##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
file number 0-368
 OTTER TAIL CORPORATION
 
  Minnesota
    
    41-0462685(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 215 South Cascade Street, Box 496, Fergus Falls, Minnesota
    
    56538-0496(Address of principal executive offices)
    
    (Zip Code)
  
  
  þ o
 þ o
  July 31, 2005  29,219,279 Common Shares ($5 par value)




---



OTTER
TAIL CORPORATION
 INDEX
 Page No.Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets  June 30, 2005
and December 31, 2004 (not audited)
    
    
    2 & 3Consolidated Statements of Income  Three and Six Months
Ended June 30, 2005 and 2004 (not audited)
    
    
    4Consolidated Statements of Cash Flows  Six Months Ended June 30, 2005 and 2004
(not audited)
    
    
    5Notes to Consolidated Financial Statements (not audited)
    
    
    6-18Item 2. Managements Discussion and Analysis of Financial
 Condition and Results of Operations
    
    
    19-35Item 3. Quantitative and Qualitative Disclosures about
 Market Risk
    
    
    35-38Item 4. Controls and Procedures
    
    
    38Part II. Other InformationItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    39Item 6. Exhibits
    
    
    40Signatures
    
    
    41Big Stone II Power Plant Participation AgreementBig Stone II Power Plant Operation & Maintenance Services AgreementBig Stone I and Big Stone II 2005 Joint Facilities AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




---



##### Table of Contents



PART
I. FINANCIAL INFORMATION
 
 Item 1.
Financial Statements
 Otter Tail Corporation
 
 Consolidated Balance Sheets   -Assets-
 June 30,
    
    December 31,2005
    
    2004(Thousands of dollars)Current assetsCash and cash equivalents
    
    $
    16,179
    
    
    $

    Accounts receivable:Tradenet
    
    
    120,232
    
    
    
    116,141Other
    
    
    9,634
    
    
    
    9,872Inventories
    
    
    95,808
    
    
    
    72,504Deferred income taxes
    
    
    4,875
    
    
    
    4,852Accrued utility revenues
    
    
    19,699
    
    
    
    15,344Costs and estimated earnings in excess of billings
    
    
    25,120
    
    
    
    18,145Other
    
    
    16,545
    
    
    
    7,800Assets held for sale from discontinued operations
    
    
    9,938
    
    
    
    30,937Total current assets
    
    
    318,030
    
    
    
    275,595Investments and other assets
    
    
    45,985
    
    
    
    42,650Goodwillnet
    
    
    97,970
    
    
    
    92,196Other intangiblesnet
    
    
    21,549
    
    
    
    19,600Deferred debitsUnamortized debt expense and reacquisition premiums
    
    
    6,828
    
    
    
    7,291Regulatory assets and other deferred debits
    
    
    17,046
    
    
    
    16,692Total deferred debits
    
    
    23,874
    
    
    
    23,983PlantElectric plant in service
    
    
    894,398
    
    
    
    890,200Nonelectric operations
    
    
    216,045
    
    
    
    208,311Total plant
    
    
    1,110,443
    
    
    
    1,098,511Less accumulated depreciation and amortization
    
    
    449,240
    
    
    
    436,856Plantnet of accumulated depreciation and amortization
    
    
    661,203
    
    
    
    661,655Construction work in progress
    
    
    22,920
    
    
    
    18,469Net plant
    
    
    684,123
    
    
    
    680,124Total
    
    $
    1,191,531
    
    
    $
    1,134,148
  - 2 -




---



##### Table of Contents



Otter Tail Corporation
 Consolidated Balance Sheets   -Liabilities-
 June 30,
    
    December 31,2005
    
    2004(Thousands of dollars)Current liabilitiesShort-term debt
    
    $
    78,000
    
    
    $
    39,950Current maturities of long-term debt
    
    
    4,834
    
    
    
    6,016Accounts payable
    
    
    75,294
    
    
    
    84,433Accrued salaries and wages
    
    
    15,524
    
    
    
    17,330Accrued federal and state income taxes
    
    
    19,311
    
    
    
    3,700Other accrued taxes
    
    
    9,535
    
    
    
    11,391Other accrued liabilities
    
    
    12,335
    
    
    
    10,417Liabilities from discontinued operations
    
    
    1,835
    
    
    
    8,585Total current liabilities
    
    
    216,668
    
    
    
    181,822Pensions benefit liability
    
    
    18,652
    
    
    
    16,703Other postretirement benefits liability
    
    
    25,957
    
    
    
    25,053Other noncurrent liabilities
    
    
    13,719
    
    
    
    11,874Deferred creditsDeferred income taxes
    
    
    119,084
    
    
    
    121,301Deferred investment tax credit
    
    
    9,901
    
    
    
    10,477Regulatory liabilities
    
    
    58,020
    
    
    
    56,909Other
    
    
    4,587
    
    
    
    1,662Total deferred credits
    
    
    191,592
    
    
    
    190,349CapitalizationLong-term debt, net of current maturities
    
    
    259,615
    
    
    
    261,805Class B stock options of subsidiary
    
    
    1,271
    
    
    
    1,832Class B stock of subsidiary
    
    
    728
    
    
    
    Cumulative preferred shares
authorized 1,500,000 shares without par value;
outstanding 2004 and 2003  155,000 shares
    
    
    15,500
    
    
    
    15,500Cumulative preference shares  authorized 1,000,000
shares without par value; outstanding  none
    
    
    
    
    
    
    Common shares, par value $5 per share
authorized 50,000,000 shares;
outstanding 2005  29,170,703 and 2004  28,976,919
    
    
    145,854
    
    
    
    144,885Premium on common shares
    
    
    91,233
    
    
    
    87,865Unearned compensation
    
    
    (2,351
    )
    
    
    (2,577
    )Retained earnings
    
    
    215,011
    
    
    
    199,427Accumulated other comprehensive loss
    
    
    (1,918
    )
    
    
    (390
    )Total common equity
    
    
    447,829
    
    
    
    429,210Total capitalization
    
    
    724,943
    
    
    
    708,347Total
    
    $
    1,191,531
    
    
    $
    1,134,148
  - 3 -




---



##### Table of Contents



Otter Tail Corporation
 
 Consolidated Statements of Income
 Three months ended
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, except share
    
    (In thousands, except shareand per share amounts)
    
    and per share amounts)Operating revenues
    
    $
    256,378
    
    
    $
    203,457
    
    
    $
    488,511
    
    
    $
    403,040Operating expensesProduction fuel
    
    
    10,549
    
    
    
