Press Release

Otter Tail Corporation Announces Second Quarter Earnings

Company Release - 8/5/2019 6:00 PM ET

Reaffirms 2019 Earnings Per Share Guidance Range of $2.10-$2.25
Board of Directors Declares Quarterly Dividend of $0.35 Per Share

FERGUS FALLS, Minn., Aug. 05, 2019 (GLOBE NEWSWIRE) -- Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the quarter ended June 30, 2019.

Summary:

  • Consolidated operating revenues increased 1.3% to $229.2 million compared with $226.3 million for the second quarter of 2018.
  • Consolidated net income and diluted earnings per share were $15.4 million and $0.39 per share, respectively, compared with $18.7 million and $0.47 per share for the second quarter of 2018.
  • The corporation reaffirms its 2019 earnings guidance range of $2.10-$2.25 per diluted share.

CEO Overview
“We are reaffirming our 2019 diluted earnings per share guidance range of $2.10-$2.25. Our second quarter earnings per share is in line with our expectations. Our Electric segment quarter-over-quarter earnings decreased $3.1 million mainly due to the planned outage at Coyote Station, unexpected turbine repairs at our Hoot Lake Plant and milder weather during the quarter compared with the same period last year. The last half of 2018 included a planned outage at our Big Stone Plant, costs associated with the establishment of foundations at Otter Tail Corporation and Otter Tail Power Company and increased tax expense at corporate related to certain tax matters. We don’t expect these costs to occur in the second half of 2019,” said President and CEO Chuck MacFarlane.

“Our Manufacturing segment earnings increased $0.4 million primarily due to improved performance at BTD Manufacturing, with continued operational improvement at its Georgia plant. Earnings from T.O. Plastics were essentially unchanged between the quarters.

“Our Plastics segment second quarter results were $0.4 million lower than 2018 second quarter results driven by lower sales prices on slightly higher volumes. Our business outlook for this segment calls for lower earnings in 2019.

“We closed on the purchase of certain development assets from EDF Renewables Development, Inc. (EDF) in July and have issued a notice to proceed on construction of our $270 million, 150-megawatt Merricourt Wind Energy Center in southeastern North Dakota. An affiliate of EDF and its contractors will begin construction in August with completion anticipated in October 2020. We project our customers will receive approximately 30 percent of their energy from renewable resources we own or secure through power-purchase agreements by 2021.

“In our South Dakota general rate case, the South Dakota Public Utilities Commission approved a partial settlement in March 2019 along with an 8.75 percent return on equity and a transmission rate base adjustment during the second quarter, resulting in an annual revenue increase that is 69 percent of our requested increase. The settlement includes approval of a phase-in plan to provide for a return on amounts invested in the Merricourt Wind Energy Center and Astoria Station generation projects while under construction, along with a moratorium on filing another general rate case in South Dakota until the projects have been in service for one year.

“We began construction of our Astoria Station natural gas-fired combustion turbine generation project in May with site grading and foundation preparation for the switching station. The project continues to be on schedule and on budget.

“Otter Tail Power Company continues to benefit from strong rate base growth investments and expects to invest $1 billion in capital projects from 2019 through 2023, including regulated investments in renewable generation and Astoria Station. This results in a projected compounded annual growth rate of approximately 9 percent in utility rate base from year-end 2018 through 2023 and is expected to deliver value to customers and shareholders. We continue to make system investments to meet our customers’ expectations and enable us to work smarter, reduce emissions and improve reliability and safety.

“Our strategic initiatives to grow our businesses, achieve operational and commercial excellence, and develop our talent are strengthening our position in the markets we serve.”

Cash Flows and Liquidity
Our consolidated cash provided by operations for the six months ended June 30, 2019 was $69.3 million compared with $53.4 million for the six months ended June 30, 2018. The primary reasons for the $15.9 million increase in cash provided by operations between the periods was a $10.0 million decrease in discretionary contributions to the corporation’s funded pension plan and a $12.7 million net increase in cash provided by changes in noncurrent liabilities and deferred credits, partially offset by a $6.4 million decrease in cash from changes in deferred debits and other assets between the periods.

