Otter Tail Corporation (Nasdaq: OTTR) today announced financial
results for the quarter ended June 30, 2024.
SUMMARY
- Diluted earnings per share increased 6% to $2.07 per share
compared to the second quarter of 2023.
- Midpoint of 2024 earnings guidance increased 8% to $6.92 per
share, or a return on equity of 18.7%.
- Received approval from the Minnesota Public Utilities
Commission on Integrated Resource Plan.
CEO OVERVIEW
“We are pleased with our second quarter financial results,” said
President and CEO Chuck MacFarlane, “as our team members continue
to perform well amid changing market conditions. Plastics segment
earnings increased 9 percent compared to the second quarter of 2023
due to higher sales volumes driven by customer sales volume growth
and improved end market demand, partially offset by lower sales
prices. Manufacturing segment earnings increased 15 percent,
primarily driven by higher margins at BTD Manufacturing, partially
offset by lower sales volumes. Electric segment earnings decreased
6 percent from the same time last year due to the impact of
unfavorable weather.
“In May, Otter Tail Power received approval from the Minnesota
Public Utilities Commission on its Integrated Resource Plan. The
decision authorizes the addition of 200 to 300 megawatts of solar
generation by 2027, and 150 to 200 megawatts of wind generation and
20 to 75 megawatts of battery storage by 2029. Otter Tail Power
also received approval to designate the Minnesota portion of Coyote
Station as an emergency-only resource starting as early as 2026,
retaining the reliability benefits from the facility while
simultaneously reducing its output and emissions.
“The process to receive final approval of our Integrated
Resource Plan was complicated by changing energy policy and
environmental regulation impacting the power system and changing
market conditions in MISO influencing our preferred plan since our
initial filing in 2021. I am grateful to our team members and the
other parties to the docket for reaching a favorable outcome that
helps to preserve reliability while we continue transitioning to
cleaner energy.
“Despite our strong quarterly financial results within the
Manufacturing segment, we continue to face end market demand
related headwinds and anticipate conditions to soften further in
the second half of 2024. We will continue to take action to manage
costs and mitigate the impact of lower sales volumes.
“Our Plastics segment continues to perform exceptionally well,
capitalizing on customer sales volume growth and distributor and
end market demand. The sales price of PVC pipe continues to decline
but at a slower rate than what we originally anticipated.
“We are increasing our 2024 diluted earnings per share guidance
to a range of $6.77 to $7.07 from our previous range of $6.23 to
$6.53 primarily due to continued strength within the Plastics
segment.”
QUARTERLY DIVIDEND
On August 5, 2024, the corporation’s Board of Directors declared
a quarterly common stock dividend of $0.4675 per share. This
dividend is payable September 10, 2024 to shareholders of record on
August 15, 2024.
CASH FLOWS AND LIQUIDITY
Our consolidated cash provided by operating activities for the
six months ended June 30, 2024 was $223.5 million compared to
$184.5 million for the six months ended June 30, 2023, with the
increase primarily due to increased earnings from our Plastics
segment.
Investing activities for the six months ended June 30, 2024
included capital expenditures of $175.5 million and the purchase of
long-term marketable securities of $50.1 million. Capital
expenditures during the period were largely within our Electric
segment, including investments in our wind repowering and advanced
metering infrastructure projects, but also included continued
investments in our manufacturing facility expansion projects in
Arizona and Georgia. Financing activities for the six months ended
June 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 six months ended
June 30, 2024 also included dividend payments of $39.1 million.
As of June 30, 2024, we had $170.0 million and $148.1 million of
available liquidity under our Otter Tail Corporation and Otter Tail
Power Credit Agreements, respectively, along with $230.7 million of
available cash and cash equivalents, for total available liquidity
of $548.7 million.
SEGMENT PERFORMANCE
Electric Segment
Three Months Ended June
30,
($ in thousands)
2024
2023
Change
% Change
Operating Revenues
$
112,828
$
113,763
$
(935
)
(0.8
)%
Net Income
18,485
19,634
(1,149
)
(5.9
)
Retail MWh Sales
1,315,504
1,345,830
(30,326
)
(2.3
)%
Heating Degree Days
372
639
(267
)
(41.8
)
Cooling Degree Days
61
254
(193
)
(76.0
)
The following table shows heating degree days (HDDs) and cooling
degree days (CDDs) as a percent of normal.
