##### Table of Contents



SECURITIES AND EXCHANGE
 COMMISSION


Washington, D.C. 20549


FORM 10-Q

|(Mark One)                                                        
|------------------------------------------------------------------
|[X]                                                               
|For the quarterly period ended
  SEPTEMBER 30, 2002               
|                                                                  
|OR                                                                
|                                                                  
|[   ]                                                             
|For the transition
 period from _______________ to _______________
|                                                                  
|Commission file
 number     
     0-368                           
|                                                                  
|OTTER TAIL CORPORATION                                            
|                                                                  
|(Exact name of
 registrant as specified in its charter)           

|Minnesota                                                                            |  | 41-0462685                          
|------------------------------------------------------------------------------------ |  | ------------------------------------
|                                                                                    
|(State or other
 jurisdiction ofincorporation 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)                          
|                                                                                    
|218-739-8200                                                                        
|                                                                                    
|(Registrants
 telephone number, including area code)                               
|                                                                                    
|                                                                                    
|(Former name,
 former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has
 filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
 of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
 to file such reports), and (2) has been subject to such
 filing requirements for the past 90
 days.     YES [X]   NO [   ]

Indicate the number of shares outstanding
 of each of the issuers classes of Common Stock, as of the latest practicable date:

October 31, 2002 - 25,588,732 Common
 Shares ($5 par value)



---

TABLE OF CONTENTS



|                                                   |                                                                                               |                                            |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Consolidated Balance Sheets               
|                                                   |                                                                                               | Consolidated Statements of Income         
|                                                   |                                                                                               | Consolidated Statements of Cash Flows     
|                                                   |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                        
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|CERTIFICATIONS                                    
|EXHIBIT INDEX                                     
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350



---



##### Table of Contents



OTTER TAIL CORPORATION
INDEX

|                               |  |                                                                                                              | Page No.
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------ | --------
|                               |  |                                                                                                              |         
|Part I.  Financial Information
|Item 1.                        |  | Financial Statements                                                                                         |         
|                               |  | Consolidated
 Balance Sheets - September 30, 2002 and December 31, 2001 (Unaudited)                          | 2 & 3   
|                               |  | Consolidated Statements of
 Income - Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited)     | 4       
|                               |  | Consolidated Statements of
 Cash Flows - Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) | 5       
|                               |  | Notes to Consolidated Financial
 Statements (Unaudited)                                                      | 6-14    
|Item 2.                        |  | Managements Discussion
 and Analysis of Financial Condition and Results of Operations                       | 14-25   
|Item 3.                        |  | Quantitative and Qualitative
 Disclosures about Market Risk                                                  | 25-26   
|Item 4.                        |  | Controls and Procedures                                                                                      | 26      
|Part II.                       |  | Other Information                                                                                            |         
|Item 6.                        |  | Exhibits and Reports
 on Form 8-K                                                                            | 27      
|Signatures                     |  | 28                                                                                                          
|Certifications                 |  | 29-30                                                                                                       



---



##### Table of Contents






PART I. FINANCIAL
 INFORMATION




Item 1. Financial Statements




Otter Tail
 CorporationConsolidated Balance Sheets(Unaudited)-Assets-



|                                                    |  | September 30,2002      |         | December 31,2001
|--------------------------------------------------- |  | ---------------------- | ------- | ----------------
|                                                    |  |                        |         |                 
|                                                    |  | (Thousands of dollars)
|Current assets:                                     |  |                        |         |                 
|Cash and cash equivalents                           |  | $                      | 16,736  |                 
|Accounts receivable:                                |  |                        |         |                 
|Trade - net                                         |  |                        | 72,406  |                 
|Other                                               |  |                        | 3,208   |                 
|Inventories                                         |  |                        | 45,550  |                 
|Deferred income taxes                               |  |                        | 4,112   |                 
|Accrued utility revenues                            |  |                        | 8,368   |                 
|Other                                               |  |                        | 18,388  |                 
|                                                    |  |                        |         |                 
|Total current assets                                |  |                        | 168,768 |                 
|                                                   
|Investments                                         |  |                        | 17,725  |                 
|Goodwill  net                                      |  |                        | 59,216  |                 
|Other intangibles  net                             |  |                        | 5,625   |                 
|Other assets                                        |  |                        | 19,204  |                 
|                                                   
|Deferred debits:                                    |  |                        |         |                 
|Unamortized debt expense and reacquisition premiums |  |                        | 7,626   |                 
|Regulatory assets                                   |  |                        | 6,379   |                 
|Other                                               |  |                        | 1,357   |                 
|                                                    |  |                        |         |                 
|Total deferred debits                               |  |                        | 15,362  |                 
|Plant:                                              |  |                        |         |                 
|Electric plant in service                           |  |                        | 821,085 |                 
|Diversified operations                              |  |                        | 173,372 |                 
|                                                    |  |                        |         |                 
|Total plant                                         |  |                        | 994,457 |                 
|Less accumulated depreciation and amortization      |  |                        | 464,589 |                 
|                                                    |  |                        |         |                 
|                                                    |  |                        | 529,868 |                 
|Construction work in progress                       |  |                        | 46,318  |                 
|                                                    |  |                        |         |                 
|Net plant                                           |  |                        | 576,186 |                 
|                                                    |  |                        |         |                 
|Total                                               |  | $                      | 862,086 |                 
|                                                    |  |                        |         |                 

See
 accompanying notes to consolidated financial statements

- 2 -



---



##### Table of Contents



Otter Tail Corporation
Consolidated Balance Sheets
(Unaudited)-Liabilities-

|                                                                                                                         | September
 30,2002      |         | December
 31,2001
|------------------------------------------------------------------------------------------------------------------------ | ----------------------- | ------- | -----------------
|                                                                                                                         |                         |         |                  
|                                                                                                                         | (Thousands
 of dollars)
|Current liabilities                                                                                                      |                         |         |                  
|Short-term debt                                                                                                          | $                       |        |                  
|Sinking fund requirements and current maturities                                                                         |                         | 38,080  |                  
|Accounts payable                                                                                                         |                         | 49,415  |                  
|Accrued salaries and wages                                                                                               |                         | 13,398  |                  
|Accrued federal and state income taxes                                                                                   |                         | 6,786   |                  
|Other accrued taxes                                                                                                      |                         | 8,374   |                  
|Other accrued liabilities                                                                                                |                         | 7,296   |                  
|                                                                                                                         |                         |         |                  
|Total current liabilities                                                                                                |                         | 123,349 |                  
|                                                                                                                        
|Noncurrent liabilities                                                                                                   |                         | 35,526  |                  
|                                                                                                                        
|Deferred credits                                                                                                         |                         |         |                  
|Accumulated deferred income taxes                                                                                        |                         | 86,068  |                  
|Accumulated deferred investment tax credit                                                                               |                         | 13,071  |                  
|Regulatory liabilities                                                                                                   |                         | 9,422   |                  
|Other                                                                                                                    |                         | 7,639   |                  
|                                                                                                                         |                         |         |                  
|Total deferred credits                                                                                                   |                         | 116,200 |                  
|                                                                                                                        
|Capitalization                                                                                                           |                         |         |                  
|Long-term debt, net of sinking fund and current maturities                                                               |                         | 261,512 |                  
|                                                                                                                        
|Cumulative preferred shares authorized
 1,500,000 shares without par value; outstanding 2002 and 2001  155,000 shares   |                         | 15,500  |                  
|Cumulative 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 2002  25,330,574 and 2001  24,653,490 |                         | 126,653 |                  
|Premium on common shares                                                                                                 |                         | 17,945  |                  
|Unearned compensation                                                                                                    |                         | (2,266  | )                
|Retained earnings                                                                                                        |                         | 169,642 |                  
|Accumulated other comprehensive loss                                                                                     |                         | (1,975  | )                
|                                                                                                                         |                         |         |                  
|Total                                                                                                                    |                         | 309,999 |                  
|                                                                                                                        
|Total capitalization                                                                                                     |                         | 587,011 |                  
|                                                                                                                         |                         |         |                  
|Total                                                                                                                    | $                       | 862,086 |                  
|                                                                                                                         |                         |         |                  

See
 accompanying notes to consolidated financial statements

- 3 -



---



##### Table of Contents






Otter Tail Corporation
Consolidated Statements of Income
(Unaudited)

|                                                      | Three months
 endedSeptember 30,                    |            | Nine months ended
September 30,
|----------------------------------------------------- | --------------------------------------------------- | ---------- | -------------------------------
|                                                      | 2002                                                |            | 2001                           
|                                                      |                                                     |            |                                
|                                                      | (In thousands,
 except share and per share amounts)
|Operating revenues                                    |                                                     |            |                                
|Electric                                              | $                                                   | 82,049     |                                
|Plastics                                              |                                                     | 22,370     |                                
|Health services                                       |                                                     | 23,019     |                                
|Manufacturing                                         |                                                     | 34,576     |                                
|Other business operations                             |                                                     | 23,736     |                                
|                                                      |                                                     |            |                                
|Total operating revenues                              |                                                     | 185,750    |                                
|                                                      |                                                     |            |                                
|Operating expenses                                    |                                                     |            |                                
|Production fuel                                       |                                                     | 11,107     |                                
|Purchased power                                       |                                                     | 27,703     |                                
|Other electric operation and maintenance expenses     |                                                     | 20,143     |                                
|Cost of goods sold                                    |                                                     | 73,446     |                                
|Other nonelectric expenses                            |                                                     | 16,926     |                                
|Depreciation and amortization                         |                                                     | 10,880     |                                
|Property taxes                                        |                                                     | 2,537      |                                
|                                                      |                                                     |            |                                
|Total operating expenses                              |                                                     | 162,742    |                                
|                                                      |                                                     |            |                                
|Operating income (loss)                               |                                                     |            |                                
|Electric                                              |                                                     | 14,316     |                                
|Plastics                                              |                                                     | 3,998      |                                
|Health services                                       |                                                     | 1,499      |                                
|Manufacturing                                         |                                                     | 1,737      |                                
|Other business operations                             |                                                     | 1,458      |                                
|                                                      |                                                     |            |                                
|Total operating income                                |                                                     | 23,008     |                                
|                                                      |                                                     |            |                                
|Other income and deductions - net                     |                                                     | 746        |                                
|Interest charges                                      |                                                     | 4,518      |                                
|                                                      |                                                     |            |                                
|Income before income taxes                            |                                                     | 19,236     |                                
|Income taxes                                          |                                                     | 6,354      |                                
|                                                      |                                                     |            |                                
|Net income                                            |                                                     | 12,882     |                                
|Preferred dividend requirements                       |                                                     | 184        |                                
|                                                      |                                                     |            |                                
|Earnings available for common shares                  | $                                                   | 12,698     |                                
|                                                      |                                                     |            |                                
|Basic earnings per common share:                      | $                                                   | 0.50       |                                
|Diluted earnings per common share:                    | $                                                   | 0.50       |                                
|Average number of common shares outstanding - basic   |                                                     | 25,327,522 |                                
|Average number of common shares outstanding - diluted |                                                     | 25,496,519 |                                
|Dividends per common share                            | $                                                   | 0.265      |                                

