Otter Tail Corporation Announces Third Quarter Earnings, Increases Consolidated 2024 Annual Earnings Guidance
SUMMARY
-
Midpoint of 2024 earnings guidance increased
$0.15 to$7.07 per share. -
Diluted earnings per share decreased 7% to
$2.03 per share compared to the third quarter of 2023. - Return on equity of 20% over the trailing twelve months.
CEO OVERVIEW
“Our team members continue to perform well as they navigate changing market conditions,” said President and CEO
“Otter Tail Power continues to execute on its significant rate base growth plan, which includes investments to support safe, reliable, increasingly clean and affordable electric service for our customers. Our wind repowering project remains on schedule and we expect to finish the equipment upgrades at the first of four owned wind energy centers later this year. We look forward to completing this project in its entirety next year as it will increase the efficiency of these wind sites while simultaneously lowering customer bills through increased output and available tax credits.
“Our Manufacturing segment continues to face softening end market demand. We continue to take action to tightly manage costs and mitigate the impact of lower sales volumes. Despite this near-term softness, the longer term fundamentals of the segment remain strong. Our expansion project in
“Despite Plastics segment earnings decreasing from the same time last year, the segment continues to perform better than anticipated, capitalizing on customer sales volume growth. Sales prices of PVC pipe continue to decline but at a slower rate than expected. The first phase of our expansion project at
“Our diversified business model continues to serve us and our stakeholders well as it generates incremental earnings and cash flow for us to fund our rate base growth plan without any equity needs. As of
“We are increasing and tightening our 2024 diluted earnings per share guidance to a range of
QUARTERLY DIVIDEND
On
CASH FLOWS AND LIQUIDITY
Our consolidated cash provided by operating activities for the nine months ended
Investing activities for the nine months ended
As of
SEGMENT PERFORMANCE
Electric Segment
|
Three Months Ended |
|
|
|
|
|||||||||
($ 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
|
||||
|
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
|
2024 vs
|
|
2024 vs
|
|
2023 vs
|
||||||
Effect on Diluted Earnings Per Share |
$ |
0.01 |
|
$ |
0.02 |
|
$ |
(0.01 |
) |
Operating Revenues increased
Net Income increased
Manufacturing Segment
|
Three Months Ended |
|
|
|
|
|||||||||
(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
Net Income decreased
Plastics Segment
|
Three Months Ended |
|
|
|
|
|||||||||
(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
Net Income decreased
Corporate
|
Three Months Ended |
|
|
|
|
|||||||||
(in thousands) |
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|||
Net Income |
$ |
296 |
|
$ |
801 |
|
$ |
(505 |
) |
|
(63.0 |
)% |
Net Income decreased
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 |
|
|
|
0.36 |
|
|
|
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
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
Category: Earnings
About the Corporation:
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
(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 |
|
|
|
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 |
|
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|||||||
|
|
|
|
||||
(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 |
|
|
|
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 |
|
|
|
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 |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|||||||
|
Nine Months Ended |
||||||
(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 |
) |
|
|
(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 |
|
SEGMENT RESULTS (unaudited)
|
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
(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/
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