Otter Tail Corporation Announces Record Second Quarter Earnings, Maintains Electric Segment Guidance and Increases Consolidated 2024 Annual Earnings Guidance
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
$6.92 per share, or a return on equity of 18.7%. - Received approval from the Minnesota Public Utilities Commission on Integrated Resource Plan.
CEO OVERVIEW
“We are pleased with our second quarter financial results,” said President and CEO
“In May,
“The process to receive final approval of our Integrated Resource Plan was complicated by changing energy policy and environmental regulation impacting the power system and changing market conditions in MISO influencing our preferred plan since our initial filing in 2021. I am grateful to our team members and the other parties to the docket for reaching a favorable outcome that helps to preserve reliability while we continue transitioning to cleaner energy.
“Despite our strong quarterly financial results within the Manufacturing segment, we continue to face end market demand related headwinds and anticipate conditions to soften further in the second half of 2024. We will continue to take action to manage costs and mitigate the impact of lower sales volumes.
“Our Plastics segment continues to perform exceptionally well, capitalizing on customer sales volume growth and distributor and end market demand. The sales price of PVC pipe continues to decline but at a slower rate than what we originally anticipated.
“We are increasing our 2024 diluted earnings per share guidance to a range of
QUARTERLY DIVIDEND
On
CASH FLOWS AND LIQUIDITY
Our consolidated cash provided by operating activities for the six months ended
Investing activities for the six months ended
As of
SEGMENT PERFORMANCE
Electric Segment
|
Three Months Ended |
|
|
|
|
|||||||||
($ 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 |
||||
|
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
|
2024 vs Normal |
|
2024 vs 2023 |
|
2023 vs Normal |
||||||
Effect on Diluted Earnings Per Share |
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.04 |
Operating Revenues decreased
Net Income decreased
Manufacturing Segment
|
Three Months Ended |
|
|
|
|
|||||||||
(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
Net Income increased
Plastics Segment
|
Three Months Ended |
|
|
|
|
|||||||||
(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
Net Income increased
Corporate
|
Three Months Ended |
|
|
|
|
|||||||||
(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
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 |
|
|
|
|
||||||||||||||
|
|
|
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
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
Category: Earnings
About the Corporation:
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
(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 |
|
|
|
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 |
|
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|||||||
|
|
|
|
||||
(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 |
|
|
|
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 |
|
|
|
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 |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|||||||
|
Six Months Ended |
||||||
(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 |
) |
|
|
(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 |
|
SEGMENT RESULTS (unaudited)
|
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
(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 |
|
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