The following table presents the status of the corporation’s lines of credit:

(in thousands)Line LimitIn Use On
June 30, 2019
Restricted due to
Outstanding
Letters of Credit
Available on
June 30, 2019
Available on
December 31,
2018
Otter Tail Corporation Credit Agreement$130,000$13,801$--$116,199$120,785
Otter Tail Power Company Credit Agreement 170,000 22,801 8,766 138,433 160,316
Total$300,000$36,602$8,766$254,632$281,101

Both credit agreements are in place until October 31, 2023.

Board of Directors Declared Quarterly Dividend
On August 5, 2019 the corporation’s Board of Directors declared a quarterly common stock dividend of $0.35 per share. This dividend is payable September 10, 2019 to shareholders of record on August 15, 2019.

2019 Segment Performance Summary

Electric

 Three Months ended June 30,  
($s in thousands) 2019 2018Change% Change
Retail Electric Revenues$88,345$87,835$510 0.6 
Transmission Services Revenues 11,469 11,313 156 1.4 
Wholesale Electric Revenues 941 2,539 (1,598)(62.9)
Other Electric Revenues 1,489 2,038 (549)(26.9)
Total Electric Revenues$102,244$103,725$(1,481)(1.4)
Net Income$7,502$10,600$(3,098)(29.2)
Retail Megawatt-hour Sales 1,088,052 1,136,326 (48,274)(4.2)
Heating Degree Days 580 675 (95)(14.1)
Cooling Degree Days 104 228 (124)(54.4)

The following table shows heating and cooling degree days as a percent of normal.

 Three Months ended June 30,
 2019 2018 
Heating Degree Days112.6%133.7%
Cooling Degree Days95.4%221.4%

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 in the second quarters of 2019 and 2018 and between quarters.

 2019 vs Normal2018 vs Normal2019 vs 2018
Effect on Diluted Earnings Per Share$0.01$0.04$(0.03)

The $0.5 million increase in retail electric revenues includes:

  • A $1.1 million increase in Minnesota retail revenue due to lower provisions for Tax Cuts and Jobs Act (TCJA) refunds. The effect of lower tax expense recovery requirements was rolled into Minnesota base rates beginning in June 2019.
  • A $1.0 million increase in transmission cost recovery revenues, in large part due to the recovery of investment and operating costs of the Big Stone South-Ellendale 345-kilovolt transmission line energized on February 6, 2019.
  • A $0.7 million increase in South Dakota revenues related to an interim rate increase that went into effect on October 18, 2018.
  • A $0.7 million increase in Minnesota Renewable Rider revenues due to increased cost recovery requirements resulting from the expiration of federal Production Tax Credits (PTCs) in November 2018 on a company-owned wind farm.
  • A $0.3 million increase in Minnesota Conservation Improvement Program (MNCIP) cost recovery revenues due to an increase in MNCIP recoverable expenditures in the second quarter of 2019.
  • A $0.2 million increase in accrued revenue related to the establishment of a generation cost recovery rider in North Dakota (the NDGCR rider) to provide for a return on funds invested in building Astoria Station during its construction phase. The NDGCR rider will be included in North Dakota customer billings beginning in July 2019.

partially offset by:

  • A $1.9 million decrease in retail revenues related to decreased consumption due to milder weather in the second quarter of 2019 compared to warmer than normal weather in May and June of 2018 reflected in a 54.4% decrease in cooling degree days between quarters, and colder weather in April 2018 reflected in a 14.1% decrease in heating degree days between quarters.
  • A $0.8 million reduction in retail revenue due to decreased kwh sales, primarily to commercial and industrial customers, exclusive of the weather-related decrease in retail kwh sales.
  • A $0.7 million decrease in retail revenue related to the recovery of decreased fuel and purchased power costs mainly related to 4.2% decrease in retail kwh sales.