Three Months Ended June
30,
2024
2023
HDDs
68.8
%
120.6
%
CDDs
48.8
%
215.3
%
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 June 30,
2024 and 2023.
2024 vs
Normal
2024 vs
2023
2023 vs
Normal
Effect on Diluted Earnings Per Share
$
(0.03
)
$
(0.07
)
$
0.04
Operating Revenues decreased $0.9 million primarily due
to a decrease in retail revenue from the impact of unfavorable
weather, as well as decreased transmission revenue. During the
second quarter last year updates were made to estimated project
costs for certain transmission projects and previously estimated
recovery amounts for annual operating expenses were finalized which
resulted in a nonrecurring increase in revenue during the period.
The impact of unfavorable weather and decreases in transmission
revenues were partially offset by an increase in retail revenues
due to an interim rate increase in North Dakota in connection with
our rate case filed in November 2023, increased fuel recovery
revenues, and increased commercial and industrial sales.
Net Income decreased $1.1 million primarily due to the
impact of unfavorable weather, as described above, partially offset
by decreased operating and maintenance expenses, the interim rate
increase in North Dakota, and increased commercial and industrial
sales.
Manufacturing Segment
Three Months Ended June
30,
(in thousands)
2024
2023
$ Change
% Change
Operating Revenues
$
96,684
$
102,475
$
(5,791
)
(5.7
)%
Net Income
6,835
5,969
866
14.5
Operating Revenues decreased $5.8 million primarily due
to decreased sales volumes at both of our manufacturing businesses,
with an overall sales volume decrease of 13% compared to the same
period last year. At BTD Manufacturing, our contract metal
fabricator, sales volumes declined primarily in the lawn and garden
and agriculture end markets. A 31% decline in scrap metal revenues
also contributed to the overall decrease in operating revenues.
Decreased sales volumes and scrap revenues were partially offset by
increased steel prices, resulting in a 5% increase in material
costs, which are passed through to customers. At T.O. Plastics, our
plastics thermoforming manufacturer, sales volume declines were
primarily attributable to decreased sales of horticulture products
as customers and distributors continued to reduce inventory levels
from the high levels previously established due to supply chain
challenges.
Net Income increased $0.9 million primarily due to
increased margins at BTD Manufacturing driven by a positive impact
from the timing of pass-through steel cost fluctuations and the
selling of lower cost inventory, as well as favorable product mix
compared to the same period last year. These positive impacts were
partially offset by lower sales volumes and lower scrap sales, as
described above. Decreased profit margins at T.O. Plastics driven
by a reduced leverage of fixed manufacturing costs resulting from
decreased production and sales volumes, as described above, also
partially offset the overall increase in earnings compared to the
same period last year.
Plastics Segment
Three Months Ended June
30,
(in thousands)
2024
2023
$ Change
% Change
Operating Revenues
$
132,824
$
121,478
$
11,346
9.3
%
Net Income
60,612
55,392
5,220
9.4
Operating Revenues increased $11.3 million primarily due
to a 26% increase in sales volumes driven by customer sales volume
growth and distributor and end market demand. Sales volumes in the
second quarter of last year were negatively impacted by
distributors’ inventory management strategies amid uncertain market
conditions. Although demand has recovered from last year, sales
prices have continued to decline. Sales prices decreased 13%
compared to the same period last year, partially offsetting the
impact of increased sales volumes.
Net Income increased $5.2 million primarily due to
increased sales volumes, as described above. Resin and other input
material costs decreased 14% compared to the same period last year
and have remained relatively stable during the first half of the
year.