See
 accompanying notes to consolidated financial statements

- 4 -



---



##### Table of Contents






Otter Tail Corporation
Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                   | Nine months
 endedSeptember 30,
|---------------------------------------------------------------------------------- | -------------------------------
|                                                                                   | 2002                           
|                                                                                   |                                
|                                                                                   | (Thousands
 of dollars)        
|Cash flows from operating activities:                                              |                                
|Net income                                                                         | $                              
|Adjustments to reconcile net income to net cash provided
 by operating activities: |                                
|Depreciation and amortization                                                      |                                
|Deferred investment tax credit - net                                               |                                
|Deferred income taxes                                                              |                                
|Change in deferred debits and other assets                                         |                                
|Change in noncurrent liabilities and
 deferred credits                             |                                
|Allowance for equity (other) funds used during
 construction                       |                                
|Other - net                                                                        |                                
|Cash provided by (used for) current assets & current
 liabilities:                 |                                
|Change in receivables, materials and supplies                                      |                                
|Change in other current assets                                                     |                                
|Change in payables and other current liabilities                                   |                                
|Change in interest and income taxes payable                                        |                                
|                                                                                   |                                
|Net cash provided by operating activities                                          |                                
|                                                                                   |                                
|Cash flows from investing activities:                                              |                                
|Capital expenditures                                                               |                                
|Proceeds from disposal of noncurrent assets                                        |                                
|Acquisitions, net of cash acquired                                                 |                                
|Sale (Purchase) of other investments                                               |                                
|                                                                                   |                                
|Net cash used in investing activities                                              |                                
|                                                                                   |                                
|Cash flows from financing activities:                                              |                                
|Net borrowings under line of credit                                                |                                
|Proceeds from employee stock plans                                                 |                                
|Proceeds from issuance of long-term debt                                           |                                
|Payments for retirement of long-term debt                                          |                                
|Payments for debt issuance expense                                                 |                                
|Dividends paid                                                                     |                                
|                                                                                   |                                
|Net cash provided by (used in) financing activities                                |                                
|                                                                                   |                                
|Net change in cash and cash equivalents                                            |                                
|                                                                                   |                                
|Cash and cash equivalents at beginning of period                                   |                                
|                                                                                   |                                
|Cash and cash equivalents at end of period                                         | $                              
|                                                                                   |                                

See
 accompanying notes to consolidated financial statements

- 5 -



---



##### Table of Contents



OTTER TAIL CORPORATION




NOTES TO CONSOLIDATED
 FINANCIAL STATEMENTS(Unaudited)

Otter Tail Corporation (the Company), in
 its opinion, has included all adjustments (including normal recurring accruals)
 necessary for a fair presentation of the consolidated results of operations for
 the periods presented. The consolidated financial statements and notes thereto
 should be read in conjunction with the consolidated financial statements and notes
 for the years ended December 31, 2001, 2000 and 1999 included in the Companys
 2001 Annual Report to the Securities and Exchange Commission on Form 10-K. Because
 of seasonal and other factors, the earnings for the three-month and nine-month periods
 ended September 30, 2002, should not be taken as an indication of earnings for all
 or any part of the balance of the year.

Acquisitions

On May 1, 2002 the Company acquired 100%
 of the outstanding stock of Computed Imaging Service, Inc. (CIS) of Houston, Texas
 for 158,257 shares of Otter Tail Corporation common stock and approximately $1.2
 million in cash. CIS provides computed tomography and magnetic resonance imaging
 mobile services, interim rental, and sales and service of new, used, and refurbished
 diagnostic imaging equipment. CIS serves hospitals and other healthcare facilities
 in the south central United States. The acquisition of CIS allows the Company to
 expand its existing health services operations into another region of the country.
 CIS annual revenues were approximately $5.9 million in 2001.

On May 28, 2002 the Company acquired 100%
 of the outstanding stock of ShoreMaster, Inc. (ShoreMaster), of Fergus Falls, Minnesota
 for 303,124 shares of Otter Tail Corporation common stock and $2.3 million in cash.
 ShoreMaster is a leading manufacturer of waterfront equipment ranging from residential-use
 boatlifts and docks to commercial marina systems. The acquisition of ShoreMaster
 is expected to provide diversification and growth opportunities for the Companys
 manufacturing segment. ShoreMasters annual revenues were approximately
 $20 million in 2001.

In July 2002 the Company acquired the assets
 and operations of Dakota Direct Control, a Sioux Falls, South Dakota based design/build
 engineering group of Siemens/Staefa Control Systems, for $373,000 in cash. The acquisition
 of Dakota Direct Control is expected to support the growth of the Companys
 energy management services business.

Below is a condensed balance sheet disclosing
 the fair value assigned to each major asset and liability category of the acquired
 companies.



|(in thousands)          |  | CIS |        | ShoreMaster |  | Dakota Direct Control
|----------------------- |  | --- | ------ | ----------- |  | ---------------------
|                        |  |     |        |             |  |                      
|Assets                  |  |     |        |             |  |                      
|Current Assets          |  | $   | 1,439  |             |  | $                    
|Plant                   |  |     | 3,976  |             |  |                      
|Goodwill                |  |     | 5,683  |             |  |                      
|Other Intangible Assets |  |     | 30     |             |  |                      
|                        |  |     |        |             |  |                      
|Total Assets            |  | $   | 11,128 |             |  | $                    
|                        |  |     |        |             |  |                      

6



---



##### Table of Contents







|(in thousands)               |  | CIS |        | ShoreMaster |  | Dakota Direct Control
|---------------------------- |  | --- | ------ | ----------- |  | ---------------------
|                             |  |     |        |             |  |                      
|Liabilities and Equity       |  |     |        |             |  |                      
|Current Liabilities          |  | $   | 3,834  |             |  | $                    
|Long-Term Debt               |  |     | 2,587  |             |  |                      
|Other Long-Term Liabilities  |  |     | 750    |             |  |                      
|Equity                       |  |     | 3,957  |             |  |                      
|                             |  |     |        |             |  |                      
|Total Liabilities and Equity |  | $   | 11,128 |             |  | $                    
|                             |  |     |        |             |  |                      

Common Shares and Earnings per Share

On April 8, 2002 the Companys Board
 of Directors granted 278,750 stock options to key management employees and 75,800
 shares of restricted stock to certain key executives and non-employee directors
 under the 1999 Stock Incentive Plan. The exercise price of the stock options is
 equal to the fair market value per share at the date of the grant. The options
 and restricted stock vest ratably over a four-year period. The options expire ten
 years after the date of the grant. As of October 31, 2002 a total of 1,364,523
 options were outstanding and a total of 100,513 shares of restricted stock had been
 issued under the Plan. The Company accounts for the Plan under Accounting Principles
 Board Opinion No. 25.

Basic earnings per common share are calculated
 by dividing earnings available for common shares by the average number of common
 shares outstanding during the period. Diluted earnings per common share are calculated
 by adjusting outstanding shares, assuming conversion of all potentially dilutive
 stock options.

Comprehensive Income

The only element of comprehensive income
 for the three and nine months ended September 30, 2002 was net income of $12.9 million
 and $33.5 million, respectively, as compared to $11.1 million and $32.2 million
 for the three and nine months ended September 30, 2001, respectively.

Goodwill and Other Intangible Assets -
 Adoption of Statement of Financial Accounting Standards No. 142

In June 2001 the Financial Accounting Standards
 Board (FASB) approved the issuance of Statement of Financial Accounting Standards
 (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
 Assets. SFAS No. 141 requires that all business combinations entered into subsequent
 to June 30, 2001 be accounted for using the purchase method of accounting. SFAS
 No. 142 provides that goodwill and other intangible assets with indefinite lives
 will not be amortized, but tested for impairment on an annual basis. Intangible
 assets with finite useful lives will be amortized over their respective estimated
 useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting
 for the Impairment or Disposal of Long-Lived Assets. The Company adopted SFAS No.
 142 on January 1, 2002.

The Company determined that as of January
 1, 2002 goodwill was not impaired and no write-off was necessary. If
 goodwill had not been amortized in 2001, net income would have increased by $628,000
 and $1.8 million for the three-month and nine-month periods ended September 30,
 2001, respectively. The following table presents the effects of not amortizing goodwill
 on reported net income and basic and diluted earnings per share.