Wholesale electric revenues decreased $1.6 million due to fewer opportunities for wholesale sales as Otter Tail Power Company’s Coyote Station was offline during the entire second quarter of 2019 due to an extended maintenance outage. Also, wholesale demand was down due to a milder spring in 2019, which also resulted in lower wholesale electricity prices.

Production fuel costs decreased $7.6 million mainly as a result of a 47.1% decrease in kwhs generated from our fuel‑burning plants due to the maintenance outage at Coyote Station and a 43.3% reduction in generation at Hoot Lake Plant due to maintenance issues and reduced opportunities for economic dispatch resulting from lower wholesale demand and lower wholesale energy prices due to milder spring weather in 2019.

The cost of purchased power to serve retail customers increased $5.2 million (36.3%) due to a 66.4% increase in kwhs purchased as a result of needing to purchase replacement power during Coyote Station’s maintenance outage and reduced availability of Hoot Lake Plant due to maintenance issues. The increased costs due to the increase in kwhs purchased was partially mitigated by an 18.1% decrease in the cost per kwh purchased resulting from lower wholesale energy prices due to the market factors addressed above.

Electric operating and maintenance expense increased $2.1 million including:

  • A $2.6 million increase in external maintenance costs and material and operating supply expenses in connection with the maintenance outage at Coyote Station over the entire second quarter of 2019.
  • A $0.6 million increase in transmission services expenses mainly related to cost reductions and billing adjustments recorded in 2018.
  • A $0.3 million increase in external maintenance costs and material and operating supply expenses at Hoot Lake Plant in connection with an unplanned outage in the second quarter of 2019 for turbine repairs.

partially offset by:

  • A $0.9 million decrease in storm damage repair expenses, including tree trimming and removal costs, due to a large storm in 2018 that impacted Otter Tail Power Company’s service area.
  • A $0.5 million decrease in expenses related to additional software licensing costs incurred in the second quarter of 2018.

Property tax expense increased $0.6 million due to capital additions, mainly transmission assets, in South Dakota and Minnesota.

Depreciation and amortization expense increased $1.1 million mainly due to 2018 capital additions of transmission plant and the new customer information system put in service in 2019.

Income tax expense in the Electric segment increased $0.4 million despite a $2.7 million decrease in income before income taxes mostly due to a $0.9 million decrease in federal PTCs resulting from the expiration of PTCs on Otter Tail Power Company’s Ashtabula wind farm in November 2018.

Manufacturing

 Three Months ended June 30,  
(in thousands) 2019 2018Change% Change
Operating Revenues$73,496$68,154$5,3427.8
Net Income 3,990 3,583 40711.4

BTD’s revenue increase of $3.9 million included growth in parts revenue of $4.5 million driven by increased sales in construction, recreational vehicle and agricultural end markets, partially offset by decreased sales in energy end markets. Included in the parts revenue increase is the pass-through of higher material costs of $4.2 million, with the remaining increase due to higher sales volume. Revenues from scrap metal sales were down $0.6 million (29%) quarter over quarter due to a 28% decrease in scrap metal prices on a less than 1% decrease in scrap volume. An increase in cost of products sold at BTD of $3.2 million resulted from both the $4.2 million in higher material costs passed through to customers and increased sales volume, partially offset by a $1.4 million increase in recovery of tooling costs from customers.

The $0.7 million increase in gross margins on sales was partially offset by a $0.4 million increase in operating expenses resulting mainly from increases in labor-related costs due to additional employees. Depreciation and amortization expense at BTD decreased $0.3 million as a result of certain assets reaching the ends of their depreciable lives. BTD’s income before tax increased $0.5 million resulting in increases in income tax expense and net income of $0.1 million and $0.4 million, respectively.

At T.O. Plastics, revenues increased $1.4 million primarily due to a $1.8 million increase in sales of horticultural containers, partially offset by a $0.4 million decrease in industrial sales. The increase in horticultural sales volume is due to an early order program offered to customers during the second quarter, a catch up on shipments that were delayed due to inclement weather in the first quarter of 2019 and growth of plug tray sales to certain horticultural markets. Industrial sales were down due to a customer bringing more production in house.

