Good day, ladies and gentlemen and welcome to the Otter Tail Corporation's First Quarter 2013 Earnings Conference Call. Today's call is being recorded and there will be a question-and-answer session after the prepared remarks. I would now like to introduce your host for today's conference, Mr. Loren Hanson. Please go ahead, sir. Loren Hanson. Please go ahead sir.

Good morning, everyone and welcome to our call. My name is Loren Hanson, and I manage the Investor Relations area at Otter Tail Corporation. Last night we announced our first quarter results. Please note that our complete earnings release and slides accompanying this earnings call are available on our website at www.ottertail.com. A replay of the call will be available on our website later today. With me on the call today is Jim McIntyre, Otter Tail Corporation's President and CEO, Kevin Moug, Otter Tail Corporation's Senior Vice President and Chief Financial Officer and Charles MacFarlane, President and CEO of Otter Tail Power. Before I begin, I would like to remind you that during the course of this call, we will be making forward-looking statements. These forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and includes statements regarding Otter Tail Corporation's future financial and operating results or other statements that are not historical facts. Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements to the certain risks and uncertainties, including those described in our most recent form 10-K and subsequent quarterly reports on Form 10-Q. Otter Tail Corporation disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. For opening remarks, I would now like to turn the call over to Otter Tail Corporation's President and CEO, Mr. Jim McIntyre. Jim?

Good morning and thanks for joining our call today. 2013 is off to a good start with first quarter earnings per share from continuing operations of $0.41 compared to $0.28 last year. Given more favorable weather this year, earnings from the Electric segment met our expectations. Manufacture and performance was down slightly, but was in line with expectations and results demonstrate continued improvement in operations. Our Construction segment is greatly improved over last year, despite reporting a loss for the quarter. Plastics had a very strong first quarter, acting on favorable market conditions. In our view these results were a clear indication that our effort to focus and realign our portfolio is beginning to pay off, improving shareholder value and positioning the company for the future. Furthering this goal, this past quarter we completed the sale of ShoreMaster, another important step in our portfolio of realignment. We are well on our way to achieving a more optimal configuration of manufacturing infrastructure holdings. As we narrow our focus to our electric business and entire portfolio of manufacturing infrastructure businesses, management and the Board of Directors are better able to understand and improve our companies, using a more targeted and disciplined approach. This increases options for sharing expertise, knowledge and leadership through the exchange of information and job rotations. It also offers a wider variety of talent development and the ability to attract the right people looking for a company with a broad range of career opportunities. In addition to the strong first quarter utility results, there were also a number of events that highlight this growth strategy for the utility. As part of the bidding and planning process related to our Big Stone Plant air quality control system or AQCS Otter Tail Power Company was able to reduce its planned capital…

Thank you, Jim and good morning. Please refer to slide four as I walk through the quarter's results. Our manufacturing segment experienced a slight decrease in earnings when compared with the same quarter a year ago. Reduced demand across construction, energy, and lawn and garden end markets was the primary cause of reduced sales volume of $6.3 million. This segment improved its return on sales on a quarter-over-quarter basis to 6.2% of sales compared to 5.8% of sales primarily due to improved productivity at both BTD and T.O. Plastics in spite of the lower sales volumes. Our corporate expenses decreased $600,000 between the quarters as a result of lower interest expense related to the early redemption of the corporation's 50 million senior unsecured notes in July of 2012 and decreases in professional and contracted service expenses. These lower costs were partially offset by increases related to staffing additions to support the manufacturing and infrastructure platform and additional stock incentive cost resulting from the strong performance of our common stock price. Our plastics segment had a strong first quarter due to increased sales volume as housing markets improved in the South Central and South West regions of the United States. These improvements were partially offset by lower sales in the North Central region due to a harsher winter. Moving on to the Electric segment. The colder weather led to a 33.8% increase in heating degree days this year compared to the unusually mild winter last year, contributing to an 8.8% increase retail kilowatt hour sales and a $900,000 increase in net earnings. The number of heating degree days in the first quarter of 2013 was 5% greater than normal for the same period. Our revenues were also impacted by higher fuel and purchase power prices due to increased market demand for…

(Operator instructions) Our first question comes from the line of Matt Tucker of KeyBanc Capital Markets. Your line is open. Please go ahead.

Hey guys. Good morning. Just a couple of questions on the non-utility businesses. You mentioned the plastics guidance raise was related to the first quarter performance, which was obviously strong. Should we just think about it that way, or is there anything about the outlook for the rest of the year that's changed?

I would primarily think about it that we did have very strong first quarter performance as compared to what our original budgets and expectations were Matt and as we based on the current conditions as we look forward, we would expect that that strong first quarter performance -- we don't expect to have to give that back. We expect to be able to maintain that, and thus we are increasing the guidance as a part of that in terms of the current market conditions that we were currently seeing. We've included that view in the guidance as well.