7



---



##### Table of Contents





|                                            |  | Three months ended |        | Nine months ended
|------------------------------------------- |  | ------------------ | ------ | -----------------
|                                            |  | September 30,      |        | September 30,    
|(in thousands, except per share amounts)    |  | 2002               |        | 2001             
|                                            |  |                    |        |                  
|Net income:                                 |  |                    |        |                  
|Reported net income                         |  | $                  | 12,882 |                  
|Add back: goodwill amortization, net of tax |  |                    |       |                  
|                                            |  |                    |        |                  
|Adjusted net income                         |  | $                  | 12,882 |                  
|                                            |  |                    |        |                  
|Basic earnings per share:                   |  |                    |        |                  
|Reported basic earnings per share           |  | $                  | 0.50   |                  
|Add back: goodwill amortization, net of tax |  |                    |       |                  
|                                            |  |                    |        |                  
|Adjusted basic earnings per share:          |  | $                  | 0.50   |                  
|                                            |  |                    |        |                  
|Diluted earnings per share:                 |  |                    |        |                  
|Reported diluted earnings per share         |  | $                  | 0.50   |                  
|Add back: goodwill amortization, net of tax |  |                    |       |                  
|                                            |  |                    |        |                  
|Adjusted diluted earnings per share:        |  | $                  | 0.50   |                  
|                                            |  |                    |        |                  

The changes in the carrying amount of goodwill
 by segment were



|                          |  | Balance December 31, |        | Adjustment
 to  goodwill acquired in |  | Goodwill acquired in |       | Balance September 30,
|------------------------- |  | -------------------- | ------ | ------------------------------------ |  | -------------------- | ----- | ---------------------
|(in thousands)            |  | 2001                 |        | 2001                                 |  | 2002                 |       | 2002                 
|                          |  |                      |        |                                      |  |                      |       |                      
|Plastics                  |  | $                    | 19,302 |                                      |  |                      |      |                      
|Health services           |  |                      | 13,311 |                                      |  | $                    | 1,522 |                      
|Manufacturing             |  |                      | 1,627  |                                      |  |                      | 40    |                      
|Other business operations |  |                      | 13,981 |                                      |  |                      |      |                      
|                          |  |                      |        |                                      |  |                      |       |                      
|Total                     |  | $                    | 48,221 |                                      |  | $                    | 1,562 |                      
|                          |  |                      |        |                                      |  |                      |       |                      

Goodwill recorded during 2002 relating to
 the acquisitions of CIS, ShoreMaster, and Dakota Direct Control was $5,683,000,
 $3,500,000 and $250,000 respectively.

The following table summarizes the components
 of the Companys intangible assets at September 30, 2002 and December 31, 2001.



|                                            |  | September 30, 2002    |       | December 31, 2001       
|------------------------------------------- |  | --------------------- | ----- | ------------------------
|                                            |  |                       |       |                         
|(in thousands)                              |  | Gross carrying amount |       | Accumulated amortization
|                                            |  |                       |       |                         
|Amortized intangible assets:                |  |                       |       |                         
|Covenants not to compete                    |  | $                     | 1,819 |                         
|Other intangible assets including contracts |  |                       | 2,079 |                         
|                                            |  |                       |       |                         
|Total                                       |  | $                     | 3,898 |                         
|                                            |  |                       |       |                         
|Non-amortized intangible assets:            |  |                       |       |                         
|Brandname                                   |  | $                     | 3,620 |                         
|                                            |  |                       |       |                         

8



---



##### Table of Contents



Intangible assets with finite lives are
 being amortized over average lives that vary from one to five years. The amortization
 expense for these intangible assets was $391,000 for the nine months ended September
 30, 2002 compared to $256,000 for the nine months ended September 30, 2001. The
 estimated annual amortization expense for these intangible assets for the next five
 years is: $534,000 for 2002, $471,000 for 2003, $457,000 for 2004, $353,000 for
 2005, and $204,000 for 2006.

Segment Information

The Companys business operations consist
 of five segments based on products and services. Electric includes the electric
 utility operating in Minnesota, North Dakota and South Dakota. Plastics consists
 of businesses involved in the production of PVC pipe in the Upper Midwest and Southwest
 regions of the United States. Health services include businesses involved in the
 sale of diagnostic medical equipment, supplies and accessories. In addition these
 businesses also provide service maintenance, mobile diagnostic imaging, mobile positron
 emission tomography and nuclear medicine imaging, portable x-ray imaging and rental
 of diagnostic medical imaging equipment to various medical institutions located
 in 36 states. Manufacturing consists of businesses involved in the production of
 waterfront equipment, wind towers, frame-straightening equipment and accessories
 for the auto repair industry, custom plastic pallets, material and handling trays,
 horticultural containers, fabrication of steel products, contract machining, and
 metal parts stamping and fabrication located in the Upper Midwest and Utah. Other
 business operations consists of businesses in electrical and telephone construction
 contracting, transportation, telecommunications, entertainment, energy services,
 and natural gas marketing, as well as the portion of corporate administrative and
 general expenses that are not allocated to other segments. The electrical and telephone
 construction contracting companies and energy services and natural gas marketing
 business operate primarily in the Upper Midwest. The telecommunications companies
 operate in central and northeast Minnesota and the transportation company operates
 in 48 states and 6 Canadian provinces. The Company evaluates the performance of
 its business segments and allocates resources to them based on earnings contribution
 and return on total invested capital.



|Operating Income (Loss)  
|-------------------------
|                         
|                         
|                         
|(in thousands)           
|                         
|Electric                 
|Plastics                 
|Health services          
|Manufacturing            
|Other business operations
|                         
|Total                    
|                         



|Identifiable Assets      
|-------------------------
|                         
|                         
|(in thousands)           
|                         
|Electric                 
|Plastics                 
|Health services          
|Manufacturing            
|Other business operations
|                         
|Total                    
|                         

Substantially all sales and long-lived assets
 of the Company are within the United States.

9



---



##### Table of Contents



Financing

On June 19, 2002 the Company filed with
 the SEC a shelf registration statement for $200 million of unsecured debt securities.
 On September 27, 2002 the Company issued $65 million in senior unsecured notes under
 the shelf registration statement. The offering consisted of $40 million of 5.625%
 insured senior notes due 2017 and $25 million of 6.80% senior notes due 2032. Proceeds
 from these issues were used to pay off short-term debt that was used to retire the
 Companys 7.25% series first mortgage bonds at maturity on August 1, 2002 in
 the amount of $18.2 million, and to retire early on October 31, 2002 the Companys
 outstanding $27.3 million 8.25% series 2022 first mortgage bonds at an aggregate
 redemption price of $28.5 million. The remaining proceeds were used to repay short-term
 debt used to finance a portion of the costs related to a new gas-fired combustion
 turbine plant being constructed by the electric utility. Proceeds from subsequent
 debt issuances under the shelf registration, if any, may be used for other general
 corporate purposes, including working capital, capital expenditures, debt repayment,
 the financing of possible acquisitions, or stock repurchases.

Inventories

Inventories consist of the following:



|                                | September 30, |   | December 31,
|------------------------------- | ------------- | - | ------------
|(in thousands)                  | 2002          |   | 2001        
|                                |               |   |             
|Finished goods                  |               | $ | 16,435      
|Work in process                 |               |   | 2,661       
|Raw material, fuel and supplies |               |   | 26,454      
|                                |               |   |             
|                                |               | $ | 45,550      
|                                |               |   |             

Regulatory Assets and Liabilities

As a regulated entity the Company and the
 electric utility account for the financial effects of regulation in accordance with
 SFAS No. 71, Accounting for the Effect of Certain Types of Regulation. This statement
 allows for the recording of a regulatory asset or liability for costs that will
 be collected or refunded through the ratemaking process in the future.

The following table indicates the amount
 of regulatory assets and liabilities recorded on the Companys consolidated
 balance sheet:



|                                         | September 30, |   | December 31,
|---------------------------------------- | ------------- | - | ------------
|(in thousands)                           | 2002          |   | 2001        
|                                         |               |   |             
|Regulatory assets:                       |               |   |             
|Deferred income taxes                    |               | $ | 6,379       
|Long-term debt refinancing costs         |               |   | 3,035       
|                                         |               |   |             
|Total regulatory assets                  |               | $ | 9,414       
|                                         |               |   |             
|Regulatory liabilities:                  |               |   |             
|Deferred income taxes                    |               | $ | 9,248       
|Gain on sale of division office building |               |   | 174         
|Gain on long-term debt refinancing       |               |   | 2           
|                                         |               |   |             
|Total regulatory liabilities             |               | $ | 9,424       
|                                         |               |   |             
|Net regulatory position                  |               | $ | (10         
|                                         |               |   |             

10



---



##### Table of Contents



The regulatory assets and liabilities related
 to deferred income taxes are the result of the adoption of SFAS No. 109, Accounting
 for Income Taxes. The remaining regulatory assets and liabilities are being recovered
 from electric customers over the next 32 years.

If for any reason, the Companys regulated
 businesses cease to meet the criteria for application of SFAS No. 71 for all or
 part of their operations, the regulatory assets and liabilities that no longer meet
 such criteria would be removed from the consolidated balance sheet and included
 in the consolidated statement of income as an extraordinary item in the period in
 which the application of SFAS No. 71 ceases.

Property, Plant and Equipment

The estimated service lives for rate regulated
 properties is five to sixty-five years. For nonregulated property the estimated
 useful lives are from three to forty years.







|                           |                     | Service
 Life Range
|-------------------------- | ------------------- | -------------------
|                           |                     |                    
|(years)                    | Low                 |                    
|                           |                     |                    
|Regulated
 fixed assets:   |                     |                    
|                           | Production
 Plant   |                    
|                           | Transmission
 Plant |                    
|                           | Distribution
 Plant |                    
|                           | General Plant       |                    
|                           |                     |                    
|Nonregulated
 fixed assets |                     | 3                  

Revenue Recognition

Due to the diverse business operations of
 the Company, revenue recognition depends on the product produced or sold. The Company
 recognizes revenue when the earnings process is complete, evidenced by an agreement
 with the customer, there has been delivery and acceptance, and the price is fixed
 and determinable. In cases where significant obligations remain after delivery,
 revenue is deferred until such obligations are fulfilled. Provisions for sale returns
 and warranty costs are recorded at the time of sale based on historical information
 and current trends.

For those operating businesses recognizing
 revenue when shipped, the operating businesses have no further obligation to provide
 services related to such product. The shipping terms used in these instances are
 FOB shipping point.