The revenue increase at T.O. Plastics was mostly offset by a $1.3 million increase in cost of products sold related to the increase in sales volume. Operating expenses increased by $0.1 million due to an increase in sales and marketing costs. T.O. Plastics’ net income was essentially unchanged quarter over quarter.

Plastics

 Three Months ended June 30,  
(in thousands) 2019 2018Change% Change
Operating Revenues$53,476$54,476$(1,000)(1.8)
Net Income 5,792 6,229 (437)(7.0)

Plastics segment revenues and net income decreased $1.0 million and $0.4 million, respectively, due to a 3.6% decrease in polyvinyl chloride (PVC) pipe prices partially offset by a 1.9% increase in pounds of pipe sold. The quarter-over-quarter sales volume increase was due to stronger demand for product in southcentral and southwestern regions of the United States, offset by lower volume sales to certain customers in the northern region of our sales territory. Cost of products sold decreased $0.1 million despite the increase in sales volume due to a 2.0% decrease in the cost per pound of pipe sold. The decrease in pipe prices in excess of the decrease in costs per pound of pipe sold resulted in a 9.0% decrease in gross margin per pound of PVC pipe sold. Plastics segment operating and depreciation expenses decreased $0.4 million between the quarters mainly due to lower incentive compensation resulting from a decrease in operating income in the first half of 2019.

Corporate

 Three Months ended June 30,  
(in thousands) 2019  2018 Change% Change
Losses before Income Taxes$2,745 $2,498 $247 9.9
Income Tax Savings (887) (782) (105)13.4
Net Loss$1,858 $1,716 $142 8.3

Corporate pre-tax costs and net-of-tax losses increased mainly due to an increase in certain employee benefit costs.

2019 Business Outlook
We anticipate 2019 diluted earnings per share to be in the range of $2.10 to $2.25. We have taken into consideration strategies for improving future operating results, the cyclical nature of some of our businesses and current regulatory factors facing our Electric segment. We expect capital expenditures for 2019 to be $233 million compared with actual cash used for capital expenditures of $105 million in 2018. Our planned expenditures for 2019 include $79 million for the Merricourt Wind Energy Center and $46 million for Astoria Station.

Segment components of our 2019 earnings per share guidance range compared with 2018 actual earnings are as follows.

Diluted Earnings Per Share2018 EPS
by
Segment
2019 Guidance
February 18, 2019
2019 Guidance
May 6, 2019
2019 Guidance
August 5, 2019
LowHighLowHighLowHigh
Electric$1.36 $1.46 $1.49 $1.48 $1.51 $1.48 $1.51 
Manufacturing$0.32 $0.37 $0.41 $0.35 $0.39 $0.33 $0.37 
Plastics$0.60 $0.44 $0.48 $0.44 $0.48 $0.46 $0.50 
Corporate($0.22) ($0.17) ($0.13) ($0.17) ($0.13) ($0.17) ($0.13) 
 Total $2.06 $2.10 $2.25 $2.10 $2.25 $2.10 $2.25 
Return on Equity11.5% 11.5% 12.3%  11.5% 12.3% 11.5% 12.3% 

The following items contribute to our earnings guidance for 2019.

• We expect 2019 Electric segment net income to be higher than 2018 segment net income based on:

  • The business outlook assumes an annual net revenue increase of approximately $2.6 million from the full approval of our South Dakota rate case settlement on May 14, 2019. The settlement also allowed us to retain the impact of lower tax rates related to the TCJA from January 1, 2018 through October 17, 2018. This outcome favorably impacts 2019 earnings by approximately $0.02 per share.  
  • Increases in allowance for funds used during construction (AFUDC) for planned capital projects, including the Merricourt Wind Energy Center, and increases in AFUDC and North Dakota Generation Cost Recovery Rider revenue related to Astoria Station, with both projects beginning construction in 2019.
  • Increased revenues from completion of the Big Stone South–Ellendale project and additional transmission investments related to our South Dakota Transmission Reliability project.
  • Decreased operating and maintenance expenses due to decreasing costs of pension, medical, workers compensation and retiree medical benefits. The decrease in pension costs is a result of an increase in the discount rate from 3.90% to 4.50%.
  • Expenses incurred in the last half of 2018 that are not expected during the last half of 2019 consisting of $3.2 million related to the Big Stone Plant outage and the contribution to the Otter Tail Power Company Foundation of $500,000.

