    
    
    
    1.10
    
    
    
    1.08Dividend Payout Ratio
    
    
    66
    %
    
    
    68
    %
    
    
    53
    %
    
    
    70
    %
    
    
    72
    %Common Shares Outstanding  Year End
    
    
    29,850
    
    
    
    29,522
    
    
    
    29,401
    
    
    
    28,977
    
    
    
    25,724Number of Common Shareholders (3)
    
    
    14,509
    
    
    
    14,692
    
    
    
    14,801
    
    
    
    14,889
    
    
    
    14,723
 Notes:
 
 (1)
    
    Beginning in 2007 corporate revenues and expenses are no longer reported as components of Other Business Operations. Prior years have been restated accordingly.(2)
    
    Based on average number of shares outstanding.(3)
    
    Holders of record at year end.




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
    
    
    ability to provide returns on invested capital that exceed our weighted average cost of
capital over the long term; and
    
    assessment of an operating companys business and potential for future earnings growth.
   
    
    Our annual consolidated revenues topped $1.2 billion for the first time in our history.
    
    We reported record earnings in our manufacturing and food ingredient processing
segments.
    
    Construction expenditures totaled $162 million, including expenditures for the electric
utilitys portion of the Langdon wind project and DMI Industries, Inc.s new wind tower
manufacturing facility near Tulsa, Oklahoma.
    
    We continued work with other regional utilities on the planning and permitting process
for a nominally rated 500-580 megawatt coal-fired electric generating plant (Big Stone II)
on the site of the existing Big Stone Plant.
    
    The electric utility filed a general rate case in Minnesota in October 2007. The last
general rate case filing in Minnesota was in 1986.
  
    
    Planned capital budget expenditures of up to $899 million for the years 2008-2012 of
which $759 million is for capital projects at the electric utility, including $336 million
related to Big Stone II, $106 million for wind generation and associated transmission
projects and $67 million for anticipated expansion of transmission capacity in Minnesota
(CapX 2020). See Capital Requirements section for further discussion.
    
    Pursuing the regulatory approvals, financing and other arrangements necessary to build
Big Stone II.




---



##### 




    
    Adding more renewable resources to our electric resource mix.
    
    Completion of the Minnesota general rate case and rate filings in North Dakota and South
Dakota.
    
    The continued investigation and evaluation of organic growth and strategic acquisition
opportunities.
  (in thousands)
    
    2007
    
    
    2006Operating Revenues:Electric
    
    $
    323,158
    
    
    $
    305,703Nonelectric
    
    
    915,729
    
    
    
    799,251Total Operating Revenues
    
    $
    1,238,887
    
    
    $
    1,104,954Net Income from Continuing Operations:Electric
    
    $
    24,498
    
    
    $
    24,181Nonelectric
    
    
    29,463
    
    
    
    26,56953,961
    
    
    
    50,750Net Income from Discontinued Operations
    
    
    
    
    
    
    362Total Net Income
    
    $
    53,961
    
    
    $
    51,112
       (in thousands)
    
    2007
    
    2006
    
    2005Operating Revenues:Electric
    
    $
    320
    
    
    $
    311
    
    
    $
    361Nonelectric
    
    
    1,722
    
    
    
    1,433
    
    
    
    1,927Cost of Goods Sold
    
    
    1,539
    
    
    
    1,433
    
    
    
    2,070Other Nonelectric Expenses
    
    
    503
    
    
    
    311
    
    
    
    218




---



##### 



ELECTRIC
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Retail Sales Revenues
    
    $
    276,894
    
    
    
    6
    
    
    $
    260,926
    
    
    
    5
    
    
    $
    248,939Wholesale Revenues
    
    
    22,306
    
    
    
    (13
    )
    
    
    25,514
    
    
    
    (39
    )
    
    
    41,953Net Marked-to-Market Gains
    
    
    3,334
    
    
    
    639
    
    
    
    451
    
    
    
    (90
    )
    
    
    4,444Other Revenues
    
    
    20,944
    
    
    
    10
    
    
    
    19,123
    
    
    
    8
    
    
    
    17,649Total Operating Revenues
    
    $
    323,478
    
    
    
    6
    
    
    $
    306,014
    
    
    
    (2
    )
    
    $
    312,985Production Fuel
    
    
    60,482
    
    
    
    3
    
    
    
    58,729
    
    
    
    5
    
    
    
    55,927Purchased Power  System Use
    
    
    74,690
    
    
    
    28
    
    
    
    58,281
    
    
    
    (1
    )
    
    
    58,828Other Operation and Maintenance Expenses
    
    
    107,041
    
    
    
    3
    
    
    
    103,548
    
    
    
    4
    
    
    
    99,904Depreciation and Amortization
    
    
    26,097
    
    
    
    1
    
    
    
    25,756
    
    
    
    6
    
    
    
    24,397Property Taxes
    
    
    9,413
    
    
    
    (2
    )
    
    
    9,589
    
    
    
    (5
    )
    
    
    10,043Operating Income
    
    $
    45,755
    
    
    
    (9
    )
    
    $
    50,111
    
    
    
    (22
    )
    
    $
    63,886
 2007 compared with 2006




---



##### 



2006 compared with 2005




---



##### 



PLASTICS
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Operating Revenues
    
    $
    149,012
    
    
    
    (9
    )
    
    $
    163,135
    
    
    
    3
    
    
    $
    158,548Cost of Goods Sold
    
    
    124,344
    
    
    
    (2
    )
    
    
    126,374
    
    
    
    4
    
    
    
    121,245Operating Expenses
    
    
    7,223
    
    
    
    (29
    )
    
    
    10,239
    
    
    
    (6
    )
    
    
    10,939Depreciation and Amortization
    
    
    3,083
    
    
    
    10
    
    
    
    2,815
    
    
    
    12
    
    
    
    2,511Operating Income
    
    $
    14,362
    
    
    
    (39
    )
    
    $
    23,707
    
    
    
    (1
    )
    
    $
    23,853
 2007 compared with 2006
  2006 compared with 2005
  MANUFACTURING
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Operating Revenues
    
    $
    381,599
    
    
    
    22
    
    
    $
    311,811
    
    
    
    28
    
    
    $
    244,311Cost of Goods Sold
    
    
    300,146
    
    
    
    22
    
    
    
    246,649
    
    
    
    27
    
    
    
    194,264Operating Expenses
    
    
    35,278
    
    
    
    33
    
    
    
    26,508
    
    
    
    11
    
    
    
    23,872Depreciation and Amortization
    
    
    13,124
    
    
    
    18
    
    
    
    11,076
    
    
    
    17
    
    
    
    9,447Operating Income
    
    $
    33,051
    
    
    
    20
    
    
    $
    27,578
    
    
    
    65
    
    
    $
    16,728




---



##### 



2007 compared with 2006
  
    
    Revenues at DMI Industries, Inc. (DMI), our manufacturer of wind towers, increased $48.0
million (35.2%) as a result of increased productivity at the West Fargo plant and increased
production levels at the Ft. Erie plant compared with initial start-up levels beginning in
May 2006.
    
    Revenues at ShoreMaster, Inc. (ShoreMaster), our waterfront equipment manufacturer,
increased $15.9 million (26.4%) between the years due to increased production and sales of
commercial products and higher residential sales during the peak selling season. The Aviva
Sports product line, acquired by ShoreMaster in February 2007, contributed $3.7 million to
the increase in revenues.
    
    Revenues at BTD Manufacturing Inc. (BTD), our metal parts stamping and fabrication
company, increased $3.5 million (4.5%) between the years, mainly as a result of the May
2007 acquisition of Pro Engineering, LLC (Pro Engineering).
    
    Revenues at T.O. Plastics, Inc. (T.O. Plastics), our manufacturer of thermoformed
plastic and horticultural products, increased $2.4 million (6.4%) between the years as a
result of greater demand for both custom and horticultural products.
  
    
    Cost of goods sold at DMI increased $39.8 million between the years, including
increases of $30.4 million in material and supplies, $6.8 million in labor and benefit
costs and $2.6 million in other direct manufacturing costs. The increase in cost of goods
sold is directly related to DMIs increase in production and sales activity, including
operations at the Ft. Erie facilities which commenced in May 2006.
    
    Cost of goods sold at ShoreMaster increased $9.2 million between the years as a result
of increases in material and labor costs directly related to the increase in commercial
and residential product sales as well as the acquisition of the Aviva Sports product line
in February 2007, which contributed $2.9 million to cost of goods sold in 2007.
    
    Cost of goods sold at BTD increased $2.8 million between the years as a result of the
acquisition of Pro Engineering in May 2007, partially offset by a decrease in costs at
BTDs other manufacturing facilities related to a decrease in unit sales between the
years.
    
    Cost of goods sold at T.O. Plastics increased $2.1 million, mainly driven by an
increase in volume, as compared to 2006, and higher material costs.
  
    
    Operating expenses at DMI increased $3.0 million, including $2.0 million in 2007
pre-production start-up costs at its new plant in Oklahoma and increases in expenses
related to full operations at the Ft. Erie facility. The new plant in Oklahoma started
producing towers in January 2008.
    
    Operating expenses at ShoreMaster increased $3.9 million as a result of increases in
labor, benefits, sales expenses and professional services, of which $1.7 million is related
to the Aviva Sports product line acquired in February 2007 and $1.3 million is related to
facility relocation and legal expenses.
    
    Operating expenses at BTD increased $1.3 million between the years as a result of
increases in labor and other




---



##### 



expenses, mainly related to the acquisition of Pro Engineering
in May 2007, and the reduction of a legal settlement reserve in 2006.
    
    Operating expenses at T.O. Plastics increased by $0.6 million between the years mainly
as a result of leadership succession costs and increases in professional service
expenditures.
  2006 compared with 2005
  
    
    Revenues at DMI increased $64.0 million (88.4%) as a result of increases in production
and sales activity due in part to plant additions, including initial operations at the Ft.
Erie, Ontario facility which generated $25.3 million in revenue in 2006, its first year of
operations, and continued improvements in productivity and capacity utilization.
    
    Revenues at ShoreMaster increased $3.2 million (5.7%) between the years due to price
increases driven by higher material costs (especially aluminum) and due to the acquisition
of Southeast Floating Docks in May 2005.
    
    Revenues at T.O. Plastics increased $0.7 million (1.9%) between the periods as a result
of a 0.9% increase in unit sales combined with a 1.5% increase in revenue per unit sold.
    
    Revenues at BTD decreased $0.4 million (0.5%) between the periods. However, BTDs
operating income increased $3.6 million due, in part, to productivity improvements between
the years.
  
    
    Cost of goods sold at DMI increased $51.5 million between the years, including increases
of $39.6 million in material costs, $9.2 million in labor and benefit costs and $2.7
million in tools and supplies expenditures. The increase in cost of goods sold is directly
related to the increase in DMIs production and sales activity and initial operation and
start up costs at its Ft. Erie facility.
    
    Cost of goods sold at ShoreMaster increased $2.4 million between the years as a result
of increases in labor, material (especially aluminum) and other direct costs and a full
year of operations relating to the acquisition of Southeast Floating Docks, which occurred
in May 2005.
    
    Cost of goods sold at T.O. Plastics increased $2.0 million, reflecting $1.0 million in
material cost increases and $0.8 million in increased labor and benefit costs between the
years.
    
    Cost of goods sold at BTD decreased $3.3 million between the years mainly due to a
decrease in labor costs between the years due to a reduction in the number of production
employees, a decrease in overtime pay between the years and a reduction in production hours
in December 2006. Productivity gains at BTD were achieved through efforts to better utilize
and allocate available labor resources.
  
    
    Operating expenses at DMI increased $2.7 million as a result of increases in labor,
professional services and maintenance expenses mainly related to initial operation and
start-up costs at the Ft. Erie plant.
    
    ShoreMasters operating expenses increased $0.2 million between the years.
    
    T.O. Plastics operating expenses increased $0.2 million between the years.
    
    BTDs operating expenses decreased $0.4 million between the years.




---



##### 



HEALTH SERVICES
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Operating Revenues
    
    $
    130,670
    
    
    
    (3
    )
    
    $
    135,051
    
    
    
    9
    
    
    $
    123,991Cost of Goods Sold
    
    
    99,612
    
    
    
    (4
    )
    
    
    104,108
    
    
    
    15
    
    
    
    90,327Operating Expenses
    
    
    23,691
    
    
    
    4
    
    
    
    22,745
    
    
    
    3
    
    
    
    21,989Depreciation and Amortization
    
    
    3,937
    
    
    
    8
    
    
    
    3,660
    
    
    
    (9
    )
    
    
    4,038Operating Income
    
    $
    3,430
    
    
    
    (24
    )
    
    $
    4,538
    
    
    
    (41
    )
    
    $
    7,637
 2007 compared with 2006
  2006 compared with 2005
  FOOD INGREDIENT PROCESSING
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Operating Revenues
    
    $
    70,440
    
    
    
    56
    
    
    $
    45,084
    
    
    
    17
    
    
    $
    38,501Cost of Goods Sold
    
    
    56,591
    
    
    
    28
    
    
    
    44,233
    
    
    
    43
    
    
    
    30,930Operating Expenses
    
    
    3,135
    
    
    
    7
    
    
    
    2,920
    
    
    
    15
    
    
    
    2,533Depreciation and Amortization
    
    
    3,952
    
    
    
    5
    
    
    
    3,759
    
    
    
    11
    
    
    
    3,399Operating Income (Loss)
    
    $
    6,762
    
    
    
    216
    
    
    $
    (5,828
    )
    
    
    (456
    )
    
    $
    1,639
 2007 compared with 2006




---



##### 



2006 compared with 2005
  OTHER BUSINESS OPERATIONS
  %
    
    
    
    
    
    
    %(in thousands)
    
    2007
    
    
    change
    
    
    2006
    
    
    change
    
    
    2005Operating Revenues
    
    $
    185,730
    
    
    
    28
    
    
    $
    145,603
    
    
    
    38
    
    
    $
    105,821Cost of Goods Sold
    
    
    133,393
    
    
    
    45
    
    
    
    91,806
    
    
    
    36
    
    
    
    67,711Operating Expenses
    
    
    42,462
    
    
    
    1
    
    
    
    41,867
    
    
    
    16
    
    
    
    36,020Depreciation and Amortization
    
    
    2,058
    
    
    
    (12
    )
    
    
    2,330
    
    
    
    5
    
    
    
    2,225Operating Income (Loss)
    
    $
    7,817
    
    
    
    (19
    )
    
    $
    9,600
    
    
    
    
    
    
    $
    (135
    )
 2007 compared with 2006
  
    
    Revenues at Midwest Construction Services, Inc. (MCS), our electrical design and
construction services company, increased $22.9 million (49.9%) between the years as a
result of an increase in volume of jobs in 2007.
    