    11,193
    
    
    
    25,726
    
    
    
    25,790Purchased power  system use
    
    
    19,904
    
    
    
    9,903
    
    
    
    31,442
    
    
    
    20,825Electric operation and maintenance expenses
    
    
    25,334
    
    
    
    22,202
    
    
    
    49,252
    
    
    
    43,479Cost of goods sold (excludes depreciation; included below)
    
    
    140,042
    
    
    
    110,941
    
    
    
    263,676
    
    
    
    213,958Other nonelectric expenses
    
    
    25,720
    
    
    
    21,259
    
    
    
    48,461
    
    
    
    41,831Depreciation and amortization
    
    
    11,553
    
    
    
    10,529
    
    
    
    22,938
    
    
    
    21,036Property taxes  electric operations
    
    
    2,408
    
    
    
    2,359
    
    
    
    5,081
    
    
    
    4,848Total operating expenses
    
    
    235,510
    
    
    
    188,386
    
    
    
    446,576
    
    
    
    371,767Operating income
    
    
    20,868
    
    
    
    15,071
    
    
    
    41,935
    
    
    
    31,273Other income
    
    
    215
    
    
    
    755
    
    
    
    409
    
    
    
    766Interest charges
    
    
    4,841
    
    
    
    4,324
    
    
    
    9,407
    
    
    
    8,709Income from continuing operations before income taxes
    
    
    16,242
    
    
    
    11,502
    
    
    
    32,937
    
    
    
    23,330Income taxes  continuing operations
    
    
    5,275
    
    
    
    3,694
    
    
    
    10,920
    
    
    
    7,264Income from continuing operations
    
    
    10,967
    
    
    
    7,808
    
    
    
    22,017
    
    
    
    16,066Discontinued operations(Loss) income from discontinued operations net of taxes of
($96); $149; $237 and $153 for the respective periods
    
    
    (149
    )
    
    
    224
    
    
    
    348
    
    
    
    225Net gain on disposition of discontinued operations  net of taxes of
$6,820 and $5,769 for the three and six months ended June 30, 2005
    
    
    11,486
    
    
    
    
    
    
    
    9,910
    
    
    
    Net income from discontinued operations
    
    
    11,337
    
    
    
    224
    
    
    
    10,258
    
    
    
    225Net income
    
    
    22,304
    
    
    
    8,032
    
    
    
    32,275
    
    
    
    16,291Preferred dividend requirements
    
    
    183
    
    
    
    184
    
    
    
    367
    
    
    
    368Earnings available for common shares
    
    $
    22,121
    
    
    $
    7,848
    
    
    $
    31,908
    
    
    $
    15,923Basic earnings per common share:Continuing operations (net of preferred dividend requirement)
    
    $
    0.37
    
    
    $
    0.29
    
    
    $
    0.74
    
    
    $
    0.61Discontinued operations
    
    $
    0.39
    
    
    $
    0.01
    
    
    $
    0.35
    
    
    $
    0.01$
    0.76
    
    
    $
    0.30
    
    
    $
    1.09
    
    
    $
    0.62Diluted earnings per common share:Continuing operations (net of preferred dividend requirement)
    
    $
    0.37
    
    
    $
    0.29
    
    
    $
    0.74
    
    
    $
    0.60Discontinued operations
    
    $
    0.39
    
    
    $
    0.01
    
    
    $
    0.35
    
    
    $
    0.01$
    0.76
    
    
    $
    0.30
    
    
    $
    1.09
    
    
    $
    0.61Average number of common shares outstanding  basic
    
    
    29,158,140
    
    
    
    25,891,440
    
    
    
    29,142,118
    
    
    
    25,842,241Average number of common shares outstanding  diluted
    
    
    29,263,643
    
    
    
    26,013,519
    
    
    
    29,244,698
    
    
    
    25,969,648Dividends per common share
    
    $
    0.280
    
    
    $
    0.275
    
    
    $
    0.560
    
    
    $
    0.550
  - 4 -




---



##### Table of Contents



Otter Tail Corporation
 
 Consolidated Statements of Cash Flows
 Six months endedJune 30,2005
    
    2004(Thousands of dollars)Cash flows from operating activitiesNet income
    
    $
    32,275
    
    
    $
    16,291Adjustments to reconcile net income to net cash
provided by operating activities:Net gain from sale of discontinued operations
    
    
    (9,910
    )
    
    
    Income from discontinued operations
    
    
    (348
    )
    
    
    (225
    )Depreciation and amortization
    
    
    22,938
    
    
    
    21,037Deferred investment tax credit
    
    
    (576
    )
    
    
    (576
    )Deferred income taxes
    
    
    (3,985
    )
    
    
    1,194Change in deferred debits and other assets
    
    
    3,766
    
    
    
    401Discretionary contribution to pension plan
    
    
    (4,000
    )
    
    
    (2,000
    )Change in noncurrent liabilities and deferred credits
    
    
    5,750
    
    
    
    2,594Allowance for equity (other) funds used during construction
    
    
    (357
    )
    
    
    (390
    )Change in derivatives net of regulatory deferral
    
    
    (736
    )
    
    
    (729
    )Other  net
    
    
    825
    
    
    
    988Cash (used for) provided by current assets and current liabilities:Change in receivables
    
    
    (3,198
    )
    
    
    3,409Change in inventories
    
    
    (20,414
    )
    
    
    (6,390
    )Change in other current assets
    
    
    (17,625
    )
    
    
    (6,466
    )Change in payables and other current liabilities
    
    
    (9,329
    )
    
    
    (15,328
    )Change in interest and income taxes payable
    
    
    8,214
    
    
    
    3,097Net cash provided by continuing operations
    
    
    3,290
    
    
    
    16,907Net cash (used in) provided by discontinued operations
    
    
    (878
    )
    
    
    1,456Net cash provided by operating activities
    
    
    2,412
    
    
    
    18,363Cash flows from investing activitiesCapital expenditures
    
    
    (27,145
    )
    
    
    (21,412
    )Proceeds from disposal of noncurrent assets
    
    
    3,503
    
    
    
    2,672Acquisitionsnet of cash acquired
    
    
    (10,661
    )
    
    
    (393
    )Increases in other investments
    
    
    (2,269
    )
    
    
    (1,923
    )Net cash used in investing activities  continuing operations
    
    
    (36,572
    )
    
    
    (21,056
    )Net proceeds from the sales of discontinued operations
    
    
    33,685
    
    
        Net cash provided by (used in) investing activities  discontinued operations
    
    
    558
    
    
    