partially offset by: 

  • Higher depreciation and property tax expense due to large capital projects being put into service.
  • The extension of the planned outage at Coyote Station due to turbine rotor blade damage that was discovered in the early stages of the outage, and the unplanned maintenance outage at Hoot Lake Plant, which both occurred in the second quarter of 2019.

• We expect 2019 net income from our Manufacturing segment to increase over 2018. The overall increase in segment earnings in 2019 is based on:

  • Increased sales at BTD driven by growth in the recreational vehicle, lawn and garden and agricultural end markets. Most of this growth is organic with our existing customer base. However, we are lowering both ends of the guidance range due to expected softness in scrap metal revenues based on lower scrap metal prices in the second quarter which we expect will remain low for the rest of the year, partially offset by higher scrap volumes.
  • A decrease in earnings from T.O. Plastics mainly due to first quarter volume softness and the expected impact on business operations of the partial collapse and replacement of a warehouse roof, which was damaged in March of 2019 during a winter storm.
  • Backlog for the manufacturing companies of approximately $115 million for 2019 compared with $107 million one year ago.

• We expect 2019 net income from the Plastics segment to be lower than 2018 based on lower expected operating margins in 2019. This is due to lower sales volumes in 2019 compared to 2018, slightly lower sales prices and higher resin prices, which have recently moderated. The increase in the guidance is driven by the expectation that resin prices will not increase as much as originally thought based on current market dynamics.

• Corporate costs, net of tax, are expected to be lower in 2019 than in 2018. In 2018, we incurred expenses of $2 million for a contribution to the Otter Tail Corporation Foundation and $1.2 million for accruals related to certain tax matters. These expenses are not expected to occur during the remainder of 2019.

Our consolidated capital expenditure plan for the 2019-2023 time period has been revised from $1.07 billion to $1.11 billion. The increase is primarily driven by the need for additional wind and technology-related investments and transmission investments. Given the increased capital expenditure plan, our compounded annual growth rate in rate base is projected to be 8.6% over the 2018 to 2023 timeframe.

(in millions) 2018 2019 2020 2021 2022 2023Total
Capital Expenditures:       
Electric Segment:       
Renewables and Natural Gas Generation $125$264$15$82$0$486
Transformative Technology and Infrastructure  2 7 18 47 54 128
Transmission (includes replacements)  43 42 21 19 17 142
Other  43 45 58 49 55 250
Total Electric Segment$87$213$358$112$197$126$1,006
Manufacturing and Plastics Segments 18 20 18 19 23 19 99
  Total Capital Expenditures$  105$  233$  376$  131$  220$  145$1,105
Total Electric Utility Rate Base$ 1,100$1,176$1,394$1,531$1,581$1,665 

Execution on the currently anticipated electric utility capital expenditure plan is expected to grow rate base and be a key driver in increasing utility earnings over the 2019 through 2023 timeframe.

CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on Tuesday, August 6, 2019, at 10:00 a.m. CDT 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.cfm 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, call 877-312-8789. For listen-only mode, call 866-634-1342.