Some of the operating businesses enter into
 fixed-price construction contracts. Revenues under these contracts are recognized
 on a percentage-of-completion basis. The method used to determine the progress
 of completion is based on the ratio of costs incurred to total estimated costs.
 The following summarizes costs incurred and billings on uncompleted contracts:



|(in thousands)                           |  | September
 30,2002 |         | December
 31,2001
|---------------------------------------- |  | ------------------ | ------- | -----------------
|                                         |  |                    |         |                  
|Costs incurred
 on uncompleted contracts |  | $                  | 53,997  |                  
|Less billings
 to date                   |  |                    | (55,101 | )                
|Plus earnings
 recognized                |  |                    | 8,289   |                  
|                                         |  |                    |         |                  
|                                         |  | $                  | 7,185   |                  
|                                         |  |                    |         |                  

11



---



##### Table of Contents



The following costs incurred and billings
 are included in the Companys consolidated balance sheet under Other Current
 Assets and Accounts Payable:



|(in thousands)                                        |  | September
 30,2002 |        | December
 31,2001
|----------------------------------------------------- |  | ------------------ | ------ | -----------------
|                                                      |  |                    |        |                  
|Costs in excess
 of billings on uncompleted contracts |  | $                  | 9,677  |                  
|Billings in
 excess of costs on uncompleted contracts |  |                    | (2,492 | )                
|                                                      |  |                    |        |                  
|                                                      |  | $                  | 7,185  |                  
|                                                      |  |                    |        |                  

The percent of revenue recognized under
 the percentage-of-completion method compared to total consolidated revenues for
 the nine months ended September 30, 2002 was 11.6% compared with 10.1% for the nine
 months ended September 30, 2001.

Shipping and Handling Costs

The Company includes revenues received for
 shipping and handling in operating revenues. Expenses paid for shipping and handling
 are recorded as part of cost of goods sold.

Supplemental Cash Flow Information

Changes in operating assets and liabilities
 are net of acquisitions. Acquisitions, net of cash acquired in the Statement
 of Cash Flows is net of cash acquired and includes debt assumed and immediately
 repaid in acquisitions. Noncash transactions in 2002 include the acquisition of
 CIS for 158,257 shares of the Companys common stock valued at approximately
 $5.1 million and the acquisition of ShoreMaster for 303,124 shares of the Companys
 common stock valued at $9.7 million.

Certain additional supplemental disclosures
 of cash flow information are shown below.



|                                          |  | Nine
 months endedSeptember
 30,
|----------------------------------------- |  | --------------------------------
|(in thousands)                            |  |                                 
|                                          |  |                                 
|Cash paid
 for interest and income taxes: |  |                                 
|Interest                                  |  | $                               
|Income taxes                              |  | $                               

Reclassifications

Certain prior year amounts have been reclassified
 to conform to 2002 presentation. Such reclassifications had no impact on net income,
 shareholders equity or cash provided by operating activities.

New Accounting Standards

The FASB has issued SFAS No. 143, Accounting
 for Asset Retirement Obligations (ARO), which provides accounting requirements for
 retirement obligations associated with tangible long-lived assets. This statement
 is effective for fiscal years beginning after June 15, 2002. Retirement obligations
 associated with long-lived assets included within the scope of SFAS No. 143 are
 those for which there is a legal obligation to settle under existing or enacted
 law, statute, written or oral contract or by legal constructions under the doctrine
 of promissory estoppel. Adoption of SFAS No. 143 will change the accounting for
 ARO costs of the utilitys generating plants as well as certain other long-lived
 assets. Currently, estimated net salvage amounts are part of depreciation expense
 accruals collected in the utilitys rates and reported in accumulated depreciation.
 SFAS No. 143 requires the present value of

12



---



##### Table of Contents



the future decommissioning cost to be recognized
 as a liability on the balance sheet with an offsetting amount being added to the
 capitalized cost of the related long-lived asset. The liability will be accreted
 to its present value each period and the capitalized cost will be depreciated over
 the useful life of the related asset. The Federal Energy Regulatory Commission (FERC)
 issued a proposed rulemaking on Accounting, Financial Reporting, and Rate Filing
 Requirements for Asset Retirement Obligations on October 30, 2002. The Company is
 in the process of evaluating what assets may have associated retirement costs as
 defined by SFAS No. 143, and what the prescribed accounting treatment will be under
 FERC rules. The Company has not determined the ultimate impact of adoption at this
 time but expects adoption of SFAS No. 143 to increase both total assets and total
 liabilities in equal and offsetting amounts. The differences between SFAS No. 143
 and regulatory accounting for removal costs are expected to be recoverable in rates
 and to have little or no impact on earnings.

The FASB issued SFAS No. 144, Accounting
 for the Impairment or Disposal of Long-Lived Assets in October 2001. SFAS No. 144
 replaces SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
 Long-Lived Assets to be Disposed Of. This statement develops one accounting model
 for long-lived assets to be disposed of by sale and also broadens the reporting
 of discontinued operations to include all components of an entity with operations
 that can be distinguished from the rest of the entity in a disposal transaction.
 The Company adopted the accounting model for impairment or disposal of long-lived
 assets on January 1, 2002. Adoption of this statement did not have a material effect
 on the Companys consolidated financial statements.

On April 30, 2002 the FASB issued SFAS No.
 145, Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No. 13, and Technical
 Corrections. SFAS No. 145 eliminates SFAS No. 4, Reporting Gains and Losses from
 Extinguishment of Debt, and allows for only those gains or losses on the extinguishment
 of debt that meet the criteria of extraordinary items to be treated as such in the
 financial statements. SFAS No. 145 also amends SFAS No. 13, Accounting for Leases,
 to require sale-leaseback accounting for certain lease modifications that have economic
 effects that are similar to sale-leaseback transactions. The provisions of SFAS
 No. 145 relating to the rescission of SFAS No. 4 are effective for fiscal years
 beginning after May 15, 2002, the provisions of SFAS No. 145 relating to the amendment
 of SFAS No. 13 are effective for transactions occurring after May 15, 2002 and all
 other provisions of SFAS No. 145 are effective for financial statements issued on
 or after May 15, 2002. SFAS No. 145 is not expected to have a material effect on
 the Companys consolidated results of operations, financial position or cash
 flows.

On July 30, 2002 the FASB issued SFAS No.
 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No.
 146 replaces Emerging Issue Task Force (EITF) No. 94-3, Liability Recognition for
 Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
 Certain Costs Incurred in a Restructuring). SFAS No. 146 requires companies to
 recognize costs associated with exit or disposal activities when they are incurred
 rather than at the date of commitment to an exit or disposal plan as was required
 by EITF No. 94-3. SFAS No. 146 is to be applied prospectively to exit or disposal
 activities initiated after December 31, 2002. SFAS No. 146 is not expected to have
 a material effect on the Companys consolidated results of operations, financial
 position or cash flows.

Subsequent Events

On October 1, 2002 the Company acquired
 100% of the outstanding stock of Galva Foam Marine Industries, Inc., of Camdenton,
 Missouri for 256,940 shares of Otter Tail Corporation common stock and approximately
 $1.0 million in cash. Galva Foam is a leading manufacturer of waterfront equipment,
 ranging from residential boatlifts and docks to commercial marina systems. The acquisition
 of Galva Foam in combination with the May 2002 acquisition of ShoreMaster will expand
 the market reach of the Companys waterfront manufacturing product line nationwide
 with both saltwater and freshwater products. Galva Foam had annual revenues of approximately
 $13 million in 2001.

13



---



##### Table of Contents



On October 31, 2002 the Company retired early its outstanding $27.3 million 8.25%
 Series 2022 First Mortgage Bonds at an aggregate redemption price of $28.5 million.
 In accordance with regulatory treatment, the $1.2 million call premium paid on redemption
 of these bonds will not be recognized as an expense currently, but will be deferred
 and amortized over the remaining original life of the reacquired bonds.

On November 1, 2002 the Company purchased
 the assets and operations of Mobile Diagnostic Services, Inc. (MDS) of Fall River,
 Wisconsin for approximately $1.7 million in cash. MDS provides portable x-ray services
 to nursing homes, the state prison system, and other healthcare facilities in and
 around Milwaukee, Madison, Wausau and Green Bay, Wisconsin. The
acquisition of MDS
 allows the Company to expand its existing health services
operations. MDS annual
 revenues were approximately $1.3 million in 2001.

Forward Looking Information - Safe Harbor
 Statement Under the Private Securities Litigation Reform Act of 1995

In connection with the safe harbor provisions
 of the Private Securities Litigation Reform Act of 1995 (the Act), the Company has
 filed cautionary statements identifying important factors that could cause the Companys
 actual results to differ materially from those discussed in forward-looking
 statements made by or on behalf of the Company. When used in this Form 10-Q and
 in future filings by the Company with the Securities and Exchange Commission, in
 the Companys press releases and in oral statements, words such
 as may, will,
 expect, anticipate, continue, estimate, project,
 believes or similar
 expressions are intended to identify some of the forward-looking statements within
 the meaning of the Act and are included, along with this statement, for purposes
 of complying with the safe harbor provision of the Act. Factors that might cause
 such differences include, but are not limited to, the Companys ongoing involvement
 in diversification efforts, the timing and scope of deregulation and open competition,
 growth of electric revenues, impact of the investment performance of the utilitys
 pension plan, changes in the economy, governmental and regulatory action,
 weather conditions, fuel and purchased power costs, environmental issues, resin
 prices, and other factors discussed under Factors affecting future earnings on
 pages 26-27 of the Companys 2001 Annual Report to Shareholders, which is incorporated
 by reference in the Companys Form 10-K for the fiscal year ended December
 31, 2001. These factors are in addition to any other cautionary statements, written
 or oral, which may be made or referred to in connection with any such forward-looking
 statement or contained in any subsequent filings by the Company with the Securities
 and Exchange Commission. The Company is not obligated to publicly update or revise
 any forward-looking statements.