Thanks. That's very helpful. And then just on the construction side, I guess that's the one segment where you really kept the guidance intact. Could you comment on how the first quarter performance compared with your internal expectations, and then also has weather impacted the second quarter at all thus far, or has it just been a more normal quarter so far?

In terms of how the construction companies compared against our internal expectation, Foley was pretty much on the internal expectations. Aevenia was behind the internal expectations, really for the reasons that we discussed as it relates to why earnings were down quarter-over-quarter. In terms of weather heading into the second quarter, April was a pretty challenging month around here and so there is some impact, particularly from a venue standpoint for weather in the early part of the first quarter that those things were contemplated as we were pulling together our updated forecast as well.

Okay, thanks a lot. I'll jump back in the queue.

Thank you. Our next question is from the line of Michael Klein of Sidoti & Company. Your line is open. Please go ahead. Michael Klein - Sidoti & Company: Hey good morning guys.

Good morning. Michael Klein - Sidoti & Company: Does the reduced CapEx number change your plans around the timing of external financing, or do you still think 2014 is the likely time for that?

Mike we are still, we would expect based on our current plans that 2014 is still a timeframe that we are looking at for having to issue equity. Michael Klein - Sidoti & Company: Okay. And how should we think about the dividend now, especially in light of the improved cash flow and the reduced CapEx? Can we start to think that the dividend is being discussed more frequently, or how should we think about that?

Well, you can be certain that it has our full attention as follows out of the Board. The things you referenced, the improved cash flow, the dependability of their earnings also were all good steps towards a time when the Board might decide to make a change. I think 2013 is a year where we really want to work hard at executing and showing and demonstrating our ability to have strong earnings throughout the full year. So we’ll work our way through 2013, but clearly at some point we would expect and we would be in a position to consider a change in dividend. But, we’ll review that with the Board quarter-by-quarter as we go forward. Michael Klein - Sidoti & Company: Okay. And do you guys have a target payout ratio that you'd eventually like to get into, or has that not been discussed at this point yet?

We had a discussion around that. I believe we’d probably be targeting a 65% to 70% overall payout ratio, with a makeup coming from higher percentage from the utilities and from our diversified businesses consistent with better volatility that those businesses will have from time to time. We want to get into that comfortable zone, so that the dividend is viewed to be secure for an ongoing period of time. Michael Klein - Sidoti & Company: Okay, great. Thanks a lot.

Thank you. Our next question comes from the line of Mike Bates of D.A. Davidson. Your line is open. Please go ahead. Alex Heinen - D.A. Davidson & Co.: Hi guys. It’s actually Alex Heinen in for Mike today.

Hi Alex. Alex Heinen - D.A. Davidson & Co.: So I was wondering, do you guys believe that an uptick in construction and plastics environment could make these operations more attractive to potential buyers in the future?

Well, first off, we very much appreciate the earnings contribution that the plastics provides to us. We believe our two plastics companies are very well run. They are low cost both in terms of fixed cost and operating cost. So as you can see like for the last year in particular they did provide a -- they provided a very strong set of earnings for us. We know that they’re very opportunistic and any earnings opportunity that is there, they’ll take advantage of it and so we’re very pleased with them. I think when you look at overall market for plastics, there’s still an oversupply of plastic pipe manufacturing capability in the U.S. but our plants tend to do pretty well most years, even in tough time. So that may well be true, but we’re very -- we’re comfortable with our current ownership of the facilities. Alex Heinen - D.A. Davidson & Co.: Okay, thanks. That's great. And then did you guys give the weather impact on EPS versus normal?

We did not give the EPS impact. We just stated that the weather in the first quarter this year. The heating degree days are about 5% above normal. Alex Heinen - D.A. Davidson & Co.: Okay. All right, thanks. That’s all I have.

Thank you. (Operator Instructions) Our next question comes from the line of Brendan Naeve of Levin Capital. Your line is open. Please go ahead.

Yes, good morning. It's Neil Stein from Levin Capital. I just had a couple of questions, if I could. The first was on the growth rate that you provided on the last conference call, which was 4% to 7%, is that still a growth rate that you believe in? You didn't mention it in the press release today.

Well, I am surprised. I think it was in one of the earlier drafts of the press release. That’s still where we are at and of course on these front end years, as we’re re-establishing our baseline of earnings, you would expect that it would be somewhat higher than that and it will be until we get into a more stable mode. But, yes, 4% to 7% is where we think we’ll tend to be long term.

And when you talk about 4% to 7%, what's the base year we should be thinking about?

That was really off of 2011 year.