Risk Factors and Forward-Looking Statements that Could Affect Future Results
The information in this release includes certain forward-looking information, including 2019 expectations, made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations are based on reasonable assumptions, actual results may differ materially from those expectations. The following factors, among others, could cause our actual results to differ materially from those discussed in the forward-looking statements:

  • Federal and state environmental regulation could require us to incur substantial capital expenditures and increased operating costs.
  • Volatile financial markets and changes in our debt ratings could restrict our ability to access capital and increase borrowing costs and pension plan and postretirement health care expenses.
  • Any significant impairment of our goodwill would cause a decrease in our asset values and a reduction in our net operating income.
  • The inability of our subsidiaries to provide sufficient earnings and cash flows to allow us to meet our financial obligations and debt covenants and pay dividends to our shareholders could have an adverse effect on us.
  • We rely on our information systems to conduct our business, and failure to protect these systems against security breaches or cyber-attacks could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period, our business could be harmed.
  • Economic conditions could negatively impact our businesses.
  • If we are unable to achieve the organic growth we expect, our financial performance may be adversely affected.
  • Our plans to grow our businesses through capital projects, including infrastructure and new technology additions, or to grow or realign our businesses through acquisitions or dispositions may not be successful, which could result in poor financial performance.
  • We may, from time to time, sell assets to provide capital to fund investments in our electric utility business or for other corporate purposes, which could result in the recognition of a loss on the sale of any assets sold and other potential liabilities. The sale of any of our businesses could expose us to additional risks associated with indemnification obligations under the applicable sales agreements and any related disputes.
  • Significant warranty claims and remediation costs in excess of amounts normally reserved for such items could adversely affect our results of operations and financial condition.
  • We are subject to risks associated with energy markets.
  • Changes in tax laws, as well as judgments and estimates used in the determination of tax-related asset and liability amounts, could materially adversely affect our business, financial condition, results of operations and prospects.
  • Four of our operating companies have single customers that provide a significant portion of the individual operating company’s and the business segment’s revenue. The loss of, or significant reduction in revenue from, any one of these customers would have a significant negative financial impact on the operating company and its business segment and could have a significant negative financial impact on us.
  • We may experience fluctuations in revenues and expenses related to our electric operations, which may cause our financial results to fluctuate and could impair our ability to make distributions to shareholders or scheduled payments on our debt obligations, or to meet covenants under our borrowing agreements.
  • Actions by the regulators of our electric operations could result in rate reductions, lower revenues and earnings or delays in recovering capital expenditures.
  • Our electric operations are subject to an extensive legal and regulatory framework under federal and state laws as well as regulations imposed by other organizations that may have a negative impact on our business and results of operations.
  • Our electric transmission and generation facilities could be vulnerable to cyber and physical attack that could impair our ability to provide electrical service to our customers or disrupt the U.S. bulk power system.
  • Our electric generating facilities are subject to operational risks that could result in unscheduled plant outages, unanticipated operation and maintenance expenses and increased power purchase costs.
  • Changes to regulation of generating plant emissions, including but not limited to carbon dioxide emissions and regional haze regulation under state implementation plans, could affect our operating costs and the costs of supplying electricity to our customers and the economic viability of continued operation of certain of our steam-powered electric plants.
  • Competition from foreign and domestic manufacturers, the price and availability of raw materials, trade policy and tariffs affecting prices and markets for raw material and manufactured products, prices and supply of scrap or recyclable material and general economic conditions could affect the revenues and earnings of our manufacturing businesses.
  • Our plastics operations are highly dependent on a limited number of vendors for PVC resin and a limited supply of PVC resin. The loss of a key vendor, or any interruption or delay in the supply of PVC resin, could result in reduced sales or increased costs for our plastics business.
  • We compete against many other manufacturers of PVC pipe and manufacturers of alternative products. Customers may not distinguish the pipe companies’ products from those of our competitors.
  • Changes in PVC resin prices can negatively affect our plastics business.

For a further discussion of these risk factors and cautionary statements, refer to reports we file with the Securities and Exchange Commission.

About the Corporation: Otter Tail Corporation 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 are available at www.ottertail.com. Corporate offices are in Fergus Falls, Minnesota, and Fargo, North Dakota.

See Otter Tail Corporation’s results of operations for the three- and six-month periods ended June 30, 2019 and 2018 in the following financial statements: Consolidated Statements of Income, Consolidated Balance Sheets – Assets, Consolidated Balance Sheets – Liabilities and Equity, and Consolidated Statements of Cash Flows.