Item 2.   Managements Discussion and
 Analysis of Financial Condition and Results of Operations

MATERIAL CHANGES IN FINANCIAL POSITION

For the years 2002-2006 the Company estimates
 that funds internally generated net of forecasted dividend payments, combined with
 funds on hand at December 31, 2001, will be sufficient to meet scheduled debt retirements
 and almost completely provide for its estimated 2002-2006 consolidated capital expenditures.
 Reduced demand for electricity or for the products manufactured or sold by the
 Company could have an effect on funds internally generated. Additional short-term
 or long-term financing will be required in the period 2002-2006 in order to complete
 planned capital expenditures, in the event the Company decides to refund or retire
 early any of its presently outstanding debt or cumulative preferred shares, to complete
 acquisitions, or for other corporate purposes. There can be no assurance that any
 additional required financing will be available through bank borrowings, debt or
 equity financing or otherwise, or that if such financing is available, it will be
 available on terms acceptable to the Company. If adequate funds are not available
 on acceptable terms, our business, results of operations, and financial condition
 could be adversely affected.

14



---



##### Table of Contents



The Company has a $50 million line of
 credit. This line of credit bears
 interest at the rate of LIBOR plus 0.5% and expires on April 30, 2003. As of September
 30, 2002 the entire line was unused. The Companys obligations under this line
 of credit are guaranteed by a subsidiary of the Company that owns substantially
 all of the Companys nonregulated companies.

The line of credit contains a number
 of covenants that restrict the Companys ability, with significant exceptions,
 to: engage in mergers or consolidations; dispose of assets; create liens on assets;
 engage in transactions with affiliates; take any action which would result in a
 decrease in the ownership interest in any subsidiary; redeem stock or any subsidiarys
 stock and pay dividends on stock; make investments, loans or advances; guaranty
 the obligations of other persons or agree to maintain the net worth or working capital
 of, or provide funds to satisfy any other financial test applicable to, any other
 person; and enter into a contract that requires payment to be made by the Company
 whether or not delivery of the materials, supplies or services is ever made under
 the contract. In addition, the Company is required to comply with specified financial
 covenants, including maintaining a debt-to-total capitalization ratio not in excess
 of 60% and an interest and dividend coverage ratio of at least 1.5 to 1. As of
 September 30, 2002, the Company was in compliance with all of the covenants under
 the line of credit. The interest rate under the line of credit is subject to adjustment
 in the event of a change in ratings on the Companys senior unsecured debt,
 up to LIBOR plus 0.8% if the ratings on the Companys senior unsecured debt
 fall to BBB+ or below (Standard & Poors) or Baa1 or below (Moodys).
 The line of credit also provides for accelerated repayment in the event the Companys
 long-term unsecured and unsubordinated debt is rated below BBB- by Standard
 & Poors or Baa3 by Moodys.

On June 19, 2002 the Company filed with
 the SEC a shelf registration statement for $200 million of unsecured debt securities.
 On September 27, 2002 the Company issued $65 million in senior unsecured notes
 under the shelf registration statement. The proceeds were used in financing activities
 as described below. Proceeds received from subsequent debt issuance under the shelf
 registration, if any, may be used for other general corporate purposes, including
 working capital, debt repayment, capital expenditures, the financing of possible
 acquisitions, or stock repurchases.

Cash provided by operating activities of
 $50.7 million for the nine months ended September 30, 2002 combined with cash on
 hand of $11.4 million as of December 31, 2001 allowed the Company to pay dividends
 and fund a majority of its capital expenditures. Net cash provided by operating
 activities increased $3.0 million for the nine months ended September 30, 2002 compared
 to the nine months ended September 30, 2001 primarily as a result of an increase
 in net income and changes in deferred debits and other assets.

Net cash used in investing activities was
 $61.6 million for the nine months ended September 30, 2002 compared with net cash
 used in investing activities of $42.7 million for the nine months ended September
 30, 2001. The majority of this change is due to increased capital expenditures.
 Capital expenditures increased $19.8 million between the periods. Nearly $7.7 million
 of the increase in capital expenditures occurred in the electric segment reflecting
 ongoing construction expenditures for a gas-fired combustion turbine peaking plant
 and a new transmission line in North Dakota. Capital expenditures increased $7.1
 million in the manufacturing segment due to building expansions at the companies
 that manufacture wind energy towers and perform metal parts stamping and fabrication.
 Capital expenditures in the plastics segment increased $3.0 million reflecting the
 purchase of buildings and land that had previously been leased. Capital expenditures
 in the other segment increased $2.0 million reflecting the purchase of transportation
 equipment.

Net cash provided by financing activities
 was $16.2 million for the nine months ended September 30, 2002 compared with net
 cash used in financing activities of $3.9 million for the nine months ended September
 30, 2001. On September 27, 2002 the Company issued $65 million in senior unsecured
 notes. The offering consisted of $40 million of 5.625% insured senior notes due
 2017 and $25 million of 6.80% senior notes due 2032. Proceeds from these issues
 were used to pay off short-term debt that was used to retire the Companys
 7.25% series first mortgage bonds at maturity on August 1, 2002 in the amount of
 $18.2 million, and to retire early on October 31, 2002 the Companys outstanding
 $27.3 million 8.25% series 2022 first mortgage bonds at an aggregate redemption
 price of $28.5 million. The remaining proceeds were used to repay short-term debt
 used to finance a portion of the costs related to a new gas-fired combustion turbine
 plant being constructed by the electric utility.

15



---



##### Table of Contents



There are no material changes in the Companys
 contractual obligations on long-term debt, coal contracts, construction program
 commitments, capacity and energy requirements, and operating leases from those reported
 in the Companys Annual Report on Form 10-K for the year ended December 31,
 2001. For more information on contractual obligations and commitments, see Item
 7 in the Companys Annual Report on Form 10-K for the year ended December 31,
 2001.

The Companys current ratings are:



|                      |  | Fitch
Ratings |     |  | Moodys
 InvestorsService | Standard
& Poors
|--------------------- |  | ------------- | --- |  | ------------------------- | -----------------
|                      |  |               |     |  |                           |                  
|First mortgage
 bonds |  |               | AA- |  |                           |                  
|Senior unsecured      |  |               | A+  |  |                           |                  
|Preferred
 stock      |  |               | A   |  |                           |                  
|Outlook               |  | Stable        |     |  | Negative                  | Stable           

The Companys disclosure of these security
 ratings is not a recommendation to buy, sell or hold its securities. Further downgrades
 in these credit ratings could adversely affect the Companys ability to borrow
 and the Companys future borrowing costs would likely increase with resulting
 reductions in the Companys net income in future periods.

16



---



##### Table of Contents



MATERIAL CHANGES IN RESULTS OF OPERATIONS



Comparison
 of the Three Months Ended September 30, 2002 and 2001


Consolidated Results of Operations

Total operating revenues were $185.7 million
 for the three months ended September 30, 2002 compared with $177.7 million for the
 three months ended September 30, 2001. Operating income was $23.0 million for the
 three months ended September 30, 2002 compared with $20.3 million for the three
 months ended September 30, 2001. The Company recorded diluted earnings per share
 of $0.50 for the three months ended September 30, 2002 compared to $0.43 for the
 three months ended September 30, 2001. The benefit resulting solely from the discontinuance
 of goodwill amortization is $0.025 per common share during the quarter.

Following is a discussion of the results
 of operations by segment.



|Electric                                         
|-------------------------------------------------
|                                                 
|                                                 
|                                                 
|(in thousands)                                   
|                                                 
|Operating revenues                               
|Production fuel                                  
|Purchased power                                  
|Other electric operation and maintenance expenses
|Depreciation and amortization                    
|Property taxes                                   
|                                                 
|Operating income                                 
|                                                 

The 4.5% decrease in electric operating
 revenues for the three months ended September 30, 2002 compared with the three months
 ended September 30, 2001 reflects a $9.3 million (26.6%) decrease in wholesale power
 revenues, a $2.9 million (6.0%) increase in retail electric revenues and a $2.5
 million (82.2%) increase in other electric operating revenues.

The decrease in wholesale power revenues
 resulted from a 21.2% decrease in wholesale electric prices combined with a 6.9%
 decrease in megawatt-hours sold during the three months ended September 30, 2002
 compared with the three months ended September 30, 2001. The lower wholesale prices
 and reduction in megawatt-hour sales is the result of lower temperatures in the
 MAPP region in the third quarter of 2002 compared with the third quarter of 2001
 combined with peaking generation added in the MAPP region since September 2001.
 Also, the scheduled maintenance shutdown of Big Stone Plant on September 16, 2002
 resulted in a reduction in energy available for sale from Company generation in
 September 2002.

The increase in retail electric revenue
 resulted from a 4.2% increase in retail megawatt-hours sold between the periods
 combined with a 1.8% increase in revenue per megawatt-hour (mwh) sold. The increase
 in retail megawatt-hour sales reflects the addition of a large industrial customer
 in the third quarter of 2002. The increase in revenue per mwh sold reflects the
 impact of increased fuel and purchased power costs between the periods on the cost-of-energy
 adjustment factor in retail rates. The increase in other electric operating revenues
 relates to the construction of a transmission line in North Dakota for another area
 utility.

17



---



##### Table of Contents



Despite a 10.9% reduction in megawatt-hours
 generated during the three months ended September 30, 2002 compared with the three
 months ended September 30, 2001, production fuel expense increased $0.4 million
 (3.4%) as a result of a 15.9% increase in fuel costs per mwh produced. The increase
 in fuel costs per mwh produced reflects the new coal contract at the Big Stone Plant
 that went into effect at the beginning of 2002 and increased freight rates for the
 shipping of coal to Big Stone and Hoot Lake Plants.

The cost of purchased power decreased 13.9%
 for the three months ended September 30, 2002 compared with the three months ended
 September 30, 2001 due to a 21.5% decrease in cost per mwh purchased offset slightly
 by a 9.8% increase in megawatt-hours purchased. The lower cost per mwh purchased
 reflects the softening in the wholesale energy market. Activity in the short-term
 energy market is subject to change based on a number of factors and it is difficult
 to predict the quantity of wholesale power sales or prices for wholesale power.
 The increase in megawatt-hours purchased was entirely attributable to an increase
 in purchased power for retail sales to meet increased demand and make up for a reduction
 in generation at Big Stone Plant, which shut down for six weeks of scheduled maintenance
 on September 16, 2002.

