Otter Tail Corporation Announces Third Quarter Earnings, Increases Consolidated 2024 Annual Earnings Guidance

Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the quarter ended September 30, 2024.

SUMMARY

• Midpoint of 2024 earnings guidance increased $0.15 to $7.07 per share.
• Diluted earnings per share decreased 7% to $2.03 per share compared to the third quarter of 2023.
• Return on equity of 20% over the trailing twelve months.

CEO OVERVIEW

“Our team members continue to perform well as they navigate changing market conditions,” said President and CEO Chuck MacFarlane. “While third quarter earnings were lower than the same time last year, electric segment earnings increased 16 percent, or $4 million, primarily due to the impact of interim rates in North Dakota and the financial impact of a Federal Energy Regulatory Commission ruling on transmission owner returns on equity. Plastics segment earnings decreased 8 percent, or $5 million, as the sales prices of PVC pipe continue to decline. The manufacturing segment is experiencing demand related headwinds across several of its end markets, resulting in a decrease in earnings of 71 percent, or $5 million, due to lower sales volumes. Year to date earnings are ahead of last year by 4 percent and support the increase to our 2024 earnings guidance.

“Otter Tail Power continues to execute on its significant rate base growth plan, which includes investments to support safe, reliable, increasingly clean and affordable electric service for our customers. Our wind repowering project remains on schedule and we expect to finish the equipment upgrades at the first of four owned wind energy centers later this year. We look forward to completing this project in its entirety next year as it will increase the efficiency of these wind sites while simultaneously lowering customer bills through increased output and available tax credits.

“Our Manufacturing segment continues to face softening end market demand. We continue to take action to tightly manage costs and mitigate the impact of lower sales volumes. Despite this near-term softness, the longer term fundamentals of the segment remain strong. Our expansion project in Georgia is progressing well and we anticipate occupying the new space later this year. We look forward to bringing this additional capacity online in early 2025 to better serve our customers in the southeast.

“Despite Plastics segment earnings decreasing from the same time last year, the segment continues to perform better than anticipated, capitalizing on customer sales volume growth. Sales prices of PVC pipe continue to decline but at a slower rate than expected. The first phase of our expansion project at Vinyltech in Arizona is nearly complete and we anticipate adding large diameter PVC pipe production capability at this location later this year.

“Our diversified business model continues to serve us and our stakeholders well as it generates incremental earnings and cash flow for us to fund our rate base growth plan without any equity needs. As of September 30, 2024, our total available liquidity was $544 million.

“We are increasing and tightening our 2024 diluted earnings per share guidance to a range of $6.97 to $7.17 from our previous range of $6.77 to $7.07.”

QUARTERLY DIVIDEND

On November 4, 2024, the corporation’s Board of Directors declared a quarterly common stock dividend of $0.4675 per share. This dividend is payable December 10, 2024 to shareholders of record on November 15, 2024.

CASH FLOWS AND LIQUIDITY

Our consolidated cash provided by operating activities for the nine months ended September 30, 2024 was $322.8 million compared to $318.5 million for the nine months ended September 30, 2023, with the increase primarily due to increased earnings from our Plastics segment, partially offset by increased working capital at our Manufacturing segment.

Investing activities for the nine months ended September 30, 2024 included capital expenditures of $259.8 million and a $50.1 investment in long-term marketable securities. Capital expenditures during the period were largely within our Electric segment, including investments in our wind repowering and advanced metering projects, and also included continued investments in our facility expansion projects in Arizona and Georgia. Financing activities for the nine months ended September 30, 2024 included the issuance of $120.0 million of long-term debt at Otter Tail Power; the proceeds of which were used to repay short-term borrowings, fund capital investments, and support operating activities. Financing activities for the nine months ended September 30, 2024 also included net short-term borrowings of $14.0 million and dividend payments of $58.7 million.