Otter Tail Corporation
Consolidated Statements of Income
In thousands, except share and per share amounts
(not audited)
 
 Quarter Ended June 30,Year-to-Date June 30,
  2019  2018  2019  2018 
Operating Revenues by Segment    
Electric    
Revenues from Contracts with Customers$101,875 $105,290 $231,033 $229,130 
Changes in Accrued Revenues under Alternative Revenue Programs 369  (1,565) (680) (2,440)
Total Electric Revenues 102,244  103,725  230,353  226,690 
Manufacturing 73,496  68,154  151,318  136,816 
Plastics 53,476  54,476  93,534  104,129 
Intersegment Eliminations (13) (7) (30) (21)
Total Operating Revenues 229,203  226,348  475,175  467,614 
Operating Expenses    
Fuel and Purchased Power 27,929  30,290  68,801  70,589 
Nonelectric Cost of Products Sold (depreciation included below) 97,996  93,545  188,578  182,330 
Electric Operating and Maintenance Expense 39,856  37,741  78,238  77,216 
Nonelectric Operating and Maintenance Expense 13,262  12,649  26,739  25,143 
Depreciation and Amortization 19,441  18,745  38,572  37,508 
Property Taxes — Electric 3,900  3,273  7,859  7,108 
Total Operating Expenses 202,384  196,243  408,787  399,894 
Operating Income (Loss) by Segment    
Electric 15,477  18,442  45,888  43,876 
Manufacturing 5,759  5,111  12,580  11,005 
Plastics 8,031  8,557  13,173  17,896 
Corporate (2,448) (2,005) (5,253) (5,057)
Total Operating Income 26,819  30,105  66,388  67,720 
Interest Charges 7,825  7,676  15,651  15,048 
Nonservice Cost Components of Postretirement Benefits 1,075  1,386  2,110  2,803 
Other Income 850  707  2,094  1,890 
Income Tax Expense 3,343  3,054  8,971  6,848 
Net Income (Loss) by Segment    
Electric 7,502  10,600  26,202  27,268 
Manufacturing 3,990  3,583  8,832  7,747 
Plastics 5,792  6,229  9,521  13,073 
Corporate (1,858) (1,716) (2,805) (3,177)
Net Income$15,426 $18,696 $41,750 $44,911 
Average Number of Common Shares Outstanding    
Basic 39,712,036  39,605,717  39,684,679  39,578,296 
Diluted 39,917,831  39,879,069  39,910,499  39,871,376 
     
Basic Earnings Per Common Share$0.39 $0.47 $1.05 $1.13 
Diluted Earnings Per Common Share$0.39 $0.47 $1.05 $1.13 
     


Otter Tail Corporation
Consolidated Balance Sheets
ASSETS
in thousands
(not audited)
  June 30, December 31,
  2019 2018
   
Current Assets  
Cash and Cash Equivalents$982$861
Accounts Receivable:  
Trade—Net 105,407 75,144
Other 9,956 9,741
Inventories 105,860 106,270
Unbilled Receivables 18,349 23,626
Income Taxes Receivable -- 2,439
Regulatory Assets 14,501 17,225
Other 8,511 6,114
Total Current Assets 263,566 241,420
   
Investments 9,683 8,961
Other Assets 39,002 35,759
Goodwill 37,572 37,572
Other Intangibles—Net 11,858 12,450
Regulatory Assets 131,692 135,257
   
Right of Use Assets – Operating Leases 19,473 --
   
Plant  
Electric Plant in Service 2,170,259 2,019,721
Nonelectric Operations 234,245 228,120
Construction Work in Progress 73,069 181,626
Total Gross Plant 2,477,573 2,429,467
Less Accumulated Depreciation and Amortization 875,475 848,369
Net Plant 1,602,098 1,581,098
Total$2,114,944$2,052,517


Otter Tail Corporation
Consolidated Balance Sheets
LIABILITIES AND EQUITY
in thousands
(not audited)
  June 30,  December 31, 
  2019  2018 
   