    (227
    )Net cash used in investing activities
    
    
    (2,329
    )
    
    
    (21,283
    )Cash flows from financing activitiesChange in checks written in excess of cash
    
    
    (3,329
    )
    
    
    5,893Net short-term borrowings
    
    
    38,050
    
    
    
    4,000Proceeds from issuance of common stock, net of issuance expenses
    
    
    4,820
    
    
    
    5,229Payments for retirement of common stock
    
    
    (365
    )
    
    
    (345
    )Proceeds from issuance of long-term debt, net of issuance expenses
    
    
    157
    
    
    
    392Payments for retirement of long-term debt
    
    
    (3,948
    )
    
    
    (4,242
    )Dividends paid and other distributions
    
    
    (16,691
    )
    
    
    (14,576
    )Net cash provided by (used in) financing activities  continuing operations
    
    
    18,694
    
    
    
    (3,649
    )Net cash used in financing activities  discontinued operations
    
    
    (2,781
    )
    
    
    (1,141
    )Net cash provided by (used in) financing activities
    
    
    15,913
    
    
    
    (4,790
    )Effect of foreign exchange rate fluctuations on cash
    
    
    183
    
    
    
    Net change in cash and cash equivalents
    
    
    16,179
    
    
    
    (7,710
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    7,710Cash and cash equivalents at end of period
    
    $
    16,179
    
    
    $
    Supplemental cash flow informationCash paid during the year from continuing operations for:Interest (net of amount capitalized)
    
    $
    8,779
    
    
    $
    7,937Income taxes
    
    $
    3,286
    
    
    $
    3,229Cash paid during the year from discontinued operations for:Interest (net of amount capitalized)
    
    $
    67
    
    
    $
    59Income taxes
    
    $
    2,461
    
    
    $
    467
  - 5 -




---



##### Table of Contents



OTTER TAIL CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Acquisitions
     6




---



##### Table of Contents



Performance
    
    Shoreline
    
    Southeast(in thousands)
    
    Tool
    
    Industries
    
    Floating DocksAssetsCurrent assets
    
    $
    748
    
    
    $
    457
    
    
    $
    2,519Plant
    
    
    1,396
    
    
    
    260
    
    
    
    415Goodwill
    
    
    1,794
    
    
    
    1,509
    
    
    
    2,722Other intangible assets
    
    
    800
    
    
    
    557
    
    
    
    1,150Total assets
    
    $
    4,738
    
    
    $
    2,783
    
    
    $
    6,806Liabilities and equityCurrent liabilities
    
    $
    324
    
    
    $
    86
    
    
    $
    318Deferred revenue
    
    
    
    
    
    
    
    
    
    
    2,520Deferred income taxes
    
    
    
    
    
    
    295
    
    
    
    Long-term debt
    
    
    298
    
    
    
    
    
    
    
    Total liabilities
    
    $
    622
    
    
    $
    381
    
    
    $
    2,838Cash paid
    
    $
    4,116
    
    
    $
    2,402
    
    
    $
    3,968
  Revenue Recognition
   7




---



##### Table of Contents



June 30,
    
    December 31,(in thousands)
    
    2005
    
    2004Costs incurred on uncompleted contracts
    
    $
    129,615
    
    
    $
    99,213Less billings to date
    
    
    (121,836
    )
    
    
    (96,413
    )Plus estimated earnings recognized
    
    
    12,712
    
    
    
    12,469$
    20,491
    
    
    $
    15,269
  June 30,
    
    December 31,(in thousands)
    
    2005
    
    2004Costs and estimated earnings in excess of billings on uncompleted contracts
    
    $
    25,120
    
    
    $
    18,145Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (4,629
    )
    
    
    (2,876
    )$
    20,491
    
    
    $
    15,269
  Stock-based compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
  8




---



##### Table of Contents



Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Net incomeAs reported
    
    $
    22,304
    
    
    $
    8,032
    
    
    $
    32,275
    
    
    $
    16,291Total stock-based employee compensation
expense determined under fair value
based method for all awards net of
related tax effects
    
    
    (177
    )
    
    
    (330
    )
    
    
    (283
    )
    
    
    (544
    )Pro forma
    
    $
    22,127
    
    
    $
    7,702
    
    
    $
    31,992
    
    
    $
    15,747Basic earnings per shareAs reported
    
    $
    0.76
    
    
    $
    0.30
    
    
    $
    1.09
    
    
    $
    0.62Pro forma
    
    $
    0.75
    
    
    $
    0.29
    
    
    $
    1.09
    
    
    $
    0.60Diluted earnings per shareAs reported
    
    $
    0.76
    
    
    $
    0.30
    
    
    $
    1.09
    
    
    $
    0.61Pro forma
    
    $
    0.75
    
    
    $
    0.29
    
    
    $
    1.08
    
    
    $
    0.59
 Adjustments and Reclassifications
 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
  .
 9




---



##### Table of Contents



Inventories
  June 30,
    
    December 31,(in thousands)
    
    2005
    
    2004Finished goods
    
    $
    43,197
    
    
    $
    34,081Work in process
    
    
    6,705
    
    
    
    3,733Raw material, fuel and supplies
    
    
    45,906
    
    
    
    34,690$
    95,808
    
    
    $
    72,504
 Goodwill and Other Intangible Assets
   June 30, 2005
    
    December 31, 2004Gross
    
    
    
    
    
    Net
    
    Gross
    
    
    
    
    
    Netcarrying
    
    Accumulated
    
    carrying
    
    carrying
    
    Accumulated
    
    carrying(in thousands)
    
    amount
    
    amortization
    
    amount
    
    amount
    
    amortization
    
    amountAmortized intangible assets:Covenants not to compete
    
    $
    2,337
    
    
    $
    1,483
    
    
    $
    854
    
    
    $
    1,966
    
    
    $
    1,334
    
    
    $
    632Customer relationships
    
    
    10,544
    
    
    
    364
    
    
    
    10,180
    
    
    
    10,045
    
    
    
    148
    
    
    
    9,897Other intangible assets including
contracts
    
    
    2,696
    
    
    
    1,500
    
    
    
    1,196
    
    
    
    2,523
    
    
    
    1,387
    
    
    
    1,136Total
    
    $
    15,577
    
    
    $
    3,347
    
    
    $
    12,230
    
    
    $
    14,534
    
    
    $
    2,869
    
    
    $
    11,665Non-amortized intangible assets:Brand/trade name
    
    $
    9,319
    
    
    $
    
    
    
    $
    9,319
    
    
    $
    7,935
    
    
    $
    
    
    