    Revenues at Foley Company (Foley), a mechanical and prime contractor on industrial
projects, increased $17.3 million (26.9%) between the years due to an increase in the
volume of jobs in progress.
    
    Revenues at E.W. Wylie Corporation (Wylie), our flatbed trucking company, were unchanged
between the years.
  
    
    Cost of goods sold at MCS increased $25.0 million mainly due to increases in material,
subcontractor, direct labor and insurance costs related to the increase in volume of jobs
between the years. Lower than expected margins on certain construction projects at MCS was
the main factor contributing to the decrease in operating income between the years.
    
    Cost of goods sold at Foley increased $16.6 million mainly due to increases in direct
labor, employee benefits, subcontractor and material costs as a result of the increased
volume of work performed between the years.
  
    
    Operating expenses at MCS were unchanged between the years.
    
    Operating expenses at Foley increased $0.5 million between the years as a result of
increased labor, benefit and insurance expenses. Also, Foleys 2006 expenses reflect the
recovery of $0.2 million in bad debts.
    
    Operating expenses at Wylie were unchanged between the years.




---



##### 



2006 compared with 2005
  
    
    Revenues at Foley increased $33.3 million (106.4%) due to an increase in the volume of
work performed between the years.
    
    Revenues at Wylie increased $4.5 million (14.8%) between the years mainly due to an 8.4%
net increase in miles driven by owner-operated and company-operated trucks. Miles driven by
owner-operated trucks increased 50.3% while miles driven by company-operated trucks
decreased 9.3% between the periods. Wylies increased revenues also reflect higher rates
related to increased fuel costs recovered through fuel surcharges between the years for
both owner-operated and company-operated trucks.
    
    Revenues at MCS increased $2.3 million (5.2%) between the years as a result of increased
activity on several wind projects in the fourth quarter of 2006.
  
    
    Foleys cost of goods sold increased $28.3 million mainly in the areas of materials,
subcontractor and labor costs as a result of an increase in the volume of work performed
between the years.
    
    Cost of goods sold at MCS decreased $4.2 million mainly due to a reduction in material
and labor costs between the years mostly related to a job completed in 2005 on which large
losses were incurred as a result of higher than expected costs.
  
    
    Wylies revenue increase was entirely offset by a $4.5 million increase in operating
expenses, including $4.0 million in contractor costs related to higher fuel costs combined
with an increase in miles driven by owner-operated trucks between the years and $0.5
million in increased insurance costs.
    
    Foleys operating expenses increased $0.7 million between the years as a result of
increases in employee benefit costs.
    
    MCS operating expenses increased $1.0 million between the years, mainly due to increases
in employee benefit costs.
  CORPORATE
  %
    
    
    
    
    
    %(in thousands)
    
    2007
    
    change
    
    2006
    
    change
    
    2005Operating Expenses
    
    $
    9,824
    
    
    
    (13
    )
    
    $
    11,322
    
    
    
    (22
    )
    
    $
    14,572Depreciation and Amortization
    
    
    579
    
    
    
    (1
    )
    
    
    587
    
    
    
    33
    
    
    
    441
 2007 compared with 2006
  2006 compared with 2005




---



##### 



CONSOLIDATED OTHER INCOME AND DEDUCTIONS
  CONSOLIDATED INTEREST CHARGES
  CONSOLIDATED INCOME TAXES
   DISCONTINUED OPERATIONS
    (in thousands)
    
    2006
    
    
    2005| |Operating Revenues
    
    $
    28,234
    
    
    $
    80,988Expenses
    
    
    28,180
    
    
    
    81,601Goodwill Impairment Loss
    
    
    
    
    
    
    1,003Income Tax Expense (Benefit)
    
    
    28
    
    
    
    (261
    )Income (Loss) from Discontinued Operations
    
    $
    26
    
    
    $
    (1,355
    )
   2006
    
    
    
    2005(in thousands)
    
    OTESCO-gas
    
    
    
    MIS
    
    
    SGS
    
    
    CLC
    
    
    TotalGain (Loss) on Sale
    
    $
    560
    
    
    
    $
    19,025
    
    
    $
    (2,919
    )
    
    $
    (271
    )
    
    $
    15,835Income Tax (Expense) Benefit
    
    
    (224
    )
    
    
    
    (7,107
    )
    
    
    1,168
    
    
    
    108
    
    
    
    (5,831
    )Net Gain (Loss) on Sale
    
    $
    336
    
    
    
    $
    11,918
    
    
    $
    (1,751
    )
    
    $
    (163
    )
    
    $
    10,004




---



##### 



IMPACT OF INFLATION
   2008 EXPECTATIONS
  
    
    We expect increased levels of net income from our electric segment in 2008. This
increase is based on having lower cost generation available for the year, as there are no
plant shutdowns planned for Big Stone Plant or Coyote Station in 2008, and additional rate
base investment from the Langdon wind project. The increase also assumes the interim rate
increase of $7.1 million, or 5.41%, which is part of the rate case filed with the MPUC.
These interim rates remain in effect for all Minnesota customers until the MPUC makes a
final determination on the electric utilitys request, which is expected to occur by August
1, 2008. If final rates are lower than interim rates, the electric utility will refund
customers the difference with interest. If final rates are higher than interim rates, the
higher rates will become effective as of the date of the MPUC order approving those rates.
    
    We expect our plastics segments 2008 performance to be at or below normal levels.
Announced capacity expansions are not expected to come on line until the fourth quarter of
2008.
    
    We expect increased levels of net income in our manufacturing segment in 2008 as a
result of increased capacity and productivity related to recent expansions and
acquisitions, and the start-up of DMIs wind tower manufacturing plant in Oklahoma in 2008.
Backlog in place in the manufacturing segment to support 2008 revenues is approximately
$295 million compared with $241 million one year ago. The wind energy tower manufacturing
business accounts for a substantial portion of the 2008 backlog.
    
    We expect improvement in net income from our health services segment in 2008 as it
focuses on improving its mix of imaging assets and asset utilization rates.
    
    We expect our food ingredient processing business to have increased net income due to
higher operating margins in 2008. This business has backlog in place for 2008 of 51.5
million pounds compared with 52.8 million pounds one year ago.
    
    We expect our other business operations segment to have higher net income in 2008
compared with 2007. Backlog in place for the construction businesses is $77 million for
2008 compared with $74 million for the same period one year ago.
    
    Corporate general and administrative costs are expected to increase in 2008.




---



##### 



LIQUIDITY
     Cash Realization Ratios-Continuing Operations
    
    Interest Bearing Debt as a Percent of Total Capital(BAR GRAPH)
    
    (BAR GRAPH)




---



##### 



CAPITAL REQUIREMENTS
   (in millions)
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    
    2008-2012Electric
    
    $
    30
    
    
    $
    35
    
    
    $
    104
    
    
    $
    94
    
    
    
    $
    759Plastics
    
    
    4
    
    
    
    5
    
    
    
    3
    
    
    
    13
    
    
    
    
    21Manufacturing
    
    
    16
    
    
    
    20
    
    
    
    43
    
    
    
    18
    
    
    
    
    80Health Services
    
    
    3
    
    
    
    5
    
    
    
    5
    
    
    
    2
    
    
    
    
    11Food Ingredient Processing
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    4
    
    
    
    
    18Other Business Operations
    
    
    4
    
    
    
    2
    
    
    
    6
    
    
    
    4
    
    
    
    
    9Corporate
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    1Total
    
    $
    60
    
    
    $
    69
    
    
    $
    162
    
    
    $
    135
    
    
    
    $
    899
  Less than
    
    
    1-3
    
    
    3-5
    
    
    More than(in millions)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-Term Debt Obligations
    
    $
    346
    
    
    $
    3
    
    
    $
    6
    
    
    $
    101
    
    
    $
    236Interest on Long-Term Debt Obligations
    
    
    273
    
    
    
    21
    
    
    
    41
    
    
    
    35
    
    
    
    176Operating Lease Obligations
    
    
    138
    
    
    
    43
    
    
    
    69
    
    
    
    19
    
    
    
    7Capacity and Energy Requirements
    
    
    162
    
    
    
    23
    
    
    
    35
    
    
    
    11
    
    
    
    93Coal Contracts (required minimums)
    
    
    183
    
    
    
    51
    
    
    
    89
    
    
    
    16
    
    
    
    27Postretirement Benefit Obligations
    
    
    56
    
    
    
    3
    
    
    
    7
    
    
    
    7
    
    
    
    39Other Purchase Obligations
    
    
    43
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Cash Obligations
    
    $
    1,201
    
    
    $
    187
    
    
    $
    247
    
    
    $
    189
    
    
    $
    578




---



##### 



CAPITAL RESOURCES




---



##### 



MoodysInvestors
    
    StandardService
    
    & PoorsSenior Unsecured Debt
    
    A3
    
    BBB+Preferred Stock
    
    Baa2
    
    BBB-Outlook
    
    Negative
    
    Negative




---



##### 



Long-Term Debt Interest Coverage  (times-interest earned before tax)
 OFF-BALANCE-SHEET ARRANGEMENTS
  RISK FACTORS AND CAUTIONARY STATEMENTS




---



##### 



GENERAL
 Federal and state environmental regulation could require us to incur substantial capital
expenditures and increased operating costs.
   Volatile financial markets and changes in our debt ratings could restrict our ability to access
capital and increase our borrowing costs and pension plan expenses.
   Our plans to grow and diversify through acquisitions may not be successful, which could result in
poor financial performance.




---



##### 



Our plans to grow our nonelectric businesses could be limited by state law.
  ELECTRIC
 We may experience fluctuations in revenues and expenses related to our electric operations, which
may cause our financial results to fluctuate and could impair our ability to make distributions to
shareholders or scheduled payments on our debt obligations.
   Actions by the regulators of our electric operations could result in rate reductions, lower
revenues and earnings or delays in recovering capital expenditures.




---



##### 



We may not be able to respond effectively to deregulation initiatives in the electric industry,
which could result in reduced revenues and earnings.
  Our 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
(CO 2 ) emissions, could affect our operating costs and the costs of supplying electricity
to our customers.
 2 2
 PLASTICS
 Our plastics operations are highly dependent on a limited number of vendors for PVC resin and a
limited supply of PVC resin. The loss of a key vendor, or any interruption or delay in the supply
of PVC resin, could result in reduced sales or increased costs for our plastics business.
  We compete against a large number of other manufacturers of PVC pipe and manufacturers of
alternative products. Customers may not distinguish our products from those of our competitors.




---



##### 



Reductions in PVC resin prices can negatively affect our plastics business.
  MANUFACTURING
 Competition from foreign and domestic manufacturers, the price and availability of raw materials,
fluctuations in foreign currency exchange rates, the availability of production tax credits and
general economic conditions could affect the revenues and earnings of our manufacturing businesses.
  HEALTH SERVICES
 Changes in the rates or methods of third-party reimbursements for our diagnostic imaging services
could result in reduced demand for those services or create downward pricing pressure, which would
decrease our revenues and earnings.
  Our health services operations has a dealership and other agreements with Philips Medical from
which it derives significant revenues from the sale and service of Philips Medical diagnostic
imaging equipment.
  Technological change in the diagnostic imaging industry could reduce the demand for diagnostic
imaging services and require our health services operations to incur significant costs to upgrade
its equipment.
  Actions by regulators of our health services operations could result in monetary penalties or
restrictions in our health services operations.




---



##### 



FOOD INGREDIENT PROCESSING
 Our company that processes dehydrated potato flakes, flour and granules, Idaho Pacific Holdings,
Inc. (IPH), competes in a highly competitive market and is dependent on adequate sources of
potatoes for processing.
    OTHER BUSINESS OPERATIONS
 Our construction companies may be unable to properly bid and perform on projects.
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




---



##### 



December 31,(in thousands)
    
    2007Current Asset  Marked-to-Market Gain
    
    $
    5,210Regulatory Asset  Deferred Marked-to-Market Loss
    
    
    771Total Assets
    
    
    5,981Current Liability  Marked-to-Market Loss
    
    
    (5,078
    )Regulatory Liability  Deferred Marked-to-Market Gain
    
    
    (271
    )Total Liabilities
    
    
    (5,349
    )Net Fair Value of Marked-to-Market Energy Contracts
    
    $
    632
 Year ended(in thousands)
    
    December 31, 2007Fair Value at Beginning of Year
    
    $
    203Amount Realized on Contracts Entered into in 2006 and Settled in 2007
    
    
    (203
    )Changes in Fair Value of Contracts Entered into in 2006
    
    
    Net Fair Value of Contracts Entered into in 2006 at Year End 2007
    
    
    Changes in Fair Value of Contracts Entered into in 2007
    
    
    632Net Fair Value at End of Year
    
    $
    632




---



##### 



1st Quarter
    
    4th Quarter(in thousands)
    
    2008
    
    2008
    
    TotalNet Gain
    
    $
    118
    
    
    $
    514
    
    
    $
    632
    CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES
   PENSION AND OTHER POSTRETIREMENT BENEFITS OBLIGATIONS AND COSTS




---



##### 



REVENUE RECOGNITION
  FORWARD ENERGY CONTRACTS CLASSIFIED AS DERIVATIVES




---



##### 



ALLOWANCE FOR DOUBTFUL ACCOUNTS
     DEPRECIATION EXPENSE AND DEPRECIABLE LIVES
   TAXATION
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109, Accounting for Income Taxes




---



##### 



ASSET IMPAIRMENT  Accounting for the Impairment or Disposal of Long-Lived Assets
   GOODWILL IMPAIRMENT  Goodwill
and Other Intangible Assets
  
 PURCHASE ACCOUNTING  Business Combinations




---



##### 



Businesses Combinations
 KEY ACCOUNTING PRONOUNCEMENTS
 SFAS No. 123(R) (revised 2004), Share-Based Payment, Accounting for Stock-based Compensation, Accounting for Stock Issued to Employees
 
    
    $163,000, net-of-tax, for non-vested stock options that were outstanding on December 31,
2005.
    