As of September 30, 2024, we had $170.0 million and $93.8 million of available liquidity under our Otter Tail Corporation and Otter Tail Power Credit Agreements, respectively, along with $280.0 million of available cash and cash equivalents, for total available liquidity of $543.8 million.

SEGMENT PERFORMANCE

Electric Segment

	Three Months Ended September 30,
($ in thousands)		2024				2023			Change				% Change
Operating Revenues	$	130,380			$	130,326			$	54			—	%
Net Income		28,530				24,565				3,965			16.1
Retail MWh Sales		1,304,446				1,300,324				4,122			0.3	%
Heating Degree Days		2				3				(1	)		(33.3	)
Cooling Degree Days		378				317				61			19.2

The following table shows heating degree days (HDDs) and cooling degree days (CDDs) as a percent of normal.

	Three Months Ended September 30,
	2024			2023
HDDs	4.7	%		6.3	%
CDDs	111.5	%		92.2	%

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kilowatt-hour (kwh) sales under actual weather conditions and expected retail kwh sales under normal weather conditions for the three months ended September 30, 2024 and 2023.

	2024 vs Normal				2024 vs 2023				2023 vs Normal
Effect on Diluted Earnings Per Share	$	0.01			$	0.02			$	(0.01	)

Operating Revenues increased $0.1 million compared to the same period last year. Increases in retail and transmission revenue were largely offset by decreased fuel recovery revenues. Retail revenue increased due to an interim rate increase in North Dakota in connection with our current rate case and the impact of favorable weather. Transmission revenue increased due to a reduction in our estimated refund liability in connection with an order issued by FERC regarding a contested matter related to the allowed ROE during certain prior periods, which resulted in an additional nonrecurring revenue in the current period. Fuel recovery revenues decreased due to a decrease in generation from our coal-fired and natural gas facilities, thus lowering fuel consumption, as well as decreased market energy costs.

Net Income increased $4.0 million primarily due to the impact of favorable weather, interim rates in North Dakota, and the reduction of an estimated refund, as described above, as well as a decrease in property taxes in North Dakota, partially offset by increased depreciation and interest expense.

Manufacturing Segment

	Three Months Ended September 30,
(in thousands)		2024				2023			$ Change				% Change
Operating Revenues	$	79,896			$	100,678			$	(20,782	)		(20.6	)%
Net Income		2,174				7,446				(5,272	)		(70.8	)

Operating Revenues decreased $20.8 million primarily due to a 13% decrease in sales volumes, with declines experienced primarily in the recreational vehicle, agriculture, construction, and lawn and garden end markets. Sales volumes have softened due to lower end market demand and inventory management efforts by manufacturers and dealers. A 37% decline in scrap metal revenues, largely driven by lower production volumes, and a 6% decrease in steel costs, which are passed through to customers, also contributed to the decrease in operating revenues.

Net Income decreased $5.3 million primarily due to lower sales volumes and lower scrap metal sales, as described above, as well as a decrease in margins at both our contract metal fabricator and our plastics thermoforming manufacturer. Decreased profit margins were driven by the mix of products sold in the current period compared to the same period last year, and reduced leveraging of fixed manufacturing costs resulting from decreased production and sales volumes.

Plastics Segment

	Three Months Ended September 30,
(in thousands)		2024				2023			$ Change				% Change
Operating Revenues	$	127,757			$	127,052			$	705			0.6	%
Net Income		54,479				59,162				(4,683	)		(7.9	)

Operating Revenues increased $0.7 million as a 13% increase in sales volumes, driven by continued customer sales volume growth and distributor and end market demand, was largely offset by continued declining sales prices. Sales prices have steadily declined throughout the year and decreased 11% compared to the same period last year.

Net Income decreased $4.7 million primarily due to decreased sales prices, as described above, and increased general and administrative expenses.

