Good day, ladies and gentlemen and welcome to the Otter Tail Corporation’s Third 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.

Good morning everyone and welcome to our call. My name is Loren Hanson and I manage Investor Relations area at Otter Tail Corporation. Last night, we announced our third 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. Before we begin, I’d 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, due to 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. We are pleased to report strong overall 2013 third quarter results reflecting our belief that we have the company firmly back on track producing more predictable earnings with continuing improved performance. We are especially pleased with the results from manufacturing and infrastructure businesses under Varistar, which had marked improvement over 2012 third quarter net income. These companies have renewed focus on improving the financial performance showing the positive impact of changes in our governance model and benefiting from a more disciplined hands-on approach to their operations. The successful execution of refined strategy further demonstrates their efforts to reduce risk and produce a predictable earnings stream are on course in all of our continuing operations. In addition, the transformation of Otter Tail Corporation continues to be recognized by our rating agencies. Moody has recently announced a favorable change in outlook for both Otter Tail Corporation and Otter Tail Power joining other rating agencies who have recently either upgraded their ratings or the outlook for both the corporation and Otter Tail Power Company. Kevin will cover our segments in more detail, but there are few areas worth noting. Third quarter sales and net income in our Electric segment were somewhat lower in this year’s third quarter impacted by weather and higher general and administrative expenses. However, it’s important to keep these results in perspective. The quarterly anomalies do not reflect the growing earnings power of utility as it continues to successfully execute its rate based growth strategy and utilize various timely regulatory recovery mechanisms. In addition, the utility’s significant environmental upgrades and transmission projects continue on schedule and within budget. The Big Stone Plant air quality control system or AQCS project is on schedule. There is more than 250 workers on site and…

Thank you, Jim and good morning everyone. Please refer to Slide 6 as I walk you through third quarter results for earnings from continuing operations. Overall net income from continuing operations was $0.41 per share compared with $0.13 per share for the same quarter last year. 2012 third quarter net income was impacted by the $0.22 earnings per share after tax charge related to the early redemption of $50 million, 8.89% note. First, our Electric segment, items contributing to the $1.9 million decrease in electric retail revenues were one a decrease in fuel clause adjustment revenues as a result of lower fuel costs combined with two a decrease in revenue related to milder weather in the third quarter of 2013 compared to the third quarter of 2012. And three a decrease in revenue from various environmental, renewable regulatory and conservation costs recovery-related items. This particular decline was offset by related increases in other revenues or reductions in costs that are components of these alternative revenue recovery mechanisms. These declines in revenues were offset by an increase in Transmission Cost Recovery Rider revenues due to the continued build out of our transmission projects. Electric operating and maintenance expenses increased $2.2 million mainly due to an increase in MISO transmission tariff charges related to increasing investments in CapEx 2020 and multi-value transmission projects, an increase in general and administrative expenses due to an increase in corporate costs allocated to the utility due in part to changes in allocation factors resulting from our most recent divestitures and an increase in property tax expense related to higher property values in Minnesota and South Dakota. Our Manufacturing segment revenues and net income increased compared to the same quarter last year. Revenues increased at BTD as a result of higher sales volume mainly due to increased…

(Operator Instructions) And our first question comes from Matt Tucker from KeyBanc Capital Markets. Your line is open.

Congrats on a nice quarter.

Thanks Matt.

First question is on the construction side, your margins they recovered very nicely and look to be probably the strongest you have seen in several years. I was hoping you could comment on kind of where those margins fall in terms of your expected range going forward?

Yes, Matt it’s Kevin. I would tell you that the margins that we are seeing now in construction are more indicative of what we would expect to see in this business. Foley has really shown as I discussed some real improvement in their projects. They have six projects that have significant impact in 2013. And those projects are performing in line with where we had originally expected them to be. And then with Aevenia, a couple of things which happened, there is a comment that I referred to in terms of as telecommunications work and that was planned, because we were seeing our telecommunications work and jobs not being as profitable. And so we did specifically kind of look to reduce that as a part where we wanted to move the business. And then we are just seeing better performance in our construction projects at Aevenia than we did same time a year ago and so for the same time last year. And so we would – and that’s evidenced and we made a $6 million drop in revenues quarter-over-quarter, but our profits were down – net profits were down only $200,000. So we are seeing much better execution on those jobs and would say that the margins in this quarter are more indicative of what we would expect going forward.

Thanks. And so with the margins in your backlog and/or on the work that you are currently bidding be pretty similar than to the margins we saw in the third quarter?

Yes.

Thanks. And then just a bigger picture question, you all obviously made several divestitures of non-core businesses over the past two or three years, haven’t done anything in a few quarters though, so when you could just update us on how you are looking at the current business model and why or if you think that the whole is worth more than some of the parts currently?

Matt, this is Jim. Thanks for the question and again thanks for the question. We made substantial divestitures as you commented and generally right now we are working to improve all of our businesses. And as I mentioned in my prepared remarks, we are very comfortable with the progress that is being made. We will continue to assess all of our companies against our portfolio criteria as we do from time-to-time. And so that’s an ongoing process, but I do think we have got all the companies performing well. It’s nice to have that. And as I look at where we are at and how they are performing, I am pleased with the changes that have been made and where our current performance is. And I guess, again just to finish it off where I started, we will continue to assess the companies against our portfolio criteria.

Thank you. And just one other small item, the expected R&D tax credits in the fourth quarter, should we assume a similar level as we saw in the third quarter or something different?

No Matt, Kevin here and we would expect that it’s going to be based on current estimates around another $0.5 million.

Thanks guys. I will jump back in the queue.

(Operator Instructions) We have a follow-up from Matt Tucker.