    $
    7,935
  New Accounting Standards
 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
 10




---



##### Table of Contents



FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, (FIN 47) Accounting for 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,
 Segment Information
   11




---



##### Table of Contents



Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Electric
    
    $
    74,150
    
    
    $
    60,449
    
    
    $
    147,633
    
    
    $
    133,304Plastics
    
    
    36,004
    
    
    
    32,636
    
    
    
    68,159
    
    
    
    59,072Manufacturing
    
    
    67,858
    
    
    
    50,399
    
    
    
    123,387
    
    
    
    92,213Health services
    
    
    31,324
    
    
    
    26,597
    
    
    
    59,122
    
    
    
    52,273Food ingredient processing
    
    
    8,234
    
    
    
    
    
    
    
    17,489
    
    
    
    Other business operations
    
    
    39,707
    
    
    
    33,906
    
    
    
    74,604
    
    
    
    67,421Intersegment eliminations
    
    
    (899
    )
    
    
    (530
    )
    
    
    (1,883
    )
    
    
    (1,243
    )Total
    
    $
    256,378
    
    
    $
    203,457
    
    
    $
    488,511
    
    
    $
    403,040
 12




---



##### Table of Contents



Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Electric
    
    $
    7,750
    
    
    $
    7,072
    
    
    $
    19,555
    
    
    $
    22,218Plastics
    
    
    3,950
    
    
    
    3,827
    
    
    
    8,357
    
    
    
    4,899Manufacturing
    
    
    7,528
    
    
    
    3,681
    
    
    
    9,219
    
    
    
    4,188Health services
    
    
    2,035
    
    
    
    321
    
    
    
    3,384
    
    
    
    524Food ingredient processing
    
    
    410
    
    
    
    
    
    
    
    1,609
    
    
    
    Other business operations
    
    
    (5,431
    )
    
    
    (3,399
    )
    
    
    (9,187
    )
    
    
    (8,499
    )Total
    
    $
    16,242
    
    
    $
    11,502
    
    
    $
    32,937
    
    
    $
    23,330
 Identifiable Assets
 June 30,
    
    December 31,(in thousands)
    
    2005
    
    2004Electric
    
    $
    636,113
    
    
    $
    634,433Plastics
    
    
    73,532
    
    
    
    67,574Manufacturing
    
    
    189,311
    
    
    
    150,800Health services
    
    
    66,556
    
    
    
    66,506Food ingredient processing
    
    
    94,504
    
    
    
    92,392Other business operations
    
    
    121,577
    
    
    
    91,506Discontinued operations
    
    
    9,938
    
    
    
    30,937Total
    
    $
    1,191,531
    
    
    $
    1,134,148
   Discontinued Operations
  13




---



##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived
Assets
  Three months ended
    
    Three months endedJune 30, 2005
    
    June 30, 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    1,729
    
    
    $
    1,459
    
    
    $
    2,067
    
    
    $
    5,255
    
    
    $
    2,093
    
    
    $
    3,624
    
    
    $
    2,034
    
    
    $
    7,751Income/(loss) before income taxes
    
    
    897
    
    
    
    (1,179
    )
    
    
    37
    
    
    
    (245
    )
    
    
    834
    
    
    
    (438
    )
    
    
    (23
    )
    
    
    373Gain/(loss) on disposition  pretax
    
    
    19,025
    
    
    
    (419
    )
    
    
    (300
    )
    
    
    18,306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense/(benefit)
    
    
    7,467
    
    
    
    (639
    )
    
    
    (104
    )
    
    
    6,724
    
    
    
    333
    
    
    
    (175
    )
    
    
    (9
    )
    
    
    149
 Six months ended
    
    Six months endedJune 30, 2005
    
    June 30, 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    3,773
    
    
    $
    6,329
    
    
    $
    3,772
    
    
    $
    13,874
    
    
    $
    4,070
    
    
    $
    6,579
    
    
    $
    4,104
    
    
    $
    14,753Income/(loss) before income taxes
    
    
    2,167
    
    
    
    (1,563
    )
    
    
    (19
    )
    
    
    585
    
    
    
    1,569
    
    
    
    (1,089
    )
    
    
    (102
    )
    
    
    378Gain/(loss) on disposition  pretax
    
    
    19,025
    
    
    
    (3,046
    )
    
    
    (300
    )
    
    
    15,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense/(benefit)
    
    
    7,975
    
    
    
    (1,843
    )
    
    
    (126
    )
    
    
    6,006
    
    
    
    628
    
    
    
    (435
    )
    
    
    (40
    )
    
    
    153
  Quarter Ended September 30, 2004
    
    Quarter Ended December 31, 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalOperating revenues
    
    $
    2,157
    
    
    $
    3,806
    
    
    $
    1,580
    
    
    $
    7,543
    
    
    $
    2,512
    
    
    $
    6,823
    
    
    $
    2,069
    
    
    $
    11,404Income/(loss) before income
taxes
    
    
    881
    
    
    
    (165
    )
    
    
    (125
    )
    
    
    591
    
    
    
    1,247
    
    
    
    322
    
    
    
    65
    
    
    
    1,634Income tax expense/(benefit)
    
    
    352
    
    
    
    (65
    )
    
    
    (53
    )
    
    
    234
    
    
    
    503
    
    
    
    129
    
    
    
    21
    
    
    
    653
  June 30, 2005
    
    December 31, 2004(in thousands)
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalCurrent assets
    
    $
    6,221
    
    
    $
    3,356
    
    
    $
    9,577
    
    
    $
    275
    
    
    $
    9,344
    
    
    $
    3,092
    
    
    $
    12,711Investments and other assets
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    2,270
    
    
    
    
    
    
    
    5
    
    
    
    2,275Goodwillnet
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    5,925
    
    
    
    
    
    
    
    
    
    
    
    5,925Other intangiblesnet
    
    
    
    
    
    
    43
    
    
    
    43
    
    
    
    
    
    
    
    18
    
    
    
    74
    
    
    
    92Net plant
    
    
    
    
    
    
    313
    
    
    
    313
    
    
    
    7,960
    
    
    
    1,618
    
    
    
    356
    
    
    
    9,934Assets of discontinued operations
    
    $
    6,221
    
    
    $
    3,717
    
    
    $
    9,938
    
    
    $
    16,430
    
    
    $
    10,980
    
    
    $
    3,527
    
    
    $
    30,937Current liabilities
    
    $
    943
    
    
    $
    857
    
    
    $
    1,800
    
    
    $
    2,920
    
    
    $
    2,228
    
    
    $
    837
    
    
    $
    5,985Deferred credits
    
    
    