    $235,000 for the 15% discount offered under our Employee Stock Purchase Plan.
  Transition Election Related to Accounting for Tax Effects of Share-Based Payment
Awards.
 FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement No. 109, Accounting for Income Taxes
 SFAS No. 157, Fair Value Measurements,




---



##### 



SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, Accounting for the Effects of
Certain Types of Regulation,
 (in thousands)
    
    2006Decrease in Executive Survivor and Supplemental Retirement Plan
Intangible Asset
    
    $
    (767
    )Increase in Regulatory Assets (for the unrecognized portions of
net actuarial losses, prior service costs and transition
obligations that are subject to recovery through electric rates)
    
    
    36,736Increase in Pension Benefit and Other Postretirement Liability
    
    
    (34,714
    )Increase in Deferred Tax Liability
    
    
    (502
    )Decrease in Accumulated Other Comprehensive Loss (for the
unrecognized portions of net actuarial losses, prior service
costs and transition obligations that are not subject to recovery
through electric rates) (increase to equity)
    
    
    (753
    )
  SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115,
 SFAS No. 141(R) Businesses Combinations Business Combinations,




---



##### 



Managements Report Regarding Internal Controls Over Financial Reporting
   Internal Control  Integrated Framework




---



##### 



TO THE SHAREHOLDERS OF OTTER TAIL CORPORATION




---



##### 








---



##### 



Otter Tail Corporation
 Consolidated Statements of IncomeFor the Years Ended December 31
 (in thousands, except per-share amounts)
    
    2007
    
    
    2006
    
    
    2005Operating RevenuesElectric
    
    $
    323,158
    
    
    $
    305,703
    
    
    $
    312,624Nonelectric
    
    
    915,729
    
    
    
    799,251
    
    
    
    669,245Total Operating Revenues
    
    
    1,238,887
    
    
    
    1,104,954
    
    
    
    981,869Operating ExpensesProduction Fuel  Electric
    
    
    60,482
    
    
    
    58,729
    
    
    
    55,927Purchased Power  Electric System Use
    
    
    74,690
    
    
    
    58,281
    
    
    
    58,828Electric Operation and Maintenance Expenses
    
    
    107,041
    
    
    
    103,548
    
    
    
    99,904Cost of Goods Sold  Nonelectric (excludes depreciation; included below)
    
    
    712,547
    
    
    
    611,737
    
    
    
    502,407Other Nonelectric Expenses
    
    
    121,110
    
    
    
    115,290
    
    
    
    109,707Depreciation and Amortization
    
    
    52,830
    
    
    
    49,983
    
    
    
    46,458Property Taxes  Electric
    
    
    9,413
    
    
    
    9,589
    
    
    
    10,043Total Operating Expenses
    
    
    1,138,113
    
    
    
    1,007,157
    
    
    
    883,274Operating Income
    
    
    100,774
    
    
    
    97,797
    
    
    
    98,595Other Income and Deductions
    
    
    2,012
    
    
    
    (440
    )
    
    
    1,773Interest Charges
    
    
    20,857
    
    
    
    19,501
    
    
    
    18,459Income from Continuing Operations Before Income Taxes
    
    
    81,929
    
    
    
    77,856
    
    
    
    81,909Income Taxes  Continuing Operations
    
    
    27,968
    
    
    
    27,106
    
    
    
    28,007Net Income from Continuing Operations
    
    
    53,961
    
    
    
    50,750
    
    
    
    53,902Discontinued OperationsIncome (Loss) from Discontinued OperationsNet of Taxes of $28 in 2006 and ($261) in 2005
    
    
    
    
    
    
    26
    
    
    
    (352
    )Goodwill Impairment Loss
    
    
    
    
    
    
    
    
    
    
    (1,003
    )Gain on Disposition of Discontinued Operations
Net of Taxes of $224 in 2006 and $5,831 in 2005
    
    
    
    
    
    
    336
    
    
    
    10,004Net Income from Discontinued Operations
    
    
    
    
    
    
    362
    
    
    
    8,649Net Income
    
    
    53,961
    
    
    
    51,112
    
    
    
    62,551Preferred Dividend Requirements
    
    
    736
    
    
    
    736
    
    
    
    735Earnings Available for Common Shares
    
    $
    53,225
    
    
    $
    50,376
    
    
    $
    61,816Average Number of Common Shares OutstandingBasic
    
    
    29,681
    
    
    
    29,394
    
    
    
    29,223Average Number of Common Shares OutstandingDiluted
    
    
    29,970
    
    
    
    29,664
    
    
    
    29,348Basic Earnings Per Share:Continuing Operations (net of preferred dividend requirements)
    
    $
    1.79
    
    
    $
    1.70
    
    
    $
    1.82Discontinued Operations
    
    
    
    
    
    
    0.01
    
    
    
    0.30$
    1.79
    
    
    $
    1.71
    
    
    $
    2.12Diluted Earnings Per Share:Continuing Operations (net of preferred dividend requirements)
    
    $
    1.78
    
    
    $
    1.69
    
    
    $
    1.81Discontinued Operations
    
    
    
    
    
    
    0.01
    
    
    
    0.30$
    1.78
    
    
    $
    1.70
    
    
    $
    2.11Dividends Per Common Share
    
    $
    1.17
    
    
    $
    1.15
    
    
    $
    1.12
 See accompanying notes to consolidated financial statements.




---



##### 



Otter Tail Corporation
 Consolidated Balance Sheets, December 31
 (in thousands)
    
    2007
    
    
    2006AssetsCurrent AssetsCash and Cash Equivalents
    
    $
    39,824
    
    
    $
    6,791Accounts Receivable:Trade (less allowance for doubtful accounts of
$3,811 for 2007 and $2,964 for 2006)
    
    
    151,446
    
    
    
    135,011Other
    
    
    14,934
    
    
    
    10,265Inventories
    
    
    97,214
    
    
    
    103,002Deferred Income Taxes
    
    
    7,200
    
    
    
    8,069Accrued Utility and Cost-of-Energy Revenues
    
    
    32,501
    
    
    
    23,931Costs and Estimated Earnings in Excess of Billings
    
    
    42,234
    
    
    
    38,384Other
    
    
    15,299
    
    
    
    9,611Assets of Discontinued Operations
    
    
    
    
    
    
    289Total Current Assets
    
    
    400,652
    
    
    
    335,353Investments
    
    
    10,057
    
    
    
    8,955Other Assets
    
    
    24,500
    
    
    
    20,991Goodwill
    
    
    99,242
    
    
    
    98,110Other IntangiblesNet
    
    
    20,456
    
    
    
    20,080Deferred DebitsUnamortized Debt Expense and Reacquisition Premiums
    
    
    6,986
    
    
    
    6,133Regulatory Assets and Other Deferred Debits
    
    
    38,837
    
    
    
    50,419Total Deferred Debits
    
    
    45,823
    
    
    
    56,552PlantElectric Plant in Service
    
    
    1,028,917
    
    
    
    930,689Nonelectric Operations
    
    
    257,590
    
    
    
    239,269Total
    
    
    1,286,507
    
    
    
    1,169,958Less Accumulated Depreciation and Amortization
    
    
    506,744
    
    
    
    479,557PlantNet of Accumulated Depreciation and Amortization
    
    
    779,763
    
    
    
    690,401Construction Work in Progress
    
    
    74,261
    
    
    
    28,208Net Plant
    
    
    854,024
    
    
    
    718,609Total
    
    $
    1,454,754
    
    
    $
    1,258,650
 See accompanying notes to consolidated financial statements.




---



##### 



Otter Tail Corporation
 Consolidated Balance Sheets, December 31
 (in thousands, except share data)
    
    2007
    
    
    2006Liabilities and EquityCurrent LiabilitiesShort-Term Debt
    
    $
    95,000
    
    
    $
    38,900Current Maturities of Long-Term Debt
    
    
    3,004
    
    
    
    3,125Accounts Payable
    
    
    141,390
    
    
    
    120,195Accrued Salaries and Wages
    
    
    29,283
    
    
    
    28,653Accrued Federal and State Income Taxes
    
    
    
    
    
    
    2,383Other Accrued Taxes
    
    
    11,409
    
    
    
    11,509Other Accrued Liabilities
    
    
    13,873
    
    
    
    10,495Liabilities of Discontinued Operations
    
    
    
    
    
    
    197Total Current Liabilities
    
    
    293,959
    
    
    
    215,457Pensions Benefit Liability
    
    
    39,429
    
    
    
    44,035Other Postretirement Benefits Liability
    
    
    30,488
    
    
    
    32,254Other Noncurrent Liabilities
    
    
    23,228
    
    
    
    18,866Commitments (note 9)Deferred CreditsDeferred Income Taxes
    
    
    105,813
    
    
    
    112,740Deferred Tax Credits
    
    
    16,761
    
    
    
    8,181Regulatory Liabilities
    
    
    62,705
    
    
    
    63,875Other
    
    
    275
    
    
    
    281Total Deferred Credits
    
    
    185,554
    
    
    
    185,077Capitalization (page 42)Long-Term Debt, Net of Current Maturities
    
    
    342,694
    
    
    
    255,436Class B Stock Options of Subsidiary
    
    
    1,255
    
    
    
    1,255Cumulative Preferred Shares
    
    
    15,500
    
    
    
    15,500Common Shares, Par Value $5 Per ShareAuthorized, 50,000,000 Shares;
Outstanding, 200729,849,789 Shares; 200629,521,770 Shares
    
    
    149,249
    
    
    
    147,609Premium on Common Shares
    
    
    108,885
    
    
    
    99,223Retained Earnings
    
    
    263,332
    
    
    
    245,005Accumulated Other Comprehensive Income (Loss)
    
    
    1,181
    
    
    
    (1,067
    )Total Common Equity
    
    
    522,647
    
    
    
    490,770Total Capitalization
    
    
    882,096
    
    
    
    762,961Total
    
    $
    1,454,754
    
    
    $
    1,258,650
 See accompanying notes to consolidated financial statements.




---



##### 



Otter Tail Corporation
 Consolidated Statements of Common Shareholders Equity and Comprehensive Income
 AccumulatedCommon
    
    Par Value,
    
    Premium on
    
    
    
    
    
    
    
    
    
    OtherShares
    
    Common
    
    Common
    
    Unearned
    
    Retained
    
    Comprehensive
    
    Total( in thousands, except common shares outstanding)
    
    Outstanding
    
    Shares
    
    Shares
    
    Compensation
    
    Earnings
    
    Income/(Loss)
    
    EquityBalance, December 31, 2004
    
    
    28,976,919
    
    
    $
    144,885
    
    
    $
    87,865
    
    
    $
    (2,577
    )
    
    $
    199,427
    
    
    $
    (390
    )
    
    $
    429,210Common Stock Issuances, Net of Expenses
    
    
    456,211
    
    
    
    2,281
    
    
    
    8,483
    
    
    
    (529
    )
    
    
    
    
    
    
    
    
    
    
    10,235Common Stock Retirements
    
    
    (31,907
    )
    
    
    (160
    )
    
    
    (756
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (916
    )Amortization of Unearned CompensationStock Awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,386
    
    
    
    
    
    
    
    
    
    
    
    1,386Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,551
    
    
    
    
    
    
    
    62,551Unrealized Loss on Marketable Equity Securities (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Foreign Currency Exchange Translation (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    437SFAS No. 87 Minimum Pension Liability Adjustment (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,163
    )
    
    
    (6,163
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,802Tax Benefit for Exercise of Stock Options
    
    
    
    
    
    
    
    
    
    
    596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596Stock Incentive Plan Performance Award Accrual
    
    
    
    
    
    
    
    
    
    
    943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943Premium on Purchase of Stock for Employee Purchase Plan
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (363
    )Cumulative Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (735
    )
    
    
    
    
    
    
    (735
    )Common Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,728
    )
    
    
    
    
    
    
    (32,728
    )Balance, December 31, 2005
    
    
    29,401,223
    
    
    $
    147,006
    
    
    $
    96,768
    
    
    $
    (1,720
    )
    
    $
    228,515
    
    
    $
    (6,139
    )
    
    $
    464,430Common Stock Issuances, Net of Expenses
    
    
    136,917
    
    
    
    685
    
    
    
    1,837
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,522Common Stock Retirements
    
    
    (16,370
    )
    
    
    (82
    )
    
    
    (378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (460
    )SFAS No. 123(R) Reclassifications (note 7)
    
    
    
    
    
    
    
    
    
    
    (2,490
    )
    
    
    1,720
    
    
    
    
    
    
    
    
    
    
    
    (770
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,112
    
    
    
    
    
    
    
    51,112Unrealized Gain on Marketable Equity Securities (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    56Foreign Currency Exchange Translation (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6SFAS No. 87 Minimum Pension Liability Adjustment (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,257
    
    
    
    4,257Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,431SFAS No. 158 Items (net-of-tax)
Reversal of 12/31/06 MinimumPension Liability Balance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,296
    
    
    
    3,296Unrecognized Postretirement Benefit Costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,585
    )
    
    
    (24,585
    )Unrecognized Costs Classified as Regulatory Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,042
    
    
    
    22,042Tax Benefit for Exercise of Stock Options
    
    
    
    
    
    
    
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288Stock Incentive Plan Performance Award Accrual
    
    
    
    
    
    
    
    
    
    
    2,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,404Vesting of Restricted Stock Granted to Employees
    
    
    
    
    
    
    
    
    
    
    1,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,096Premium on Purchase of Stock for Employee Purchase Plan
    
    
    
    
    
    
    
    
    
    
    (302
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (302
    )Cumulative Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (736
    )
    
    
    
    
    
    
    (736
    )Common Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,886
    )
    
    
    
    
    
    
    (33,886
    )Balance, December 31, 2006
    
    
    29,521,770
    
    
    $
    147,609
    
    
    $
    99,223
    
    
    $
    
    
    
    $
    245,005
    
    
    $
    (1,067)
    (a)
    
