Otter Tail Corporation (NASDAQ:OTTR) today announced financial results for the quarter and year ended December 31, 2024.

SUMMARY

Produced record earnings, with annual diluted earnings per share of $7.17.
Achieved a consolidated return on equity of 19.3% on an equity ratio of 62.2%.
Updated our electric utility's five-year rate base compounded annual growth rate to 9.0% from 7.7%.
Increased our long-term earnings per share growth rate target to 6 to 8%.

CEO OVERVIEW

"Otter Tail Corporation produced record earnings in 2024, generating diluted earnings per share of $7.17," said President and CEO Chuck MacFarlane. "Executing on our strategy coupled with the hard work and dedication of our team members made this level of success possible and I am grateful for their contributions.

"Otter Tail Power continues to perform well, converting our 2024 rate base growth into earnings growth at approximately a 1:1 ratio. We continue to execute on our regulatory priorities and obtained approval for our fully settled North Dakota general rate case in the fourth quarter. The outcome of the case provides for a net annual revenue requirement increase of $13.1 million premised on a return on equity of 10.1 percent and an equity layer of 53.5 percent.

"Our Manufacturing segment continues to navigate softened end market demand, and we have taken action to mitigate the impact of lower sales volumes on earnings. Despite the down-cycle, this segment continues to produce incremental cash to fund future growth opportunities, and the long-term fundamentals remain intact.

"Our Plastics segment produced strong financial results, generating record earnings of $201 million. We continue to benefit from improved end market demand and customers' sales volume growth. We completed the first phase of the Vinyltech expansion project in the fourth quarter, adding large diameter PVC pipe production capability to better serve customers in the southwest market.

"We have updated our 5-year capital spending plan and revised our long-term financial targets. Otter Tail Power's updated 5-year capital spending plan totals $1.4 billion and is expected to produce a rate base compounded annual growth rate of 9 percent. We also increased our consolidated long-term earnings per share growth rate target to 6 to 8 percent from 5 to 7 percent, increasing our total shareholder return target to 9 to 11 percent.

"With the strength of our balance sheet and the talent excellence we have and continue to cultivate, we feel well positioned to deliver on our revised financial targets over the long-term. We are initiating our 2025 diluted earnings per share guidance range of $5.68 to $6.08. Our guidance reflects Electric segment earnings growth of approximately 7 percent and as expected, a decline in Plastics segment earnings driven by a continued reduction in product sales prices due to changing market conditions. We also expect a decline in Manufacturing segment earnings as end market demand conditions remain challenging."

CASH FLOWS AND LIQUIDITY

Our consolidated cash provided by operating activities was a record $452.7 million in 2024, compared to $404.5 million in 2023, with the increase primarily due to a decrease in working capital and a $7.5 million increase in net income. Investing activities during the year included capital expenditures of $358.7 million and a $50.1 million long-term investment in U.S. treasuries. Capital expenditures during the year were largely within our Electric segment, including investments in our wind repowering and advanced metering projects, but also included investments in our facility expansion projects within our Manufacturing and Plastics segments. Financing activities in 2024 included the issuance of $120.0 million of long-term debt at Otter Tail Power, the proceeds of which were primarily used to fund capital investments. Other financing activities during the year included dividend payments of $78.3 million.

As of December 31, 2024, we had $311.6 million of available liquidity under our credit facilities and $294.7 million of available cash and cash equivalents, for total available liquidity of $606.3 million.

ANNUAL SEGMENT OPERATING RESULTS

Electric Segment

*($ in thousands)*		*2024*		*2023*	*$ Change*			*% Change*
Operating Revenues	$	524,515	$	528,359	$	(3,844	)	(0.7	)%
Net Income		90,963		84,424		6,539		7.7

Retail MWh Sales		5,681,268		5,772,215		(90,947	)	(1.6	)%
Heating Degree Days		5,313		6,259		(946	)	(15.1	)
Cooling Degree Days		440		590		(150	)	(25.4	)

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

	*2024*		*2023*
Heating Degree Days	83.7	%	98.4	%
Cooling Degree Days	93.8	%	127.2	%

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 in 2024 and 2023.

2024 vs Normal

2024 vs

2023

2023 vs Normal

Effect on Diluted Earnings Per Share

(0.13

)

(0.15

)

0.02

Operating Revenues decreased $3.8 million primarily due to decreases in retail and wholesale revenues. The decrease in retail revenue was driven by decreased fuel recovery revenue due to lower market energy costs and the impact of unfavorable weather. These decreases were partially offset by retail revenue increases due to an interim rate increase in North Dakota in connection with our most recent rate case, increased commercial and industrial sales volumes, and increased rider revenue as we recover the cost of and return on our rate base investments.