    
    
    
    33
    
    
    
    33
    
    
    
    581
    
    
    
    271
    
    
    
    33
    
    
    
    885Long-term debt
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    1,710
    
    
    
    
    
    
    
    5
    
    
    
    1,715Liabilities of discontinued operations
    
    $
    943
    
    
    $
    892
    
    
    $
    1,835
    
    
    $
    5,211
    
    
    $
    2,499
    
    
    $
    875
    
    
    $
    8,585
 14




---



##### Table of Contents



Class B Stock Options and Class B Stock of Subsidiary
  Common Shares and Earnings per Share
      15




---



##### Table of Contents



Comprehensive Income
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    22,304
    
    
    $
    8,032
    
    
    $
    32,275
    
    
    $
    16,291Other comprehensive income (net-of-tax)Minimum pension liability adjustment
    
    
    (1,263
    )
    
    
    
    
    
    
    (1,263
    )
    
    
    Foreign currency translation (loss) gain
    
    
    (176
    )
    
    
    
    
    
    
    (259
    )
    
    
    Unrealized (loss) on available-for-sale securities
    
    
    16
    
    
    
    (20
    )
    
    
    (6
    )
    
    
    (20
    )Total other comprehensive income
    
    
    (1,423
    )
    
    
    (20
    )
    
    
    (1,528
    )
    
    
    (20
    )Total comprehensive income
    
    $
    20,881
    
    
    $
    8,012
    
    
    $
    30,747
    
    
    $
    16,271
  Rate and Regulatory Matters
  Regulatory Assets and Liabilities
 Accounting for the Effect of Certain Types of
Regulation
 16




---



##### Table of Contents



June 30,
    
    December 31,(in thousands)
    
    2005
    
    2004Regulatory assets:Deferred income taxes
    
    $
    15,085
    
    
    $
    14,526Debt expenses and reacquisition premiums
    
    
    3,205
    
    
    
    3,424Deferred conservation program costs
    
    
    748
    
    
    
    1,203Plant acquisition costs
    
    
    218
    
    
    
    240Deferred marked-to-market losses
    
    
    830
    
    
    
    331Accrued cost-of-energy revenue
    
    
    10,688
    
    
    
    3,348Accumulated ARO accretion/depreciation adjustment
    
    
    165
    
    
    
    114Total regulatory assets
    
    $
    30,939
    
    
    $
    23,186Regulatory liabilities:Accumulated reserve for estimated removal costs
    
    $
    50,345
    
    
    $
    49,823Deferred income taxes
    
    
    6,360
    
    
    
    6,727Deferred marked-to-market gains
    
    
    1,156
    
    
    
    197Gain on sale of division office building
    
    
    159
    
    
    
    162Total regulatory liabilities
    
    $
    58,020
    
    
    $
    56,909Net regulatory liability position
    
    $
    27,081
    
    
    $
    33,723
 Accounting for Income Taxes
  Pension Plan and Other Postretirement Benefits
 Pension Plan
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Service costbenefit earned during the period
    
    $
    1,034
    
    
    $
    900
    
    
    $
    2,068
    
    
    $
    1,800Interest cost on projected benefit obligation
    
    
    2,448
    
    
    
    2,350
    
    
    
    4,896
    
    
    
    4,700Expected return on assets
    
    
    (2,996
    )
    
    
    (3,000
    )
    
    
    (5,992
    )
    
    
    (6,000
    )Amortization of prior-service cost
    
    
    240
    
    
    
    225
    
    
    
    481
    
    
    
    450Net periodic pension cost
    
    $
    726
    
    
    $
    475
    
    
    $
    1,453
    
    
    $
    950
 17




---



##### Table of Contents



Executive Survivor and Supplemental Retirement Plan
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Service costbenefit earned during the period
    
    $
    92
    
    
    $
    205
    
    
    $
    184
    
    
    $
    410Interest cost on projected benefit obligation
    
    
    316
    
    
    
    372
    
    
    
    632
    
    
    
    744Amortization of prior-service cost
    
    
    18
    
    
    
    37
    
    
    
    36
    
    
    
    74Recognized net actuarial loss
    
    
    104
    
    
    
    170
    
    
    
    208
    
    
    
    340Net periodic pension cost
    
    $
    530
    
    
    $
    784
    
    
    $
    1,060
    
    
    $
    1,568
   Postretirement Benefits
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Service costbenefit earned during the period
    
    $
    311
    
    
    $
    289
    
    
    $
    622
    
    
    $
    577Interest cost on projected benefit obligation
    
    
    666
    
    
    
    645
    
    
    
    1,332
    
    
    
    1,290Amortization of transition obligation
    
    
    187
    
    
    
    188
    
    
    
    374
    
    
    
    377Amortization of prior-service cost
    
    
    (77
    )
    
    
    (77
    )
    
    
    (154
    )
    
    
    (154
    )Amortization of net actuarial loss
    
    
    156
    
    
    
    171
    
    
    
    312
    
    
    
    343Effect of Medicare Part D expected subsidy
    
    
    (201
    )
    
    
    (189
    )
    
    
    (402
    )
    
    
    (378
    )Net periodic postretirement benefit cost
    
    $
    1,042
    
    
    $
    1,027
    
    
    $
    2,084
    
    
    $
    2,055
 18




---



##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations
 RESULTS OF OPERATIONS
 Comparison of the Three Months Ended June 30, 2005 and 2004
     Electric
 Three months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeRetail sales revenues
    
    $
    59,532
    
    
    $
    49,257
    
    
    $
    10,275
    
    
    
    20.9Wholesale revenues
    
    
    9,440
    
    
    
    5,281
    
    
    
    4,159
    
    
    
    78.8Net marked-to-market gains
    
    
    999
    
    
    
    1,547
    
    
    
    (548
    )
    
    
    (35.4
    )Other revenues
    
    
    4,179
    
    
    
    4,364
    
    
    
    (185
    )
    
    
    (4.2
    )Total operating revenues
    
    $
    74,150
    
    
    $
    60,449
    
    
    $
    13,701
    
    
    
    22.7Production fuel
    
    
    10,549
    
    
    
    11,193
    
    
    
    (644
    )
    
    
    (5.8
    )Purchased power  retail use
    
    
    19,904
    
    
    
    9,903
    
    
    
    10,001
    
    
    
    101.0Other operation and maintenance expenses
    
    
    25,334
    
    
    
    22,202
    
    
    
    3,132
    
    
    
