##### 



Selected Consolidated Financial Data
 (thousands, except number of shareholders and per-share data)
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    1995RevenuesElectric
    
    $
    312,985
    
    
    $
    266,385
    
    
    $
    267,494
    
    
    $
    244,005
    
    
    $
    232,720
    
    
    $
    219,718
    
    
    $
    192,053Plastics
    
    
    158,548
    
    
    
    115,426
    
    
    
    86,009
    
    
    
    82,931
    
    
    
    63,216
    
    
    
    82,667
    
    
    
    4,569Manufacturing (1)
    
    
    244,311
    
    
    
    201,615
    
    
    
    157,401
    
    
    
    119,880
    
    
    
    96,571
    
    
    
    73,940
    
    
    
    34,121Health services
    
    
    123,991
    
    
    
    114,318
    
    
    
    100,912
    
    
    
    93,420
    
    
    
    79,129
    
    
    
    66,319
    
    
    
    50,896Food Ingredient Processing
    
    
    38,501
    
    
    
    14,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
business operations (1)
    
    
    171,939
    
    
    
    148,328
    
    
    
    114,726
    
    
    
    75,947
    
    
    
    72,191
    
    
    
    70,145
    
    
    
    28,984Intersegment eliminations
    
    
    (3,867
    )
    
    
    (2,733
    )
    
    
    (2,254
    )
    
    
    (1,036
    )
    
    
    
    
    
    
    
    
    
    
    Total operating revenues
    
    $
    1,046,408
    
    
    $
    857,362
    
    
    $
    724,288
    
    
    $
    615,147
    
    
    $
    543,827
    
    
    $
    512,789
    
    
    $
    310,623Income from continuing operations (1)
    
    
    52,855
    
    
    
    40,632
    
    
    
    38,225
    
    
    
    44,222
    
    
    
    40,055
    
    
    
    37,654
    
    
    
    28,305Income from discontinued operations (1)
    
    
    9,696
    
    
    
    1,563
    
    
    
    1,431
    
    
    
    1,906
    
    
    
    3,548
    
    
    
    3,388
    
    
    
    640Net income
    
    
    62,551
    
    
    
    42,195
    
    
    
    39,656
    
    
    
    46,128
    
    
    
    43,603
    
    
    
    41,042
    
    
    
    28,945Operating cash flow from continuing operations (1)
    
    
    90,358
    
    
    
    54,330
    
    
    
    76,314
    
    
    
    71,582
    
    
    
    71,025
    
    
    
    57,110
    
    
    
    56,404Operating cash flow  continuing and discontinued operations
    
    
    95,800
    
    
    
    56,301
    
    
    
    76,955
    
    
    
    76,797
    
    
    
    77,529
    
    
    
    61,761
    
    
    
    58,077Capital expenditures  continuing operations (1)
    
    
    59,969
    
    
    
    49,484
    
    
    
    48,783
    
    
    
    73,447
    
    
    
    50,727
    
    
    
    44,655
    
    
    
    36,343Total assets
    
    
    1,181,496
    
    
    
    1,134,148
    
    
    
    986,423
    
    
    
    914,112
    
    
    
    817,778
    
    
    
    772,562
    
    
    
    643,173Long-term debt (1)
    
    
    258,260
    
    
    
    261,805
    
    
    
    262,311
    
    
    
    254,015
    
    
    
    221,643
    
    
    
    188,031
    
    
    
    160,235Redeemable preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    18,000Basic earnings per share  continuing operations (1) (2)
    
    
    1.79
    
    
    
    1.53
    
    
    
    1.46
    
    
    
    1.73
    
    
    
    1.55
    
    
    
    1.46
    
    
    
    1.16Basic earnings per share  total (2)
    
    
    2.12
    
    
    
    1.59
    
    
    
    1.52
    
    
    
    1.80
    
    
    
    1.69
    
    
    
    1.59
    
    
    
    1.19Diluted earnings per share  continuing operations (1) (2)
    
    
    1.78
    
    
    
    1.52
    
    
    
    1.45
    
    
    
    1.71
    
    
    
    1.53
    
    
    
    1.45
    
    
    
    1.16Diluted earnings per share  total (2)
    
    
    2.11
    
    
    
    1.58
    
    
    
    1.51
    
    
    
    1.79
    
    
    
    1.68
    
    
    
    1.59
    
    
    
    1.19Return on average common equity
    
    
    13.9
    %
    
    
    12.0
    %
    
    
    12.2
    %
    
    
    15.3
    %
    
    
    15.5
    %
    
    
    15.4
    %
    
    
    14.8
    %Dividends per common share
    
    
    1.12
    
    
    
    1.10
    
    
    
    1.08
    
    
    
    1.06
    
    
    
    1.04
    
    
    
    1.02
    
    
    
    0.88Dividend payout ratio
    
    
    53
    %
    
    
    70
    %
    
    
    72
    %
    
    
    59
    %
    
    
    62
    %
    
    
    64
    %
    
    
    74
    %Common shares outstanding  year end
    
    
    29,401
    
    
    
    28,977
    
    
    
    25,724
    
    
    
    25,592
    
    
    
    24,653
    
    
    
    24,574
    
    
    
    22,360Number of common shareholders (3)
    
    
    14,801
    
    
    
    14,889
    
    
    
    14,723
    
    
    
    14,503
    
    
    
    14,358
    
    
    
    14,103
    
    
    
    13,933
 
 Notes:(1)

Prior years are restated to exclude the operations of
Midwest Information Systems, Inc., St George Steel Fabrication, Inc.
and Chassis Liner Corporation, which are classified as discontinued
operations. See note 15 to consolidated financial statements.(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 billion for the first time in our history.
    
    We reported record consolidated earnings and record earnings in our electric and plastics segments.
    
    We sold three of our operating companies for a net after-tax gain of $10.0 million.
    
    In June we jointly announced an agreement with six other regional utilities to build a
new 600-megawatt coal-fired electric generating plant (BSP II) on the site of the existing
Big Stone Plant if all necessary permits and approvals are granted on a timely basis.




---



##### 




    
    Planned capital budget expenditures of $477 million for the years 2006-2010, including
$247 million related to BSP II, if built.
    
    The continued investigation and evaluation of strategic acquisition opportunities.
    
    Pursuing the regulatory approvals, financing and other arrangements necessary to build BSP II.
  (in thousands)
    
    2005
    
    
    2004Operating revenues:Electric
    
    $
    312,985
    
    
    $
    266,385Nonelectric
    
    
    733,423
    
    
    
    590,977Total operating revenues
    
    $
    1,046,408
    
    
    $
    857,362Net income from continuing operations:Electric
    
    $
    37,301
    
    
    $
    31,535Nonelectric
    
    
    15,554
    
    
    
    9,09752,855
    
    
    
    40,632Net income from discontinued operations
    
    
    9,696
    
    
    
    1,563Total net income
    
    $
    62,551
    
    
    $
    42,195




---



##### 



RESULTS OF OPERATIONS
   (in thousands)
    
    2005
    
    2004
    
    2003Operating revenues
    
    $
    3,867
    
    
    $
    2,733
    
    
    $
    2,254Cost of goods sold
    
    
    2,070
    
    
    
    1,083
    
    
    
    527Other nonelectric expenses
    
    
    1,797
    
    
    
    1,650
    
    
    
    1,727
 ELECTRIC
  %
    
    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change
    
    
    2004
    
    
    change
    
    
    2003Retail sales revenues
    
    $
    248,939
    
    
    
    11
    
    
    $
    224,326
    
    
    
    3
    
    
    $
    217,439Wholesale revenues
    
    
    41,953
    
    
    
    75
    
    
    
    24,000
    
    
    
    (6)
    
    
    
    25,644Net marked-to-market gains
    
    
    4,444
    
    
    
    38
    
    
    
    3,228
    
    
    
    (20)
    
    
    
    4,058Other revenues
    
    
    17,649
    
    
    
    19
    
    
    
    14,831
    
    
    
    (27)
    
    
    
    20,353Total operating revenues
    
    $
    312,985
    
    
    
    17
    
    
    $
    266,385
    
    
    
    
    
    
    $
    267,494Production fuel
    
    
    55,927
    
    
    
    7
    
    
    
    52,056
    
    
    
    2
    
    
    
    51,163Purchased power  system use
    
    
    58,828
    
    
    
    47
    
    
    
    40,098
    
    
    
    11
    
    
    
    36,002Other operation and maintenance expenses
    
    
    99,904
    
    
    
    17
    
    
    
    85,361
    
    
    
    (2)
    
    
    
    87,186Depreciation and amortization
    
    
    24,397
    
    
    
    1
    
    
    
    24,236
    
    
    
    (7)
    
    
    
    26,008Property taxes
    
    
    10,043
    
    
    
    (4)
    
    
    
    10,411
    
    
    
    8
    
    
    
    9,598Operating income
    
    $
    63,886
    
    
    
    18
    
    
    $
    54,223
    
    
    
    (6)
    
    
    $
    57,537




---



##### 








---



##### 








---



##### 



PLASTICS
  %
    
    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change
    
    
    2004
    
    
    change
    
    
    2003Operating revenues
    
    $
    158,548
    
    
    
    37
    
    
    $
    115,426
    
    
    
    34
    
    
    $
    86,009Cost of goods sold
    
    
    121,245
    
    
    
    25
    
    
    
    97,126
    
    
    
    28
    
    
    
    76,046Operating expenses
    
    
    10,939
    
    
    
    91
    
    
    
    5,718
    
    
    
    50
    
    
    
    3,824Depreciation and amortization
    
    
    2,511
    
    
    
    9
    
    
    
    2,297
    
    
    
    8
    
    
    
    2,126Operating income
    
    $
    23,853
    
    
    
    132
    
    
    $
    10,285
    
    
    
    156
    
    
    $
    4,013




---



##### 



MANUFACTURING
  %
    
    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change
    
    
    2004
    
    
    change
    
    
    2003Operating revenues
    
    $
    244,311
    
    
    
    21
    
    
    $
    201,615
    
    
    
    28
    
    
    $
    157,401Cost of goods sold
    
    
    194,264
    
    
    
    23
    
    
    
    157,802
    
    
    
    29
    
    
    
    122,763Operating expenses
    
    
    23,872
    
    
    
    13
    
    
    
    21,098
    
    
    
    14
    
    
    
    18,471Depreciation and amortization
    
    
    9,447
    
    
    
    21
    
    
    
    7,828
    
    
    
    14
    
    
    
    6,882Operating income
    
    $
    16,728
    
    
    
    12
    
    
    $
    14,887
    
    
    
    60
    
    
    $
    9,285
   
    
    Revenues at DMI Industries, Inc. (DMI), our manufacturer of wind towers, increased $23.8
million (48.9%) due to increased production and sales activity. This is in part related to
the production tax credits for wind-generated electricity being in place for 2005 as well
as improvements in productivity and capacity utilization.
    
    Revenues at BTD Manufacturing Inc. (BTD), our metal parts stamping and fabrication
company, increased $10.2 million (14.9%) mainly as a result of product price increases to
cover rising material costs reflected in an 11.8% increase in revenue per unit sold between
the periods. The purchase of Performance Tool in January 2005 contributed $3.8 million
toward BTDs revenue increase.
    
    Revenues at ShoreMaster, Inc., our waterfront equipment manufacturer, increased $4.9
million (9.5%) due to the acquisitions of Shoreline Industries and Southeast Floating
Docks, offset in part by a decline in revenues in its residential and commercial divisions.
    
    Revenues at T.O. Plastics, Inc., our manufacturer of thermoformed plastic and
horticultural products, increased $3.8 million (11.6%) as a result of productivity
improvements and higher prices that provided for recovery of increased raw material costs.
  