    $
    490,770Common Stock Issuances, Net of Expenses
    
    
    336,508
    
    
    
    1,683
    
    
    
    6,018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,701Common Stock Retirements
    
    
    (8,489
    )
    
    
    (43
    )
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (295
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,961
    
    
    
    
    
    
    
    53,961Unrealized Gain on Marketable Equity Securities (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Foreign Currency Exchange Translation (net-of-tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,019
    
    
    
    2,019SFAS No. 158 Items (net-of-tax):Amortization of Unrecognized Postretirement Benefit Costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    165Actuarial Gains and Regulatory Allocations Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,209Tax Benefit for Exercise of Stock Options
    
    
    
    
    
    
    
    
    
    
    1,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,092Stock Incentive Plan Performance Award Accrual
    
    
    
    
    
    
    
    
    
    
    2,213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,213Vesting of Restricted Stock Granted to Employees
    
    
    
    
    
    
    
    
    
    
    860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    860Premium on Purchase of Stock for Employee Purchase Plan
    
    
    
    
    
    
    
    
    
    
    (269
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (269
    )Cumulative Effect of Adoption of FIN No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118
    )
    
    
    
    
    
    
    (118
    )Cumulative Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (736
    )
    
    
    
    
    
    
    (736
    )Common Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,780
    )
    
    
    
    
    
    
    (34,780
    )Balance, December 31, 2007
    
    
    29,849,789
    
    
    $
    149,249
    
    
    $
    108,885
    
    
    $
    
    
    
    $
    263,332
    
    
    $
    1,181
    (a)
    
    $
    522,647
 (a)
 2006(in thousands)
    
    Before Tax
    
    Tax Effect
    
    Net-of-TaxUnamortized Actuarial Losses and Transition Obligation Related to Pension and Postretirement Benefits
    
    $
    (4,238
    )
    
    $
    1,695
    
    
    $
    (2,543
    )Foreign Currency Exchange Translation
    
    
    2,430
    
    
    
    (972
    )
    
    
    1,458Unrealized Gain on Marketable Equity Securities
    
    
    30
    
    
    
    (12
    )
    
    
    18Net Accumulated Other Comprehensive Loss
    
    $
    (1,778
    )
    
    $
    711
    
    
    $
    (1,067
    )2007(in thousands)
    
    Before Tax
    
    Tax Effect
    
    Net-of-TaxUnamortized Actuarial Losses and Transition Obligation Related to Pension and Postretirement Benefits
    
    $
    (3,863
    )
    
    $
    1,545
    
    
    $
    (2,318
    )Foreign Currency Exchange Translation
    
    
    5,795
    
    
    
    (2,318
    )
    
    
    3,477Unrealized Gain on Marketable Equity Securities
    
    
    36
    
    
    
    (14
    )
    
    
    22Net Accumulated Other Comprehensive Income
    
    $
    1,968
    
    
    $
    (787
    )
    
    $
    1,181
 See accompanying notes to consolidated financial statements.




---



##### 



Otter Tail Corporation
 Consolidated Statements of Cash FlowsFor the Years Ended December 31
 (in thousands)
    
    2007
    
    
    2006
    
    
    2005Cash Flows from Operating ActivitiesNet Income
    
    $
    53,961
    
    
    $
    51,112
    
    
    $
    62,551Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:Net Gain on Sale of Discontinued Operations
    
    
    
    
    
    
    (336
    )
    
    
    (10,004
    )(Income) Loss from Discontinued Operations
    
    
    
    
    
    
    (26
    )
    
    
    1,355Depreciation and Amortization
    
    
    52,830
    
    
    
    49,983
    
    
    
    46,458Deferred Tax Credits
    
    
    (1,169
    )
    
    
    (1,146
    )
    
    
    (1,150
    )Deferred Income Taxes
    
    
    4,366
    
    
    
    (1,258
    )
    
    
    (9,223
    )Change in Deferred Debits and Other Assets
    
    
    6,505
    
    
    
    (38,499
    )
    
    
    8,865Discretionary Contribution to Pension Plan
    
    
    (4,000
    )
    
    
    (4,000
    )
    
    
    (4,000
    )Change in Noncurrent Liabilities and Deferred Credits
    
    
    481
    
    
    
    45,340
    
    
    
    1,321Allowance for Equity (Other) Funds Used During Construction
    
    
    
    
    
    
    2,529
    
    
    
    (723
    )Change in Derivatives Net of Regulatory Deferral
    
    
    (800
    )
    
    
    3,083
    
    
    
    (2,615
    )Stock Compensation Expense
    
    
    2,986
    
    
    
    2,404
    
    
    
    2,388OtherNet
    
    
    (1,837
    )
    
    
    418
    
    
    
    1,118Cash (Used for) Provided by Current Assets and Current Liabilities:Change in Receivables
    
    
    (18,903
    )
    
    
    (15,713
    )
    
    
    (9,715
    )Change in Inventories
    
    
    8,407
    
    
    
    (14,345
    )
    
    
    (12,500
    )Change in Other Current Assets
    
    
    (14,616
    )
    
    
    (17,409
    )
    
    
    (13,908
    )Change in Payables and Other Current Liabilities
    
    
    (2,556
    )
    
    
    23,022
    
    
    
    32,682Change in Interest and Income Taxes Payable
    
    
    (843
    )
    
    
    (5,952
    )
    
    
    (2,552
    )Net Cash Provided by Continuing Operations
    
    
    84,812
    
    
    
    79,207
    
    
    
    90,348Net Cash Provided by Discontinued Operations
    
    
    
    
    
    
    1,039
    
    
    
    5,452Net Cash Provided by Operating Activities
    
    
    84,812
    
    
    
    80,246
    
    
    
    95,800Cash Flows from Investing ActivitiesCapital Expenditures
    
    
    (161,985
    )
    
    
    (69,448
    )
    
    
    (59,969
    )Proceeds from Disposal of Noncurrent Assets
    
    
    12,486
    
    
    
    5,233
    
    
    
    4,193AcquisitionsNet of Cash Acquired
    
    
    (6,750
    )
    
    
    
    
    
    
    (11,223
    )(Increases) Decreases in Other Investments
    
    
    (7,745
    )
    
    
    (3,326
    )
    
    
    4,171Net Cash Used in Investing Activities  Continuing Operations
    
    
    (163,994
    )
    
    
    (67,541
    )
    
    
    (62,828
    )Net Proceeds from Sale of Discontinued Operations
    
    
    
    
    
    
    1,960
    
    
    
    34,185Net Cash Provided by Investing Activities  Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    602Net Cash Used in Investing Activities
    
    
    (163,994
    )
    
    
    (65,581
    )
    
    
    (28,041
    )Cash Flows from Financing ActivitiesChange in Checks Written in Excess of Cash
    
    
    
    
    
    
    (11
    )
    
    
    (3,329
    )Net Short-Term Borrowings (Repayments)
    
    
    56,100
    
    
    
    22,900
    
    
    
    (23,950
    )Proceeds from Issuance of Common Stock, Net of Issuance Expenses
    
    
    7,733
    
    
    
    2,444
    
    
    
    9,690Payments for Retirement of Common Stock and Class B Stock of Subsidiary
    
    
    (305
    )
    
    
    (463
    )
    
    
    (939
    )Proceeds from Issuance of Long-Term Debt
    
    
    205,129
    
    
    
    149
    
    
    
    368Debt Issuance Expenses
    
    
    (1,762
    )
    
    
    (458
    )
    
    
    (140
    )Payments for Retirement of Long-Term Debt
    
    
    (118,171
    )
    
    
    (3,287
    )
    
    
    (7,232
    )Dividends Paid
    
    
    (35,516
    )
    
    
    (34,621
    )
    
    
    (33,463
    )Net Cash Provided by (Used in) Financing Activities  Continuing Operations
    
    
    113,208
    
    
    
    (13,347
    )
    
    
    (58,995
    )Net Cash Used in Financing Activities  Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    (2,996
    )Net Cash Provided by (Used in) Financing Activities
    
    
    113,208
    
    
    
    (13,347
    )
    
    
    (61,991
    )Effect of Foreign Exchange Rate Fluctuations on Cash
    
    
    (993
    )
    
    
    43
    
    
    
    (338
    )Net Change in Cash and Cash Equivalents
    
    
    33,033
    
    
    
    1,361
    
    
    
    5,430Cash and Cash Equivalents at Beginning of Year  Continuing Operations
    
    
    6,791
    
    
    
    5,430
    
    
    
    Cash and Cash Equivalents at End of Year  Continuing Operations
    
    $
    39,824
    
    
    $
    6,791
    
    
    $
    5,430
 See accompanying notes to consolidated financial statements.




---



##### 



Otter Tail Corporation
 Consolidated Statements of Capitalization, December 31
 (in thousands, except share data)
    
    2007
    
    
    2006Long-Term DebtSenior Unsecured Notes 6.63%, due December 1, 2011
    
    $
    90,000
    
    
    $
    90,000Senior Debentures 6.375%, due December 1, 2007
    
    
    
    
    
    
    50,000Senior Unsecured Note 5.778%, due November 30, 2017
    
    
    50,000
    
    
    
    Insured Senior Notes 5.625%, due October 1, 2017 (retired October 15, 2007)
    
    
    
    
    
    
    40,000Senior Notes 6.80%, due October 1, 2032 (retired October 15, 2007)
    
    
    
    
    
    
    25,000Senior Unsecured Notes 6.47%, Series D, due August 20, 2037
    
    
    50,000
    
    
    
    Senior Unsecured Notes 6.37%, Series C, due August 20, 2027
    
    
    42,000
    
    
    
    Senior Unsecured Notes 5.95%, Series A, due August 20, 2017
    
    
    33,000
    
    
    
    Senior Unsecured Notes 6.15%, Series B, due August 20, 2022
    
    
    30,000
    
    
    
    Mercer County, North Dakota Pollution Control Refunding Revenue Bonds 4.85%, due September 1, 2022
    
    
    20,705
    
    
    
    20,735Pollution Control Refunding Revenue Bonds, Variable, 3.97% at December 31, 2007, due December 1, 2012
    
    
    10,400
    
    
    
    10,400Lombard US Equipment Finance Note 6.76%, due October 2, 2010
    
    
    6,986
    
    
    
    9,314Grant County, South Dakota Pollution Control Refunding Revenue Bonds 4.65%, due September 1, 2017
    
    
    5,185
    
    
    
    5,185Obligations of Varistar Corporation  Various up to 8.25% at December 31, 2007
    
    
    7,891
    
    
    
    8,424Total
    
    
    346,167
    
    
    
    259,058Less:Current Maturities
    
    
    3,004
    
    
    
    3,125Unamortized Debt Discount
    
    
    469
    
    
    
    497Total Long-Term Debt
    
    
    342,694
    
    
    
    255,436Class B Stock Options of Subsidiary
    
    
    1,255
    
    
    
    1,255Cumulative Preferred SharesWithout Par Value (Stated andLiquidating Value $100 a Share)Authorized 1,500,000 Shares;
nonvoting and redeemable at the option of the Company
 Series Outstanding:
    
    Call Price December 31, 2007$3.60, 60,000 Shares
    
    $
    102.25
    
    
    
    6,000
    
    
    
    6,000$4.40, 25,000 Shares
    
    $
    102.00
    
    
    
    2,500
    
    
    
    2,500$4.65, 30,000 Shares
    
    $
    101.50
    
    
    
    3,000
    
    
    
    3,000$6.75, 40,000 Shares
    
    $
    102.025
    
    
    
    4,000
    
    
    
    4,000Total Preferred
    
    
    
    
    
    
    15,500
    
    
    
    15,500
 Cumulative Preference SharesWithout Par Value, Authorized 1,000,000 Shares; Outstanding: NoneTotal Common Shareholders Equity
    
    
    522,647
    
    
    
    490,770Total Capitalization
    
    $
    882,096
    
    
    $
    762,961
 See accompanying notes to consolidated financial statements.




---



##### 



Principles of Consolidation  Accounting for the
Effects of Certain Types of Regulation
 Regulation and Statement of Financial Accounting Standards No. 71
  Plant, Retirements and Depreciation
  Jointly Owned Plants
 (in thousands)
    
    Big Stone
Plant
    
    
    Coyote
StationDecember 31, 2007Electric Plant in Service
    
    $
    136,493
    
    
    $
    147,724Accumulated Depreciation
    
    
    (72,342
    )
    
    
    (83,417
    )Net Plant
    
    $
    64,151
    
    
    $
    64,307December 31, 2006Electric Plant in Service
    
    $
    124,965
    
    
    $
    147,319Accumulated Depreciation
    
    
    (75,872
    )
    
    
    (80,336
    )Net Plant
    
    $
    49,093
    
    
    $
    66,983




---



##### 



Recoverability of Long-Lived Assets
 Income Taxes  Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109, Accounting for Income
Taxes
 Revenue Recognition  Accounting for Derivative Instruments and Hedging Activities,




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Costs Incurred on Uncompleted Contracts
    
    $
    286,358
    
    
    $
    257,370Less Billings to Date
    
    
    (292,692
    )
    
    
    (284,273
    )Plus Estimated Earnings Recognized
    
    
    38,275
    
    
    
    35,955$
    31,941
    
    
    $
    9,052
  December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts
    
    $
    42,234
    
    
    $
    38,384Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts
    
    
    (10,293
    )
    
    
    (29,332
    )$
    31,941
    
    
    $
    9,052
  Foreign Currency Translation
  Shipping and Handling Costs
 Use of Estimates




---



##### 



Cash Equivalents
 Supplemental Disclosures of Cash Flow Information
 (in thousands)
    
    2007
    
    2006
    
    2005Increases (Decreases) in Accounts Payable and Other
Liabilities Related to Capital Expenditures
    
    $
    23,514
    
    
    $
    1,401
    
    
    $
    Cash Paid During the Year from Continuing
Operations for:Interest (net of amount capitalized)
    
    $
    18,155
    
    
    $
    18,456
    
    
    $
    17,637Income Taxes
    
    $
    25,906
    
    
    $
    35,061
    
    
    $
    39,548Cash Paid During the Year from Discontinued
Operations for:Interest
    
    $
    
    
    
    $
    91
    
    
    $
    119Income Taxes
    
    $
    
    
    