    14.1Depreciation and amortization
    
    
    6,103
    
    
    
    6,015
    
    
    
    88
    
    
    
    1.5Property taxes
    
    
    2,408
    
    
    
    2,359
    
    
    
    49
    
    
    
    2.1Operating income
    
    $
    9,852
    
    
    $
    8,777
    
    
    $
    1,075
    
    
    
    12.2
 19




---



##### Table of Contents



20




---



##### Table of Contents



Plastics
 Three months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    36,004
    
    
    $
    32,636
    
    
    $
    3,368
    
    
    
    10.3Cost of goods sold
    
    
    29,664
    
    
    
    26,491
    
    
    
    3,173
    
    
    
    12.0Operating expenses
    
    
    1,460
    
    
    
    1,530
    
    
    
    (70
    )
    
    
    (4.6
    )Depreciation and amortization
    
    
    628
    
    
    
    583
    
    
    
    45
    
    
    
    7.7Operating income
    
    $
    4,252
    
    
    $
    4,032
    
    
    $
    220
    
    
    
    5.5
  Manufacturing
 Three months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    67,858
    
    
    $
    50,399
    
    
    $
    17,459
    
    
    
    34.6Cost of goods sold
    
    
    51,519
    
    
    
    38,417
    
    
    
    13,102
    
    
    
    34.1Operating expenses
    
    
    5,332
    
    
    
    5,871
    
    
    
    (539
    )
    
    
    (9.2
    )Depreciation and amortization
    
    
    2,345
    
    
    
    1,905
    
    
    
    440
    
    
    
    23.1Operating income
    
    $
    8,662
    
    
    $
    4,206
    
    
    $
    4,456
    
    
    
    105.9
  21




---



##### Table of Contents



Health Services
 Three months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    31,324
    
    
    $
    26,597
    
    
    $
    4,727
    
    
    
    17.8Cost of goods sold
    
    
    22,795
    
    
    
    20,225
    
    
    
    2,570
    
    
    
    12.7Operating expenses
    
    
    5,272
    
    
    
    4,544
    
    
    
    728
    
    
    
    16.0Depreciation and amortization
    
    
    1,010
    
    
    
    1,296
    
    
    
    (286
    )
    
    
    (22.1
    )Operating income
    
    $
    2,247
    
    
    $
    532
    
    
    $
    1,715
    
    
    
    322.4
  22




---



##### Table of Contents



Food Ingredient Processing
 Three months ended(in thousands)
    
    June 30, 2005Operating revenues
    
    $
    8,234Cost of goods sold
    
    
    6,421Operating expenses
    
    
    536Depreciation and amortization
    
    
    821Operating income
    
    $
    456
  Other Business Operations
 Three months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    39,707
    
    
    $
    33,906
    
    
    $
    5,801
    
    
    
    17.1Cost of goods sold
    
    
    30,085
    
    
    
    25,870
    
    
    
    4,215
    
    
    
    16.3Operating expenses
    
    
    13,577
    
    
    
    9,782
    
    
    
    3,795
    
    
    
    38.8Depreciation and amortization
    
    
    646
    
    
    
    730
    
    
    
    (84
    )
    
    
    (11.5
    )Operating loss
    
    $
    (4,601
    )
    
    $
    (2,476
    )
    
    $
    (2,125
    )
    
    
    (85.8
    )
   23




---



##### Table of Contents



Interest Charges and Income Taxes  Continuing Operations
   Discontinued Operations
  Three months ended
    
    Three months endedJune 30, 2005
    
    June 30, 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalIncome/(loss) before income taxes
    
    $
    897
    
    
    $
    (1,179
    )
    
    $
    37
    
    
    $
    (245
    )
    
    $
    834
    
    
    $
    (438
    )
    
    $
    (23
    )
    
    $
    373Gain/(loss) on disposition  pretax
    
    
    19,025
    
    
    
    (419
    )
    
    
    (300
    )
    
    
    18,306
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense/(benefit)
    
    
    7,467
    
    
    
    (639
    )
    
    
    (104
    )
    
    
    6,724
    
    
    
    333
    
    
    
    (175
    )
    
    
    (9
    )
    
    
    149Net income
    
    $
    12,455
    
    
    $
    (959
    )
    
    $
    (159
    )
    
    $
    11,337
    
    
    $
    501
    
    
    $
    (263
    )
    
    $
    (14
    )
    
    $
    224
 Comparison of the Six Months Ended June 30, 2005 and 2004
   24




---



##### Table of Contents



Electric
 Six months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeRetail sales revenues
    
    $
    122,847
    
    
    $
    112,385
    
    
    $
    10,462
    
    
    
    9.3Wholesale revenues
    
    
    14,357
    
    
    
    9,892
    
    
    
    4,465
    
    
    
    45.1Net marked-to-market gains
    
    
    1,103
    
    
    
    3,159
    
    
    
    (2,056
    )
    
    
    (65.1
    )Other revenues
    
    
    9,326
    
    
    
    7,868
    
    
    
    1,458
    
    
    
    18.5Total operating revenues
    
    $
    147,633
    
    
    $
    133,304
    
    
    $
    14,329
    
    
    
    10.7Production fuel
    
    
    25,726
    
    
    
    25,790
    
    
    
    (64
    )
    
    
    (0.2
    )Purchased power  retail use
    
    
    31,442
    
    
    
    20,825
    
    
    
    10,617
    
    
    
    51.0Other operation and maintenance expenses
    
    
    49,252
    
    
    
    43,479
    
    
    
    5,773
    
    
    
    13.3Depreciation and amortization
    
    
    12,203
    
    
    
    11,951
    
    
    
    252
    
    
    
    2.1Property taxes
    
    
    5,081
    
    
    
    4,848
    
    
    
    233
    
    
    
    4.8Operating income
    
    $
    23,929
    
    
    $
    26,411
    
    
    $
    (2,482
    )
    
    
    (9.4
    )
     25




---



##### Table of Contents



Plastics
 Six months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    68,159
    
    
    $
    59,072
    
    
    $
    9,087
    
    
    
    15.4Cost of goods sold
    
    
    55,081
    
    
    
    49,803
    
    
    
    5,278
    
    
    
    10.6Operating expenses
    
    
    2,969
    
    
    
    2,796
    
    
    
    173
    
    
    
    6.2Depreciation and amortization
    
    
    1,219
    
    
    
    1,152
    
    
    
    67
    
    
    
    5.8Operating income
    
    $
    8,890
    
    
    $
    5,321
    
    
    $
    3,569
    
    
    