    
    DMI cost of goods sold increased $18.4 million between the periods as a result of
increased production and higher raw material costs, subcontractor and labor costs. DMI cost
of goods sold also includes a $1.0 million write-down of inventory in the third quarter
2005 for tower sections that have limited use in the wind business due to changes in wind
tower design requirements.




---



##### 




    
    Cost of goods sold at BTD increased $12.1 million as a result of higher raw material and
labor costs mainly related to increased production. The purchase of Performance Tool in
January 2005 contributed $2.8 million toward BTDs increase in cost of goods sold.
    
    ShoreMasters $3.8 million increase in cost of goods sold is mainly related to the
acquisitions of Shoreline Industries and Southeast Floating Docks and increases in material
costs.
    
    T.O. Plastics cost of goods sold increased $2.3 million between the periods as a result
of increased material costs.
  
    
    DMI operating expenses increased $1.2 million as a result of a $0.5 million increase in
wages, salaries and benefit expenses, a $0.4 million increase in costs associated with
changes in plant layout to improve productivity and a $0.2 million increase in repairs and
maintenance costs.
    
    ShoreMasters operating expenses increased $1.5 million mainly as a result of the
acquisitions of Shoreline Industries and Southeast Floating Docks in January and May of
2005.
    
    
    Revenues at BTD increased $18.5 million (36.8%) as a result of product price increases
related to increases in raw material costs, especially steel, and a 12.7% increase in the
number of units produced and sold at BTDs expanded manufacturing facilities in 2004
compared with 2003.
    
    DMI revenues increased $11.3 million (30.4%) reflecting product price increases related
to increased steel prices and increased productivity and plant utilization in 2004.
    
    ShoreMaster revenues increased $8.6 million (19.7%) as a result of increases in sales of
residential waterfront equipment, increases in jobs in progress and product price increases
related to higher raw material costs.
    
    Revenues at T.O. Plastics increased $5.8 million (21.8%) as a result of a 14.2% increase
in units sold in 2004 compared with 2003.




---



##### 



HEALTH SERVICES
  %

    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change

    
    2004
    
    
    change

    
    2003Operating revenues
    
    $
    123,991
    
    
    
    8
    
    
    $
    114,318
    
    
    
    13
    
    
    $
    100,912Cost of goods sold
    
    
    90,327
    
    
    
    5
    
    
    
    85,731
    
    
    
    14
    
    
    
    75,117Operating expenses
    
    
    21,989
    
    
    
    25
    
    
    
    17,593
    
    
    
    14
    
    
    
    15,410Depreciation and amortization
    
    
    4,038
    
    
    
    (20)
    
    
    
    5,047
    
    
    
    (2)
    
    
    
    5,137Operating income
    
    $
    7,637
    
    
    
    28
    
    
    $
    5,947
    
    
    
    13
    
    
    $
    5,248




---



##### 



FOOD INGREDIENT PROCESSING
  2005
    
    
    2004(in thousands)
    
    (full year)
    
    
    (19 weeks)Operating revenues
    
    $
    38,501
    
    
    $
    14,023Cost of goods sold
    
    
    30,930
    
    
    
    11,379Operating expenses
    
    
    2,533
    
    
    
    876Depreciation and amortization
    
    
    3,399
    
    
    
    1,118Operating income
    
    $
    1,639
    
    
    $
    650
   OTHER BUSINESS OPERATIONS
  %

    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change

    
    2004
    
    
    change

    
    2003Operating revenues
    
    $
    171,939
    
    
    
    16
    
    
    $
    148,328
    
    
    
    29
    
    
    $
    114,726Cost of goods sold
    
    
    131,951
    
    
    
    17
    
    
    
    113,054
    
    
    
    37
    
    
    
    82,378Operating expenses
    
    
    52,468
    
    
    
    22
    
    
    
    42,907
    
    
    
    17
    
    
    
    36,646Goodwill impairment loss
    
    
    1,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    2,666
    
    
    
    (9)
    
    
    
    2,945
    
    
    
    4
    
    
    
    2,841Operating (loss)
    
    $
    (16,149
    )
    
    
    (53)
    
    
    $
    (10,578
    )
    
    
    (48)
    
    
    $
    (7,139
    )
  
    
    Revenues at OTESCO, our energy services company, increased $20.4 million (45.8%), which
includes $20.9 million in increased revenue from natural gas sales mainly as a result of
increases in natural gas prices between the periods. The increase in revenue from natural
gas sales was almost entirely offset by a $20.6 million increase in natural gas costs
between the years. OTESCO also recorded a net increase in technical services revenue of
$0.2 million between the years and a net loss on natural gas forward swap transactions of
$0.5 million in 2005 compared to a net gain of $0.2 million recorded in 2004.
    
    Revenues at Midwest Construction Services, Inc. (MCS), our electrical design and
construction services company, increased $16.6 million (61.4%) between the years as a
result of an increase in work in progress, which was mostly offset by a $13.7 million
increase in cost of goods sold including $4.4 million in increased material and labor costs
incurred on a single project that resulted in a significant loss on that project.




---



##### 




    
    Revenues at E.W. Wylie Corporation (Wylie), our flatbed trucking company, increased $3.7
million (13.7%) in 2005 compared with 2004 due to a 9.7% increase in miles driven by
company-operated and owner-operated trucks and a $0.9 million increase in fuel surcharge
revenue.
    
    Revenues at Foley Company, a mechanical and prime contractor on industrial projects,
decreased $17.2 million (35.4%) in 2005 compared with 2004 due to a decrease in jobs in
progress. The decrease in Foleys revenues was mostly offset by a decrease of $15.4 million
in material, subcontractor, labor and insurance costs between the periods.
  
    
    Wylies operating expenses increased $3.9 million as a result of higher fuel prices,
increased fuel usage and labor costs related to the increase in miles driven and increases
in truck leasing costs between the periods.
    
    Increases in employee health insurance and other employee benefit costs and increases in
insurance costs at our captive insurance company contributed $1.9 million to the increase
in net losses in this segment.
    
    MCS reported increased expenses of $0.8 million for wages and benefits, outside
contracted services and advertising and promotions in 2005 compared with 2004.
    
    
    Revenues at Foley Company, acquired in November 2003, increased $40.6 million and
Foleys cost of goods sold increased $36.7 million between the years, reflecting a full
year of operations in 2004.
    
    Revenues at OTESCO increased $8.6 million (23.9%) and its cost of goods sold increased
$8.5 million between the years mainly due to increases in natural gas prices.
    
    Wylies revenues increased $1.9 million (7.8%) reflecting increased brokerage activity
and the pass through of increased diesel fuel prices to customers. Brokered miles increased
5.5% between the years while the combined miles driven by company-owned trucks and
owner-operated trucks decreased 7.4%.
    
    MCS revenues decreased $17.7 million (39.5%) and cost of goods sold decreased $14.6
million between the periods due to a lower volume of available work in combination with
excess capacity in MCSs construction market.




---



##### 




    
    Foleys operating expenses were $3.2 million for 2004 compared with $0.5 million for two
months of operations in 2003.
    
    Wylies operating expenses increased $1.9 million mainly as a result of higher fuel
prices and increased brokerage activity between the periods.
    
    Operating expenses in 2004 reflect $1.3 million in increased unallocated corporate
overhead costs mainly due to increases in employee benefit costs and increased expenses for
professional services related to compliance with Sarbanes-Oxley Section 404 requirements.
    
    MCS reported increased expenses of $0.7 million, mostly due to increases in payroll and
advertising and promotional expenses in 2004 compared with 2003.
    
    OTESCOs general and administrative expenses decreased $0.3 million between the years.
 CONSOLIDATED INTEREST CHARGES
   CONSOLIDATED INCOME TAXES
   DISCONTINUED OPERATIONS




---



##### 



%
    
    
    
    
    
    
    %(in thousands)
    
    2005
    
    
    change
    
    
    2004
    
    
    change
    
    
    2003Operating revenues
    
    $
    16,449
    
    
    
    (51)
    
    
    $
    33,701
    
    
    
    16
    
    
    $
    28,951Expenses
    
    
    16,978
    
    
    
    (45)
    
    
    
    31,098
    
    
    
    16
    
    
    
    26,752Income tax (benefit) expense
    
    
    (221
    )
    
    
    
    
    
    
    1,040
    
    
    
    35
    
    
    
    768(Loss) income from discontinued operations
    
    $
    (308
    )
    
    
    
    
    
    $
    1,563
    
    
    
    9
    
    
    $
    1,431
  (in thousands)
    
    MIS
    
    
    SGS
    
    
    CLC
    
    
    TotalGain (loss) on sale
    
    $
    19,025
    
    
    $
    (2,919
    )
    
    $
    (271
    )
    
    $
    15,835Income tax (expense) benefit
    
    
    (7,107
    )
    
    
    1,168
    
    
    
    108
    
    
    
    (5,831
    )Net gain (loss) on sale
    
    $
    11,918
    
    
    $
    (1,751
    )
    
    $
    (163
    )
    
    $
    10,004
 IMPACT OF INFLATION
   2006 EXPECTATIONS
  
    
    We expect solid performance in the electric segment in 2006 although net income is
anticipated to be lower than 2005 levels. This is primarily because margins on wholesale
electric sales are expected to be tighter as the MISO market becomes more efficient,
anticipated increases in transmission service and wage and benefit costs, and uncertainty
related to the recoverability of certain MISO-related costs through the fuel clause
adjustments in Minnesota and North Dakota retail rates. We expect earnings for the electric
segment in 2006 to return to more historical levels.




---



##### 




    
    We expect the plastics segment performance to return to more historical levels in 2006
following the 2005 record year.
    
    The improving economy, continued enhancements in productivity and capacity utilization,
expanded markets, expansion of production capacity with the opening of a new wind tower
production facility in Fort Erie, Ontario, Canada, and continued availability of production
tax credits are expected to result in increased net income in our manufacturing segment.
    
    Our health services segment is expected to have moderate growth in net income in 2006.
    
    We expect our food ingredient processing business to generate net income in the range of
$2 million to $4 million for the year ending December 31, 2006.
    
    Our other business operations segment is expected to show improved results over 2005 due
to an improving economy and an increase in its backlog of construction contracts. An
increase in wind energy projects activity is expected to have a positive impact on our
electrical contracting business.
    
    We anticipate investing approximately $57 million in capital expenditures during 2006 in
addition to funding possible future acquisitions.
    