Corporate
Three Months Ended June
30,
(in thousands)
2024
2023
$ Change
% Change
Net Income
$
1,063
$
974
$
89
9.1
%
2024 BUSINESS OUTLOOK
We are increasing our 2024 diluted earnings per share range to
$6.77 to $7.07. We expect our earnings mix in 2024, based on our
updated guidance, to be approximately 31% from our Electric segment
and 69% 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
May 6, 2024
August 5, 2024
Low
High
Low
High
Electric
$
2.01
$
2.13
$
2.17
$
2.13
$
2.17
Manufacturing
0.51
0.45
0.49
0.36
0.40
Plastics
4.47
3.78
3.97
4.35
4.54
Corporate
0.01
(0.13
)
(0.10
)
(0.07
)
(0.04
)
Total
$
7.00
$
6.23
$
6.53
$
6.77
$
7.07
Return on Equity
22.1
%
17.1
%
17.8
%
18.3
%
19.0
%
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 as end market demand softens,
primarily within the recreational vehicle, agriculture,
construction and horticulture markets, and
- Declining operating margins as lower production and sales
volumes negatively impact leverage of our fixed manufacturing
costs.
Plastics Segment - We are increasing our segment earnings
guidance based on:
- Better than expected financial results in the second quarter of
2024, and
- A slower decline in product sales prices than previously
expected over the second half of 2024.
Corporate Costs - We are reducing our corporate cost
estimate primarily due to an increase in expected income on our
cash equivalent investments from a higher anticipated yield and an
increase in invested funds driven by an increase in expected
earnings and cash flows from our Plastics segment.
CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on Tuesday, August 6,
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, 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 June
30,
Six Months Ended June
30,
(in thousands, except per-share
amounts)
2024
2023
2024
2023
Operating Revenues
Electric
$
112,828
$
113,763
$
254,317
$
265,671
Product Sales
229,508
223,953
435,087
411,126
Total Operating Revenues
342,336
337,716
689,404
676,797
Operating Expenses
Electric Production Fuel
12,324
14,833
30,018
26,326
Electric Purchased Power
9,249
5,212
31,771
47,037
Electric Operating and Maintenance
Expense
44,652
45,522
92,630
91,070
Cost of Products Sold (excluding
depreciation)
116,795
120,658
231,518
233,027
Nonelectric Selling, General, and
Administrative Expenses
18,154
16,870
37,067
35,568
Depreciation and Amortization
26,632
24,232
52,528
48,089
Electric Property Taxes
3,619
4,336
7,986
8,957
Total Operating Expenses
231,425
231,663
483,518
490,074
Operating Income
110,911
106,053
205,886
186,723
Other Income and (Expense)
Interest Expense
(10,202
)
(9,696
)
(20,052
)
(19,111
)
Nonservice Components of Postretirement
Benefits
2,388
2,421
4,830
4,833
Other Income (Expense), net
4,490
3,253
9,069
5,370
Income Before Income Taxes
107,587
102,031
199,733
177,815
Income Tax Expense
20,592
20,062
38,400
33,365
Net Income
$
86,995
$
81,969
$
161,333
$
144,450
Weighted-Average Common Shares
Outstanding:
Basic
41,784
41,678
41,754
41,655
Diluted
42,068
42,053
42,051
42,035
Earnings Per Share:
Basic
$
2.08
$
1.97
$
3.86
$
3.47
Diluted
$
2.07
$
1.95
$
3.84
$
3.44
OTTER TAIL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30,
December 31,
(in thousands)
2024
2023
Assets
Current Assets
Cash and Cash Equivalents
$
230,672
$
230,373
Receivables, net of allowance for credit
losses
191,946
157,143
Inventories
161,787
149,701
Regulatory Assets
8,172
16,127
Other Current Assets
21,551
16,826
Total Current Assets
614,128
570,170
Noncurrent Assets
Investments
117,062
62,516
Property, Plant and Equipment, net of
accumulated depreciation
2,538,841
2,418,375
Regulatory Assets
95,605
95,715
Intangible Assets, net of accumulated
amortization
6,293
6,843
Goodwill
37,572
37,572
Other Noncurrent Assets
51,282
51,377