    67.1
  26




---



##### Table of Contents



Manufacturing
 Six months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    123,387
    
    
    $
    92,213
    
    
    $
    31,174
    
    
    
    33.8Cost of goods sold
    
    
    96,878
    
    
    
    72,572
    
    
    
    24,306
    
    
    
    33.5Operating expenses
    
    
    10,754
    
    
    
    10,586
    
    
    
    168
    
    
    
    1.6Depreciation and amortization
    
    
    4,550
    
    
    
    3,801
    
    
    
    749
    
    
    
    19.7Operating income
    
    $
    11,205
    
    
    $
    5,254
    
    
    $
    5,951
    
    
    
    113.3
     27




---



##### Table of Contents



Health Services
 Six months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    59,122
    
    
    $
    52,273
    
    
    $
    6,849
    
    
    
    13.1Cost of goods sold
    
    
    43,087
    
    
    
    39,622
    
    
    
    3,465
    
    
    
    8.7Operating expenses
    
    
    10,185
    
    
    
    9,008
    
    
    
    1,177
    
    
    
    13.1Depreciation and amortization
    
    
    2,077
    
    
    
    2,687
    
    
    
    (610
    )
    
    
    (22.7
    )Operating income
    
    $
    3,773
    
    
    $
    956
    
    
    $
    2,817
    
    
    
    294.7
  Food Ingredient Processing
 Six months ended(in thousands)
    
    June 30, 2005Operating revenues
    
    $
    17,489Cost of goods sold
    
    
    13,106Operating expenses
    
    
    1,079Depreciation and amortization
    
    
    1,646Operating income
    
    $
    1,658
  28




---



##### Table of Contents



Other Business Operations
 Six months endedJune 30,
    
    
    
    
    
    %(in thousands)
    
    2005
    
    2004
    
    Change
    
    ChangeOperating revenues
    
    $
    74,604
    
    
    $
    67,421
    
    
    $
    7,183
    
    
    
    10.7Cost of goods sold
    
    
    56,477
    
    
    
    52,083
    
    
    
    4,394
    
    
    
    8.4Operating expenses
    
    
    24,404
    
    
    
    20,562
    
    
    
    3,842
    
    
    
    18.7Depreciation and amortization
    
    
    1,243
    
    
    
    1,445
    
    
    
    (202
    )
    
    
    (14.0
    )Operating loss
    
    $
    (7,520
    )
    
    $
    (6,669
    )
    
    $
    (851
    )
    
    
    (12.8
    )
   Interest Charges and Income Taxes  Continuing Operations
   Discontinued Operations
  29




---



##### Table of Contents



Six months ended
    
    Six months endedJune 30, 2005
    
    June 30, 2004(in thousands)
    
    MIS
    
    SGS
    
    CLC
    
    Total
    
    MIS
    
    SGS
    
    CLC
    
    TotalIncome/(loss) before income taxes
    
    $
    2,167
    
    
    $
    (1,563
    )
    
    $
    (19
    )
    
    $
    585
    
    
    $
    1,569
    
    
    $
    (1,089
    )
    
    $
    (102
    )
    
    $
    378Gain/(loss) on disposition  pretax
    
    
    19,025

    
    
    
    (3,046
    )
    
    
    (300
    )
    
    
    15,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense/(benefit)
    
    
    7,975
    
    
    
    (1,843
    )
    
    
    (126
    )
    
    
    6,006
    
    
    
    628
    
    
    
    (435
    )
    
    
    (40
    )
    
    
    153Net income
    
    $
    13,217
    
    
    $
    (2,766
    )
    
    $
    (193
    )
    
    $
    10,258
    
    
    $
    941
    
    
    $
    (654
    )
    
    $
    (62
    )
    
    $
    225
 2005 OUTLOOK
    
    
    We expect solid performance in the electric segment in 2005 although net income is
anticipated to be lower than 2004 levels. This is primarily because of uncertainty in the
wholesale electric markets due to the implementation of MISO electric markets on April 1,
2005 and anticipated lower margins on retail sales. Regulated returns in 2005 for the
electric segment are expected to be consistent with authorized levels.
 
    
    We expect the plastics segment will perform well in 2005 due to continuing strong demand
in the southwestern region of the country and sustained high PVC resin prices. 2005 net
earnings for this segment
are expected to be similar to 2004 net earnings.
    
    The improving economy, continued enhancements in productivity and capacity utilization,
and the extension of the production tax credit are expected to result in increased net
income in our manufacturing segment.
    
    The health services segment is expected to grow net income in 2005 as it continues to
realize earnings improvement from its imaging business.
    
    We expect our food ingredient processing business to generate net income in the range of
$2.1 million to $3.8 million for the year ending December 31, 2005. The revision in the low
end of the range is due to lower than expected sales volumes, high energy costs, the
increasing value of the Canadian dollar relative to the U.S. dollar and excess capacity in
the potato flake market.
    
    The other business operations segment is expected to show results similar to 2004. While
the improving economy is having a positive impact on the transportation business and the
extension of the production tax credit is expected to have a positive impact on our
electrical contracting business, earnings growth in these businesses are expected to be
offset by weaker performance in our other construction business, increased health and
casualty insurance costs, and other employee benefit costs.
 30




---



##### Table of Contents



FINANCIAL POSITION
      31




---



##### Table of Contents



MoodysInvestors
    
    StandardService
    
    & PoorsSenior unsecured debt
    
    A2
    
    BBB+Preferred stock
    
    Baa1
    
    BBB-Outlook
    
    Negative
    
    Negative
      32




---



##### Table of Contents



Critical Accounting Policies Involving Significant Estimates
   Goodwill Impairment
   33




---



##### Table of Contents



Forward Looking Information  Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995
   
    
    We are subject to government regulations and actions that may have a negative impact on
our business and results of operations.
    
    Weather conditions can adversely affect our operations and revenues.
    
    Liquidated damages due to implementation of the MISO Day 2 electric markets.
    
    Federal and state environmental regulation could cause us to incur substantial capital
expenditures which could result in increased operating costs.
 
    
    Our plans to grow and diversify through acquisitions may not be successful and could result
in poor financial performance.
    
    Competition is a factor in all of our businesses.
    
    Economic uncertainty could have a negative impact on our future revenues and earnings.
    
    Volatile financial markets could restrict our ability to access capital and could
increase borrowing costs and pension plan expenses.
    