    Our outlook for 2006 reflects the impact of Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment, which is anticipated to lower diluted earnings per share
results by $0.015 per share in 2006. This standard requires all share-based compensation
awards be measured at fair value at the date of grant and expensed over their vesting or
service periods. This standard is effective beginning in January 2006.
  LIQUIDITY




---



##### 



Company
    
    (thousands)Performance Tool
    
    $
    4,116Shoreline Industries
    
    
    2,328Southeast Floating Docks
    
    
    3,968Contingency paymentsprior years acquisitions
    
    
    811Total
    
    $
    11,223
  
    
    $32.7 million for the payment of dividends on common shares outstanding
    
    $24.0 million for repayment of short-term debt
    
    $7.2 million for the retirement of long-term debt




---



##### 








---



##### 



CAPITAL REQUIREMENTS
    (in millions)
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2006-2010Electric
    
    $
    28
    
    
    $
    25
    
    
    $
    30
    
    
    $
    29
    
    
    $
    381Plastics
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    8
    
    
    
    18Manufacturing
    
    
    10
    
    
    
    13
    
    
    
    16
    
    
    
    13
    
    
    
    55Health services
    
    
    6
    
    
    
    4
    
    
    
    3
    
    
    
    1
    
    
    
    3Food ingredient processing
    
    
    
    
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    15Other business operations
    
    
    1
    
    
    
    1
    
    
    
    4
    
    
    
    2
    
    
    
    5Total
    
    $
    49
    
    
    $
    50
    
    
    $
    60
    
    
    $
    57
    
    
    $
    477
  Less than
    
    1-3
    
    3-5
    
    More than(in millions)
    
    Total
    
    1 year
    
    years
    
    years
    
    5 yearsLong-term debt obligations
    
    $
    262
    
    
    $
    3
    
    
    $
    58
    
    
    $
    5
    
    
    $
    196Interest on long-term debt obligations
    
    
    141
    
    
    
    16
    
    
    
    27
    
    
    
    24
    
    
    
    74Operating lease obligations
    
    
    136
    
    
    
    37
    
    
    
    59
    
    
    
    37
    
    
    
    3Capacity and energy requirements
    
    
    110
    
    
    
    17
    
    
    
    33
    
    
    
    24
    
    
    
    36Coal contracts (required minimums)
    
    
    84
    
    
    
    16
    
    
    
    22
    
    
    
    12
    
    
    
    34Postretirement benefit obligations
    
    
    47
    
    
    
    4
    
    
    
    7
    
    
    
    8
    
    
    
    28Other purchase obligations
    
    
    42
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    822
    
    
    $
    135
    
    
    $
    206
    
    
    $
    110
    
    
    $
    371




---



##### 



CAPITAL RESOURCES




---



##### 



MoodysInvestors
    
    
    StandardService
    
    
    & PoorsSenior unsecured debt
    
    
    A3
    
    
    BBB+Preferred stock
    
    Baa2
    
    BBBOutlook
    
    Stable
    
    Stable
   
 OFF-BALANCE-SHEET ARRANGEMENTS
  RISK FACTORS AND CAUTIONARY STATEMENTS




---



##### 



GENERAL
 Our plans to grow and diversify through capital expenditures and acquisitions may not be
successful, which could result in poor financial performance.
  Federal and state environmental regulation could require us to incur substantial capital
expenditures which could result in increased operating costs.




---



##### 



Volatile financial markets could restrict our ability to access capital and increase our borrowing
costs and pension plan expenses.
   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.
  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.
  MANUFACTURING


Competition from foreign and domestic manufacturers, the price and availability of raw materials,
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 competes in a highly
competitive market, and is dependent on adequate sources of potatoes for processing.




---



##### 



OTHER
BUSINESS OPERATIONS
 Our transportation company may be unable to maintain profitable operations if economic conditions
restrict its ability to recover the increasing costs of fuel, insurance and labor supplies.
  Our construction companies may be unable to properly bid and perform on projects.
  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




---



##### 



Accounting for Derivative Instruments and Hedging Activities. Issues
Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk Management Activities
  (in thousands)
    
    December 31, 2005Current asset  marked-to-market gain
    
    $
    825Current liability  marked-to-market loss
    
    
    (851
    )Net fair value of marked-to-market gas contracts
    
    $
    (26
    )
 Year ended(in thousands)
    
    December 31, 2005Fair value at beginning of year
    
    $
    134Amount realized on contracts entered into in 2004 and settled in
2005
    
    
    (134
    )Changes in fair value of contracts entered into in 2004
    
    
    Net fair value of contracts entered into in 2004 at year end 2005
    
    
    Changes in fair value of contracts entered into in 2005
    
    
    (26
    )Net fair value at end of year
    
    $
    (26
    )




---



##### 



Megawatt Daily
   December 31,(in thousands)
    
    2005Current asset  marked-to-market gain
    
    $
    8,603Regulatory asset  deferred marked-to-market loss
    
    
    1,423Total assets
    
    
    10,026Current liability  marked-to-market loss
    
    
    (4,185
    )Regulatory liability  deferred marked-to-market gain
    
    
    (2,925
    )Total liabilities
    
    
    (7,110
    )Net fair value of marked-to-market energy contracts
    
    $
    2,916
 Year ended(in thousands)
    
    December 31, 2005Fair value at beginning of year
    
    $
    301Amount realized on contracts entered into in 2004 and settled in 2005
    
    
    (322
    )Changes in fair value of contracts entered into in 2004
    
    
    21Net fair value of contracts entered into in 2004 at year end 2005
    
    
    Changes in fair value of contracts entered into in 2005
    
    
    2,916Net fair value at end of year
    
    $
    2,916




---



##### 



1st Quarter
    
    2nd Quarter
    
    3rd Quarter(in thousands)
    
    2006
    
    2006
    
    2006
    
    TotalNet gain
    
    $
    2,281
    
    
    $
    527
    
    
    $
    108
    
    
    $
    2,916
    CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES
   PENSION
AND OTHER POSTRETIREMENT BENEFITS OBLIGATIONS AND COSTS




---



##### 



REVENUE
RECOGNITION




---



##### 



FORWARD
ENERGY CONTRACTS CLASSIFIED AS DERIVATIVES
 Megawatt Daily
 ALLOWANCE
FOR DOUBTFUL ACCOUNTS




---



##### 



DEPRECIATION
EXPENSE AND DEPRECIABLE LIVES
   TAXATION
 Accounting for Contingencies, 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




---



##### 



KEY ACCOUNTING PRONOUNCEMENTS
 SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4,
 SFAS No. 123(R) (revised 2004), Share-Based Payment, Accounting for Stock-based Compensation Accounting for
Stock Issued to Employees
 FASB Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligations,
 SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions




---



##### 



SFAS No. 154, Accounting for Changes and Error Corrections, a replacement of APB Opinion No. 20 and
FASB Statement No. 3,




---



##### 



Managements Report Regarding Internal Controls Over Financial Reporting




---



##### 



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)
    
    2005
    
    
    2004
    
    
    2003Operating revenues
    
    $
    1,046,408
    
    
    $
    857,362
    
    
    $
    724,288Operating expensesProduction fuel
    
    
    55,927
    
    
    
    52,056
    
    
    
    51,163Purchased power  system use
    
    
    58,828
    
    
    
    40,098
    
    
    
    36,002Electric operation and maintenance expenses
    
    
    99,904
    
    
    
    85,361
    
    
    
    87,186Cost of goods sold (excludes depreciation; included below)
    
    
    566,647
    
    
    
    464,009
    
    
    
    355,777Other nonelectric expenses
    
    
    110,004
    
    
    
    86,542
    
    
    
    72,624Goodwill impairment loss
    
    
    1,003
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    46,458
    
    
    
    43,471
    
    
    
    42,994Property taxes  electric operations
    
    
    10,043
    
    
    
    10,411
    
    
    
    9,598Total operating expenses
    
    
    948,814
    
    
    
    781,948
    
    
    
    655,344Operating income
    
    
    97,594
    
    
    
    75,414
    
    
    
    68,944Other income
    
    
    1,786
    
    
    
    793
    
    
    
    1,111Interest charges
    
    
    18,558
    
    
    
    18,128
    
    
    
    17,668Income from continuing operations before income taxes
    
    
    80,822
    
    
    
    58,079
    
    
    
    52,387Income taxes  continuing operations
    
    
    27,967
    
    
    
    17,447
    
    
    
    14,162Net income from continuing operations
    
    
    52,855
    
    
    
    40,632
    
    
    
    38,225Discontinued operationsIncome (loss) from discontinued operations net of taxes of
$(221) in 2005, $1,040 in 2004 and $768 in 2003
    
    
    (308
    )
    
    
    1,563
    
    
    
    1,431Net gain on disposition of discontinued operations
net of taxes of $5,831 in 2005
    
    
    10,004
    
    
    
    
    
    
    
    Net income from discontinued operations
    
    
    9,696
    
    
    
    1,563
    
    
    
    1,431Net Income
    
    
    62,551
    
    
    
    42,195
    
    
    
    39,656Preferred dividend requirements
    
    
    735
    
    
    
    736
    
    
    
    735Earnings available for common shares
    
    $
    61,816
    
    
    $
    41,459
    
    
    $
    38,921Average number of common shares outstandingbasic
    
    
    29,223
    
    
    
    26,089
    
    
    
    25,673Average number of common shares outstandingdiluted
    
    
    29,348
    
    
    
    26,207
    
    
    
    25,826Basic earnings per share:Continuing operations (net of preferred dividend
requirements)
    
    $
    1.79
    
    
    $
    1.53
    
    
    $
    1.46Discontinued operations
    
    
    0.33
    
    
    
    0.06
    
    
    
    0.06$
    2.12
    
    
    $
    1.59
    
    
    $
    1.52Diluted earnings per share:Continuing operations (net of preferred dividend
requirements)
    
    $
    1.78
    
    
    $
    1.52
    
    
    $
    1.45Discontinued operations
    
    
    0.33
    
    
    
    0.06
    
    
    
    0.06$
    2.11
    
    
    $
    1.58
    
    
    $
    1.51Dividends per common share
    
    $
    1.12
    
    
    $
    1.10
    
    
    $
    1.08
 See accompanying notes to consolidated financial statements.




---



##### 



Otter
Tail Corporation
 Consolidated Balance Sheets, December 31
 (in thousands)
    
    2005
    
    
    2004AssetsCurrent assetsCash and cash equivalents
    
    $
    5,430
    
    
    $
    Accounts receivable:Trade (less allowance for doubtful accounts of
$3,493 for 2005 and $2,730 for 2004)
    
    
    128,355
    
    
    
    116,141Other
    
    
    11,790
    
    
    
    9,872Inventories
    
    
    88,677
    
    
    
    72,504Deferred income taxes
    
    
    6,871
    
    
    
    4,852Accrued utility revenues
    
    
    22,892
    
    
    
    15,344Costs and estimated earnings in excess of billings
    
    
    21,542
    
    
    
    18,145Other
    
    
    17,301
    
    
    
    7,800Assets of discontinued operations
    
    
    2,317
    
    
    
    30,937Total current assets
    
    
    305,175
    
    
    
    275,595Investments and other assets
    
    
    33,824
    
    
    
    42,650Goodwillnet
    
    
    98,110
    
    
    
    92,196Other intangiblesnet
    
    
    21,160
    
    
    
    19,600Deferred debitsUnamortized debt expense and reacquisition premiums
    
    
    6,520
    
    
    
    7,291Regulatory assets and other deferred debits
    
    
    19,616
    
    
    
    16,692Total deferred debits
    
    
    26,136
    
    
    
    23,983PlantElectric plant in service
    
    
    910,766
    
    
    
    890,200Nonelectric operations
    
    
    228,548
    
    
    
    208,311Total
    
    
    1,139,314
    
    
    
    1,098,511Less accumulated depreciation and amortization
    
    
    459,438
    
    
    
    436,856Plantnet of accumulated depreciation and amortization
    
    
    679,876
    
    
    
    661,655Construction work in progress
    
    
    17,215
    
    
    
    18,469Net plant
    
    
    697,091
    
    
    
    680,124Total
    
    $
    1,181,496
    
    
    $
    1,134,148
 See accompanying notes to consolidated financial statements.




---



##### 



Otter
Tail Corporation
 Consolidated Balance Sheets, December 31
 (in thousands, except share data)
    
    2005
    
    
    2004Liabilities and EquityCurrent liabilitiesShort-term debt
    
    $
    16,000
    
    
    $
    39,950Current maturities of long-term debt
    
    
    3,340
    
    
    
    6,016Accounts payable
    
    
    106,570
    
    
    
    84,433Accrued salaries and wages
    
    
    24,326
    
    
    
    17,330Accrued federal and state income taxes
    
    
    8,776
    
    
    
    3,700Other accrued taxes
    
    
    12,620
    
    
    
    11,391Other accrued liabilities
    
    
    14,975
    
    
    
    10,417Liabilities of discontinued operations
    
    
    372
    
    
    
    8,585Total current liabilities
    
    
    186,979
    
    
    
    181,822Pension benefit liability
    
    
    23,216
    
    
    
    16,703Other postretirement benefits liability
    
    
    26,982
    
    
    
    25,053Other noncurrent liabilities
    
    
    18,683
    
    
    
    11,874Commitments (note 8)Deferred creditsDeferred income taxes
    
    
    113,737
    
    
    
    121,301Deferred investment tax credit
    
    
    9,327
    
    
    
    10,477Regulatory liabilities
    
    
    61,624
    
    
    
    56,909Other
    
    
    1,500
    
    
    
    1,662Total deferred credits
    
    
    186,188
    
    
    
    190,349Capitalization (page 40)Long-term debt, net of current maturities
    
    
    258,260
    
    
    
    261,805Class B stock options of subsidiary
    
    
    1,258
    
    
    
    1,832Cumulative preferred shares
    
    
    15,500
    
    
    
    15,500Common
shares, par value $5 per shareauthorized, 50,000,000
shares;
outstanding, 200529,401,223 shares; 200428,976,919 shares
    
    
    147,006
    
    
    
    144,885Premium on common shares
    
    
    96,768
    
    
    
    87,865Unearned compensation
    
    
    (1,720
    )
    
    
    (2,577
    )Retained earnings
    
    
    228,515
    
    
    
    199,427Accumulated other comprehensive loss
    
    
    (6,139
    )
    
    
    (390
    )Total common equity
    
    
    464,430
    
    
    
    429,210Total capitalization
    
    
    739,448
    
    
    
    708,347Total
    
    $
    1,181,496
    
    
    $
    1,134,148
 See accompanying notes to consolidated financial statements.