Total Noncurrent Assets
2,846,655
2,672,398
Total Assets
$
3,460,783
$
3,242,568
Liabilities and Shareholders'
Equity
Current Liabilities
Short-Term Debt
$
12,809
$
81,422
Accounts Payable
126,926
94,428
Accrued Salaries and Wages
25,972
38,134
Accrued Taxes
20,608
26,590
Regulatory Liabilities
45,183
25,408
Other Current Liabilities
39,454
43,775
Total Current Liabilities
270,952
309,757
Noncurrent Liabilities and Deferred
Credits
Pensions Benefit Liability
32,781
33,101
Other Postretirement Benefits
Liability
27,759
27,676
Regulatory Liabilities
275,068
276,547
Deferred Income Taxes
249,489
237,273
Deferred Tax Credits
14,799
15,172
Other Noncurrent Liabilities
80,691
75,977
Total Noncurrent Liabilities and Deferred
Credits
680,587
665,746
Commitments and Contingencies
Capitalization
Long-Term Debt
943,592
824,059
Shareholders’ Equity
Common Shares
209,072
208,553
Additional Paid-In Capital
427,264
426,963
Retained Earnings
928,553
806,342
Accumulated Other Comprehensive Income
763
1,148
Total Shareholders' Equity
1,565,652
1,443,006
Total Capitalization
2,509,244
2,267,065
Total Liabilities and Shareholders'
Equity
$
3,460,783
$
3,242,568
OTTER TAIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June
30,
(in thousands)
2024
2023
Operating Activities
Net Income
$
161,333
$
144,450
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization
52,528
48,089
Deferred Tax Credits
(372
)
(372
)
Deferred Income Taxes
9,492
8,708
Investment Gains
(3,111
)
(4,295
)
Stock Compensation Expense
6,824
6,484
Other, net
(1,251
)
161
Change in Operating Assets and
Liabilities:
Receivables
(34,803
)
(50,558
)
Inventories
(11,551
)
2,396
Regulatory Assets
7,361
7,320
Other Assets
(3,951
)
3,561
Accounts Payable
41,239
1,037
Accrued and Other Liabilities
(19,312
)
(4,271
)
Regulatory Liabilities
23,863
27,169
Pension and Other Postretirement
Benefits
(4,828
)
(5,382
)
Net Cash Provided by Operating
Activities
223,461
184,497
Investing Activities
Capital Expenditures
(175,528
)
(151,516
)
Proceeds from Disposal of Noncurrent
Assets
5,124
2,970
Purchases of Investments and Other
Assets
(57,661
)
(5,079
)
Net Cash Used in Investing
Activities
(228,065
)
(153,625
)
Financing Activities
Net Borrowings (Repayments) on Short-Term
Debt
(68,612
)
41,993
Proceeds from Issuance of Long-Term
Debt
120,000
—
Dividends Paid
(39,122
)
(36,524
)
Payments for Shares Withheld for Employee
Tax Obligations
(5,753
)
(3,088
)
Other, net
(1,610
)
(1,671
)
Net Cash Provided by Financing
Activities
4,903
710
Net Change in Cash and Cash
Equivalents
299
31,582
Cash and Cash Equivalents at Beginning
of Period
230,373
118,996
Cash and Cash Equivalents at End of
Period
$
230,672
$
150,578
OTTER TAIL CORPORATION
SEGMENT RESULTS (unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2024
2023
2024
2023
Operating Revenues
Electric
$
112,828
$
113,763
$
254,317
$
265,671
Manufacturing
96,684
102,475
196,065
209,257
Plastics
132,824
121,478
239,022
201,869
Total Operating Revenues
$
342,336
$
337,716
$
689,404
$
676,797
Operating Income (Loss)
Electric
$
22,597
$
25,188
$
51,639
$
55,284
Manufacturing
9,600
8,320
17,014
17,829
Plastics
82,089
75,035
145,392
120,718
Corporate
(3,375
)
(2,490
)
(8,159
)
(7,108
)
Total Operating Income
$
110,911
$
106,053
$
205,886
$
186,723
Net Income (Loss)
Electric
$
18,485
$
19,634
$
40,956
$
42,854
Manufacturing
6,835
5,969
12,096
12,831
Plastics
60,612
55,392
107,350
89,078
Corporate
1,063
974
931
(313
)
Total Net Income
$
86,995
$
81,969
$
161,333
$
144,450
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240805789576/en/
Media Contact: Stephanie Hoff, Director of Corporate
Communications, (218) 739-8535 Investor Contact: Beth Eiken,
Manager of Investor Relations, (701) 451-3571
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