Corporate

	Three Months Ended September 30,
(in thousands)		2024				2023			$ Change				% Change
Net Income	$	296			$	801			$	(505	)		(63.0	)%

Net Income decreased $0.5 million primarily due to increased insurance and employee benefit expenses, partially offset by increased investment income earned on our short- and long-term investments, as well as gains on our corporate-owned life insurance policies.

2024 BUSINESS OUTLOOK

We are increasing our 2024 diluted earnings per share range to $6.97 to $7.17. We expect our earnings mix in 2024, based on our updated guidance, to be approximately 30% from our Electric segment and 70% from our Manufacturing and Plastics segments, net of corporate costs.

The segment components of our 2024 diluted earnings per share guidance compared with actual earnings for 2023 are as follows:

							2024 EPS Guidance								2024 EPS Guidance
			2023 EPS by Segment				August 5, 2024								November 4, 2024
							Low				High				Low				High
Electric			$	2.01			$	2.13			$	2.17			$	2.13			$	2.17
Manufacturing				0.51				0.36				0.40				0.30				0.34
Plastics				4.47				4.35				4.54				4.61				4.70
Corporate				0.01				(0.07	)			(0.04	)			(0.07	)			(0.04	)
Total			$	7.00			$	6.77			$	7.07			$	6.97			$	7.17
Return on Equity				22.1	%			18.3	%			19.0	%			18.8	%			19.3	%

The following items contribute to our revised 2024 earnings guidance:

Electric Segment - We are maintaining our guidance, expecting earnings to increase 7% over 2023.

Manufacturing Segment - We are decreasing our segment earnings guidance based on:

• Anticipated lower sales volumes in the fourth quarter as demand continues to soften across most end markets and manufacturers tightly manage inventories through year-end, and
• Product pricing pressures and lower scrap revenues within our metal fabrication business, partially offset by reduced operating costs as we align our production costs with the current demand environment.

Plastics Segment - We are increasing our segment earnings guidance based on:

• Better than expected financial results in the third quarter of 2024, and
• A slower decline in product sales prices than previously expected and increased sales volumes in the fourth quarter of 2024.

Corporate Costs - We are maintaining our corporate cost guidance.

CONFERENCE CALL AND WEBCAST

The corporation will host a live webcast on Tuesday, November 5, 2024, at 10:00 a.m. CT to discuss its financial and operating performance.

The presentation will be posted on our website before the webcast. To access the live webcast, go to www.ottertail.com/presentations and select “Webcast.” Please allow time prior to the call to visit the site and download any software needed to listen in. An archived copy of the webcast will be available on our website shortly after the call.

If you are interested in asking a question during the live webcast, visit and follow the link provided in the press release announcing the upcoming conference call.

FORWARD-LOOKING STATEMENTS

Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “future,” “goal,” “intend,” “likely,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “probable,” “projected,” “should,” “target,” “will,” “would” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of management. Forward-looking statements made herein, which may include statements regarding 2024 earnings and earnings per share, long-term earnings, earnings per share growth and earnings mix, anticipated levels of energy generation from renewable resources, anticipated reductions in carbon dioxide emissions, future investments and capital expenditures, rate base levels and rate base growth, future raw materials costs, future raw materials availability and supply constraints, future operating revenues and operating results, and expectations regarding regulatory proceedings, as well as other assumptions and statements, involve known and unknown risks and uncertainties that may cause our actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, uncertainty of future investments and capital expenditures; rate base levels and rate base growth; risks associated with energy markets; the availability and pricing of resource materials; inflationary cost pressures; attracting and maintaining a qualified and stable workforce; changing macroeconomic and industry conditions that impact the demand for our products, pricing and margin; long-term investment risk; seasonal weather patterns and extreme weather events; counterparty credit risk; future business volumes with key customers; reductions in our credit ratings; our ability to access capital markets on favorable terms; assumptions and costs relating to funding our employee benefit plans; our subsidiaries’ ability to make dividend payments; cybersecurity threats or data breaches; the impact of government legislation and regulation including foreign trade policy and environmental; health and safety laws and regulations; changes in tax laws and regulations; the impact of climate change including compliance with legislative and regulatory changes to address climate change; expectations regarding regulatory proceedings, including state utility commission approval of resource plans, assigned service areas, the siting and construction of major facilities, capital structure, and allowed customer rates; actual and threatened claims or litigation; and operational and economic risks associated with our electric generating and manufacturing facilities. These and other risks are more fully described in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.