    $
    423
    
    
    $
    323
 Investments
 December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Cost Method:Economic Development Loan Pools
    
    $
    655
    
    
    $
    569Other
    
    
    1,303
    
    
    
    1,518Equity Method:Affordable Housing Partnerships
    
    
    1,851
    
    
    
    2,228Marketable Securities Classified as Available-for-Sale
    
    
    6,248
    
    
    
    4,640Total Investments
    
    $
    10,057
    
    
    $
    8,955
 Consolidation of Variable Interest
Entities,
  Inventories
 December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Finished Goods
    
    $
    38,952
    
    
    $
    46,477Work in Process
    
    
    5,218
    
    
    
    5,663Raw Material, Fuel and Supplies
    
    
    53,044
    
    
    
    50,862Total Inventories
    
    $
    97,214
    
    
    $
    103,002
 Goodwill and Intangible Assets  Goodwill and Other Intangible Assets, Accounting for
the Impairment or Disposal of Long-Lived Assets




---



##### 



Balance
    
    
    Adjustment
    
    
    Goodwill
    
    
    BalanceDecember 31,
    
    
    to Goodwill
    
    
    Acquired in
    
    
    December 31,(in thousands)
    
    2006
    
    
    Acquired in 2004
    
    
    2007
    
    
    2007Plastics
    
    $
    19,302
    
    
    $
    
    
    
    $
    
    
    
    $
    19,302Manufacturing
    
    
    15,698
    
    
    
    
    
    
    
    1,048
    
    
    
    16,746Health Services
    
    
    24,328
    
    
    
    
    
    
    
    
    
    
    
    24,328Food Ingredient
Processing
    
    
    24,240
    
    
    
    84
    
    
    
    
    
    
    
    24,324Other Business
Operations
    
    
    14,542
    
    
    
    
    
    
    
    
    
    
    
    14,542Total
    
    $
    98,110
    
    
    $
    84
    
    
    $
    1,048
    
    
    $
    99,242
  Gross Carrying
    
    
    Accumulated
    
    
    Net Carrying2007 (in thousands)
    
    Amount
    
    
    Amortization
    
    
    AmountAmortized Intangible Assets:Covenants Not to Compete
    
    $
    2,637
    
    
    $
    2,113
    
    
    $
    524Customer Relationships
    
    
    10,879
    
    
    
    1,469
    
    
    
    9,410Other Intangible Assets
Including Contracts
    
    
    2,785
    
    
    
    1,775
    
    
    
    1,010Total
    
    $
    16,301
    
    
    $
    5,357
    
    
    $
    10,944Nonamortized Intangible Assets:Brand/Trade Name
    
    $
    9,512
    
    
    $
    
    
    
    $
    9,5122006 (in thousands)Amortized Intangible Assets:Covenants Not to Compete
    
    $
    2,198
    
    
    $
    1,813
    
    
    $
    385Customer Relationships
    
    
    10,574
    
    
    
    1,016
    
    
    
    9,558Other Intangible Assets
Including Contracts
    
    
    2,083
    
    
    
    1,291
    
    
    
    792Total
    
    $
    14,855
    
    
    $
    4,120
    
    
    $
    10,735Nonamortized Intangible Assets:Brand/Trade Name
    
    $
    9,345
    
    
    $
    
    
    
    $
    9,345
  New Accounting Standards  SFAS No. 123(R) (revised 2004), Share-Based Payment, Accounting for Stock-based Compensation, Accounting for Stock Issued to Employees.
 
    
    $163,000, net-of-tax, in 2006 for non-vested stock options that were outstanding on
December 31, 2005.
    
    $235,000 in 2006 for the 15% discount offered under the Companys Employee Stock
Purchase Plan.
  Transition Election
Related to Accounting for Tax Effects of Share-Based Payment Awards.




---



##### 



FIN No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No.
109, Accounting for Income Taxes
 SFAS No. 157, Fair Value Measurements,
 SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, Accounting for the Effects of Certain Types of
Regulation
 (in thousands)
    
    2006Decrease in Executive Survivor and Supplemental Retirement Plan
Intangible Asset
    
    $
    (767
    )Increase in Regulatory Assets (for the unrecognized portions of
net actuarial losses, prior service costs and transition
obligations that are subject to recovery through electric rates)
    
    
    36,736Increase in Pension Benefit and Other Postretirement Liability
    
    
    (34,714
    )Increase in Deferred Tax Liability
    
    
    (502
    )Decrease in Accumulated Other Comprehensive Loss (for the
unrecognized portions of net actuarial losses, prior service
costs and transition obligations that are not subject to recovery
through electric rates) (increase to equity)
    
    
    (753
    )
  SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115,
 SFAS No. 141 (revised 2007), Businesses Combinations (SFAS No. 141(R)), Business Combinations,




---



##### 



Pro(in thousands)
    
    Aviva
    
    
    EngineeringAssetsCurrent Assets
    
    $
    2,083
    
    
    $
    1,956Goodwill
    
    
    
    
    
    
    1,048Other Intangible Assets
    
    
    870
    
    
    
    396Plant
    
    
    
    
    
    
    1,600Total Assets
    
    $
    2,953
    
    
    $
    5,000LiabilitiesCurrent Liabilities
    
    $
    988
    
    
    $
    215Noncurrent Liabilities
    
    
    
    
    
    
    Total Liabilities
    
    $
    988
    
    
    $
    215Cash Paid
    
    $
    1,965
    
    
    $
    4,785




---



##### 



Segment Information
           2007
    
    
    2006
    
    
    2005United States of America
    
    
    96.9
    %
    
    
    97.2
    %
    
    
    97.8
    %Canada
    
    
    1.3
    %
    
    
    1.3
    %
    
    
    1.1
    %All Other Countries
    
    
    1.8
    %
    
    
    1.5
    %
    
    
    1.1
    %




---



##### 



(in thousands)
    
    2007
    
    
    2006
    
    
    2005Operating RevenueElectric
    
    $
    323,478
    
    
    $
    306,014
    
    
    $
    312,985Plastics
    
    
    149,012
    
    
    
    163,135
    
    
    
    158,548Manufacturing
    
    
    381,599
    
    
    
    311,811
    
    
    
    244,311Health Services
    
    
    130,670
    
    
    
    135,051
    
    
    
    123,991Food Ingredient Processing
    
    
    70,440
    
    
    
    45,084
    
    
    
    38,501Other Business Operations
    
    
    185,730
    
    
    
    145,603
    
    
    
    105,821Corporate Revenue and Intersegment Eliminations
    
    
    (2,042
    )
    
    
    (1,744
    )
    
    
    (2,288
    )Total
    
    $
    1,238,887
    
    
    $
    1,104,954
    
    
    $
    981,869Depreciation and AmortizationElectric
    
    $
    26,097
    
    
    $
    25,756
    
    
    $
    24,397Plastics
    
    
    3,083
    
    
    
    2,815
    
    
    
    2,511Manufacturing
    
    
    13,124
    
    
    
    11,076
    
    
    
    9,447Health Services
    
    
    3,937
    
    
    
    3,660
    
    
    
    4,038Food Ingredient Processing
    
    
    3,952
    
    
    
    3,759
    
    
    
    3,399Other Business Operations
    
    
    2,058
    
    
    
    2,330
    
    
    
    2,225Corporate
    
    
    579
    
    
    
    587
    
    
    
    441Total
    
    $
    52,830
    
    
    $
    49,983
    
    
    $
    46,458Interest ChargesElectric
    
    $
    9,405
    
    
    $
    10,315
    
    
    $
    10,271Plastics
    
    
    970
    
    
    
    814
    
    
    
    1,080Manufacturing
    
    
    8,546
    
    
    
    6,550
    
    
    
    4,516Health Services
    
    
    883
    
    
    
    910
    
    
    
    822Food Ingredient Processing
    
    
    177
    
    
    
    481
    
    
    
    165Other Business Operations
    
    
    1,234
    
    
    
    988
    
    
    
    686Corporate and Intersegment Eliminations
    
    
    (358
    )
    
    
    (557
    )
    
    
    919Total
    
    $
    20,857
    
    
    $
    19,501
    
    
    $
    18,459Income Before Income TaxesElectric
    
    $
    37,422
    
    
    $
    38,802
    
    
    $
    55,984Plastics
    
    
    13,452
    
    
    
    22,959
    
    
    
    22,803Manufacturing
    
    
    24,503
    
    
    
    21,148
    
    
    
    12,242Health Services
    
    
    2,626
    
    
    
    3,909
    
    
    
    6,875Food Ingredient Processing
    
    
    5,912
    
    
    
    (6,325
    )
    
    
    1,482Other Business Operations
    
    
    6,762
    
    
    
    8,666
    
    
    
    (827
    )Corporate
    
    
    (8,748
    )
    
    
    (11,303
    )
    
    
    (16,650
    )Total
    
    $
    81,929
    
    
    $
    77,856
    
    
    $
    81,909Earnings Available for Common SharesElectric
    
    $
    23,762
    
    
    $
    23,445
    
    
    $
    36,566Plastics
    
    
    8,314
    
    
    
    14,326
    
    
    
    13,936Manufacturing
    
    
    15,632
    
    
    
    13,171
    
    
    
    7,589Health Services
    
    
    1,427
    
    
    
    2,230
    
    
    
    4,007Food Ingredient Processing
    
    
    4,386
    
    
    
    (4,115
    )
    
    
    329Other Business Operations
    
    
    4,049
    
    
    
    5,257
    
    
    
    (488
    )Corporate
    
    
    (4,345
    )
    
    
    (4,300
    )
    
    
    (8,772
    )Total
    
    $
    53,225
    
    
    $
    50,014
    
    
    $
    53,167Capital ExpendituresElectric
    
    $
    104,288
    
    
    $
    35,207
    
    
    $
    30,479Plastics
    
    
    3,305
    
    
    
    5,504
    
    
    
    3,636Manufacturing
    
    
    42,786
    
    
    
    20,048
    
    
    
    16,112Health Services
    
    
    5,276
    
    
    
    4,720
    
    
    
    3,095Food Ingredient Processing
    
    
    47
    
    
    
    1,762
    
    
    
    2,952Other Business Operations
    
    
    5,589
    
    
    
    1,779
    
    
    
    3,086Corporate
    
    
    694
    
    
    
    428
    
    
    
    609Total
    
    $
    161,985
    
    
    $
    69,448
    
    
    $
    59,969Identifiable AssetsElectric
    
    $
    813,565
    
    
    $
    689,653
    
    
    $
    654,175Plastics
    
    
    77,971
    
    
    
    80,666
    
    
    
    76,573Manufacturing
    
    
    274,780
    
    
    
    219,336
    
    
    
    177,969Health Services
    
    
    64,824
    
    
    
    66,126
    
    
    
    67,066Food Ingredient Processing
    
    
    91,966
    
    
    
    94,462
    
    
    
    96,023Other Business Operations
    
    
    72,258
    
    
    
    67,110
    
    
    
    55,341Corporate
    
    
    59,390
    
    
    
    41,008
    
    
    
    40,648Discontinued Operations
    
    
    
    
    
    
    289
    
    
    
    13,701Total
    
    $
    1,454,754
    
    
    $
    1,258,650
    
    
    $
    1,181,496




---



##### 



Minnesota  General Rate Case
 Capacity Expansion 2020 (CapX 2020) Mega Certificate of Need
 Renewable Energy Standards, Conservation and Renewable Resource Riders
   Recovery of MISO Costs




---



##### 



Minnesota Annual Automatic Adjustment Report on Energy Costs (AAA Report)
 Claims of Improper Regulatory Filings




---



##### 



North Dakota
 Federal  Revenue Sufficiency Guarantee (RSG) Charges




---



##### 



Transmission Practices Audit
 Big Stone II Project




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Regulatory Assets:Unrecognized Transition Obligation, Prior Service Costs
and Actuarial Losses on Pension and Other Postretirement
Benefits
    
    $
    26,933
    
    
    $
    36,736Accrued Cost-of-Energy Revenue
    
    
    19,452
    
    
    
    10,735Deferred Income Taxes
    
    
    8,733
    
    
    
    11,712Reacquisition Premiums
    
    
    3,745
    
    
    
    2,694MISO Schedule 16 and 17 Deferred Administrative Costs  MN
    
    
    855
    
    
    
    541Deferred Marked-to-Market Losses
    
    
    771
    
    
    
    MISO Schedule 16 and 17 Deferred Administrative Costs  ND
    
    
    576
    
    
    
    Deferred Conservation Program Costs
    
    
    518
    
    
    
    1,036Accumulated ARO Accretion/Depreciation Adjustment
    
    
    345
    
    
    
    249Plant Acquisition Costs
    
    
    107
    
    
    
    151Total Regulatory Assets
    
    $
    62,035
    
    
    $
    63,854Regulatory Liabilities:Accumulated Reserve for Estimated Removal Costs
    
    $
    57,787
    
    
    $
    58,496Deferred Income Taxes
    
    
    4,502
    
    
    
    5,228Deferred Marked-to-Market Gains
    
    
    271
    
    
    
    Gain on Sale of Division Office Building
    
    
    145
    
    
    
    151Total Regulatory Liabilities
    
    $
    62,705
    
    
    $
    63,875Net Regulatory Liability Position
    
    $
    670
    
    
    $
    21
 Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, Accounting for Income Taxes




---



##### 



Electricity Contracts
  (in thousands)
    
    2007
    
    
    2006
    
    
    2005Wholesale Sales  CompanyOwned Generation
    
    $
    20,345
    
    
    $
    23,130
    
    
    $
    24,799Revenue from Settled Contracts at Market Prices
    
    
    389,643
    
    
    
    385,978
    
    
    
    474,882Market Cost of Settled Contracts
    
    
    (387,682
    )
    
    
    (383,594
    )
    
    
    (457,728
    )Net Margins on Settled Contracts at Market
    
    
    1,961
    
    
    
    2,384
    
    
    
    17,154Marked-to-Market Gains on Settled Contracts
    
    
    31,243
    
    
    
    20,950
    
    
    
    11,118Marked-to-Market Losses on Settled Contracts
    
    
    (28,541
    )
    
    
    (20,702
    )
    
    
    (9,590
    )Net Marked-to-Market Gain on Settled Contracts
    
    
    2,702
    
    
    