The 2.9% increase in other electric operation
 and maintenance expenses for the three months ended September 30, 2002 compared
 with the three months ended September 30, 2001 is mainly due to an increase in costs
 related to the construction of a transmission line in North Dakota for another area
 utility.



|Plastics                     
|-----------------------------
|                             
|                             
|                             
|(in thousands)               
|                             
|Operating revenues           
|Cost of goods sold           
|Operating expenses           
|Depreciation and amortization
|                             
|Operating income (loss)      
|                             

The 28.2% increase in operating revenues
 for the three months ended September 30, 2002 compared with the three months ended
 September 30, 2001 is the result of a 28.4% increase in the price per pound of PVC
 pipe sold. The pounds of pipe sold remained constant between the periods. Cost
 of goods sold increased 4.2% mainly due to a $642,000 increase in raw materials
 cost. The cost per pound of resin, the raw material used to produce PVC pipe increased
 14.8% between periods. Operating expenses increased 27.9% primarily due to a $182,000
 increase in sales commissions and employee bonuses related to increased profitability
 in this segment. The 43.1% decrease in depreciation and amortization is due to the
 accounting change that eliminated the amortization of goodwill beginning in 2002.

18



---



##### Table of Contents





|Health Services              
|-----------------------------
|                             
|                             
|                             
|(in thousands)               
|                             
|Operating revenues           
|Cost of goods sold           
|Operating expenses           
|Depreciation and amortization
|                             
|Operating income             
|                             

Health services operating revenues for the
 three months ended September 30, 2002 compared with the three months ended September
 30, 2001 increased 18.2% due to added revenues from the acquisitions that occurred
 in September 2001 and May 2002. The number of scans increased 23.2% due to the acquisitions
 while the average fee per scan increased 9.1% primarily as a result of the addition
 of new modalities provided by the companies acquired in September 2001. Revenue
 from equipment sales decreased by $823,000 between the periods. The increase in
 cost of goods sold and depreciation and amortization are primarily due to the 2001
 and 2002 acquisitions. The 64.3% increase in operating expenses is partially due
 to the 2001 and 2002 acquisitions and partially due to expenses incurred to establish
 and promote fixed-base imaging systems.



|Manufacturing                
|-----------------------------
|                             
|                             
|                             
|(in thousands)               
|                             
|Operating revenues           
|Cost of goods sold           
|Operating expenses           
|Depreciation and amortization
|                             
|Operating income             
|                             

The 8.4% increase in operating revenues
 for the three months ended September 30, 2002 compared with the three months ended
 September 30, 2001 includes $3.4 million from the ShoreMaster acquisition completed
 in May 2002. Also contributing to the increase was $2.7 million in revenues from
 sales of wind towers and steel fabrication offset by a reduction in revenues of
 $3.4 million from metal parts stamping and fabrication. The 14.8% increase in
 cost of goods primarily reflects $2.5 million in costs of goods sold at ShoreMaster
 in the third quarter of 2002 combined with increased labor, material and subcontractor
 costs of $2.5 million related to wind tower production, offset by a $1.5 million
 decrease in costs related to metal parts stamping.

The main contributors to the decrease in
 manufacturing operating income are the Companys steel fabrication companies
 that manufacture stacks for power plants, ducts and wind towers. Uncertainty in
 the energy industry has directly affected these businesses. Orders for these products
 have been significantly lower than forecasted by the Company in the third quarter
 of 2001.

19



---



##### Table of Contents





|Other Business Operations    
|-----------------------------
|                             
|                             
|                             
|(in thousands)               
|                             
|Operating revenues           
|Cost of goods sold           
|Operating expenses           
|Depreciation and amortization
|                             
|Operating income             
|                             

The 3.6% increase in operating revenues
 for the three months ended September 30, 2002 compared with the three months ended
 September 30, 2001 was due to a $595,000 increase in revenues at the construction
 companies and a $558,000 increase in revenue at the energy services company offset
 by a $182,000 decrease at the transportation subsidiary. While revenues were up
 on increased natural gas sales at the energy services company, the increase was
 more than offset by a greater increase in the cost of natural gas, resulting in
 a decrease of $165,000 in gross margins on natural gas sales. Operating income increased
 at the transportation subsidiary between the periods despite a decrease in operating
 revenues and miles driven mainly as a result of the discontinuation of the amortization
 of goodwill and a decrease in bad debts expense. While most companies in this segment
 showed modest increases in operating income for the three months ended September
 30, 2002 compared with the three months ended September 30, 2001, they were more
 than offset by an increase in losses at the Companys energy services business
 and increases in unallocated corporate overhead charges between the periods.

Other Income and Deductions
  net, Interest Charges and Income Taxes

For the three months ended September 30,
 2002 compared with the three months ended September 30, 2001, other income and deductions
 increased $414,000 (125%) mainly due to an increase in the capitalization of the
 cost of equity funds used in the construction of electric utility assets. The $21.1
 million (100%) increase in the electric utilitys average construction work-in-progress
 balance during the three months ended September 30, 2002 compared with the three
 months ended September 30, 2001 reflects accumulated costs on a large transmission
 line project scheduled to go into service in the fourth quarter of 2002 and accumulated
 costs on a new 45 MW combustion turbine scheduled for completion in 2003. The $658,000
 (17.0%) increase in interest charges is mainly due to higher long-term debt balances
 outstanding for the three months ended September 30, 2002 compared with the three
 months ended September 30, 2001 and $321,000 in interest paid on the Companys
 IRS audit settlement for tax years 1997 and 1998 in September 2002. The $649,000
 (11.4%) increase in income tax expense between the quarters is primarily the result
 of a 14.6% increase in income before income tax for the three months ended September
 30, 2002 compared with the three months ended September 30, 2001. The effective
 tax rate was 33.0% for the three months ended September 30, 2002 compared to 34.0%
 for the three months ended September 30, 2001.

20



---



##### Table of Contents



Comparison of the Nine Months Ended September
 30, 2002 and 2001

Consolidated Results of
 Operations

Total operating revenues were $520.1 million
 for the nine months ended September 30, 2002, an increase of $25.4 million (5.1%)
 from the $494.7 million for the nine months ended September 30, 2001. Operating
 income increased $3.3 million (5.6%) from $58.5 million for the nine months ended
 September 30, 2001 to $61.8 million for the nine months ended September 30, 2002.
 The Company recorded basic earnings per share of $1.32 for the nine months ended
 September 30, 2002 and $1.25 for the nine months ended September 30, 2001. The Company
 recorded diluted earnings per share of $1.30 for the nine months ended September
 30, 2002 and $1.24 for the nine months ended September 30, 2001. Excluding goodwill
 amortization from the nine months ended September 30, 2001, basic earnings per share
 was $1.32 and diluted earnings per share was $1.31.

Following is a discussion of the results
 of operations by segment.

Electric



|                                                  |  | Nine months endedSeptember 30, |         |      |  |       
|------------------------------------------------- |  | ------------------------------ | ------- | ---- |  | ------
|(in thousands)                                    |  | 2002                           |         | 2001 |  | Change
|                                                  |  |                                |         |      |  |       
|Operating revenues                                |  | $                              | 228,339 |      |  | $     
|Production fuel                                   |  |                                | 33,569  |      |  |       
|Purchased power                                   |  |                                | 70,262  |      |  |       
|Other electric operation and maintenance expenses |  |                                | 58,698  |      |  |       
|Depreciation and amortization                     |  |                                | 18,614  |      |  |       
|Property taxes                                    |  |                                | 7,419   |      |  |       
|                                                  |  |                                |         |      |  |       
|Operating income                                  |  | $                              | 39,777  |      |  | $     
|                                                  |  |                                |         |      |  |       

The 4.0% decrease in electric operating
 revenues for the nine months ended September 30, 2002 compared with the nine months
 ended September 30, 2001 is due to a $18.6 million (22.7%) decrease in revenues
 from wholesale power sales offset by a $7.7 million (107%) increase for other electric
 operating revenues and a $1.3 million (0.9%) increase in retail revenue. Revenues
 from wholesale power sales decreased as a result of a 27.9% decrease in the average
 price per mwh sold, despite a 7.2% increase in the volume of megawatt-hours sold.
 The decrease in revenue per mwh reflects the soft wholesale power market combined
 with peaking generation added in the MAPP region since September 2001. Gross margins
 per mwh sold on wholesale power sales decreased 40.3% between the periods. The
 increase in other electric operating revenues is primarily due to a large transmission
 line construction project being completed for another area utility. The increase
 in retail revenues resulted from a 0.8% increase in retail megawatt-hours sold.

Production fuel expenses increased 5.9%
 during the nine months ended September 30, 2002 compared with the nine months ended
 September 30, 2001 primarily due to a 13.5% increase in fuel costs per mwh produced
 at the electric utilitys coal-fired generating stations. The increase in fuel
 costs per mwh produced is due to higher costs reflected in the new coal contracts
 that went into effect at the beginning of 2002 and increased freight rates for the
 shipping of coal to Big Stone and Hoot Lake Plants. In 2001 coal was being shipped
 to Big Stone Plant under a negotiated agreement that expired in 2001. Currently,
 coal is being shipped to Big Stone Plant under a tariff rate that is set through
 December 2002. The cost of purchased power decreased 13.0% reflecting a decrease
 of 23.1% in the cost per mwh purchased offset by a 13.1% increase in mwh purchased.
 The increase in mwh purchased was to provide for the increase in wholesale energy
 sales, to meet system demand and to make up for a reduction in generation at Big
 Stone Plant, which was shut down on September 16, 2002 for scheduled maintenance.

21



---



##### Table of Contents



Other operation and maintenance expenses
 for the nine months ended September 30, 2002 increased 8.7% over the nine months
 ended September 30, 2001. This increase includes $3.5 million of expenses related
 to the transmission line construction project for another utility and an increase
 of $1.2 million in employee benefits costs mainly related to increased medical claims
 expenses of active and retired employees.