---



##### 



Otter
Tail Corporation
 Consolidated Statements of Common Shareholders Equity
 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, 2002
    
    
    25,592,160
    
    
$
    127,961
    
    
$
    24,135
    
    
$
    (1,946
    )
    
$
    175,304
    
    
$
    (11,989
    )
    
$
    313,465Common stock issuances
    
    
    140,621
    
    
    
    703
    
    
    
    2,793
    
    
    
    (2,477
    )
    
    
    
    
    
    
    
    
    
    
    1,019Common stock retirements
    
    
    (8,967
    )
    
    
    (45
    )
    
    
    (225
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (270
    )Amortization of unearned compensationstock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,110
    
    
    
    
    
    
    
    
    
    
    
    1,110Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,656
    
    
    
    
    
    
    
    39,656Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,560
    
    
    
    7,560Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,216Tax benefit for exercise of stock options
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111Purchase stock for employee purchase plan
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )Cumulative preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (735
    )
    
    
    
    
    
    
    (735
    )Common dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,730
    )
    
    
    
    
    
    
    (27,730
    )Balance, December 31, 2003
    
    
    25,723,814
    
    
    $
    128,619
    
    
$
    26,515
    
    
$
    (3,313
    )
    
$
    186,495
    
    
$
    (4,429
    )
    
    
    333,887Common stock issuances, net of expenses
    
    
    3,266,266
    
    
    
    16,332
    
    
    
    63,373
    
    
    
    (566
    )
    
    
    
    
    
    
    
    
    
    
    79,139Common stock retirements
    
    
    (13,161
    )
    
    
    (66
    )
    
    
    (283
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )Amortization of unearned compensationstock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,302
    
    
    
    
    
    
    
    
    
    
    
    1,302Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,195
    
    
    
    
    
    
    
    42,195Unrealized loss on marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,014
    
    
    
    1,014Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,039
    
    
    
    3,039Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,234Tax benefit for exercise of stock options
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92Valuation of stock options of subsidiary acquired in 2004
    
    
    
    
    
    
    
    
    
    
    (1,832
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,832
    )Cumulative preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (735
    )
    
    
    
    
    
    
    (735
    )Common dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,528
    )
    
    
    
    
    
    
    (28,528
    )Balance, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    437Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,163
    )
    
    
    (6,163
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,802Tax benefit for exercise of stock options
    
    
    
    
    
    
    
    
    
    
    596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596Stock incentive plan performance award accrual
    
    
    
    
    
    
    
    
    
    
    943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943Purchase 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)
    (a)
    
    $
    464,430
  (in thousands)
    
    Before Tax
    
    
    Tax Effect
    
    
    Net-of-taxMinimum pension liability adjustment
    
    $
    (12,588
    )
    
    $
    5,035
    
    
    $
    (7,553
    )Foreign currency exchange translation
    
    
    2,420
    
    
    
    (968
    )
    
    
    1,452Unrealized loss on marketable equity securities
    
    
    (63
    )
    
    
    25
    
    
    
    (38
    )Net accumulated other comprehensive loss
    
    $
    (10,231
    )
    
    $
    4,092
    
    
    $
    (6,139
    )
 See accompanying notes to consolidated financial statements.




---



##### 



Otter
Tail Corporation
 Consolidated Statements of Cash FlowsFor the Years Ended December 31
 (in thousands)
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income
    
    $
    62,551
    
    
    $
    42,195
    
    
    $
    39,656Adjustments to reconcile net income to net cash provided
by operating activities:Net gain on sale of discontinued operations
    
    
    (10,004
    )
    
    
    
    
    
    
    Loss (income) from discontinued operations
    
    
    308
    
    
    
    (1,563
    )
    
    
    (1,431
    )Depreciation and amortization
    
    
    46,458
    
    
    
    43,471
    
    
    
    42,994Deferred investment tax credit
    
    
    (1,150
    )
    
    
    (1,152
    )
    
    
    (1,152
    )Deferred income taxes
    
    
    (9,223
    )
    
    
    3,950
    
    
    
    3,125Change in deferred debits and other assets
    
    
    9,868
    
    
    
    (1,641
    )
    
    
    (3,173
    )Discretionary contribution to pension plan
    
    
    (4,000
    )
    
    
    (4,000
    )
    
    
    Change in noncurrent liabilities and deferred credits
    
    
    1,321
    
    
    
    2,110
    
    
    
    8,026Allowance for equity (other) funds used during construction
    
    
    (723
    )
    
    
    (716
    )
    
    
    (1,355
    )Change in derivatives net of regulatory deferral
    
    
    (2,455
    )
    
    
    1,621
    
    
    
    (2,057
    )Othernet
    
    
    3,506
    
    
    
    1,430
    
    
    
    1,643Cash (used for) provided by current assets and current liabilities:Change in receivables
    
    
    (13,482
    )
    
    
    (9,808
    )
    
    
    (19,137
    )Change in inventories
    
    
    (12,500
    )
    
    
    (6,894
    )
    
    
    (12,619
    )Change in other current assets
    
    
    (13,882
    )
    
    
    (15,386
    )
    
    
    (2,012
    )Change in payables and other current liabilities
    
    
    36,021
    
    
    
    1,679
    
    
    
    18,624Change in interest and income taxes payable
    
    
    (2,256
    )
    
    
    (966
    )
    
    
    5,182Net cash provided by continuing operations
    
    
    90,358
    
    
    
    54,330
    
    
    
    76,314Net cash provided by discontinued operations
    
    
    5,442
    
    
    
    1,971
    
    
    
    641Net cash provided by operating activities
    
    
    95,800
    
    
    
    56,301
    
    
    
    76,955Cash flows from investing activitiesCapital expenditures
    
    
    (59,969
    )
    
    
    (49,484
    )
    
    
    (48,783
    )Proceeds from disposal of noncurrent assets
    
    
    4,193
    
    
    
    5,844
    
    
    
    1,563Acquisitionsnet of cash acquired
    
    
    (11,223
    )
    
    
    (69,069
    )
    
    
    (12,896
    )Decreases (increases) in other investments
    
    
    4,171
    
    
    
    (5,099
    )
    
    
    1,071Net cash used in investing activities  continuing operations
    
    
    (62,828
    )
    
    
    (117,808
    )
    
    
    (59,045
    )Net proceeds from sale of discontinued operations
    
    
    34,185
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities  discontinued operations
    
    
    602
    
    
    
    (1,310
    )
    
    
    (1,363
    )Net cash used in investing activities
    
    
    (28,041
    )
    
    
    (119,118
    )
    
    
    (60,408
    )Cash flows from financing activitiesChange in checks written in excess of cash
    
    
    (3,329
    )
    
    
    3,458
    
    
    
    Net short-term (repayments) borrowings
    
    
    (23,950
    )
    
    
    9,950
    
    
    
    Proceeds from issuance of common stock, net of issuance expenses
    
    
    9,690
    
    
    
    78,780
    
    
    
    1,072Payments for retirement of common stock and Class B stock of subsidiary
    
    
    (939
    )
    
    
    (349
    )
    
    
    Proceeds from issuance of long-term debt, net of issuance expenses
    
    
    228
    
    
    
    4,065
    
    
    
    18,442Payments for retirement of long-term debt
    
    
    (7,232
    )
    
    
    (9,061
    )
    
    
    (8,189
    )Dividends paid
    
    
    (33,463
    )
    
    
    (29,263
    )
    
    
    (28,937
    )Net cash (used in) provided by financing activities  continuing operations
    
    
    (58,995
    )
    
    
    57,580
    
    
    
    (17,612
    )Net cash used in financing activities  discontinued operations
    
    
    (2,996
    )
    
    
    (1,679
    )
    
    
    (1,239
    )Net cash (used in) provided by financing activities
    
    
    (61,991
    )
    
    
    55,901
    
    
    
    (18,851
    )Effect of foreign exchange rate fluctuations on cash
    
    
    (338
    )
    
    
    (794
    )
    
    
    Net change in cash and cash equivalents
    
    
    5,430
    
    
    
    (7,710
    )
    
    
    (2,304
    )Cash and cash equivalents at beginning of year  continuing operations
    
    
    
    
    
    
    7,710
    
    
    
    10,014Cash and cash equivalents at end of year  continuing operations
    
    $
    5,430
    
    
    $
    
    
    
    $
    7,710Supplemental disclosures of cash flow informationCash paid during the year from continuing operations for:Interest (net of amount capitalized)
    
    $
    17,670
    
    
    $
    16,443
    
    
    $
    16,563Income taxes
    
    $
    39,212
    
    
    $
    16,204
    
    
    $
    7,956Cash paid during the year from discontinued operations for:Interest
    
    $
    86
    
    
    $
    111
    
    
    $
    218Income taxes
    
    $
    659
    
    
    $
    840
    
    
    $
    481
 See accompanying notes to consolidated financial statements.




---



##### 



Otter
Tail Corporation
 Consolidated Statements of Capitalization, December 31
 (in thousands, except share data)
    
    2005
    
    
    2004Long-term debtLombard US Equipment Finance note, variable, 5.484% at December 31, 2005, due October 2, 2010
    
    $
    11,643
    
    
    $
    13,971Senior debentures 6.375%, due December 1, 2007
    
    
    50,000
    
    
    
    50,000Senior notes 6.63%, due December 1, 2011
    
    
    90,000
    
    
    
    90,000Insured senior notes 5.625%, due October 1, 2017
    
    
    40,000
    
    
    
    40,000Senior notes 6.80%, due October 1, 2032
    
    
    25,000
    
    
    
    25,000Pollution control refunding revenue bonds, variable, 3.91% at December 31, 2005, due December 1,
2012
    
    
    10,400
    
    
    
    10,400Grant County, South Dakota pollution control refunding revenue bonds 4.65%, due September 1, 2017
    
    
    5,185
    
    
    
    5,185Mercer County, North Dakota pollution control refunding revenue bonds 4.85%, due September 1, 2022
    
    
    20,735
    
    
    
    20,735Obligations of Varistar Corporation:8.15% five-year term note, retired in April 2005
    
    
    
    
    
    
    5407.80% ten-year term note, retired in July 2005
    
    
    
    
    
    
    1,483Various up to 9.65% at December 31, 2005
    
    
    9,235
    
    
    
    11,191Total
    
    
    262,198
    
    
    
    268,505Less:Current maturities
    
    
    3,340
    
    
    
    6,016Unamortized debt discount
    
    
    598
    
    
    
    684Total long-term debtcontinuing operations
    
    
    258,260
    
    
    
    261,805Class B stock options of subsidiary
    
    
    1,258
    
    
    