Current Liabilities  
Short-Term Debt$36,602 $18,599 
Current Maturities of Long-Term Debt 177  172 
Accounts Payable 111,848  96,291 
Accrued Salaries and Wages 18,034  24,857 
Accrued Federal and State Income Taxes 3,732  -- 
Other Accrued Taxes 11,753  17,287 
Regulatory Liabilities 8,959  738 
Current Operating Lease Liabilities
 3,784  -- 
Other Accrued Liabilities 11,260  12,149 
Total Current Liabilities 206,149  170,093 
   
Pensions Benefit Liability 88,030  98,358 
Other Postretirement Benefits Liability 73,080  71,561 
Long-Term Operating Lease Liabilities 16,084  -- 
Other Noncurrent Liabilities 28,859  24,326 
   
Deferred Credits  
Deferred Income Taxes 122,035  120,976 
Deferred Tax Credits 19,300  19,974 
Regulatory Liabilities 224,655  226,469 
Other 2,384  1,895 
Total Deferred Credits 368,374  369,314 
   
Capitalization  
Long-Term Debt—Net 590,063  590,002 
   
Cumulative Preferred Shares --  -- 
   
Cumulative Preference Shares --  -- 
   
Common Equity  
Common Shares, Par Value $5 Per Share 198,775  198,324 
Premium on Common Shares 345,030  344,250 
Retained Earnings 205,115  190,433 
Accumulated Other Comprehensive Loss (4,615) (4,144)
Total Common Equity 744,305  728,863 
Total Capitalization 1,334,368  1,318,865 
Total$2,114,944 $2,052,517 




Otter Tail Corporation
Consolidated Statements of Cash Flows
In thousands
(not audited)
 
 For the Six Months Ended June 30,
In thousands 2019  2018 
Cash Flows from Operating Activities  
Net Income$41,750 $44,911 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:  
Depreciation and Amortization 38,572  37,508 
Deferred Tax Credits (674) (703)
Deferred Income Taxes 960  2,076 
Change in Deferred Debits and Other Assets 3,884  10,309 
Discretionary Contribution to Pension Plan (10,000) (20,000)
Change in Noncurrent Liabilities and Deferred Credits 11,942  (759)
Allowance for Equity/Other Funds Used During Construction (688) (1,060)
Stock Compensation Expense – Equity Awards 3,944  2,253 
Other—Net 276  (193)
Cash (Used for) Provided by Current Assets and Current Liabilities:  
Change in Receivables (30,478) (25,677)
Change in Inventories 410  (2,401)
Change in Other Current Assets 2,870  2,428 
Change in Payables and Other Current Liabilities 222  1,233 
Change in Interest and Income Taxes Receivable/Payable 6,297  3,470 
Net Cash Provided by Operating Activities 69,287  53,395 
Cash Flows from Investing Activities  
Capital Expenditures (54,012) (49,094)
Proceeds from Disposal of Noncurrent Assets 3,405  1,477 
Cash Used for Investments and Other Assets (4,776) (2,102)
Net Cash Used in Investing Activities (55,383) (49,719)
Cash Flows from Financing Activities  
Changes in Checks Written in Excess of Cash (1,120) 2,236 
Net Short-Term Borrowings (Repayments) 18,003  (91,394)
Common Stock Issuance Expenses --  (108)
Payments for Retirement of Capital Stock (2,730) (2,450)
Proceeds from Issuance of Long-Term Debt --  100,000 
Short-Term and Long-Term Debt Issuance Expenses --  (441)
Payments for Retirement of Long-Term Debt (84) (107)
Dividends Paid (27,852) (26,592)
Net Cash Used in Financing Activities (13,783) (18,856)
Net Change in Cash and Cash Equivalents 121  (15,180)
Cash and Cash Equivalents at Beginning of Period 861  16,216 
Cash and Cash Equivalents at End of Period$982 $1,036 

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Source: Otter Tail Corporation