Plastics



|                              |  | Nine months endedSeptember 30, |        |      |  |       
|----------------------------- |  | ------------------------------ | ------ | ---- |  | ------
|(in thousands)                |  | 2002                           |        | 2001 |  | Change
|                              |  |                                |        |      |  |       
|Operating revenues            |  | $                              | 62,650 |      |  | $     
|Cost of goods sold            |  |                                | 47,309 |      |  |       
|Operating expenses            |  |                                | 3,190  |      |  |       
|Depreciation and amortization |  |                                | 1,326  |      |  |       
|                              |  |                                |        |      |  |       
|Operating income (loss)       |  | $                              | 10,825 |      |  | $     
|                              |  |                                |        |      |  |       

The 25.1% increase in operating revenues
 for the nine months ended September 30, 2002 compared with the nine months ended
 September 30, 2001 reflects a 20.6% increase in pounds of PVC pipe sold combined
 with a 3.7% increase in the average sales price per pound. The 1.4% increase in
 cost of goods sold reflects $1.1 million in costs related to the increase in PVC
 pipe sold offset by a $512,000 reduction in material costs due to a 17% decrease
 in the price per pound of resin. Operating expenses increased 25.1% primarily due
 to increases in sales commissions and employee bonuses related to increased profitability
 in this segment. The decrease in depreciation and amortization is due to the accounting
 change that eliminated the amortization of goodwill beginning in 2002.

Since the PVC pipe industry is affected
 directly by economic cycles it is difficult to predict that the recent increase
 in pounds of pipe sold will continue. The industry experienced a significant increase
 in demand during the first half of 2002 compared with the same period last year
 when demand was exceptionally weak. During 2001 PVC resin prices declined holding
 down sales prices. The Company expects sales volumes and operating margins to decline
 in the fourth quarter of 2002 due to a normal slowdown in construction activities
 as winter season approaches.

The companies in this segment are highly
 dependent upon a limited number of third-party vendors for PVC resin. For the year
 2001 raw materials purchased from two vendors totaled 74.9%. For the nine months
 ended September 30, 2002 the raw material purchased from the same two vendors was
 down to 57.7%, with 41.7% supplied by three other vendors. The companies in this
 segment believe their relationships with their key raw material vendors are good.
 However, the loss of a key supplier or any interruption or delay in the supply
 of PVC resin could have a significant impact on the plastics segment.

22



---



##### Table of Contents



Health Services



|                              | Nine months endedSeptember 30, |       
|----------------------------- | ------------------------------ | ------
|(in thousands)                | 2002                           |       
|                              |                                |       
|Operating revenues            | $                              | 67,771
|Cost of goods sold            |                                | 47,894
|Operating expenses            |                                | 10,169
|Depreciation and amortization |                                | 3,159 
|                              |                                |       
|Operating income              | $                              | 6,549 
|                              |                                |       

The 18.9% increase in health
 services operating revenues, 10.9% increase in cost of goods sold, 50.8%
 increase in operating expenses and the 32.2% increase in depreciation and
 amortization for the nine months ended September 30, 2002 compared with the
 nine months ended September 30, 2001 is primarily due to the acquisitions
 completed during September 2001 and May 2002. The number of scans performed
 increased 18.6% due to the acquisitions while the average fee per scan
 increased 7.5% primarily as a result of the addition of new modalities provided
 by the companies acquired in September 2001. Revenues from equipment sales
 decreased 11.7%. The increase in cost of goods sold reflects an increase of
 $1.7 million in equipment repairs and maintenance, a $1.8 million in labor
 related costs and $0.5 million in equipment rental costs. The increase in
 operating expenses is due to increased labor related costs and other general
 and administrative costs. Operating margins improved between the periods due to
 increases in margins on service sales in the diagnostic equipment imaging
 business and in the mobile imaging business offset by expenses incurred in the
 segments continued investment in and promotion of fixed-based imaging systems.

Manufacturing



|                              | Nine months endedSeptember 30, |     
|----------------------------- | ------------------------------ | ----
|(in thousands)                |                                | 2002
|                              |                                |     
|Operating revenues            |                                | $   
|Cost of goods sold            |                                |     
|Operating expenses            |                                |     
|Depreciation and amortization |                                |     
|                              |                                |     
|Operating income              |                                | $   
|                              |                                |     

The 12.4% increase in manufacturing
 operating revenues for the nine months ended September 30, 2002 compared with
 the nine months ended September 30, 2001 reflects the May 2002 ShoreMaster
 acquisition combined with increased production and sales of wind towers offset
 by decreased sales volumes of metal part stamping. Cost of goods sold
 increased 16.3% due to the ShoreMaster acquisition and increases of $9.2
 million in material cost at the wind towers and steel fabrication businesses
 offset by a $4.7 million reduction in material costs at the metal parts
 stamping companies. The ShoreMaster acquisition accounted for $1.5 million of
 the $1.7 million increase in operating expenses between the periods.

All of the companies in the segment,
 except ShoreMaster, experienced decreases in their operating income for the
 nine months ended September 30, 2002 compared with the nine months ended
 September 30, 2001. The companies in this segment continue to be adversely
 affected by a slower economy. Operating margins were also affected at the
 metal parts stamping and fabrication plants due to a temporary closing of a
 major customers plant during the month of June due to flooding. A slowdown in
 the wind energy marketdespite the passage of the Production Tax Credithas
 affected the wind tower business. Uncertainty in the energy industry has
 directly affected the Companys steel fabrication company that manufactures
 stacks for power plants, ducts and wind towers. Orders for these products have
 been significantly lower than forecasted by the Company in the third quarter of
 2001.

23



---



##### Table of Contents



Other Business Operations



|                              | Nine months ended |        |      |  |       
|----------------------------- | ----------------- | ------ | ---- |  | ------
|                              | September 30,     |        |      |  |       
|(in thousands)                | 2002              |        | 2001 |  | Change
|                              |                   |        |      |  |       
|Operating revenues            | $                 | 59,649 |      |  | $     
|Cost of goods sold            |                   | 32,427 |      |  |       
|Operating expenses            |                   | 25,535 |      |  |       
|Depreciation and amortization |                   | 3,765  |      |  |       
|                              |                   |        |      |  |       
|Operating (loss) income       | $                 | (2,078 | )    |  | $     
|                              |                   |        |      |  |       

Increases in operating revenues of $2.2
 million at the construction subsidiaries and $0.4 million at the telecommunications
 company were partially offset by decreases in revenues of $1.6 million from the
 transportation subsidiary and $0.3 million at the energy services subsidiary. A
 decrease of 7.8% in miles driven combined with a 3.3% decrease in revenue per mile
 led to the decrease in operating revenues at the transportation subsidiary.

The increase in cost of goods sold is
 mainly attributable to the construction subsidiaries and is directly related to
 increased construction revenue. Operating expenses increased 9.0% due to a $2.0
 million increase in unallocated corporate overhead, an $821,000 increase in operating
 expenses at the energy services company and a $315,000 increase in operating expenses
 at the telecommunications subsidiary mainly due to increases in their provisions
 for doubtful accounts. An 11% decrease in the average cost of diesel fuel per gallon
 at the transportation subsidiary partially offset the increase in operating expenses
 at the other companies. The decrease in depreciation and amortization is due to
 the accounting change that eliminated the amortization of goodwill beginning in
 2002.

Other Income and Deductions
 - net, Interest Charges, and Income Taxes

For the nine months ended September 30,
 2002 compared with the nine months ended September 30, 2001, the $372,000 (24.4%)
 decrease in other income and deductions reflects an increase in non-operating miscellaneous
 expenses of $852,000, a decrease in interest income of $212,000 and reductions of
 $213,000 in gains from sale of fixed assets offset by a $905,000 increase in the
 amount of allowance for funds used during construction recorded at the electric
 utility. The $1.1 million (9.5%) increase in interest charges is due to higher
 long-term debt balances outstanding for the nine months ended September 30, 2002
 compared to the nine months ended September 30, 2001. Income taxes increased $545,000
 between the periods commensurate with an increase in taxable income for the same
 periods. The effective tax rate was 32.7% in the first nine months of 2002 compared
 to 32.8% in the same period in 2001.

Critical Accounting Policies

The discussion and analysis of the Companys
 consolidated financial condition and results of operations are based on consolidated
 financial statements prepared in accordance with accounting principles generally
 accepted in the United States. Preparation of these consolidated financial statements
 requires the use of estimates and judgments that affect the reported results. Actual
 results may differ from these estimates under different assumptions or conditions.

24



---



##### Table of Contents



Critical accounting policies are those
 that require significant management judgments and business uncertainties and could
 result in materially different results using different assumptions and conditions.
 The following accounting policies meet the criteria of a critical accounting policy.

Revenue recognitionDue to the
 diverse business operations of the Company, revenue recognition depends on the product
 produced and sold. In general, the Company recognizes revenue when the earnings
 process is complete, evidenced by an agreement with the customer, there has been
 delivery and acceptance and the price is fixed or determinable. In cases where
 significant obligations remain after delivery, revenue is deferred until such obligations
 are fulfilled. Provisions for sale returns and warranty costs are recorded at the
 time of the sale based on historical information and current trends.

Electric customers meters are read
 and bills are rendered on a cycle basis. Revenue is accrued for electricity consumed
 but not yet billed. Rate schedules applicable to substantially all customers include
 a cost of energy adjustment clause, under which the rates are adjusted to reflect
 changes in average cost of fuels and purchased power, and a surcharge for recovery
 of conservation-related expenses. Revenues on wholesale energy sales are recognized
 when energy is delivered. The majority of wholesale energy revenue is the result
 of agreements with individual counter-parties. Plastics operating revenues are
 recorded when the product is shipped. Health services operating revenues on major
 equipment and installation contracts are recorded when the equipment is delivered.
 Amounts received in advance under customer service contracts are deferred and recognized
 on a straight-line basis over the contract period. Revenues generated in the mobile
 imaging operations are recorded on a fee for scan basis. Manufacturing operating
 revenues are recorded when products are shipped and on a percentage-of-completion
 basis for construction type contracts. Other business operations operating revenues
 are recorded when services are rendered or products are shipped. In the case of
 construction contracts, the percentage-of-completion method is used. The method
 used to determine the progress of completion is based on the ratio of costs incurred
 to total estimated costs.