    1,832Cumulative preferred shareswithout par value (stated andliquidating value $100 a share)authorized 1,500,000 shares;Series outstanding:$3.60, 60,000 shares
    
    
    6,000
    
    
    
    6,000$4.40, 25,000 shares
    
    
    2,500
    
    
    
    2,500$4.65, 30,000 shares
    
    
    3,000
    
    
    
    3,000$6.75, 40,000 shares
    
    
    4,000
    
    
    
    4,000Total preferred
    
    
    15,500
    
    
    
    15,500Cumulative preference shareswithout par value, authorized 1,000,000 shares; outstanding: noneTotal common shareholders equity
    
    
    464,430
    
    
    
    429,210Total capitalization
    
    $
    739,448
    
    
    $
    708,347
 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
 Big Stone
    
    
    Coyote(in thousands)
    
    Plant
    
    
    StationDecember 31, 2005Electric plant in service
    
    $
    124,852
    
    
    $
    146,405Accumulated depreciation
    
    
    (71,824
    )
    
    
    (77,909
    )Net plant
    
    $
    53,028
    
    
    $
    68,496December 31, 2004Electric plant in service
    
    $
    116,405
    
    
    $
    146,343Accumulated depreciation
    
    
    (70,904
    )
    
    
    (75,431
    )Net plant
    
    $
    45,501
    
    
    $
    70,912
  Recoverability
of Long-Lived Assets
 Income Taxes
 Revenue
Recognition




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Costs incurred on uncompleted contracts
    
    $
    194,076
    
    
    $
    99,213Less billings to date
    
    
    (203,862
    )
    
    
    (96,413
    )Plus estimated earnings recognized
    
    
    22,834
    
    
    
    12,469$
    13,048
    
    
    $
    15,269
  December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Costs and estimated earnings in excess of billings on uncompleted contracts
    
    $
    21,542
    
    
    $
    18,145Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (8,494
    )
    
    
    (2,876
    )$
    13,048
    
    
    $
    15,269
 Foreign Currency Translation




---



##### 



Accumulated other comprehensive loss
 Pre-Production Costs Accounting for Pre-production Costs Related to Long-Term Supply
Arrangements
 Shipping and Handling Costs
 Stock-Based Compensation Accounting for Stock
Issued to Employees Accounting for Stock-Based Compensation
 Share-Based Payment,
 2005
    
    
    2004
    
    
    2003(in thousands, except per share amounts)Net incomeAs reported
    
    $
    62,551
    
    
    $
    42,195
    
    
    $
    39,656Total stock-based employee compensation
expense determined under fair value-based
method for all awards net of related
tax effects
    
    
    (640
    )
    
    
    (1,087
    )
    
    
    (984
    )Pro forma
    
    $
    61,911
    
    
    $
    41,108
    
    
    $
    38,672Basic earnings per shareAs reported
    
    $
    2.12
    
    
    $
    1.59
    
    
    $
    1.52Pro forma
    
    $
    2.09
    
    
    $
    1.55
    
    
    $
    1.48Diluted earnings per shareAs reported
    
    $
    2.11
    
    
    $
    1.58
    
    
    $
    1.51Pro forma
    
    $
    2.08
    
    
    $
    1.54
    
    
    $
    1.47
 Use of Estimates




---



##### 



Adjustments and Reclassifications
  Cash Equivalents
 Investments
 December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Cost method:Acquisition escrow account
    
    $
    
    
    
    $
    6,017Economic development loan pools
    
    
    742
    
    
    
    879Other
    
    
    1,913
    
    
    
    1,743Equity method:Affordable housing partnerships
    
    
    2,980
    
    
    
    3,802Marketable securities classified as available-for-sale
    
    
    3,067
    
    
    
    2,009Total investments
    
    $
    8,702
    
    
    $
    14,450
 Consolidation of
Variable Interest Entities,
 Accumulated other comprehensive loss
 Inventories




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Finished goods
    
    $
    38,928
    
    
    $
    34,081Work in process
    
    
    7,146
    
    
    
    3,733Raw material, fuel and supplies
    
    
    42,603
    
    
    
    34,690Total inventories
    
    $
    88,677
    
    
    $
    72,504
 Goodwill and Intangible Assets Goodwill and Other Intangible
Assets, Accounting for the Impairment or Disposal of Long-Lived Assets
  Adjustment toBalance
    
    
    goodwill
    
    
    Goodwill
    
    
    Goodwill
    
    
    BalanceDecember 31,
    
    
    acquired in
    
    
    impairment
    
    
    acquired
    
    
    December 31,(in thousands)
    
    2004
    
    
    2004
    
    
    in 2005
    
    
    in 2005
    
    
    2005Plastics
    
    $
    19,302
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    19,302Manufacturing
    
    
    9,680
    
    
    
    
    
    
    
    
    
    
    
    6,018
    
    
    
    15,698Health services
    
    
    24,582
    
    
    
    (254
    )
    
    
    
    
    
    
    
    
    
    
    24,328Food ingredient processing
    
    
    23,087
    
    
    
    1,153
    
    
    
    
    
    
    
    
    
    
    
    24,240Other business operations
    
    
    15,545
    
    
    
    
    
    
    
    (1,003
    )
    
    
    
    
    
    
    14,542Total
    
    $
    92,196
    
    
    $
    899
    
    
    $
    (1,003
    )
    
    $
    6,018
    
    
    $
    98,110
  Goodwill and Other Intangible Assets




---



##### 



Gross carrying
    
    
    Accumulated
    
    
    Net carryingamount
    
    
    amortization
    
    
    amount2005 (in thousands)Amortized intangible assets:Covenants not to compete
    
    $
    2,338
    
    
    $
    1,620
    
    
    $
    718Customer relationships
    
    
    10,575
    
    
    
    583
    
    
    
    9,992Other intangible assets including contracts
    
    
    2,785
    
    
    
    1,680
    
    
    
    1,105Total
    
    $
    15,698
    
    
    $
    3,883
    
    
    $
    11,815Nonamortized intangible assets:Brand/trade name
    
    $
    9,345
    
    
    $
    
    
    
    $
    9,3452004 (in thousands)Amortized intangible assets:Covenants not to compete
    
    $
    1,966
    
    
    $
    1,334
    
    
    $
    632Customer relationships
    
    
    10,045
    
    
    
    148
    
    
    
    9,897Other intangible assets including contracts
    
    
    2,523
    
    
    
    1,387
    
    
    
    1,136Total
    
    $
    14,534
    
    
    $
    2,869
    
    
    $
    11,665Nonamortized intangible assets:Brand/trade name
    
    $
    7,935
    
    
    $
    
    
    
    $
    7,935
  New Accounting Pronouncements
 SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4 ,
 SFAS No. 123(R) (revised 2004), Share-Based Payment, Accounting for Stock-based Compensation Accounting for Stock Issued to Employees
 FASB Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligations,




---



##### 



SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 , Accounting for Nonmonetary
Transactions
 SFAS No. 154, Accounting for Changes and Error Corrections, a replacement of APB Opinion No. 20
and FASB Statement No. 3 ,




---



##### 



Performance
    
    
    Shoreline
    
    
    Southeast(in thousands)
    
    Tool
    
    
    Industries
    
    
    Floating DocksAssetsCurrent assets
    
    $
    748
    
    
    $
    464
    
    
    $
    2,437Plant
    
    
    1,396
    
    
    
    260
    
    
    
    415Deferred income taxes
    
    
    22
    
    
    
    
    
    
    
    Goodwill
    
    
    1,772
    
    
    
    1,442
    
    
    
    2,804Other intangible assets
    
    
    800
    
    
    
    557
    
    
    
    1,150Total assets
    
    $
    4,738
    
    
    $
    2,723
    
    
    $
    6,806LiabilitiesCurrent liabilities
    
    $
    324
    
    
    $
    86
    
    
    $
    318Deferred revenue
    
    
    
    
    
    
    
    
    
    
    2,520Deferred income taxes
    
    
    
    
    
    
    235
    
    
    
    Long-term debt
    
    
    298
    
    
    
    
    
    
    
    Total liabilities
    
    $
    622
    
    
    $
    321
    
    
    $
    2,838Cash paid
    
    $
    4,116
    
    
    $
    2,402
    
    
    $
    3,968




---



##### 



(in thousands)
    
    IPHAssetsCurrent assets
    
    $
    17,740Plant
    
    
    35,296Goodwill
    
    
    24,240Other intangible assets
    
    
    13,200Total assets
    
    $
    90,476LiabilitiesCurrent liabilities
    
    $
    5,893Deferred income taxes
    
    
    12,408Long-term debt
    
    
    2,140Class B common stock options
    
    
    1,832Total liabilities
    
    $
    22,273Cash paid
    
    $
    68,203
     (in thousands)
    
    Foley
    
    
    OthersAssetsCurrent assets
    
    $
    9,847
    
    
    $
    675Plant
    
    
    3,793
    
    
    
    45Goodwill
    
    
    7,319
    
    
    
    1,924Other intangible assets
    
    
    1,653
    
    
    
    102Total assets
    
    $
    22,612
    
    
    $
    2,746LiabilitiesCurrent liabilities
    
    $
    8,618
    
    
    $
    669Long-term debt
    
    
    
    
    
    
    136Other long-term liabilities
    
    
    1,712
    
    
    
    Total liabilities
    
    $
    10,330
    
    
    $
    805Cash paid
    
    $
    12,282
    
    
    $
    1,941




---



##### 



Segment Information




---



##### 



2005
    
    
    2004
    
    
    2003(in thousands)Operating revenueElectric
    
    $
    312,985
    
    
    $
    266,385
    
    
    $
    267,494Plastics
    
    
    158,548
    
    
    
    115,426
    
    
    
    86,009Manufacturing
    
    
    244,311
    
    
    
    201,615
    
    
    
    157,401Health services
    
    
    123,991
    
    
    
    114,318
    
    
    
    100,912Food ingredient processing
    
    
    38,501
    
    
    
    14,023
    
    
    
    Other business operations
    
    
    171,939
    
    
    
    148,328
    
    
    
    114,726Intersegment eliminations
    
    
    (3,867
    )
    
    
    (2,733
    )
    
    
    (2,254
    )Total
    
    $
    1,046,408
    
    
    $
    857,362
    
    
    $
    724,288Depreciation and amortizationElectric
    
    $
    24,397
    
    
    $
    24,236
    
    
    $
    26,008Plastics
    
    
    2,511
    
    
    
    2,297
    
    
    
    2,126Manufacturing
    
    
    9,447
    
    
    
    7,828
    
    
    
    6,882Health services
    
    
    4,038
    
    
    
    5,047
    
    
    
    5,137Food ingredient processing
    
    
    3,399
    
    
    
    1,118
    
    
    
    Other business operations
    
    
    2,666
    
    
    
    2,945
    
    
    
    2,841Total
    
    $
    46,458
    
    
    $
    43,471
    
    
    $
    42,994Income before income taxesElectric
    
    $
    55,984
    
    
    $
    45,234
    
    
    $
    48,689Plastics
    
    
    22,803
    
    
    
    9,453
    
    
    
    3,341Manufacturing
    
    
    12,242
    
    
    
    12,543
    
    
    
    6,904Health services
    
    
    6,875
    
    
    
    5,075
    
    
    
    4,197Food ingredient processing
    
    
    1,482
    
    
    
    618
    
    
    
    Other business operations
    
    
    (18,564
    )
    
    
    (14,844
    )
    
    
    (10,744
    )Total
    
    $
    80,822
    
    
    $
    58,079
    
    
    $
    52,387Earnings available for common sharesElectric
    
    $
    36,566
    
    
    $
    30,799
    
    
    $
    33,411Plastics
    
    
    13,936
    
    
    
    5,657
    
    
    
    2,019Manufacturing
    
    
    7,589
    
    
    
    7,563
    
    
    
    4,495Health services
    
    
    4,007
    
    
    
    2,951
    
    
    