Category: Earnings

About the Corporation: Otter Tail Corporation, a member of the S&P SmallCap 600 Index, has interests in diversified operations that include an electric utility and manufacturing businesses. Otter Tail Corporation stock trades on the Nasdaq Global Select Market under the symbol OTTR. The latest investor and corporate information is available at www.ottertail.com. Corporate offices are in Fergus Falls, Minnesota, and Fargo, North Dakota.

OTTER TAIL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except per-share amounts)		2024				2023				2024				2023
Operating Revenues
Electric	$	130,380			$	130,326			$	384,696			$	395,997
Product Sales		207,653				227,730				642,741				638,856
Total Operating Revenues		338,033				358,056				1,027,437				1,034,853
Operating Expenses
Electric Production Fuel		14,991				19,603				45,009				45,928
Electric Purchased Power		10,735				10,895				42,507				57,932
Electric Operating and Maintenance Expense		43,737				43,534				136,367				134,604
Cost of Products Sold (excluding depreciation)		111,444				118,303				342,962				351,330
Nonelectric Selling, General, and Administrative Expenses		18,829				15,863				55,896				51,433
Depreciation and Amortization		27,051				24,548				79,579				72,636
Electric Property Taxes		3,705				4,194				11,691				13,151
Total Operating Expenses		230,492				236,940				714,011				727,014
Operating Income		107,541				121,116				313,426				307,839
Other Income and (Expense)
Interest Expense		(11,173	)			(9,175	)			(31,225	)			(28,285	)
Nonservice Components of Postretirement Benefits		2,367				2,289				7,197				7,122
Other Income (Expense), net		5,421				2,471				14,491				7,841
Income Before Income Taxes		104,156				116,701				303,889				294,517
Income Tax Expense		18,677				24,727				57,077				58,093
Net Income	$	85,479			$	91,974			$	246,812			$	236,424
Weighted-Average Common Shares Outstanding:
Basic		41,800				41,680				41,770				41,663
Diluted		42,081				42,058				42,068				42,028
Earnings Per Share:
Basic	$	2.04			$	2.21			$	5.91			$	5.67
Diluted	$	2.03			$	2.19			$	5.87			$	5.63

OTTER TAIL CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited)
	September 30,				December 31,
(in thousands)		2024				2023
Assets
Current Assets
Cash and Cash Equivalents	$	280,020			$	230,373
Receivables, net of allowance for credit losses		186,273				157,143
Inventories		153,233				149,701
Regulatory Assets		7,860				16,127
Other Current Assets		22,927				16,826
Total Current Assets		650,313				570,170
Noncurrent Assets
Investments		121,421				62,516
Property, Plant and Equipment, net of accumulated depreciation		2,604,869				2,418,375
Regulatory Assets		95,537				95,715
Intangible Assets, net of accumulated amortization		6,018				6,843
Goodwill		37,572				37,572
Other Noncurrent Assets		51,009				51,377
Total Noncurrent Assets		2,916,426				2,672,398
Total Assets	$	3,566,739			$	3,242,568
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt	$	67,401			$	81,422
Accounts Payable		88,885				94,428
Accrued Salaries and Wages		31,320				38,134
Accrued Taxes		29,150				26,590
Regulatory Liabilities		43,685				25,408
Other Current Liabilities		39,149				43,775
Total Current Liabilities		299,590				309,757
Noncurrent Liabilities and Deferred Credits
Pension Benefit Liability		32,388				33,101
Other Postretirement Benefits Liability		28,074				27,676
Regulatory Liabilities		282,997				276,547
Deferred Income Taxes		251,105				237,273
Deferred Tax Credits		14,613				15,172
Other Noncurrent Liabilities		80,978				75,977
Total Noncurrent Liabilities and Deferred Credits		690,155				665,746
Commitments and Contingencies
Capitalization
Long-Term Debt		943,663				824,059
Shareholders’ Equity
Common Shares		209,140				208,553
Additional Paid-In Capital		427,751				426,963
Retained Earnings		994,461				806,342
Accumulated Other Comprehensive Income		1,979				1,148
Total Shareholders' Equity		1,633,331				1,443,006
Total Capitalization		2,576,994				2,267,065
Total Liabilities and Shareholders' Equity	$	3,566,739			$	3,242,568