Inventory valuationThe majority
 of the Companys inventory is stated at the lower of cost (first in, first
 out) or market. Changes in the market conditions could require a write down of
 inventory values.

Use of estimatesThe Company
 uses estimates based on the best information available in recording transactions
 and balances resulting from business operations. Estimates are used for such items
 as depreciable lives, tax provisions, collectability of trade accounts receivable,
 self insurance programs, environmental liabilities, unbilled electric revenues,
 unscheduled power exchanges, service contract maintenance costs, percentage-of-completion
 and actuarially determined benefits costs. As better information becomes available
 or actual amounts are known, estimates are revised. Operating results can be affected
 by changes made to prior accounting estimates.

The Companys significant accounting
 policies are more fully described in note 1 of the notes to consolidated financial
 statements included under Item 8 in the Companys Annual Report on Form 10-K
 for the year ended December 31, 2001.




Item 3.   
 Quantitative and Qualitative Disclosures About Market Risk

The Company has limited exposure to market
 risk associated with interest rates and commodity prices. The Company currently
 has no exposure to market risk associated with changes in foreign currency exchange
 rates.

The majority of the Companys long-term
 debt obligations bear interest at a fixed rate. Variable rate long-term debt bears
 interest at a rate that is reset on a periodic basis reflecting current market conditions.
 The Company manages its interest rate risk through the issuance of fixed-rate debt
 with varying maturities, through economic refunding of debt through optional refundings,
 limiting the amount of variable interest rate debt, and utilization of short-term
 borrowings to allow flexibility in the timing and placement of long-term debt.
 As of September 30, 2002, the Company had $15.8 million of long-term debt subject
 to variable interest rates. Assuming no change in

25



---



##### Table of Contents



the Companys financial structure,
 if variable interest rates were to average 1% higher (lower) than what the average
 variable rate was on September 30, 2002, interest expense and pre-tax earnings would
 change by approximately $158,000. The Company has short-term borrowing arrangements
 to provide financing for working capital and general corporate purposes. The level
 of borrowings under these arrangements vary from period to period, depending upon,
 among other factors, operating needs and capital expenditures. On September 30,
 2002 the Company had no outstanding short-term borrowings under these arrangements.

The Company has not used interest rate
 swaps to manage net exposure to interest rate changes related to the Companys
 portfolio of borrowings. The Company maintains a ratio of fixed rate debt to total
 debt within a certain range. It is the Companys policy to enter into interest
 rate transactions and other financial instruments only to the extent considered
 necessary to meet its stated objectives. The Company does not enter into transactions
 for speculative or trading purposes.

The electric utilitys retail portion
 of fuel and purchased power costs are subject to cost of energy adjustment clauses
 that mitigate the commodity price risk by allowing a pass through of most of the
 increase or decrease in energy costs to retail customers. In addition, the electric
 utility participates in an active wholesale power market providing access to commodity
 transactions that may serve to mitigate price risk. The Company has in place an
 energy risk management policy with a goal to manage, through the use of defined
 risk management practices, price risk and credit risk associated with wholesale
 power purchases and sales.

The Company through its energy services
 subsidiary markets natural gas to approximately 150 retail customers. A portion
 of these customers are served under fixed-price contracts. There is price risk
 associated with these limited number of fixed-price contracts since the corresponding
 cost of natural gas is not immediately locked in. This price risk is not considered
 material to the Company.

The plastics companies are exposed to
 market risk related to changes in commodity prices for PVC resins, the raw material
 used to manufacture PVC pipe. The PVC pipe industry is highly sensitive to commodity
 raw material pricing volatility. Historically, when resin prices are rising or
 stable, margins and sales volume have been higher and when resin prices are falling,
 sales volumes and margins have been lower. Gross margins also decline when the
 supply of PVC pipe increases faster than demand. Due to the commodity nature of
 PVC resin and the dynamic supply and demand factors worldwide, it is very difficult
 to predict gross margin percentages or to assume that historical trends will continue.




Item 4.   
 Controls and Procedures

(a)     Evaluation of Disclosure
 Controls and Procedures. Under the supervision and with the participation of the
 Companys management, including the Chief Executive Officer and the Chief Financial
 Officer, the Company evaluated the effectiveness of the design and operation of
 its disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities
 Exchange Act of 1934) as of a date (the Evaluation Date) within 90 days
 prior to the filing date of this report. Based on that evaluation, the Chief Executive
 Officer and Chief Financial Officer concluded that the Companys disclosure
 controls and procedures were effective as of the Evaluation Date.

(b)     Changes in Internal
 Controls. There were no significant changes in the Companys internal controls
 or in other factors that could significantly affect those controls subsequent to
 the date of their most recent evaluation.

26



---



##### Table of Contents






PART II. OTHER INFORMATION




Item 6.   Exhibits and
 Reports on Form 8-K

a)  Exhibits:



| | 10-J | First Amendment
 dated as of September 19, 2002 to Credit Agreement dated as of April 30, 2002 among
 Otter Tail Corporation, the Banks, as defined therein, and U.S. Bank National Association,
 as a Bank and as Agent (incorporated by reference to Exhibit 99-A to the Companys
 Current Report on Form 8-K filed September 27, 2002).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                            
| | 99-A | Certification
 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002 as to the Quarterly Report on Form 10-Q for
 the quarterly period ended September 30, 2002, by John D. Erickson, President and
 Chief Executive Officer, Otter Tail Corporation.                                  
| |      |                                                                                                                                                                                                                                                                                                                                            
| | 99-B | Certification
 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002 as to the Quarterly Report on Form 10-Q
 for the quarterly period ended September 30, 2002, by Kevin G. Moug, Chief Financial
 Officer and Treasurer, Otter Tail Corporation.                                     
| |      |                                                                                                                                                                                                                                                                                                                                            

b)  Reports on Form 8-K.



| | A report on
 Form 8-K was filed on September 20, 2002 under Item 5  Other Events, and Item
 7  Financial Statements and Exhibits to incorporate by reference certain consolidated
 financial statements and other information related to Ambac Assurance Corporation
 and its subsidiaries on file with the SEC into the Companys Report on Form
 8-K being filed, the Companys Registration Statement on Form S-3 Registration
 No. 333-90952 (the Registration Statement), and the Companys Preliminary
 Prospectus Supplement dated September 20, 2002 related to the offering of its insured
 senior notes due 2017 and its senior notes due 2032, and to file as an exhibit to
 the Registration Statement the consent of Ambacs auditors.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | A report on
 Form 8-K was filed on September 27, 2002 under Item 5  Other Events, and Item
 7  Financial Statements and Exhibits to incorporate by reference certain consolidated
 financial statements and other information related to Ambac Assurance Corporation
 and its subsidiaries on file with the SEC into the Companys Report on Form
 8-K being filed, the Registration Statement, and the Companys Prospectus Supplement
 dated September 23, 2002 related to the offering of its insured senior notes due
 2017 and its senior notes due 2032, and to file as exhibits to the Registration
 Statement the consent of Ambacs auditors and certain other documents.                                                                   

27



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities
 Exchange Act of 1934, the Registrant has duly caused this report to be signed on
 its behalf by the undersigned thereunto duly authorized.



|                            | OTTER TAIL CORPORATION                       
|--------------------------- | ---------------------------------------------
|                            |                                              
|                            |                                              
|                            | By:                                          
|                            |                                              
|                            |                                              
|                            | Chief Financial Officer and Treasurer        
|                            | (Chief
 Financial Officer/Authorized Officer)
|                            |                                              
|Dated:   November
 14, 2002 |                                              

28



---



##### Table of Contents






CERTIFICATIONS

I, John D. Erickson, certify that:



|   | 1.                                                                                                                                                                                                                                                                                                                                 | I have
 reviewed this quarterly report on Form 10-Q of Otter Tail Corporation;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for,
 the periods presented in this quarterly report;                   
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                      



| | a) | designed
 such disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                    
| | b) | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                    
| | c) | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



| | 5. | The registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent function):
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                   
| | b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                          



| | 6. | The registrants
 other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002

/s/ John D. Erickson

---

29



---



##### Table of Contents



I, Kevin G. Moug, certify that:



|   | 1.                                                                                                                                                                                                                                                                                                                                 | I have
 reviewed this quarterly report on Form 10-Q of Otter Tail Corporation;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on
 my knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on
 my knowledge, the financial statements, and other financial information included
 in this quarterly report, fairly present in all material respects the financial
 condition, results of operations and cash flows of the registrant as of, and for,
 the periods presented in this quarterly report;                   
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The registrants
 other certifying officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                      



| | a) | designed
 such disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                    
| | b) | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                    
| | c) | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



| | 5. | The registrants
 other certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants
 board of directors (or persons performing the equivalent function):
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                   
| | b) | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                          



| | 6. | The registrants
 other certifying officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002

/s/ Kevin G. Moug

---

30



---



##### Table of Contents






EXHIBIT INDEX



|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                            
|10-J           | First Amendment
 dated as of September 19, 2002 to Credit Agreement dated as of April 30, 2002 among
 Otter Tail Corporation, the Banks, as defined therein, and U.S. Bank National Association,
 as a Bank and as Agent (incorporated by reference to Exhibit 99-A to the Companys
 Current Report on Form 8-K filed September 27, 2002).
|               |                                                                                                                                                                                                                                                                                                                                            
|99-A           | Certification
 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002 as to the Quarterly Report on Form 10-Q for the quarterly period ended
 September 30, 2002, by John D. Erickson, President and Chief Executive Officer,
 Otter Tail Corporation                                   
|               |                                                                                                                                                                                                                                                                                                                                            
|99-B           | Certification
 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002 as to the Quarterly Report on Form 10-Q for the quarterly period ended
 September 30, 2002, by Kevin G. Moug, Chief Financial Officer and Treasurer, Otter
 Tail Corporation.