    2,464Food ingredient processing
    
    
    329
    
    
    
    351
    
    
    
    Other business operations
    
    
    (10,307
    )
    
    
    (7,425
    )
    
    
    (4,899
    )Total
    
    $
    52,120
    
    
    $
    39,896
    
    
    $
    37,490Capital expendituresElectric
    
    $
    30,479
    
    
    $
    25,368
    
    
    $
    28,177Plastics
    
    
    3,636
    
    
    
    2,544
    
    
    
    3,984Manufacturing
    
    
    16,112
    
    
    
    13,163
    
    
    
    9,592Health services
    
    
    3,095
    
    
    
    3,919
    
    
    
    5,427Food ingredient processing
    
    
    2,952
    
    
    
    3,528
    
    
    
    Other business operations
    
    
    3,695
    
    
    
    962
    
    
    
    1,603Total
    
    $
    59,969
    
    
    $
    49,484
    
    
    $
    48,783Identifiable assetsElectric
    
    $
    654,175
    
    
    $
    634,433
    
    
    $
    609,190Plastics
    
    
    76,573
    
    
    
    67,574
    
    
    
    58,538Manufacturing
    
    
    177,969
    
    
    
    150,800
    
    
    
    125,877Health services
    
    
    67,066
    
    
    
    66,506
    
    
    
    67,587Food ingredient processing
    
    
    96,023
    
    
    
    92,392
    
    
    
    Other business operations
    
    
    107,373
    
    
    
    91,506
    
    
    
    95,350Discontinued operations
    
    
    2,317
    
    
    
    30,937
    
    
    
    29,881Total
    
    $
    1,181,496
    
    
    $
    1,134,148
    
    
    $
    986,423
   2005
    
    
    2004
    
    
    2003United States of America
    
    
    97.9
    %
    
    
    97.1
    %
    
    
    100.0
    %Canada
    
    
    1.0
    %
    
    
    2.1
    %
    
    
    All other countries
    
    
    1.1
    %
    
    
    0.8
    %
    
    
    




---



##### 




    
    The Public Utility Holding Company Act of 1935 (PUHCA) was repealed effective February
8, 2006. PUHCA significantly restricted mergers and acquisitions in the electric utility
sector.
    
    The FERC will appoint and oversee an electric reliability organization to establish
and enforce mandatory reliability rules regarding the interstate electric transmission
system.
    
    The FERC will establish incentives for transmission companies, such as
performance-based rates, recovery of costs to comply with reliability rules and
accelerated depreciation for investments in transmission infrastructure.
    
    The Price Anderson Amendments Act of 1988, which provides the framework for nuclear
liability protection, will be extended by 20 years to 2025.
    
    Federal support will be available for certain clean coal power initiatives, nuclear
power projects and renewable energy technologies.




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Regulatory assets:Deferred income taxes
    
    $
    16,724
    
    
    $
    14,526Reacquisition premiums
    
    
    2,995
    
    
    
    3,424Deferred conservation program costs
    
    
    1,064
    
    
    
    1,203Plant acquisition costs
    
    
    196
    
    
    
    240Deferred marked-to-market losses
    
    
    1,423
    
    
    
    331Accrued cost-of-energy revenue
    
    
    10,400
    
    
    
    3,348Accumulated ARO accretion/depreciation adjustment
    
    
    209
    
    
    
    114Total regulatory assets
    
    $
    33,011
    
    
    $
    23,186Regulatory liabilities:Accumulated reserve for estimated removal costs
    
    $
    52,582
    
    
    $
    49,823Deferred income taxes
    
    
    5,961
    
    
    
    6,727Deferred marked-to-market gains
    
    
    2,925
    
    
    
    197Gain on sale of division office building
    
    
    156
    
    
    
    162Total regulatory liabilities
    
    $
    61,624
    
    
    $
    56,909Net regulatory liability position
    
    $
    28,613
    
    
    $
    33,723
 Accounting for Income Taxes Unamortized debt expense and reacquisition premiums Accrued utility revenues




---



##### 



Electricity Contracts
   (in thousands)
    
    2005
    
    
    2004
    
    
    2003Wholesale sales  companyowned generation
    
    $
    24,799
    
    
    $
    17,970
    
    
    $
    18,600Revenue from settled contracts at market prices
    
    
    474,882
    
    
    
    134,715
    
    
    
    121,303Market cost of settled contracts
    
    
    (457,728
    )
    
    
    (128,685
    )
    
    
    (114,259
    )Net margins on settled contracts at market
    
    
    17,154
    
    
    
    6,030
    
    
    
    7,044Marked-to-market gains on settled contracts
    
    
    11,118
    
    
    
    12,663
    
    
    
    2,978Marked-to-market losses on settled contracts
    
    
    (9,590
    )
    
    
    (9,736
    )
    
    
    (977
    )Net marked-to-market gain
on settled contracts
    
    
    1,528
    
    
    
    2,927
    
    
    
    2,001Unrealized marked-to-market gains
on open contracts
    
    
    5,678
    
    
    
    514
    
    
    
    6,338Unrealized marked-to-market losses
on open contracts
    
    
    (2,762
    )
    
    
    (213
    )
    
    
    (4,281
    )Net unrealized marked-to-market gain
on open contracts
    
    
    2,916
    
    
    
    301
    
    
    
    2,057Wholesale electric revenue
    
    $
    46,397
    
    
    $
    27,228
    
    
    $
    29,702
  December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Current asset  marked-to-market gain
    
    $
    8,603
    
    
    $
    711Regulatory asset  deferred marked-to-market loss
    
    
    1,423
    
    
    
    331Total assets
    
    
    10,026
    
    
    
    1,042Current liability  marked-to-market loss
    
    
    (4,185
    )
    
    
    (544
    )Regulatory liability  deferred marked-to-market gain
    
    
    (2,925
    )
    
    
    (197
    )Total liabilities
    
    
    (7,110
    )
    
    
    (741
    )Net fair value of marked-to-market energy contracts
    
    $
    2,916
    
    
    $
    301




---



##### 



Year endedDecember 31,(in thousands)
    
    2005Fair value at beginning of year
    
    $
    301Amount realized on contracts entered into in 2004 and settled in 2005
    
    
    (322
    )Changes in fair value of contracts entered into in 2004
    
    
    21Net fair value of contracts entered into in 2004 at year end 2005
    
    
    Changes in fair value of contracts entered into in 2005
    
    
    2,916Net fair value at end of year
    
    $
    2,916
  1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter(in thousands)
    
    2006
    
    
    2006
    
    
    2006
    
    
    TotalNet gain
    
    $
    2,281
    
    
    $
    527
    
    
    $
    108
    
    
    $
    2,916
  Natural Gas Contracts
  Issues Involved in
Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities
  (in thousands)
    
    2005
    
    
    2004Gains on settled contracts
    
    $
    17,685
    
    
    $
    780Losses on settled contracts
    
    
    (18,161
    )
    
    
    (747
    )Net (loss) gain on settled contracts
    
    
    (476
    )
    
    
    33Unrealized gains on open contracts
    
    
    825
    
    
    
    1,834Unrealized losses on open contracts
    
    
    (851
    )
    
    
    (1,700
    )Net unrealized (loss) gain on open contracts
    
    
    (26
    )
    
    
    134Net revenue recognized
    
    $
    (502
    )
    
    $
    167




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Current asset  marked-to-market gain
    
    $
    825
    
    
    $
    1,834Current liability  marked-to-market loss
    
    
    (851
    )
    
    
    (1,700
    )Net fair value of marked-to-market gas contracts
    
    $
    (26
    )
    
    $
    134
 Year endedDecember 31,(in thousands)
    
    2005Fair value at beginning of year
    
    $
    134Amount realized on contracts entered into in 2004 and settled in 2005
    
    
    (134
    )Changes in fair value of contracts entered into in 2004
    
    
    Net fair value of contracts entered into in 2004 at year end 2005
    
    
    Changes in fair value of contracts entered into in 2005
    
    
    (26
    )Net fair value at end of year
    
    $
    (26
    )
   New Issuances
  Stock Incentive Plan




---



##### 



Stock Option Activity
    
    2005
    
    
    2004
    
    
    2003Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Averageexercise
    
    
    
    
    
    
    exercise
    
    
    
    
    
    
    exerciseOptions
    
    
    price
    
    
    Options
    
    
    price
    
    
    Options
    
    
    priceOutstanding,
beginning of year
    
    
    1,508,277
    
    
    $
    25.35
    
    
    
    1,531,125
    
    
    $
    25.16
    
    
    
    1,360,721
    
    
    $
    24.68Granted
    
    
    74,900
    
    
    
    24.93
    
    
    
    72,400
    
    
    
    26.50
    
    
    
    222,750
    
    
    
    27.24Exercised
    
    
    257,948
    
    
    
    22.90
    
    
    
    51,468
    
    
    
    19.83
    
    
    
    47,700
    
    
    
    20.21Forfeited
    
    
    88,065
    
    
    
    28.79
    
    
    
    43,780
    
    
    
    27.37
    
    
    
    4,646
    
    
    
    23.09Outstanding, year end
    
    
    1,237,164
    
    
    
    25.58
    
    
    
    1,508,277
    
    
    
    25.35
    
    
    
    1,531,125
    
    
    
    25.16Exercisable, year end
    
    
    1,095,272
    
    
    
    25.16
    
    
    
    1,111,681
    
    
    
    24.27
    
    
    
    791,661
    
    
    
    22.97Fair value of options
granted during year
    
    $
    4.76
    
    
    
    
    
    
    $
    5.27
    
    
    
    
    
    
    $
    5.42
  2005
    
    
    2004
    
    
    2003Risk-free interest rate
    
    
    4.3
    %
    
    
    3.9
    %
    
    
    3.7
    %Expected lives
    
    7 years
    
    
    7 years
    
    
    7 yearsExpected volatility
    
    
    25.4
    %
    
    
    25.7
    %
    
    
    26.3
    %Dividend yield
    
    
    4.4
    %
    
    
    4.0
    %
    
    
    4.0
    %
  Options outstanding
    
    
    Options exercisableWeighted-average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Outstanding
    
    
    remaining
    
    
    average
    
    
    Exercisable
    
    
    averageRange of
    
    as of
    
    
    contractual
    
    
    exercise
    
    
    as of
    
    
    exerciseexercise prices
    
    12/31/05
    
    
    life (yrs)
    
    
    price
    
    
    12/31/05
    
    
    price$18.80-$21.94
    
    
    308,890
    
    
    
    3.7
    
    
    $
    19.48
    
    
    
    308,890
    
    
    $
    19.48$21.95-$25.07
    
    
    66,400
    
    
    
    9.3
    
    
    $
    24.93
    
    
    
    66,400
    
    
    $
    24.93$25.08-$28.21
    
    
    624,250
    
    
    
    6.1
    
    
    $
    26.54
    
    
    
    536,750
    
    
    $
    26.42$28.22-$31.34
    
    
    237,624
    
    
    
    6.1
    
    
    $
    31.21
    
    
    
    183,232
    
    
    $
    31.17
    Maximum
    
    
    Amount of shares
    

    
    Amount ofshares
    
    
    expected to be awarded
    
    
    expense duringPerformance
    
    subject
    
    
    based on current
    
    
    the years endedPeriod
    
    to award
    
    
    stock performance
    
    
    December 31,2005
    
    
    20042005-2007
    
    
    75,150
    
    
    
    50,872
    
    
    $
    490,000
    
    
    
    2004-2006
    
    
    70,500
    
    
    
    23,500
    
    
    $
    453,000
    
    
    
    
 Employee Stock Purchase Plan




---



##### 



Dividend Reinvestment and Share Purchase Plan
 Shareholder Rights Plan
 Earnings Per Share




---



##### 



Electric
    
    
    Nonelectric
    
    
    Total(in thousands)2006
    
    $
    1,980
    
    
    $
    35,301
    
    
    $
    37,2812007
    
    
    1,699
    
    
    