    Our food ingredient processing segment operates in a highly competitive market and is
dependent on adequate sources of raw materials for processing. Should the supply of these
raw materials be affected by poor growing conditions, this could negatively impact the
results of operations for this segment. This segment could also be impacted by foreign
currency changes between Canadian and United States currencies and prices of natural gas.
    
    Our plastics segment is highly dependent on a limited number of vendors for PVC resin.
The loss of a key vendor or an interruption or delay in the supply of PVC resin could
result in reduced sales or increased costs for this segment.
    
    Our health services businesses may not be able to retain or comply with the dealership
arrangement and other agreements with Philips Medical.
 34




---



##### Table of Contents



Quantitative and Qualitative Disclosures About Market Risk
      Accounting for Derivative Instruments and Hedging Activities
 35




---



##### Table of Contents



Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts
Involved in Energy Trading and Risk Management Activities
  (in thousands)
    
    June 30, 2005Current asset  marked-to-market gain
    
    $
    852Current liability  marked-to-market loss
    
    
    (812
    )Net fair value of marked-to-market gas contracts
    
    $
    40
 Year-to-date(in thousands)
    
    June 30, 2005Fair value at beginning of year
    
    $
    134Amount realized on contracts entered into in 2004 and settled in 2005
    
    
    (62
    )Changes in fair value of contracts entered into in 2004
    
    
    Net fair value of contracts entered into in 2004 at end of period
    
    
    72Changes in fair value of contracts entered into in 2005
    
    
    (32
    )Net fair value end of period
    
    $
    40
  3rd Quarter
    
    4th Quarter(in thousands)
    
    2005
    
    2005
    
    TotalNet gain
    
    $
    37
    
    
    $
    3
    
    
    $
    40
   36




---



##### Table of Contents



(in thousands)
    
    June 30, 2005Current asset  marked-to-market gain
    
    $
    4,143Regulatory asset  deferred marked-to-market loss
    
    
    830Total assets
    
    
    4,973Current liability  marked-to-market loss
    
    
    (2,687
    )Regulatory liability  deferred marked-to-market gain
    
    
    (1,156
    )Total liabilities
    
    
    (3,843
    )Net fair value of marked-to-market energy contracts
    
    $
    1,130
 Year-to-date(in thousands)
    
    June 30, 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 end of period
    
    
    0Changes in fair value of contracts entered into in 2005
    
    
    1,130Net fair value end of period
    
    $
    1,130
  3rd Quarter
    
    4th Quarter
    
    1st Quarter
    
    2nd Quarter(in thousands)
    
    2005
    
    2005
    
    2006
    
    2006
    
    TotalNet gain
    
    $
    383
    
    
    $
    52
    
    
    $
    557
    
    
    $
    138
    
    
    $
    1,130
 37




---



##### Table of Contents



Controls and Procedures
   38




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Unregistered Sales of Equity Securities and Use of Proceeds
  Total number of
    
    Average pricePeriod
    
    shares purchased
    
    paid per shareApril 2005
    
    
    14,295
    
    
    $
    25.10May 2005
    
    
    
    
    
    
    June 2005
    
    
    
    
    
    
    Total
    
    
    14,295
 
 Submission of Matters to a Vote of Security Holders
  Shares
    
    Shares Voted
    
    BrokerElection of Directors
    
    Voted For
    
    Withheld Authority
    
    Non-VotesDennis R. Emmen
    
    
    22,524,766
    
    
    
    1,274,497
    
    
    
    -0-Kenneth L. Nelson
    
    
    23,167,503
    
    
    
    631,760
    
    
    
    -0-Nathan I. Partain
    
    
    23,307,042
    
    
    
    492,221
    
    
    
    -0-
 Ratification of
    
    
    
    
    
    Shares
    
    SharesIndependent Registered
    
    Shares
    
    Voted
    
    Voted
    
    BrokerPublic Accounting Firm
    
    Voted For
    
    Against
    
    Abstain
    
    Non-VotesDeloitte & Touche LLP
    
    
    23,214,836
    
    
    
    347,494
    
    
    
    236,933
    
    
    
    -0-
 39




---



##### Table of Contents



Exhibits
 10.1
    
    Big Stone II Power Plant Participation Agreement dated as of June 30, 2005 by
and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland
Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources
Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota
Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners. *10.2
    
    Big Stone II Power Plant Operation & Maintenance Services Agreement dated as of
June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River
Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of
MDU Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company,
Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency,
as Owners, and Otter Tail Corporation dba Otter Tail Power Company,
as Operator. *10.3
    
    Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June
30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy,
Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU
Resources Group, Inc., NorthWestern Corporation dba NorthWestern Energy, Otter Tail
Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and
Western Minnesota Municipal Power Agency, as Owners. *10.4
    
    Form of 2005 Performance Award Agreement (incorporated by reference to Exhibit
10.1 to the Companys Form 8-K filed April 15, 2005) **10.5
    
    Executive Annual Incentive Plan (Effective April 1, 2005) (incorporated by
reference to Exhibit 10.2 to the Companys Form 8-K filed April 15, 2005) **31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Confidential information has been omitted from this Exhibit and filed separately with
the Commission pursuant to a confidential treatment request under Rule 24b-2.**
    
    Management contract or compensatory plan or arrangement required to be filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K 40




---



##### Table of Contents



SIGNATURES
   By:
    /s/ Kevin G. MougKevin G. MougChief Financial Officer and
Treasurer

(Chief Financial Officer/Authorized Officer)  41




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description10.1
    
    Big Stone II Power Plant Participation Agreement dated as of June 30, 2005 by
and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland
Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources
Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota
Municipal Power Agency and Western Minnesota Municipal Power Agency,
as Owners. *10.2
    
    Big Stone II Power Plant Operation & Maintenance Services Agreement dated as of
June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy,
Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU
Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern
Minnesota Municipal Power Agency and Western Minnesota Municipal
Power Agency, as Owners, and Otter Tail Corporation dba Otter Tail
Power Company, as Operator. *10.3
    
    Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June
30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy,
Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU
Resources Group, Inc., NorthWestern Corporation dba NorthWestern Energy, Otter Tail
Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and
Western Minnesota Municipal Power Agency, as Owners. *10.4
    
    Form of 2005 Performance Award Agreement (incorporated by reference to Exhibit 10.1
to the Companys Form 8-K filed April 15, 2005) **10.5
    
    Executive Annual Incentive Plan (Effective April 1, 2005) (incorporated by
reference to Exhibit 10.2 to the Companys Form 8-K filed April 15, 2005) **31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Confidential information has been omitted from this Exhibit and filed
separately with the Commission pursuant to a confidential treatment request under Rule
24b-2.**
    
    Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K