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Note 2 - Business Segment Information

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

2. Business Segment Information

The accounting policies of the segments are described under note 1 – Summary of Significant Accounting Policies. The Company's businesses have been classified into three segments to be consistent with its business strategy and the reporting and review process used by the Company’s chief operating decision maker. These businesses sell products and provide services to customers primarily in the United States. The Company’s business structure currently includes the following three segments: Electric, Manufacturing and Plastics. The chart below indicates the operating companies included in each segment.

Electric includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota by OTP. In addition, OTP is a participant in the Midcontinent Independent System Operator, Inc. (MISO) markets. OTP’s operations have been the Company’s primary business since 1907.

Manufacturing consists of businesses in the following manufacturing activities: contract machining, metal parts stamping, fabrication and painting, and production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components. These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States.

Plastics consists of businesses producing PVC pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the upper Midwest and Southwest regions of the United States.

OTP is a wholly owned subsidiary of the Company. All of the Company’s other businesses are owned by its wholly owned subsidiary, Varistar Corporation. The Company’s Corporate operating costs include items such as corporate staff and overhead costs, the results of the Company’s captive insurance company and other items excluded from the measurement of operating segment performance. Corporate assets consist primarily of cash, prepaid expenses, investments and fixed assets. Corporate is not an operating segment. Rather, it is added to operating segment totals to reconcile to totals on the Company’s consolidated financial statements.

No single customer accounted for over 10% of the Company’s consolidated revenues in 2019, 2018 and 2017. While no single customer accounted for over 10% of consolidated revenue in 2019, certain customers provided a significant portion of each business segment’s 2019 revenue. The Electric segment has one customer that provided 11.9% of 2019 segment revenues. The Manufacturing segment has one customer that manufactures and sells recreational vehicles that provided 23.8% of 2019 segment revenues and one customer that manufactures and sells lawn and garden equipment that provided 11.1% of 2019 segment revenues. The Manufacturing segment’s top five revenue-generating customers provided over 54% of 2019 segment revenues. The Plastics segment has two customers that individually provided 25.3% and 20.4% of 2019 segment revenues. The loss of any one of these customers would have a significant negative impact on the financial position and results of operations of the respective business segment and the Company.

All the Company’s long-lived assets are within the United States and sales within the United States accounted for 98.8% of sales in 2019, 98.4% of sales in 2018 and 98.2% of sales in 2017.

The Company evaluates the performance of its business segments and allocates resources to them based on earnings contribution and return on total invested capital. Information for the business segments for 2019, 2018 and 2017 is presented in the following table:

(in thousands)		2019				2018				2017
Operating Revenue
Electric Segment:
Retail Sales Revenue from Contracts with Customers		$	405,446			$	388,690			$	376,902
Changes in Accrued ARP Revenues			1,032				(439	)			(1,971	)
Total Retail Sales Revenue			406,478				388,251				374,931
Transmission Services Revenue			40,542				46,947				46,664
Wholesale Revenues – Company Generation			5,007				7,735				5,173
Other Electric Revenues			7,070				7,322				7,769
Total Electric Segment Revenues			459,097				450,255				434,537
Manufacturing Segment:
Metal Parts and Tooling			236,032				223,765				189,242
Plastic Products and Tooling			35,173				35,836				33,939
Other			5,999				8,808				6,557
Total Manufacturing Segment Revenues			277,204				268,409				229,738
Plastics Segment – Sale of PVC Pipe Products			183,257				197,840				185,132
Intersegment Eliminations			(55	)			(57	)			(57	)
Total		$	919,503			$	916,447			$	849,350
Cost of Products Sold
Manufacturing		$	215,179			$	205,699			$	176,473
Plastics			139,974				148,881				140,107
Intersegment Eliminations			(34	)			(21	)			(18	)
Total		$	355,119			$	354,559			$	316,562
Other Nonelectric Expenses
Manufacturing		$	29,895			$	29,650			$	23,785
Plastics			11,393				12,323				11,564
Corporate			9,515				9,607				6,182
Intersegment Eliminations			(21	)			(36	)			(39	)
Total		$	50,782			$	51,544			$	41,492

(in thousands)

2019

2018

2017

Depreciation and Amortization

Electric
$ 60,044 $ 55,935 $ 53,276

Manufacturing
14,261 14,794 15,379

Plastics
3,451 3,719 3,817

Corporate
330 218 73

Total
$ 78,086 $ 74,666 $ 72,545

Operating Income (Loss)

Electric
$ 98,417 $ 88,031 $ 94,797

Manufacturing
17,869 18,266 14,101

Plastics
28,439 32,917 29,644

Corporate
(9,845 ) (9,825 ) (6,255 )

Total
$ 134,880 $ 129,389 $ 132,287

Interest Charges

Electric
$ 26,548 $ 26,365 $ 25,334

Manufacturing
2,345 2,230 2,215

Plastics
718 609 633

Corporate and Intersegment Eliminations
1,800 1,204 1,422

Total
$ 31,411 $ 30,408 $ 29,604

Income Tax Expense (Benefit)

Electric
$ 12,867 $ 5,685 $ 17,013

Manufacturing
2,784 3,393 989

Plastics
7,309 8,728 7,448

Corporate
(5,519 ) (3,218 ) 1,806

Total
$ 17,441 $ 14,588 $ 27,256

Net Income (Loss)

Electric
$ 59,046 $ 54,431 $ 49,446

Manufacturing
12,899 12,839 11,050

Plastics
20,572 23,819 21,696

Corporate
(5,670 ) (8,744 ) (9,753 )

Total
$ 86,847 $ 82,345 $ 72,439

Capital Expenditures

Electric
$ 187,362 $ 87,287 $ 118,444

Manufacturing
14,268 13,316 9,916

Plastics
5,452 4,199 4,432

Corporate
283 623 121

Total
$ 207,365 $ 105,425 $ 132,913

Identifiable Assets

Electric
$ 1,931,525 $ 1,728,534 $ 1,690,224

Manufacturing
195,742 187,556 167,023

Plastics
92,049 91,630 87,230

Corporate
54,279 44,797 59,801

Total
$ 2,273,595 $ 2,052,517 $ 2,004,278