    248
    
    
    
    1,528Unrealized Marked-to-Market Gains on Open Contracts
    
    
    5,117
    
    
    
    2,215
    
    
    
    5,678Unrealized Marked-to-Market Losses on Open Contracts
    
    
    (4,485
    )
    
    
    (2,012
    )
    
    
    (2,762
    )Net Unrealized Marked-to-Market Gain on Open Contracts
    
    
    632
    
    
    
    203
    
    
    
    2,916Wholesale Electric Revenue
    
    $
    25,640
    
    
    $
    25,965
    
    
    $
    46,397
  December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Current Asset  Marked-to-Market Gain
    
    $
    5,210
    
    
    $
    2,215Regulatory Asset  Deferred Marked-to-Market Loss
    
    
    771
    
    
    
    Total Assets
    
    
    5,981
    
    
    
    2,215Current Liability  Marked-to-Market Loss
    
    
    (5,078
    )
    
    
    (2,012
    )Regulatory Liability  Deferred Marked-to-Market Gain
    
    
    (271
    )
    
    
    Total Liabilities
    
    
    (5,349
    )
    
    
    (2,012
    )Net Fair Value of Marked-to-Market Energy Contracts
    
    $
    632
    
    
    $
    203
 Year ended(in thousands)
    
    December 31, 2007Fair Value at Beginning of Year
    
    $
    203Amount Realized on Contracts Entered into in 2006 and Settled in
2007
    
    
    (203
    )Changes in Fair Value of Contracts Entered into in 2006
    
    
    Net Fair Value of Contracts Entered into in 2006 at Year End 2007
    
    
    Changes in Fair Value of Contracts Entered into in 2007
    
    
    632Net Fair Value at End of Year
    
    $
    632




---



##### 



1st Quarter
    
    4th Quarter(in thousands)
    
    2008
    
    2008
    
    TotalNet Gain
    
    $
    118
    
    
    $
    514
    
    
    $
    632
  Natural Gas Contracts
    Common Shares Outstanding, December 31, 2006
    
    
    29,521,770Issuances:Stock Options Exercised
    
    
    298,601Directors Compensation:Restricted Shares
    
    
    15,200Unrestricted Shares
    
    
    885Vesting of Restricted Stock Units
    
    
    4,522Restricted Shares Issued for Employee Compensation
    
    
    17,300Retirements:Shares Withheld for Individual Income Tax Requirements
    
    
    (8,409
    )Restricted Shares Forfeited
    
    
    (80
    )Common Shares Outstanding, December 31, 2007
    
    
    29,849,789
 Stock Incentive Plan
 Employee Stock Purchase Plan




---



##### 



Dividend Reinvestment and Share Purchase Plan
 Shareholder Rights Plan
 Earnings Per Share
  Year
    
    Options Outstanding
    
    Range of Exercise Prices2007
    
    
    
    
    
    NA2006
    
    
    210,250
    
    
    $
    29.74 - $31.342005
    
    
    237,624
    
    
    $
    28.66 - $31.34
 Share-Based Payments
 Share-Based Payment, Accounting for Stock-based Compensation, Accounting for
Stock Issued to Employees.




---



##### 



Purchase Plan
 Stock Options Granted Under the Incentive Plan
   (in thousands, except per share amounts)
    
    2005Net IncomeAs Reported
    
    $
    62,551Total Stock-Based Employee Compensation Expense Determined
Under Fair Value-Based Method for All Awards Net of Related
Tax Effects
    
    
    (640
    )Pro Forma
    
    $
    61,911Basic Earnings Per Share
As Reported
    
    $
    2.12Pro Forma
    
    $
    2.09Diluted Earnings Per Share
As Reported
    
    $
    2.11Pro Forma
    
    $
    2.08
  2007
    
    2006
    
    2005Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseStock Option Activity
    
    Options
    
    Price
    
    Options
    
    Price
    
    Options
    
    PriceOutstanding, Beginning of Year
    
    
    1,091,238
    
    
    $
    25.74
    
    
    
    1,237,164
    
    
    $
    25.58
    
    
    
    1,508,277
    
    
    $
    25.35Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,900
    
    
    
    24.93Exercised
    
    
    298,601
    
    
    
    25.73
    
    
    
    107,458
    
    
    
    22.88
    
    
    
    257,948
    
    
    
    22.90Forfeited
    
    
    5,500
    
    
    
    28.85
    
    
    
    38,468
    
    
    
    28.60
    
    
    
    88,065
    
    
    
    28.79Outstanding, End of Year
    
    
    787,137
    
    
    
    25.73
    
    
    
    1,091,238
    
    
    
    25.74
    
    
    
    1,237,164
    
    
    
    25.58Exercisable, End of Year
    
    
    787,137
    
    
    
    25.73
    
    
    
    1,049,713
    
    
    
    25.69
    
    
    
    1,095,272
    
    
    
    25.16Cash Received for Options Exercised
    
    $
    7,682,000
    
    
    
    
    
    
    $
    2,458,000
    
    
    
    
    
    
    $
    5,911,000Fair Value of Options Granted During Year
    
    none granted
    
    
    
    
    
    none granted
    
    
    
    
    
    $
    4.76




---



##### 



2005Risk-Free Interest Rate
    
    
    4.3
    %Expected Lives
    
    7 yearsExpected Volatility
    
    
    25.4
    %Dividend Yield
    
    
    4.4
    %
  Options Outstanding and ExercisableOutstanding
    
    
    Weighted-and
    
    
    Average
    
    
    Weighted-Exercisable
    
    
    Remaining
    
    
    AverageRange of
    
    as of
    
    
    Contractual
    
    
    ExerciseExercise Prices
    
    12/31/07
    
    
    Life (yrs)
    
    
    price$18.80-$21.94
    
    
    175,210
    
    
    
    2.0
    
    
    $
    19.62$21.95-$25.07
    
    
    40,100
    
    
    
    7.3
    
    
    $
    24.93$25.08-$28.21
    
    
    429,927
    
    
    
    4.0
    
    
    $
    26.50$28.22-$31.34
    
    
    141,900
    
    
    
    4.2
    
    
    $
    31.17
 Restricted Stock Granted to Directors
  Directors' Restricted Stock Awards
    
    2007
    
    
    2006
    
    
    2005WeightedWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Grant-Grant-Date
    
    
    
    
    
    
    Grant-Date
    
    
    
    
    
    
    Date FairShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair Value
    
    
    Shares
    
    
    ValueNonvested, Beginning of Year
    
    
    32,775
    
    
    $
    27.27
    
    
    
    27,000
    
    
    $
    26.32
    
    
    
    22,600
    
    
    $
    27.61Granted
    
    
    15,200
    
    
    $
    35.04
    
    
    
    19,800
    
    
    $
    28.24
    
    
    
    11,700
    
    
    $
    24.93Vested
    
    
    13,875
    
    
    $
    27.10
    
    
    
    14,025
    
    
    $
    26.82
    
    
    
    7,300
    
    
    $
    28.09Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested, End of Year
    
    
    34,100
    
    
    $
    30.80
    
    
    
    32,775
    
    
    $
    27.27
    
    
    
    27,000
    
    
    $
    26.32Compensation Expense Recognized
    
    
    
    
    
    $
    454,000
    
    
    
    
    
    
    $
    401,000
    
    
    
    
    
    
    $
    261,000Fair Value of Shares Vested in Year
    
    
    
    
    
    $
    376,000
    
    
    
    
    
    
    $
    376,000
    
    
    
    
    
    
    $
    205,000
 Restricted Stock Granted to Employees




---



##### 



Employees' Restricted Stock Awards
    
    2007
    
    
    2006
    
    
    2005Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueNonvested, Beginning of Year
    
    
    31,666
    
    
    $
    31.47
    
    
    
    72,974
    
    
    $
    28.91
    
    
    
    103,340
    
    
    $
    25.31Granted
    
    
    17,300
    
    
    $
    35.82
    
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    $
    26.31Variable/Liability Awards Vested
    
    
    24,608
    
    
    $
    35.09
    
    
    
    41,308
    
    
    $
    28.98
    
    
    
    39,126
    
    
    $
    25.08Nonvariable Awards Vested
    
    
    300
    
    
    $
    35.30
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    $
    26.68Nonvested, End of Year
    
    
    24,058
    
    
    $
    35.46
    
    
    
    31,666
    
    
    $
    31.47
    
    
    
    72,974
    
    
    $
    28.91Compensation Expense Recognized
    
    
    
    
    
    $
    549,000
    
    
    
    
    
    
    $
    815,000
    
    
    
    
    
    
    $
    1,118,000Fair Value of Variable Awards
Vested/Liability Paid
    
    
    
    
    
    $
    863,000
    
    
    
    
    
    
    $
    1,197,000
    
    
    
    
    
    
    $
    981,000Fair Value of Nonvariable Awards Vested
    
    
    
    
    
    $
    11,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Restricted Stock Units Granted to Employees
  2007
    
    
    2006Weighted
    
    
    
    
    
    
    WeightedRestricted
    
    
    Average
    
    
    Restricted
    
    
    AverageStock
    
    
    Grant-Date
    
    
    Stock
    
    
    Grant-DateUnits
    
    
    Fair Value
    
    
    Units
    
    
    Fair ValueNonvested, Beginning of Year
    
    
    38,615
    
    
    $
    24.65
    
    
    
    
    
    
    $
    Granted
    
    
    23,450
    
    
    $
    30.07
    
    
    
    47,425
    
    
    $
    25.41Converted
    
    
    4,850
    
    
    $
    26.95
    
    
    
    7,450
    
    
    $
    29.55Forfeited
    
    
    1,735
    
    
    $
    27.03
    
    
    
    1,360
    
    
    $
    24.36Nonvested, End of Year
    
    
    55,480
    
    
    $
    26.66
    
    
    
    38,615
    
    
    $
    24.65Compensation Expense Recognized
    
    
    
    
    
    $
    383,000
    
    
    
    
    
    
    $
    427,000Fair Value of Units Converted in Year
    
    
    
    
    
    $
    131,000
    
    
    
    
    
    
    $
    220,000




---



##### 



Stock Performance Awards granted to Executive Officers
   Maximum
    
    
    SharesShares
    
    
    Used To
    
    
    
    
    
    
    Expense RecognizedPerformance
    
    Subject
    
    
    Estimate
    
    
    Fair
    
    
    in the Year Ended
    
    
    SharesPeriod
    
    To Award
    
    
    Expense
    
    
    Value
    
    
    December 31,
    
    
    Awarded2007
    
    
    2006
    
    
    20052007-2009
    
    
    109,000
    
    
    
    67,263
    
    
    $
    38.01
    
    
    $
    852,000
    
    
    $
    
    
    
    $
    2006-2008
    
    
    88,050
    
    
    
    58,700
    
    
    $
    25.95
    
    
    
    508,000
    
    
    
    508,000
    
    
    
    2005-2007
    
    
    75,150
    
    
    
    50,872
    
    
    $
    22.10
    
    
    
    375,000
    
    
    
    375,000
    
    
    
    490,000
    
    
    
    62,6252004-2006
    
    
    70,500
    
    
    
    23,500
    
    
    $
    23.90
    
    
    
    
    
    
    
    187,000
    
    
    
    453,000
    
    
    
    23,500Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,735,000
    
    
    $
    1,070,000
    
    
    $
    943,000
    
    
    
    86,125




---



##### 



(in thousands)
    
    Electric
    
    
    Nonelectric
    
    
    Total2008
    
    $
    2,560
    
    
    $
    40,722
    
    
    $
    43,2822009
    
    
    2,560
    
    
    
    37,504
    
    
    
    40,0642010
    
    
    2,203
    
    
    
    26,812
    
    
    
    29,0152011
    
    
    1,446
    
    
    
    14,008
    
    
    
    15,4542012
    
    
    951
    
    
    
    2,669
    
    
    
    3,620Later years
    
    
    3,206
    
    
    
    3,603
    
    
    
    6,809Total
    
    $
    12,926
    
    
    $
    125,318
    
    
    $
    138,244
    Short-Term Debt




---



##### 



Long-Term Debt




---



##### 



Financial Covenants
  Class B Stock Options of Subsidiary
   Accounting for Defined Benefit
Pension and Other Postretirement Plans, Accounting for
the Effects of Certain Types of Regulation
  January 1, 2005 through
    
    July 1, 2005 throughKey Assumptions and Data
    
    June 30, 2005
    
    December 31, 2005Discount Rate
    
    
    6.00
    %
    
    
    5.25
    %Long-Term Rate of Return on Plan Assets
    
    
    8.50
    %
    
    
    8.50
    %Social Security Wage Base
    
    
    4.00
    %
    
    
    3.50
    %Rate of Inflation
    
    
    3.00
    %
    
    
    2.50
    %Rate of Withdrawal
    
    1% per year through age 54
    
    2% per year through age 54Mortality Table
    
    GAM 83
    
    RP-2000 projected to 2006Market Value of Assets  Beginning of Period
    
    $
    141,685,000
    
    
    $
    142,547,832




---



##### 



Pension Plan
    (in thousands)
    
    2007
    
    
    2006
    
    
    2005Service CostBenefit Earned During the Period
    
    $
    4,837
    
    
    $
    5,057
    
    
    $
    4,695Interest Cost on Projected Benefit Obligation
    
    
    10,790
    
    
    
    10,435
    
    
    
    9,721Expected Return on Assets
    
    
    (12,948
    )
    
    
    (12,288
    )
    
    
    (12,071
    )Amortization of Prior-Service Cost
    
    
    742
    
    
    
    742
    
    
    
    726Amortization of Net Actuarial Loss
    
    
    1,091
    
    
    
    1,844
    
    
    
    1,364Net Periodic Pension Cost
    
    $
    4,512
    
    
    $
    5,790
    
    
    $
    4,435
  (in thousands)
    
    2007
    
    
    2006Regulatory Assets:Unrecognized Prior Service Cost
    
    $
    (4,018
    )
    
    $
    (4,748
    )Unrecognized Actuarial Loss
    
    
    (17,115
    )
    
    
    (21,771
    )Total Regulatory Assets
    
    
    (21,133
    )
    
    
    (26,519
    )Accumulated Other Comprehensive Loss:Unrecognized Prior Service Cost
    