Just to keep going here, back to the construction side, I was hoping you could comment a little bit about what end markets, what geographies you are seeing the best opportunities in or most bidding activity?

Well, looking first to Aevenia, I mean clearly our most opportunistic geographical area right now is in support of the infrastructure build out regarding the oil and gas production in West and North Dakota. There is a substantial amount of work going on there and that’s close to what which is always helpful in addition doing transmission work for other regional utilities and coops because there is a quite a bit of lower voltage transmission. We don’t do the very high 245 KV or 345 KV transmission work, but the 230 KV and lower we do that kind of work and there is a lot of that work that’s available. So that’s a key source area. And we are targeting those types of business opportunities where we can create higher margins and that’s been working out pretty well as we kind of changed a little bit mid-course in 2013. Over on the Foley side, there are some projects that are kind of in sweet sport by having to do with some of the environmental upgrades or changes in power plant work where we have got some work going on there. Those are places where we can – we also have had productive experience in the past also there is some waste water and other projects that we have done. And Foley we like to keep closer to Kansas City if we can where those markets are overwhelming where we also have fair amount of business over and they basically the Tennessee market site as well. Kevin you want to add to that?

I think that’s pretty well covers it, I mean I would say that Foley also is as it relates to Jim’s comment as looking as we head forward to do more commercial and industrial kinds of projects. We have had some challenges in the water waster and water treatment area. And so as we look forward we would probably see them be more of their mix coming in that commercial and industrial area.

Thanks guys. That’s very helpful. Switching to plastics, it was a strong year last year and initially expected this year to be down quite a bit, but it keeps surprising it upside, you keep raising your guidance, could you talk a little bit about what’s been so surprising about the strength this year, what the key drives have been and do you see any signs at this point of it slowing down?

Yes, Matt. The key drivers I think we really discussed in the press release and our context I mean we have continued to see strong markets in the Southwest and South Central part of the United States. Clearly we are still seeing the benefit of what’s going on up here in the North Central part of the country as well. And those markets are continuing to be pretty robust in driving the volumes that we are seeing and the year we are having. We did see an uptick in resin pricing here quarter-over-quarter of about $0.04 a pound and so there is that it’s clearly going to have some impact here on the rest of the year. We are forecasting the rest of the year to be more kind of normal type levels. Last year fourth quarter the plastics was clearly benefited by some favorable weather. We are not – if we have that happen that’s a plus where we are really planning towards more normal kinds of weather conditions here in the second quarter. I mean, if you have looked where we are at through September and say well where is your guidance for the rest of the year – for the year we are basically telling you we got about a $0.04 quarter that we are expecting in the fourth quarter here at ‘13. Last year was a $0.09 quarter clearly very healthy quarter or strong one of the – I think probably the strongest quarter we have ever had. If you look back beyond that our quarters were kind of a $0.02 to $0.03 type quarter from 2009 to ’11. So we are expecting I would say something more normal here in the fourth quarter. And as we look to the 2014, additions are we continue to keep an eye on the export markets in terms of what’s happening with resin, how that’s impacting our markets here and our pricing. We know there is some announced expansion of PVC resin plants coming on line in the last half of ‘14, and so we are going to have to look to see how that affects our year as well.

Have resin prices continued to move up here a month into the fourth quarter or just kind of hanging onto the gains they saw in the third quarter?

They are pretty much hanging on right now Matt.

Let me just add little bit to what Kevin had said and then that is as both of these companies have relatively low existing fixed costs, they have got low operating costs. So we have been able to compete and we are comfortable that they will be able to compete and do well as long as there is a market. We have as we explained in past, we have seen some increased marketability with regard to the housing support in the Southwest region. In both cases, both companies have been able to kind of increase their market share because of their low price in terms of their operating costs and fixed costs. So we have been picking some market share as well, which is always good. So we remain optimistic. But again they are to certain extent result of the overarching market demand for plastic pipe and as well as the resin price, so two good great companies.

That's great. Thanks. And finally, are you able to quantify the earnings impact and impact on retail sales volumes of the milder weather in the third quarter?

We did not quantify it Matt. I mean we talked about in terms of quarter-over-quarter what the impact was of milder weather.

Got it. I mean was there – I am sorry if I missed it, but did you kind of quantify that or just give kind of the directional impact?

Well I just I am pulling up the press release here. We came out we basically said that we have 29% decrease in heating degree days and a 15% decrease in cooling degree days between the quarter and so that was about a $1 million in revenues relating to that.

Got it, do you have an estimate of what the temperature normalized retail sales growth would have been?

I don’t have that with me Matt.

Okay, fair enough, thanks guys. That’s all I had.

Thanks Matt.

(Operator Instructions) And I see no further questions.

Well, thank you for your questions and thank you for your interest in our company. We believe our efforts to reduce risk and deliver financial results in a more consistent manner are working as exemplified by our strong third quarter and year-to-date results as well as improved credit ratings and outlooks recently signed by our rating agencies. Also our renewed focus on enhancing the financial performance of our manufacturing infrastructure companies is bearing fruit with market improvement over the 2012 results. The improved performance of these companies supports the goal of our diversification strategy, which is to offset future periods of lower growth from the utility. Actually getting our strategy to have a strong well-managed utility that has low rates, strong reliability, and outstanding customer service coupled with selected diversified companies with a more hands on operational governance model is the right path for our company. I am pleased with our execution of the strategy to-date as we continue to prepare the company for an even better future. Thank you for joining our call today and for your interest in Otter Tail Corporation. We look forward to speaking with you next quarter.

(Operator Instructions) Ladies and gentlemen, this does conclude today’s call. Thank you for your attendance. You may all disconnect. Have a great day.