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

About this update from Otter Tail Corporation

FERGUS FALLS, Minn. --(BUSINESS WIRE)-- 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 View source version on businesswire.com : https://www.businesswire.com/news/home/20241104293379/en/ Media Contact: Stephanie Hoff , Director of Corporate Communications, (218) 739-8535 Investor Contact: Beth Eiken , Manager of Investor Relations, (701) 451-3571 Source: Otter Tail Corporation

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