    30,172
    
    
    
    31,8712008
    
    
    1,243
    
    
    
    25,688
    
    
    
    26,9312009
    
    
    1,243
    
    
    
    22,374
    
    
    
    23,6172010
    
    
    1,243
    
    
    
    12,125
    
    
    
    13,368Later years
    
    
    497
    
    
    
    2,705
    
    
    
    3,202Total
    
    $
    7,905
    
    
    $
    128,365
    
    
    $
    136,270
    Short-Term Debt




---



##### 



Long-Term
Debt
     Covenants
   Series outstanding
    
    Call price$3.60, 60,000 shares
    
    $
    102.25$4.40, 25,000 shares
    
    $
    102.00$4.65, 30,000 shares
    
    $
    101.50$6.75, 40,000 shares
    
    $
    102.70




---



##### 



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




---



##### 



2005
    
    
    2004(in thousands)Reconciliation of benefit obligation:Obligation at January 1
    
    $
    166,190
    
    
    $
    154,159Service cost
    
    
    4,695
    
    
    
    4,063Interest cost
    
    
    9,721
    
    
    
    9,458Benefit payments
    
    
    (8,567
    )
    
    
    (8,600
    )Plan amendments
    
    
    222
    
    
    
    Actuarial loss
    
    
    9,326
    
    
    
    7,110Obligation at December 31
    
    $
    181,587
    
    
    $
    166,190Reconciliation of fair value of plan assets:Fair value of plan assets at January 1
    
    $
    141,685
    
    
    $
    132,811Actual return on plan assets
    
    
    9,864
    
    
    
    13,474Discretionary company contributions
    
    
    4,000
    
    
    
    4,000Benefit payments
    
    
    (8,567
    )
    
    
    (8,600
    )Fair value of plan assets at December 31
    
    $
    146,982
    
    
    $
    141,685Funded status
    
    $
    (34,605
    )
    
    $
    (24,505
    )Unrecognized net actuarial loss
    
    
    38,777
    
    
    
    28,607Unrecognized prior service cost
    
    
    5,623
    
    
    
    6,127Net amount recognized
    
    $
    9,795
    
    
    $
    10,229
  2005
    
    
    2004(in thousands)Prepaid pension cost
    
    $
    9,795
    
    
    $
    10,229Additional minimum liability
    
    
    (13,380
    )
    
    
    Net pension asset/(liability)
    
    $
    (3,585
    )
    
    $
    10,229Intangible asset
    
    
    5,623
    
    
    
    Accumulated other comprehensive loss
    
    
    7,757
    
    
    
    Net amount recognized
    
    $
    9,795
    
    
    $
    10,229
  2005
    
    
    2004(in thousands)Projected benefit obligation
    
    $
    181,587
    
    
    $
    166,190Accumulated benefit obligation
    
    
    150,567
    
    
    
    137,682Fair value of plan assets
    
    
    146,982
    
    
    
    141,685
  2005
    
    
    2004
    
    
    2003(in thousands)Service costbenefit earned during the period
    
    $
    4,695
    
    
    $
    4,063
    
    
    $
    3,779Interest cost on projected benefit obligation
    
    
    9,721
    
    
    
    9,458
    
    
    
    9,491Expected return on assets
    
    
    (12,071
    )
    
    
    (12,438
    )
    
    
    (12,933
    )Amortization of prior-service cost
    
    
    726
    
    
    
    897
    
    
    
    1,170Amortization of net actuarial loss
    
    
    1,364
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    4,435
    
    
    $
    1,980
    
    
    $
    1,507
 Accumulated other comprehensive loss
  2005
    
    2004Discount rate
    
    
    5.75
    %
    
    
    6.00
    %Rate of increase in future compensation level
    
    
    3.75
    %
    
    
    3.75
    %




---



##### 



2005
    
    2004Discount rate (2005 is remeasurement composite rate)
    
    
    5.625
    %
    
    
    6.25
    %Long-term rate of return on plan assets
    
    
    8.50
    %
    
    
    8.50
    %Rate of increase in future compensation level
    
    
    3.75
    %
    
    
    3.75
    %
    Asset Allocation
    
    2005
    
    
    2004Large capitalization equity securities
    
    
    51.2
    %
    
    
    48.4
    %Small capitalization equity securities
    
    
    11.4
    %
    
    
    11.2
    %International equity securities
    
    
    9.8
    %
    
    
    14.7
    %Total equity securities
    
    
    72.4
    %
    
    
    74.3
    %Cash and fixed-income securities
    
    
    27.6
    %
    
    
    25.7
    %100.0
    %
    
    
    100.0
    %
  
    
    The Plan is managed to operate in perpetuity.
    
    The Plan will meet the pension benefit obligation payments of Otter Tail Corporation.
    
    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%
 Cash
Flows
 
  (in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years2006
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011-2015$8,601
    
    $
    8,687
    
    
    $
    8,834
    
    
    $
    9,013
    
    
    $
    9,183
    
    
    $
    52,747




---



##### 



Executive Survivor and Supplemental Retirement Plan (ESSRP)
    2005
    
    
    2004(in thousands)Reconciliation of benefit obligation:Obligation at January 1
    
    $
    23,123
    
    
    $
    24,451Service cost
    
    
    406
    
    
    
    820Interest cost
    
    
    1,267
    
    
    
    1,489Plan amendments
    
    
    (663
    )
    
    
    Actuarial loss (gain)
    
    
    232
    
    
    
    (2,543
    )Benefit payments
    
    
    (1,094
    )
    
    
    (1,094
    )Obligation at December 31
    
    $
    23,271
    
    
    $
    23,123Funded status:Funded status at December 31
    
    $
    (23,271
    )
    
    $
    (23,123
    )Unrecognized prior-service cost
    
    
    891
    
    
    
    1,626Unrecognized net actuarial loss
    
    
    8,471
    
    
    
    8,737Net amount recognized
    
    $
    (13,909
    )
    
    $
    (12,760
    )
  2005
    
    
    2004(in thousands)Accrued benefit liability
    
    $
    (19,631
    )
    
    $
    (16,703
    )Intangible asset
    
    
    891
    
    
    
    1,626Accumulated other comprehensive loss
    
    
    4,831
    
    
    
    2,317Net amount recognized
    
    $
    (13,909
    )
    
    $
    (12,760
    )
  2005
    
    
    2004(in thousands)Projected benefit obligation
    
    $
    23,271
    
    
    $
    23,123Accumulated benefit obligation
    
    
    19,631
    
    
    
    16,703Fair value of plan assets
    
    
    
    
    
    
    
  2005
    
    
    2004
    
    
    2003(in thousands)Service costbenefit earned during the period
    
    $
    406
    
    
    $
    820
    
    
    $
    417Interest cost on projected benefit obligation
    
    
    1,267
    
    
    
    1,489
    
    
    
    1,426Amortization of prior-service cost
    
    
    71
    
    
    
    147
    
    
    
    147Recognized net actuarial loss
    
    
    498
    
    
    
    680
    
    
    
    573Total
    
    $
    2,242
    
    
    $
    3,136
    
    
    $
    2,563




---



##### 



Accumulated other comprehensive loss
 Weighted-average assumptions used to determine benefit obligations at December 31:


2005
    
    2004Discount rate
    
    
    5.75
    %
    
    
    6.00
    %Rate of increase in future compensation level
    
    
    4.69
    %
    
    
    4.69
    %
 Weighted-average assumptions used to determine net periodic pension cost for the year ended December 31:


2005
    
    2004Discount rate (2005 is remeasurement composite rate)
    
    
    5.625
    %
    
    
    6.25
    %Rate of increase in future compensation level
    
    
    4.69
    %
    
    
    5.88
    %
 Cash
Flows
  (in thousands)
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    Years2006
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011-2015$1,132
    
    $
    1,128
    
    
    $
    1,114
    
    
    $
    1,120
    
    
    $
    1,116
    
    
    $
    6,326
 Other Postretirement Benefits Employers Accounting for Postretirement Benefits Other Than Pensions
 Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003
  2005
    
    
    2004(in thousands)Reconciliation of benefit obligation:Obligation at January 1
    
    $
    39,639
    
    
    $
    42,008Service cost
    
    
    1,172
    
    
    
    1,133Interest cost
    
    
    1,998
    
    
    
    2,271Benefit payments
    
    
    (3,112
    )
    
    
    (3,449
    )Participant premium payments
    
    
    1,320
    
    
    
    1,134Decrease due to Medicare Part D subsidy
    
    
    
    
    
    
    (4,935
    )Actuarial (gain) loss
    
    
    (4,260
    )
    
    
    1,477Obligation at December 31
    
    $
    36,757
    
    
    $
    39,639Funded status:Funded status at December 31
    
    $
    (36,757
    )
    
    $
    (39,639
    )Unrecognized transition obligation
    
    
    5,237
    
    
    
    5,985Unrecognized prior-service cost
    
    
    1,310
    
    
    
    1,005Unrecognized loss
    
    
    3,228
    
    
    
    7,596Net amount recognized
    
    $
    (26,982
    )
    
    $
    (25,053
    )
 Other postretirement benefits liability




---



##### 



2005
    
    
    2004
    
    
    2003(in thousands)Service cost
    
    $
    1,307
    
    
    $
    1,170
    
    
    $
    1,009Interest cost
    
    
    2,480
    
    
    
    2,580
    
    
    
    2,619Amortization of transition obligation
    
    
    748
    
    
    
    748
    
    
    
    748Amortization of prior-service cost
    
    
    (305
    )
    
    
    (305
    )
    
    
    (305
    )Amortization of net loss
    
    
    742
    
    
    
    702
    
    
    
    708Expense decrease due to Medicare Part D subsidy
    
    
    (1,251
    )
    
    
    (757
    )
    
    
    Net periodic postretirement benefit cost
    
    $
    3,721
    
    
    $
    4,138
    
    
    $
    4,779
 Weighted-average assumptions used to determine benefit obligations at December 31:

2005
    
    2004Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
 Weighted-average assumptions used to determine net periodic
postretirement benefit cost for the yearended December 31:


2005
    
    2004Discount rate (2005 is remeasurement composite rate)
    
    
    5.625
    %
    
    
    6.25
    %
  2005
    
    2004Healthcare cost-trend rate assumed for next year
    
    
    9.0
    %
    
    
    10.0
    %Rate at which the cost-trend rate is assumed to decline
    
    
    5.0
    %
    
    
    5.0
    %Year the rate reaches the ultimate trend rate
    
    
    2010
    
    
    
    2010
  1 point
    
    1 pointincrease
    
    decrease(in thousands)Effect on total of service and interest cost
    
    $
    516
    
    
    $
    (415
    )Effect on the postretirement benefit obligation
    
    $
    4,574
    
    
    $
    (3,808
    )
 Cash
Flows
  (in thousands)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years2006
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011-2015$2,380
    
    $
    2,488
    
    
    $
    2,549
    
    
    $
    2,610
    
    
    $
    2,593
    
    
    $
    14,127
  Leveraged Employee Stock Ownership Plan




---



##### 



Cash and Short-Term Investments
 Other Investments
 Long-Term Debt
 December 31, 2005
    
    December 31, 2004(in thousands)Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueCash and short-term investments
    
    $
    5,430
    
    
    $
    5,430
    
    
    $
    
    
    
    $
    Other investments
    
    
    8,702
    
    
    
    8,702
    
    
    
    14,450
    
    
    
    14,450Long-term debt
    
    
    (258,260
    )
    
    
    (273,456
    )
    
    
    (261,805
    )
    
    
    (294,020
    )
  2005
    
    
    2004(December 31, in thousands)Electric plant:Production
    
    $
    357,285
    
    
    $
    347,800Transmission
    
    
    182,502
    
    
    
    180,150Distribution
    
    
    296,301
    
    
    