    
    (120
    )
    
    
    (132
    )Unrecognized Actuarial Loss
    
    
    (511
    )
    
    
    (606
    )Total Accumulated Other Comprehensive Loss
    
    
    (631
    )
    
    
    (738
    )Prepaid Pension Cost
    
    
    7,493
    
    
    
    8,005Net Amount Recognized  Noncurrent Liability
    
    $
    (14,271
    )
    
    $
    (19,252
    )
  (in thousands)
    
    2007
    
    
    2006Accumulated Benefit Obligation
    
    $
    (154,373
    )
    
    $
    (153,816
    )Projected Benefit Obligation
    
    $
    (185,206
    )
    
    $
    (186,760
    )Fair Value of Plan Assets
    
    
    170,935
    
    
    
    167,508Funded Status
    
    $
    (14,271
    )
    
    $
    (19,252
    )




---



##### 



(in thousands)
    
    2007
    
    
    2006Reconciliation of Fair Value of Plan Assets:Fair Value of Plan Assets at January 1
    
    $
    167,508
    
    
    $
    146,982Actual Return on Plan Assets
    
    
    8,013
    
    
    
    24,856Discretionary Company Contributions
    
    
    4,000
    
    
    
    4,000Benefit Payments
    
    
    (8,586
    )
    
    
    (8,330
    )Fair Value of Plan Assets at December 31
    
    $
    170,935
    
    
    $
    167,508Estimated Asset Return
    
    
    4.85
    %
    
    
    17.24
    %Reconciliation of Projected Benefit Obligation:Projected Benefit Obligation at January 1
    
    $
    186,760
    
    
    $
    181,587Service Cost
    
    
    4,837
    
    
    
    5,057Interest Cost
    
    
    10,790
    
    
    
    10,435Benefit Payments
    
    
    (8,586
    )
    
    
    (8,330
    )Actuarial Gain
    
    
    (8,595
    )
    
    
    (1,989
    )Projected Benefit Obligation at December 31
    
    $
    185,206
    
    
    $
    186,760Reconciliation of Prepaid Pension Cost:Prepaid Pension Cost at January 1
    
    $
    8,005
    
    
    $
    9,795Net Periodic Pension Cost
    
    
    (4,512
    )
    
    
    (5,790
    )Discretionary Company Contributions
    
    
    4,000
    
    
    
    4,000Prepaid Pension Cost at December 31
    
    $
    7,493
    
    
    $
    8,005
  2007
    
    
    2006Discount Rate
    
    
    6.25
    %
    
    
    6.00
    %Rate of Increase in Future Compensation Level
    
    
    3.75
    %
    
    
    3.75
    %
  2007
    
    
    2006Discount Rate
    
    
    6.00
    %
    
    
    5.75
    %Long-Term Rate of Return on Plan Assets
    
    
    8.50
    %
    
    
    8.50
    %Rate of Increase in Future Compensation Level
    
    
    3.75
    %
    
    
    3.75
    %
  Market-related value of plan assets
   Measurement Dates:
    
    2007
    
    2006Net Periodic Pension Cost
    
    January 1, 2007
    
    January 1, 2006End of Year Benefit Obligations
    
    January 1, 2007 projected to
December 31, 2007
    
    January 1, 2006 projected to
December 31, 2006Market Value of Assets
    
    December 31, 2007
    
    December 31, 2006




---



##### 



(in thousands)
    
    2008Decrease in Regulatory Assets:Amortization of Unrecognized Prior Service Cost
    
    $
    720Amortization of Unrecognized Actuarial Loss
    
    
    103Decrease in Accumulated Other Comprehensive Loss:Amortization of Unrecognized Prior Service Cost
    
    
    22Amortization of Unrecognized Actuarial Loss
    
    
    3Total Estimated Amortization
    
    $
    848
 Cash flows
  Years(in thousands)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013-2017$
    8,917
    
    
    $
    9,073
    
    
    $
    9,234
    
    
    $
    9,641
    
    
    $
    10,103
    
    
    $
    59,365
  Asset Allocation
    
    2007
    
    2006Large Capitalization Equity Securities
    
    
    47.1
    %
    
    
    49.3
    %Small Capitalization Equity Securities
    
    
    10.7
    %
    
    
    11.6
    %International Equity Securities
    
    
    10.4
    %
    
    
    10.6
    %Total Equity Securities
    
    
    68.2
    %
    
    
    71.5
    %Cash and Fixed-Income Securities
    
    
    31.8
    %
    
    
    28.5
    %100.0
    %
    
    
    100.0
    %
  
    
    The Plan is managed to operate in perpetuity.
    
    The Plan will meet the pension benefit obligation payments of the Company.
    
    The Plans assets should be invested with the objective of meeting current and future
payment requirements while minimizing annual contributions and their volatility.
    
    The asset strategy reflects the desire to meet current and future benefit payments
while considering a prudent level of risk and diversification.
    Asset Allocation
    
    Strategic Target
    
    Tactical RangeLarge capitalization equity securities
    
    
    48
    %
    
    
    40%-55
    %Small capitalization equity securities
    
    
    12
    %
    
    
    9%-15
    %International equity securities
    
    
    10
    %
    
    
    5%-15
    %Total equity securities
    
    
    70
    %
    
    
    60%-80
    %Fixed-income securities
    
    
    30
    %
    
    
    20%-40
    %




---



##### 



Executive Survivor and Supplemental Retirement Plan (ESSRP)
     (in thousands)
    
    2007
    
    
    2006
    
    
    2005Service CostBenefit Earned During the Period
    
    $
    626
    
    
    $
    426
    
    
    $
    406Interest Cost on Projected Benefit Obligation
    
    
    1,451
    
    
    
    1,303
    
    
    
    1,267Amortization of Prior-Service Cost
    
    
    67
    
    
    
    71
    
    
    
    71Amortization of Net Actuarial Loss
    
    
    540
    
    
    
    473
    
    
    
    498Net Periodic Pension Cost
    
    $
    2,684
    
    
    $
    2,273
    
    
    $
    2,242
  (in thousands)
    
    2007
    
    
    2006Regulatory Assets:Unrecognized Prior Service Cost
    
    $
    435
    
    
    $
    496Unrecognized Actuarial Loss
    
    
    4,841
    
    
    
    5,796Total Regulatory Assets
    
    
    5,276
    
    
    
    6,292Projected Benefit Obligation Liability  Net Amount Recognized
    
    
    (25,158
    )
    
    
    (24,783
    )Accumulated Other Comprehensive Loss:Unrecognized Prior Service Cost
    
    
    266
    
    
    
    271Unrecognized Actuarial Loss
    
    
    2,954
    
    
    
    3,162Total Accumulated Other Comprehensive Loss
    
    
    3,220
    
    
    
    3,433Cumulative Employer Contributions in Excess of Net Periodic
Benefit Cost
    
    $
    (16,662
    )
    
    $
    (15,058
    )




---



##### 



(in thousands)
    
    2007
    
    
    2006Reconciliation of Fair Value of Plan Assets:Fair Value of Plan Assets at January 1
    
    $
    
    
    
    $
    Actual Return on Plan Assets
    
    
    
    
    
    
    Employer Contributions
    
    
    1,079
    
    
    
    1,124Benefit Payments
    
    
    (1,079
    )
    
    
    (1,124
    )Fair Value of Plan Assets at December 31
    
    $
    
    
    
    $
    Reconciliation of Projected Benefit Obligation:Projected Benefit Obligation at January 1
    
    $
    24,783
    
    
    $
    23,271Service Cost
    
    
    626
    
    
    
    426Interest Cost
    
    
    1,451
    
    
    
    1,303Benefit Payments
    
    
    (1,079
    )
    
    
    (1,124
    )Plan Amendments
    
    
    
    
    
    
    (53
    )Actuarial (Gain) Loss
    
    
    (623
    )
    
    
    960Projected Benefit Obligation at December 31
    
    $
    25,158
    
    
    $
    24,783Reconciliation of Funded Status:Funded Status at December 31
    
    $
    (25,158
    )
    
    $
    (24,783
    )Unrecognized Net Actuarial Loss
    
    
    7,795
    
    
    
    8,958Unrecognized Prior Service Cost
    
    
    701
    
    
    
    767Cumulative Employer Contributions in Excess
of Net Periodic Benefit Cost
    
    $
    (16,662
    )
    
    $
    (15,058
    )
  2007
    
    2006Discount Rate
    
    
    6.25%
    
    
    
    6.00%Rate of Increase in Future Compensation Level
    
    
    4.70%
    
    
    
    4.71%
  2007
    
    2006Discount Rate
    
    
    6.00%
    
    
    
    5.75%Rate of Increase in Future Compensation Level
    
    
    4.71%
    
    
    
    4.69%
  (in thousands)
    
    2008Decrease in Regulatory Assets:Amortization of Unrecognized Prior Service Cost
    
    $
    42Amortization of Unrecognized Actuarial Loss
    
    
    298Decrease in Accumulated Other Comprehensive Loss:Amortization of Unrecognized Prior Service Cost
    
    
    25Amortization of Unrecognized Actuarial Loss
    
    
    182Total Estimated Amortization
    
    $
    547
 Cash flows
 Years(in thousands)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013-2017$
    1,109
    
    
    $
    1,114
    
    
    $
    1,113
    
    
    $
    1,206
    
    
    $
    1,258
    
    
    $
    6,755




---



##### 



Other Postretirement Benefits
 Employers Accounting for Postretirement Benefits Other
Than Pensions
  (in thousands)
    
    2007
    
    
    2006
    
    
    2005Service CostBenefit Earned During the Period
    
    $
    1,098
    
    
    $
    1,319
    
    
    $
    1,307Interest Cost on Projected Benefit Obligation
    
    
    2,565
    
    
    
    2,556
    
    
    
    2,480Amortization of Transition Obligation
    
    
    748
    
    
    
    748
    
    
    
    748Amortization of Prior-Service Cost
    
    
    (206
    )
    
    
    (305
    )
    
    
    (305
    )Amortization of Net Actuarial Loss
    
    
    177
    
    
    
    556
    
    
    
    742Expense Decrease Due to Medicare Part D Subsidy
    
    
    (1,233
    )
    
    
    (1,543
    )
    
    
    (1,251
    )Net Periodic Postretirement Benefit Cost
    
    $
    3,149
    
    
    $
    3,331
    
    
    $
    3,721
  (in thousands)
    
    2007
    
    
    2006Regulatory Asset:Unrecognized Transition Obligation
    
    $
    3,658
    
    
    $
    4,414Unrecognized Prior Service Cost
    
    
    1,781
    
    
    
    1,588Unrecognized Net Actuarial Gain
    
    
    (4,915
    )
    
    
    (2,077
    )Net Regulatory Asset
    
    
    524
    
    
    
    3,925Projected Benefit Obligation Liability  Net Amount Recognized
    
    
    (30,488
    )
    
    
    (32,254
    )Accumulated Other Comprehensive Loss:Unrecognized Transition Obligation
    
    
    83
    
    
    
    75Unrecognized Prior Service Cost
    
    
    40
    
    
    
    27Unrecognized Net Actuarial Gain
    
    
    (111
    )
    
    
    (35
    )Accumulated Other Comprehensive Loss
    
    
    12
    
    
    
    67Cumulative Employer Contributions in Excess of Net Periodic
Benefit Cost
    
    $
    (29,952
    )
    
    $
    (28,262
    )
  (in thousands)
    
    2007
    
    
    2006Reconciliation of Fair Value of Plan Assets:Fair Value of Plan Assets at January 1
    
    $
    
    
    
    $
    Actual Return on Plan Assets
    
    
    
    
    
    
    Company Contributions
    
    
    1,459
    
    
    
    2,051Benefit Payments (Net of Medicare Part D Subsidy)
    
    
    (3,127
    )
    
    
    (3,625
    )Participant Premium Payments
    
    
    1,668
    
    
    
    1,574Fair Value of Plan Assets at December 31
    
    $
    
    
    
    $
    Reconciliation of Projected Benefit Obligation:Projected Benefit Obligation at January 1
    
    $
    32,254
    
    
    $
    36,757Service Cost (Net of Medicare Part D Subsidy)
    
    
    890
    
    
    
    1,110Interest Cost (Net of Medicare Part D Subsidy)
    
    
    1,776
    
    
    
    1,779Benefit Payments (Net of Medicare Part D Subsidy)
    
    
    (3,127
    )
    
    
    (3,625
    )Participant Premium Payments
    
    
    1,668
    
    
    
    1,574Actuarial Gain
    
    
    (2,973
    )
    
    
    (5,341
    )Projected Benefit Obligation at December 31
    
    $
    30,488
    
    
    $
    32,254Reconciliation of Accrued Postretirement Cost:Accrued Postretirement Cost at January 1
    
    $
    (28,262
    )
    
    $
    (26,982
    )Expense
    
    
    (3,149
    )
    
    
    (3,331
    )Net Company Contribution
    
    
    1,459
    
    
    
    2,051Accrued Postretirement Cost at December 31
    
    $
    (29,952
    )
    
    $
    (28,262
    )




---



##### 



2007
    
    2006Discount Rate
    
    
    6.25
    %
    
    
    6.00
    %
  2007
    
    2006Discount Rate
    
    
    6.00
    %
    
    
    5.75
    %
  2007
    
    2006Healthcare Cost-Trend Rate Assumed for Next Year Pre-65
    
    
    8.00
    %
    
    
    9.00
    %Healthcare Cost-Trend Rate Assumed for Next Year Post-65
    
    
    9.00
    %
    
    
    10.00
    %Rate at Which the Cost-Trend Rate is Assumed to Decline
    
    
    5.00
    %
    
    
    5.00
    %Year the Rate Reaches the Ultimate Trend Rate
    
    
    2012
    
    
    
    2012
  (in thousands)
    
    1 point increase
    
    1 point decreaseEffect on the Postretirement Benefit Obligation
    
    $
    2,804
    
    
    $
    (2,423
    )Effect on Total of Service and Interest Cost
    
    $
    358
    
    
    $
    (293
    )Effect on Expense
    
    $
    418
    
    
    $
    (544
    )
 Measurement dates:
    