What did you earn in 2011? I was looking on Bloomberg; it shows $0.53. But I don't think you intend to mean that you're going to grow 4% to 7% off of a $0.53 base year

Well, the 2011 - I am sorry continuing operations number Neil was $0.95 a share.

$0.95 okay. Well, if you're going to grow 4% to 7%, and you're already up to $1.40 versus the $0.95 here in 2011, that would imply, really, over the long term from 2013, that the growth isn't going to be really nearly that high at all, right?

No, I think as I try to make with operator getting into the numbers. You know as we make a recovery from the very challenging number of years that we had, we are re-establishing kind of our base level of earnings. When you look at the substantial growth opportunity that the utility has and even with a slight reduction in CapEx over the five year period of time, the growth that the utility will provide from its rate based growth is very, very significant, couple that with building out the capacity we have within our existing diversified companies and we believe we can provide of 4% to 7% growth even as we get ourselves back to a more -- I'll just say more normalized level of earnings for the company.

It's helpful to hear that number, and we have our own analysis on this. But when you say 2011 is the base year, it starts to be very confusing. So is 2011 the base year or not, I guess, for 4% to 7% growth?

Well when we started talking about 4% to 7% growth in 2012, it was off plans that we had in place from our base year of 2011. So that’s what we've – because we started to talk about the 4% to 7% in 2011.

But, yes, I'm just trying to -- again, for the purpose of a -- it seems to be -- you seem to be implying that maybe you could do better than 4% to 7% off of the 2011 pace? So it's a higher growth rate, but off of that base? I'm just -- you can understand the source of the confusion here.

What -- there is going to -- what Jim is trying to say is that these earnings there is higher growth rates in the earlier years and lower growth rates our later on the planning spectrum. So when we look at 2011 as our base year that we were growing off of collectively over the timeframe it’s a 4% to 7% growth rate. We will see higher growth rates in some years. We will see lower growth rates in lower years.

Because it's just already, the growth has been 20%, compound annual, for off of the '11 base through your '13 guidance. So if you average that into 4% to 7%, it just gets to be considerably lower growth in future years. But maybe it just needs to be reworked or restated, but we could take it offline. Thanks very much.

I just would add this. It's a work in progress. When you look at the CapEx utility expenditures the part of the information that’s provided with also indicated over time that we believe our utility will provide us with 75% of our earnings and our diversified business will provide 25%. We know that we are going to go out for equity offering some time in the future in order to fund the utility growth and keep our cap structure in place, but when you look at those piece I think you can get to a place where you can and should be comfortable with the 4% to 7% growth rate even after we get our sales back into our more normal level of ongoing earnings.

And could you say, is it a three-year growth rate, a five-year growth rate? Just trying to -- like it sounds good, and it's in what you might call the top half or the top quartile of what other companies say, so that's a good thing. But then when I'm trying to figure out, well, what does this mean from, how does this help me project forward earnings, it starts to get really complicated. So is this going to be through 2015? Is it through 2017? I'm just trying to understand that.

Our planning period was we were looking at this as (inaudible) to that 2017 timeframe.

4% to 7% growth off of an '11 base through 2017?

Right.

So off of the $0.95 that you earned in 2011, we should just apply 4% to 7% growth through 2017, and that will get to your 2017 earnings forecast?

I would suggest you create the model from the other information we provided, recognizing that we are working to re-establish, what I would call more traditional earnings level toward this company. And on top of that, I have 4% to 7% over five years period. I think you can get to that and it’s in these early years, it's a little bit of a mathematical challenge to try to do this en masse, but I think the basic in there in terms of the growth opportunities from the utility, the recommitment and refocusing we've done with regard to our diversified businesses, and the commitment that we have to really deliver and execute so that’s shareholders are adequately compensated for the investment they make in our Company, we take very seriously.

The other thing just to add to that as we provide the rate base chart, you know that we typically look to capitalize the utility at 51% or so equity probe cap ratio and assuming an ROE environment of 10%, 10% that helps give you the earning picture as well in terms of the 47% growth rate.

Thank you. And that does conclude our question-and-answer session. I would like to turn the conference back over to Jim McIntyre for any closing remarks.

Well slide eight of the material provided reflects a transformed Otter Tail Corporation. We've seen this realignment Otter Tail Power Company continues as strong electric utility and is aligned with strategic manufacturing infrastructure companies under Varistar. This transformation has allowed us to become more agile able and disciplined. It will help us I am sure more formidable earnings changes to support the dividend while maintaining an acceptable level of risk. It will also help increase profitability and deliver financial results in more stable manner. Our occurrence to access can be linked directly to the proper execution of the right strategies. As our first quarter results demonstrate, we are on strategy and we are on target. Thank you for joining our call and we look forward to speaking with you next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of the day.