OTTER TAIL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	Nine Months Ended September 30,
(in thousands)		2024				2023
Operating Activities
Net Income	$	246,812			$	236,424
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		79,579				72,636
Deferred Tax Credits		(559	)			(558	)
Deferred Income Taxes		8,840				10,800
Investment Gains		(5,259	)			(3,734	)
Stock Compensation Expense		8,082				6,975
Other, net		(2,167	)			(164	)
Change in Operating Assets and Liabilities:
Receivables		(29,130	)			(48,782	)
Inventories		(2,198	)			4,873
Regulatory Assets		7,209				8,387
Other Assets		(2,785	)			3,899
Accounts Payable		3,180				(511	)
Accrued and Other Liabilities		(5,745	)			13,858
Regulatory Liabilities		24,083				21,601
Pension and Other Postretirement Benefits		(7,167	)			(7,209	)
Net Cash Provided by Operating Activities		322,775				318,495
Investing Activities
Capital Expenditures		(259,750	)			(229,849	)
Proceeds from Disposal of Noncurrent Assets		6,684				4,746
Purchases of Investments and Other Assets		(59,100	)			(6,915	)
Net Cash Used in Investing Activities		(312,166	)			(232,018	)
Financing Activities
Net (Repayments) Borrowings on Short-Term Debt		(14,021	)			43,292
Proceeds from Issuance of Long-Term Debt		120,000				—
Dividends Paid		(58,693	)			(54,792	)
Payments for Shares Withheld for Employee Tax Obligations		(6,457	)			(3,088	)
Other, net		(1,791	)			(1,671	)
Net Cash Provided by (Used in) Financing Activities		39,038				(16,259	)
Net Change in Cash and Cash Equivalents		49,647				70,218
Cash and Cash Equivalents at Beginning of Period		230,373				118,996
Cash and Cash Equivalents at End of Period	$	280,020			$	189,214

OTTER TAIL CORPORATION SEGMENT RESULTS (unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)		2024				2023				2024				2023
Operating Revenues
Electric	$	130,380			$	130,326			$	384,696			$	395,997
Manufacturing		79,896				100,678				275,961				309,936
Plastics		127,757				127,052				366,780				328,920
Total Operating Revenues	$	338,033			$	358,056			$	1,027,437			$	1,034,853
Operating Income (Loss)
Electric	$	36,471			$	33,142			$	88,108			$	88,427
Manufacturing		2,683				8,829				19,699				26,657
Plastics		73,745				80,119				219,136				200,836
Corporate		(5,358	)			(974	)			(13,517	)			(8,081	)
Total Operating Income	$	107,541			$	121,116			$	313,426			$	307,839
Net Income
Electric	$	28,530			$	24,565			$	69,486			$	67,420
Manufacturing		2,174				7,446				14,271				20,276
Plastics		54,479				59,162				161,829				148,240
Corporate		296				801				1,226				488
Total Net Income	$	85,479			$	91,974			$	246,812			$	236,424

 

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The Otter Tail Stock at the time of publication of the news with a raise of +0,56 % to 78,53EUR on Nasdaq stock exchange (04. November 2024, 23:20 Uhr).