    285,253General
    
    
    74,678
    
    
    
    76,997Electric plant
    
    
    910,766
    
    
    
    890,200Less accumulated depreciation and amortization
    
    
    374,786
    
    
    
    363,696Electric plant net of accumulated depreciation
    
    
    535,980
    
    
    
    526,504Construction work in progress
    
    
    12,449
    
    
    
    12,212Net electric plant
    
    $
    548,429
    
    
    $
    538,716Nonelectric operations plant
    
    $
    228,548
    
    
    $
    208,311Less accumulated depreciation and amortization
    
    
    84,652
    
    
    
    73,160Nonelectric plant net of accumulated depreciation
    
    
    143,896
    
    
    
    135,151Construction work in progress
    
    
    4,766
    
    
    
    6,257Net nonelectric operations plant
    
    $
    148,662
    
    
    $
    141,408Net plant
    
    $
    697,091
    
    
    $
    680,124
  Service Life Range(years)
    
    Low
    
    HighElectric fixed assets:Production plant
    
    
    34
    
    
    
    62Transmission plant
    
    
    40
    
    
    
    55Distribution plant
    
    
    15
    
    
    
    55General plant
    
    
    5
    
    
    
    65Nonelectric fixed assets
    
    
    3
    
    
    
    40




---



##### 



2005
    
    
    2004
    
    
    2003(in thousands)Tax computed at federal statutory rate
    
    $
    28,288
    
    
    $
    20,327
    
    
    $
    18,335Increases (decreases) in tax from:State income taxes net of federal income tax
    
    
    1,903
    
    
    
    1,815
    
    
    
    1,837Investment tax credit amortization
    
    
    (1,151
    )
    
    
    (1,152
    )
    
    
    (1,152
    )Differences reversing in excess of federal rates
    
    
    (15
    )
    
    
    (136
    )
    
    
    (1,283
    )Dividend received/paid deduction
    
    
    (703
    )
    
    
    (703
    )
    
    
    (707
    )Affordable housing tax credits
    
    
    (1,324
    )
    
    
    (1,418
    )
    
    
    (1,412
    )Permanent and other differences
    
    
    969
    
    
    
    (1,286
    )
    
    
    (1,456
    )Total income tax expense
    
    $
    27,967
    
    
    $
    17,447
    
    
    $
    14,162Income tax
expense  discontinued operations
    
    $
    5,610
    
    
    $
    1,040
    
    
    $
    768Overall effective federal and state income tax rate
    
    
    34.9
    %
    
    
    30.5
    %
    
    
    27.4
    %Income tax expense includes the following:Current federal income taxes
    
    $
    32,760
    
    
    $
    15,299
    
    
    $
    11,101Current state income taxes
    
    
    5,260
    
    
    
    2,923
    
    
    
    2,821Deferred federal income taxes
    
    
    (7,112
    )
    
    
    1,776
    
    
    
    2,809Deferred state income taxes
    
    
    (899
    )
    
    
    194
    
    
    
    (5
    )Affordable housing tax credits
    
    
    (1,324
    )
    
    
    (1,418
    )
    
    
    (1,412
    )Investment tax credit amortization
    
    
    (1,151
    )
    
    
    (1,152
    )
    
    
    (1,152
    )Foreign income taxes
    
    
    433
    
    
    
    (175
    )
    
    
    Total
    
    $
    27,967
    
    
    $
    17,447
    
    
    $
    14,162
  2005
    
    
    2004(in thousands)Deferred tax assetsAmortization of tax credits
    
    $
    5,964
    
    
    $
    6,698Vacation accrual
    
    
    2,432
    
    
    
    2,191Unearned revenue
    
    
    2,803
    
    
    
    2,095Benefit liabilities
    
    
    29,657
    
    
    
    20,882Cost of removal
    
    
    20,507
    
    
    
    19,431Differences related to property
    
    
    7,400
    
    
    
    6,565Transfer to regulatory liability
    
    
    
    
    
    
    31Other
    
    
    3,689
    
    
    
    2,853Total deferred tax assets
    
    $
    72,452
    
    
    $
    60,746Deferred tax liabilitiesDifferences related to property
    
    $
    (154,833
    )
    
    $
    (155,175
    )Excess tax over book pension
    
    
    (3,861
    )
    
    
    (4,041
    )Transfer to regulatory asset
    
    
    (16,724
    )
    
    
    (14,528
    )Other
    
    
    (3,900
    )
    
    
    (3,451
    )Total deferred tax liabilities
    
    $
    (179,318
    )
    
    $
    (177,195
    )Deferred income taxes
    
    $
    (106,866
    )
    
    $
    (116,449
    )
  Accounting for the Impairment or Disposal of Long-Lived Assets




---



##### 



2005(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    3,773
    
    
    $
    6,564
    
    
    $
    6,112
    
    
    $
    16,449Income (loss) before income taxes
    
    
    2,167
    
    
    
    (1,740
    )
    
    
    (956
    )
    
    
    (529
    )Gain (loss) on disposition  pretax
    
    
    19,025
    
    
    
    (2,919
    )
    
    
    (271
    )
    
    
    15,835Income tax expense (benefit)
    
    
    7,975
    
    
    
    (1,863
    )
    
    
    (502
    )
    
    
    5,610
 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    8,739
    
    
    $
    17,209
    
    
    $
    7,753
    
    
    $
    33,701Income (loss) before income taxes
    
    
    3,698
    
    
    
    (932
    )
    
    
    (163
    )
    
    
    2,603Income tax expense (benefit)
    
    
    1,483
    
    
    
    (371
    )
    
    
    (72
    )
    
    
    1,040
 2003(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    8,547
    
    
    $
    12,160
    
    
    $
    8,244
    
    
    $
    28,951Income (loss) before income taxes
    
    
    3,408
    
    
    
    (938
    )
    
    
    (271
    )
    
    
    2,199Income tax expense (benefit)
    
    
    1,367
    
    
    
    (383
    )
    
    
    (216
    )
    
    
    768
  December 31, 2005
    
    
    December 31, 2004(in thousands)
    
    SGS
    
    
    CLC
    
    
    Total
    
    
    MIS
    
    
    SGS
    
    
    CLC
    
    
    TotalCurrent assets
    
    $
    857
    
    
    $
    1,455
    
    
    $
    2,312
    
    
    $
    275
    
    
    $
    9,344
    
    
    $
    3,092
    
    
    $
    12,711Investments and other assets
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    2,270
    
    
    
    
    
    
    
    5
    
    
    
    2,275Goodwillnet
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,925
    
    
    
    
    
    
    
    
    
    
    
    5,925Other intangiblesnet
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    74
    
    
    
    92Net plant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,960
    
    
    
    1,618
    
    
    
    356
    
    
    
    9,934Assets of discontinued operations
    
    $
    857
    
    
    $
    1,460
    
    
    $
    2,317
    
    
    $
    16,430
    
    
    $
    10,980
    
    
    $
    3,527
    
    
    $
    30,937Current liabilities
    
    $
    328
    
    
    $
    44
    
    
    $
    372
    
    
    $
    2,920
    
    
    $
    2,228
    
    
    $
    837
    
    
    $
    5,985Deferred credits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    581
    
    
    
    271
    
    
    
    33
    
    
    
    885Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,710
    
    
    
    
    
    
    
    5
    
    
    
    1,715Liabilities of discontinued operations
    
    $
    328
    
    
    $
    44
    
    
    $
    372
    
    
    $
    5,211
    
    
    $
    2,499
    
    
    $
    875
    
    
    $
    8,585
    Other
noncurrent liabilities




---



##### 



Three Months EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 312005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(in thousands, except per share data)Operating revenues (a)
    
    $
    232,133
    
    
    $
    199,583
    
    
    $
    256,378
    
    
    $
    203,457
    
    
    $
    272,658
    
    
    $
    214,719
    
    
    $
    285,239
    
    
    $
    239,603Operating income (a)
    
    
    21,067
    
    
    
    16,202
    
    
    
    20,868
    
    
    
    15,071
    
    
    
    32,356
    
    
    
    20,073
    
    
    
    23,303
    
    
    
    24,068Net Income:Continuing operations
    
    
    11,050
    
    
    
    8,258
    
    
    
    10,967
    
    
    
    7,808
    
    
    
    18,080
    
    
    
    10,669
    
    
    
    12,758
    
    
    
    13,897Discontinued operations
    
    
    (1,079
    )
    
    
    1
    
    
    
    11,337
    
    
    
    224
    
    
    
    (477
    )
    
    
    357
    
    
    
    (85
    )
    
    
    9819,971
    
    
    
    8,259
    
    
    
    22,304
    
    
    
    8,032
    
    
    
    17,603
    
    
    
    11,026
    
    
    
    12,673
    
    
    
    14,878Earnings available for common shares:Continuing operations
    
    
    10,866
    
    
    
    8,074
    
    
    
    10,784
    
    
    
    7,624
    
    
    
    17,895
    
    
    
    10,485
    
    
    
    12,575
    
    
    
    13,713Discontinued operations
    
    
    (1,079
    )
    
    
    1
    
    
    
    11,337
    
    
    
    224
    
    
    
    (477
    )
    
    
    357
    
    
    
    (85
    )
    
    
    9819,787
    
    
    
    8,075
    
    
    
    22,121
    
    
    
    7,848
    
    
    
    17,418
    
    
    
    10,842
    
    
    
    12,490
    
    
    
    14,694Basic earnings per share:Continuing operations
    
    $
    .37
    
    
    $
    .31
    
    
    $
    .37
    
    
    $
    .29
    
    
    $
    .61
    
    
    $
    .40
    
    
    $
    .43
    
    
    $
    .51Discontinued operations
    
    
    (.03
    )
    
    
    
    
    
    
    .39
    
    
    
    .01
    
    
    
    (.01
    )
    
    
    .02
    
    
    
    
    
    
    
    .04.34
    
    
    
    .31
    
    
    
    .76
    
    
    
    .30
    
    
    
    .60
    
    
    
    .42
    
    
    
    .43
    
    
    
    .55Diluted earnings per share:Continuing operations
    
    $
    .37
    
    
    $
    .31
    
    
    $
    .37
    
    
    $
    .29
    
    
    $
    .61
    
    
    $
    .40
    
    
    $
    .42
    
    
    $
    .51Discontinued operations
    
    
    (.04
    )
    
    
    
    
    
    
    .39
    
    
    
    .01
    
    
    
    (.02
    )
    
    
    .02
    
    
    
    
    
    
    
    .04.33
    
    
    
    .31
    
    
    
    .76
    
    
    
    .30
    
    
    
    .59
    
    
    
    .42
    
    
    
    .42
    
    
    
    .55Dividends paid per common share
    
    
    .28
    
    
    
    .275
    
    
    
    .28
    
    
    
    .275
    
    
    
    .28
    
    
    
    .275
    
    
    
    .28
    
    
    
    .275Price range:High
    
    $
    25.87
    
    
    $
    27.50
    
    
    $
    27.77
    
    
    $
    27.19
    
    
    $
    31.95
    
    
    $
    26.96
    
    
    $
    31.95
    
    
    $
    27.36Low
    
    
    24.17
    
    
    
    26.00
    
    
    
    24.02
    
    
    
    24.07
    
    
    
    27.20
    
    
    
    23.77
    
    
    
    26.76
    
    
    
    24.99Average number of common shares
outstandingbasic
    
    
    29,126
    
    
    
    25,793
    
    
    
    29,158
    
    
    
    25,891
    
    
    
    29,246
    
    
    
    26,010
    
    
    
    29,361
    
    
    
    26,663Average number of common shares
outstandingdiluted
    
    
    29,230
    
    
    
    25,936
    
    
    
    29,264
    
    
    
    26,014
    
    
    
    29,441
    
    
    
    26,122
    
    
    
    29,555
    
    
    
    26,780
 
 (a)
    
    From continuing operations.




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