    2007
    
    2006Net Periodic Postretirement 
Benefit Cost
    
    January 1, 2007
    
    January 1, 2006End of Year Benefit Obligations
    
    January 1, 2007
projected to
December 31, 2007
    
    January 1, 2006
projected to
December 31, 2006
  (in thousands)
    
    2008Decrease in Regulatory Assets:Amortization of Transition Obligation
    
    $
    732Amortization of Unrecognized Prior Service Cost
    
    
    205Amortization of Unrecognized Actuarial Gain
    
    
    (200
    )Decrease in Accumulated Other Comprehensive Loss:Amortization of Transition Obligation
    
    
    16Amortization of Unrecognized Prior Service Cost
    
    
    5Amortization of Unrecognized Actuarial Gain
    
    
    (4
    )Total Estimated Amortization
    
    $
    754
 Cash flows
 Years(in thousands)
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013-2017$
    2,213
    
    
    $
    2,266
    
    
    $
    2,310
    
    
    $
    2,294
    
    
    $
    2,403
    
    
    $
    13,263
 Leveraged Employee Stock Ownership Plan




---



##### 



Cash and Short-Term Investments
 Other Investments
 Long-Term Debt
 December 31, 2007
    
    December 31, 2006Carrying
    
    Fair
    
    Carrying
    
    Fair(in thousands)
    
    Amount
    
    Value
    
    Amount
    
    ValueCash and Short-Term Investments
    
    $
    39,824
    
    
    $
    39,824
    
    
    $
    6,791
    
    
    $
    6,791Other Investments
    
    
    10,057
    
    
    
    10,057
    
    
    
    8,955
    
    
    
    8,955Long-Term Debt
    
    
    (342,694
    )
    
    
    (354,242
    )
    
    
    (255,436
    )
    
    
    (265,547
    )
  December 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Electric PlantProduction
    
    $
    439,541
    
    
    $
    360,304Transmission
    
    
    191,949
    
    
    
    189,683Distribution
    
    
    322,107
    
    
    
    307,825General
    
    
    75,320
    
    
    
    72,877Electric Plant
    
    
    1,028,917
    
    
    
    930,689Less Accumulated Depreciation and Amortization
    
    
    401,006
    
    
    
    388,254Electric Plant Net of Accumulated Depreciation
    
    
    627,911
    
    
    
    542,435Construction Work in Progress
    
    
    33,772
    
    
    
    18,503Net Electric Plant
    
    $
    661,683
    
    
    $
    560,938Nonelectric Operations PlantEquipment
    
    $
    181,743
    
    
    $
    168,917Buildings and Leasehold Improvements
    
    
    62,563
    
    
    
    58,733Land
    
    
    13,284
    
    
    
    11,619Nonelectric Operations Plant
    
    
    257,590
    
    
    
    239,269Less Accumulated Depreciation and Amortization
    
    
    105,738
    
    
    
    91,303Nonelectric Plant Net of Accumulated Depreciation
    
    
    151,852
    
    
    
    147,966Construction Work in Progress
    
    
    40,489
    
    
    
    9,705Net Nonelectric Operations Plant
    
    $
    192,341
    
    
    $
    157,671Net Plant
    
    $
    854,024
    
    
    $
    718,609
  Service Life Range(years)
    
    Low
    
    HighElectric Fixed Assets:Production Plant
    
    
    34
    
    
    
    62Transmission Plant
    
    
    40
    
    
    
    55Distribution Plant
    
    
    15
    
    
    
    55General Plant
    
    
    5
    
    
    
    65Nonelectric Fixed Assets:Equipment
    
    
    3
    
    
    
    12Buildings and Leasehold Improvements
    
    
    7
    
    
    
    40




---



##### 



(in thousands)
    
    2007
    
    
    2006
    
    
    2005Tax Computed at Federal Statutory Rate
    
    $
    28,675
    
    
    $
    27,232
    
    
    $
    28,325Increases (Decreases) in Tax from:State Income Taxes Net of Federal Income Tax Benefit
    
    
    2,913
    
    
    
    2,261
    
    
    
    1,906Investment Tax Credit Amortization
    
    
    (1,137
    )
    
    
    (1,146
    )
    
    
    (1,151
    )Differences Reversing in Excess of Federal Rates
    
    
    929
    
    
    
    1,271
    
    
    
    (15
    )Dividend Received/Paid Deduction
    
    
    (714
    )
    
    
    (718
    )
    
    
    (703
    )Affordable Housing Tax Credits
    
    
    (285
    )
    
    
    (839
    )
    
    
    (1,324
    )Section 199 Domestic Production Activities Deduction
    
    
    (1,159
    )
    
    
    (524
    )
    
    
    (451
    )Permanent and Other Differences
    
    
    (1,254
    )
    
    
    (431
    )
    
    
    1,420Total Income Tax Expense
    
    $
    27,968
    
    
    $
    27,106
    
    
    $
    28,007Income Tax ExpenseDiscontinued Operations
    
    $
    
    
    
    $
    252
    
    
    $
    5,570Overall Effective Federal and State Income Tax Rate
    
    
    34.1
    %
    
    
    34.9
    %
    
    
    34.9
    %Income Tax Expense Includes the Following:Current Federal Income Taxes
    
    $
    23,207
    
    
    $
    26,276
    
    
    $
    32,795Current State Income Taxes
    
    
    2,339
    
    
    
    4,232
    
    
    
    5,265Deferred Federal Income Taxes
    
    
    2,832
    
    
    
    (937
    )
    
    
    (7,112
    )Deferred State Income Taxes
    
    
    2,116
    
    
    
    (189
    )
    
    
    (899
    )Affordable Housing Tax Credits
    
    
    (285
    )
    
    
    (839
    )
    
    
    (1,324
    )Investment Tax Credit Amortization
    
    
    (1,137
    )
    
    
    (1,146
    )
    
    
    (1,151
    )Foreign Income Taxes
    
    
    (1,104
    )
    
    
    (291
    )
    
    
    433Total
    
    $
    27,968
    
    
    $
    27,106
    
    
    $
    28,007
  (in thousands)
    
    2007
    
    
    2006Deferred Tax AssetsBenefit Liabilities
    
    $
    30,789
    
    
    $
    29,418Cost of Removal
    
    
    22,537
    
    
    
    22,813Related to North Dakota Wind Tax Credits
    
    
    12,999
    
    
    
    SFAS No. 158 Liabilities
    
    
    10,504
    
    
    
    14,694Differences Related to Property
    
    
    8,703
    
    
    
    7,923Amortization of Tax Credits
    
    
    4,505
    
    
    
    5,231Vacation Accrual
    
    
    2,926
    
    
    
    2,751Unearned Revenue
    
    
    1,733
    
    
    
    2,013Other
    
    
    4,063
    
    
    
    3,382Total Deferred Tax Assets
    
    $
    98,759
    
    
    $
    88,225Deferred Tax LiabilitiesDifferences Related to Property
    
    $
    (166,445
    )
    
    $
    (160,635
    )SFAS No. 158 Regulatory Asset
    
    
    (10,504
    )
    
    
    (14,694
    )Transfer to Regulatory Asset
    
    
    (8,732
    )
    
    
    (11,712
    )Related to North Dakota Wind Tax Credits
    
    
    (4,340
    )
    
    
    Excess Tax over Book Pension
    
    
    (2,953
    )
    
    
    (3,153
    )Other
    
    
    (4,398
    )
    
    
    (2,702
    )Total Deferred Tax Liabilities
    
    $
    (197,372
    )
    
    $
    (192,896
    )Deferred Income Taxes
    
    $
    (98,613
    )
    
    $
    (104,671
    )




---



##### 



(in thousands)
    
    TotalBalance at January 1, 2007
    
    $
    1,874Increases Related to Current Year Tax Positions
    
    
    198Expiration of the Statute of Limitations for the Assessment of
Taxes
    
    
    (1,566
    )Balance at December 31, 2007
    
    $
    506
    Accounting for the Impairment or Disposal of Long-Lived Assets
  2006(in thousands)
    
    OTESCO GasOperating Revenues
    
    $
    28,234Income Before Income Taxes
    
    
    54Gain on Disposition  Pretax
    
    
    560Income Tax Expense
    
    
    252
 2005(in thousands)
    
    OTESCO Gas
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating Revenues
    
    $
    64,539
    
    
    $
    3,773
    
    
    $
    6,564
    
    
    $
    6,112
    
    
    $
    80,988Income (Loss) Before Income Taxes
    
    
    (84
    )
    
    
    2,167
    
    
    
    (1,740
    )
    
    
    (956
    )
    
    
    (613
    )Goodwill Impairment Loss
    
    
    (1,003
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,003
    )Gain (Loss) on Disposition  Pretax
    
    
    
    
    
    
    19,025
    
    
    
    (2,919
    )
    
    
    (271
    )
    
    
    15,835Income Tax (Benefit) Expense
    
    
    (40
    )
    
    
    7,975
    
    
    
    (1,863
    )
    
    
    (502
    )
    
    
    5,570




---



##### 



(in thousands)
    
    2007
    
    
    2006Asset Retirement ObligationsBeginning Balance
    
    $
    1,335
    
    
    $
    1,524New Obligations Recognized
    
    
    1,024
    
    
    
    Adjustments Due to Revisions in Cash Flow Estimates
    
    
    
    
    
    
    Accrued Accretion
    
    
    88
    
    
    
    85Settlements
    
    
    
    
    
    
    (274
    )Ending Balance
    
    $
    2,447
    
    
    $
    1,335Asset Retirement Costs CapitalizedBeginning Balance
    
    $
    285
    
    
    $
    349New Obligations Recognized
    
    
    1,024
    
    
    
    Adjustments Due to Revisions in Cash Flow Estimates
    
    
    
    
    
    
    Settlements
    
    
    
    
    
    
    (64
    )Ending Balance
    
    $
    1,309
    
    
    $
    285Accumulated Depreciation  Asset Retirement Costs CapitalizedBeginning Balance
    
    $
    178
    
    
    $
    234New Obligations Recognized
    
    
    
    
    
    
    Adjustments Due to Revisions in Cash Flow Estimates
    
    
    
    
    
    
    Accrued Depreciation
    
    
    7
    
    
    
    8Settlements
    
    
    
    
    
    
    (64
    )Ending Balance
    
    $
    185
    
    
    $
    178SettlementsOriginal Capitalized Asset Retirement Cost  Retired
    
    $
    
    
    
    $
    64Accumulated Depreciation
    
    
    
    
    
    
    (64
    )Asset Retirement Obligation
    
    $
    
    
    
    $
    274Settlement Cost
    
    
    
    
    
    
    (222
    )Gain on Settlement  Deferred Under Regulatory Accounting
    
    $
    
    
    
    $
    52




---



##### 



Three Months Ended
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Operating Revenues (a)
    
    $
    301,121
    
    
    $
    257,807
    
    
    $
    305,844
    
    
    $
    279,904
    
    
    $
    302,235
    
    
    $
    280,542
    
    
    $
    329,687
    
    
    $
    286,701Operating Income (a)
    
    
    20,774
    
    
    
    27,374
    
    
    
    30,271
    
    
    
    22,136
    
    
    
    25,547
    
    
    
    24,170
    
    
    
    24,182
    
    
    
    24,117Net Income:Continuing Operations
    
    
    10,408
    
    
    
    14,855
    
    
    
    16,103
    
    
    
    11,137
    
    
    
    13,332
    
    
    
    13,476
    
    
    
    14,118
    
    
    
    11,282Discontinued Operations
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,408
    
    
    
    14,960
    
    
    
    16,103
    
    
    
    11,394
    
    
    
    13,332
    
    
    
    13,476
    
    
    
    14,118
    
    
    
    11,282Earnings Available for Common Shares:Continuing Operations
    
    
    10,224
    
    
    
    14,671
    
    
    
    15,919
    
    
    
    10,953
    
    
    
    13,148
    
    
    
    13,293
    
    
    
    13,934
    
    
    
    11,097Discontinued Operations
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,224
    
    
    
    14,776
    
    
    
    15,919
    
    
    
    11,210
    
    
    
    13,148
    
    
    
    13,293
    
    
    
    13,934
    
    
    
    11,097Basic Earnings Per Share:Continuing Operations
    
    $
    .35
    
    
    $
    .50
    
    
    $
    .54
    
    
    $
    .37
    
    
    $
    .44
    
    
    $
    .45
    
    
    $
    .47
    
    
    $
    .38Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .35
    
    
    
    .50
    
    
    
    .54
    
    
    
    .38
    
    
    
    .44
    
    
    
    .45
    
    
    
    .47
    
    
    
    .38Diluted Earnings Per Share:Continuing Operations
    
    $
    .34
    
    
    $
    .50
    
    
    $
    .53
    
    
    $
    .37
    
    
    $
    .44
    
    
    $
    .45
    
    
    $
    .46
    
    
    $
    .37Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .01
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .34
    
    
    
    .50
    
    
    
    .53
    
    
    
    .38
    
    
    
    .44
    
    
    
    .45
    
    
    
    .46
    
    
    
    .37Dividends Paid Per Common Share
    
    
    .2925
    
    
    
    .2875
    
    
    
    .2925
    
    
    
    .2875
    
    
    
    .2925
    
    
    
    .2875
    
    
    
    .2925
    
    
    
    .2875Price Range:High
    
    $
    35.00
    
    
    $
    31.34
    
    
    $
    37.06
    
    
    $
    30.09
    
    
    $
    39.39
    
    
    $
    30.80
    
    
    $
    37.88
    
    
    $
    31.92Low
    
    
    31.06
    
    
    
    27.32
    
    
    
    30.22
    
    
    
    25.78
    
    
    
    28.96
    
    
    
    26.50
    
    
    
    32.82
    
    
    
    28.60Average Number of Common SharesOutstandingBasic
    
    
    29,503
    
    
    
    29,326
    
    
    
    29,686
    
    
    
    29,393
    
    
    
    29,746
    
    
    
    29,413
    
    
    
    29,790
    
    
    
    29,445Average Number of Common SharesOutstandingDiluted
    
    
    29,757
    
    
    
    29,676
    
    
    
    29,941
    
    
    
    29,766
    
    
    
    29,996
    
    
    
    29,806
    
    
    
    30,090
    
    
    
    29,731
 
 (a)
    
    From continuing operations.




---



##### 



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