Otter Tail (OTTR) - 2024 Q3 - Quarterly Report

Financial Performance - Operating Revenues decreased by $20.0 million to$ 338.0 million, a decline of 5.6% compared to the previous year[74]. - Operating Expenses decreased by $6.4 million to$ 230.5 million, primarily due to lower sales volumes in the Manufacturing segment and reduced fuel costs in the Electric segment[73]. - Interest Expense increased by $2.0 million to$ 11.2 million, attributed to the issuance of an additional $120.0 million of long-term debt[73]. - Net Income decreased by$ 6.5 million to $85.5 million, reflecting a decline of 7.1% year-over-year[74]. - Retail Revenues increased slightly by$ 0.3 million to $110.8 million, while Transmission Services Revenues rose by$ 1.5 million to $15.2 million[75]. - Wholesale Revenues decreased significantly by$ 1.6 million to $3.1 million, a drop of 33.9% due to reduced sales volumes[75]. - Operating Income for the Electric segment increased by 10.0% to$ 36.5 million, supported by favorable weather conditions[80]. - Operating Income for the Manufacturing segment decreased by 69.6% to $2.7 million, primarily due to a 13% decrease in sales volumes[82]. - Consolidated Operating Revenues for the nine months ended September 30, 2024, decreased by$ 7.4 million, or 0.7%, to $1,027,437, primarily due to decreased sales prices in the Plastics segment and decreased sales volumes in the Manufacturing segment[84]. - Operating Income increased by$ 5.6 million, or 1.8%, to $313,426, driven by lower operating expenses which decreased by$ 13.0 million, or 1.8%[84]. - Net Income for the period increased by $10.4 million, or 4.4%, to$ 246,812, with an effective tax rate decrease from 19.7% to 18.8%[84]. Segment Performance - Electric segment Total Operating Revenues decreased by $11.3 million, or 2.9%, to$ 384,696, impacted by a $15.4 million decrease in Purchased Power costs due to a 17% decrease in the price of purchased power[85][89]. - Retail Revenues in the Electric segment decreased by$ 9.0 million, or 2.6%, primarily due to a $14.8 million decrease in fuel recovery revenues and unfavorable weather conditions[87]. - Plastics segment Operating Revenues increased by$ 37.9 million, or 11.5%, to $366,780, driven by a 28% increase in sales volumes despite a 13% decrease in sales prices[91]. - Operating Income in the Plastics segment increased by$ 18.3 million, or 9.1%, to $219,136, reflecting strong demand and sales volume growth[91]. Expenses and Income - General and Administrative Expenses surged by$ 4.4 million to $5.4 million, a 463.1% increase, mainly due to higher insurance and employee benefit costs[83]. - General and Administrative Expenses increased by$ 5.441 million, or 68.0%, from $8.003 million in 2023 to$ 13.444 million in 2024[97]. - Operating Loss rose by $5.436 million, or 67.3%, from$ 8.081 million in 2023 to $13.517 million in 2024[97]. - Other Income increased by$ 3.0 million to $5.4 million, driven by increased investment income from the Plastics segment[73]. - Other Income increased by$ 6.7 million, primarily due to increased investment income from short-term cash equivalent investments and long-term marketable securities[84]. Cash Flow and Liquidity - Net Cash Provided by Operating Activities increased by $4.3 million, from$ 318.495 million in 2023 to $322.775 million in 2024[105]. - Net Cash Used in Investing Activities increased by$ 80.1 million, from $232.018 million in 2023 to$ 312.166 million in 2024[106]. - Net Cash Provided by Financing Activities increased by $55.3 million, from a net cash used of$ 16.259 million in 2023 to $39.038 million in 2024[107]. - Total available liquidity as of September 30, 2024, was$ 543.8 million, compared to $468.1 million as of September 30, 2023[102]. Capital Expenditures and Investments - The company plans to acquire a solar facility for$ 23.6 million, with closing expected in the second half of 2025[109]. - The company has a capital expenditure plan that includes investments in electric generation facilities and manufacturing facilities, subject to review based on various factors[108]. Debt and Compliance - The company is in compliance with all financial covenants as of September 30, 2024[102]. - OTP issued $120.0 million of senior unsecured notes in March 2024, consisting of$ 60.0 million of 5.48% notes due April 1, 2034, and $60.0 million of 5.77% notes due April 1, 2054, to repay short-term borrowings and fund capital expenditures[116]. - As of September 30, 2024, the company had$ 947.0 million of principal outstanding under long-term debt arrangements, with maturities ranging from 2026 to 2054[116]. - OTC's interest-bearing debt to total capitalization ratio was 0.38 to 1.00, and OTP's was 0.48 to 1.00 as of September 30, 2024, both within the required limits[118]. - OTC's interest and dividend coverage ratio was 10.4 to 1.00, while OTP's was 3.27 to 1.00 as of September 30, 2024, indicating strong coverage[118]. - The company remains in compliance with all financial covenants as of September 30, 2024, with no priority indebtedness outstanding for both OTC and OTP[118]. Regulatory and Market Information - The North Dakota Rate Case filed by OTP requests a net increase in annual revenue of $22.5 million, or 10.9%, to adjust for regulatory changes and cost recovery mechanisms[96]. - There have been no material changes to the company's critical accounting policies and estimates since the last Annual Report on Form 10-K[119]. - The company reported no material changes in market risk from the previous disclosures in the Annual Report on Form 10-K for the year ended December 31, 2023[120].