Net Income increased $6.5 million primarily due to increased revenue resulting from the interim rate increase in North Dakota and increased rider revenue, partially offset by unfavorable weather, as discussed above. The revenue increases were partially offset by increased depreciation and interest expense related to capital investments and financing costs associated with our rate base investments.

Manufacturing Segment

*(in thousands)*		*2024*		*2023*	*$ Change*			*% Change*
Operating Revenues	$	342,592	$	402,781	$	(60,189	)	(14.9	)%
Net Income		13,681		21,454		(7,773	)	(36.2	)

Operating Revenues decreased $60.2 million primarily due to a 15% decrease in sales volumes, with declines experienced in the recreational vehicle, agriculture, construction, lawn and garden, and horticulture end markets. Sales volumes decreased due to lower end market demand and inventory management efforts by manufacturers, distributors, and dealers. A 28% decline in scrap metal revenues, largely driven by lower production volumes, also contributed to the decrease in operating revenues.

Net Income decreased $7.8 million primarily due to lower sales volumes, as described above, and a decrease in gross profit margins in our plastics thermoforming business, partially offset by reduced general and administrative expenses. Decreased profit margins were primarily due to a reduced leveraging of fixed manufacturing costs resulting from decreased production and sales volumes. Decreased scrap metal sales, as described above, also contributed to the decrease in net income.

Plastics Segment

*(in thousands)*		*2024*		*2023*	*$ Change*		*% Change*
Operating Revenues	$	463,441	$	418,026	$	45,415	10.9	%
Net Income		200,747		187,748		12,999	6.9

Operating Revenues increased $45.4 million primarily due to a 27% increase in sales volumes driven by customer sales volume growth and strong distributor and end market demand. Sales volumes in 2023 were negatively impacted by distributors and contractors reducing purchase volumes in response to uncertain and competitive market conditions. Although market conditions remain somewhat uncertain, infrastructure investment and active construction across our sales territories contributed to increased distributor and end market demand in 2024. The impact of increased sales volumes was partially offset by decreased sales prices. Our sales prices have steadily declined after peaking in late 2022 and decreased 12% in 2024 compared to the prior year due to continuing changes in market conditions.

Net Income increased $13.0 million primarily due to the impact of increased sales volumes, as described above. Increased operating revenues, driven by increased sales volumes, were partially offset by a decrease in gross profit margins. Gross profit margins decreased primarily due to decreases in sales prices, as described above.

Corporate

*(in thousands)*		*2024*				*2023*			*$ Change*				*% Change*
Net Income (Loss)	$	(3,729	)		$	565			$	(4,294	)		n/m

Net Income (Loss) at our corporate cost center decreased $4.3 million from $0.6 million of net income in the prior year, primarily due to increased insurance expenses driven by higher claims costs associated with our self-funded insurance programs, as well as increased variable compensation based on the current year financial performance. The increase in expenses was partially offset by increased investment income earned on our short- and long-term investments.

FOURTH QUARTER OPERATING RESULTS

Consolidated Results

*(in thousands, except per share amounts)*		*2024*		*2023*	*$ Change*			*% Change*
Operating Revenues	$	303,111	$	314,313	$	(11,202	)	(3.6	)%
Operating Expenses		236,287		244,233		(7,946	)	(3.3	)
Operating Income		66,824		70,080		(3,256	)	(4.6	)
Other Expense		3,821		1,109		2,712		244.5
Income Before Income Taxes		63,003		68,971		(5,968	)	(8.7	)
Income Tax Expense		8,153		11,205		(3,052	)	(27.2	)
Net Income		54,850		57,766		(2,916	)	(5.0	)
Diluted Earnings Per Share	$	1.30	$	1.37	$	(0.07	)	(5.1	)%

Electric Segment

Electric segment net income was $21.5 million, a $4.5 million increase from the fourth quarter of 2023. The increase was primarily due to increased retail revenue driven by an interim rate increase in North Dakota in connection with our most recent rate case, as well as increased rider revenue, combined with a decrease in operating and maintenance expenses. The revenue increases and operating expense decreases were partially offset by increased depreciation and interest expense related to capital investment and financing costs associated with our rate base investments.

Manufacturing Segment

Manufacturing segment net loss was $0.6 million, a $1.8 million decrease from net income of $1.2 million in the fourth quarter of 2023. The decrease was primarily due to a 25% decrease in sales volumes compared to the same period in the prior year, driven by soft end market demand, and a decrease in gross profit margins in both our contract metal fabrication and our plastics thermoforming business. Sales volume decreases were primarily in the recreational vehicle, agriculture, construction, lawn and garden, and horticulture end markets. Decreased profit margins were primarily due to a reduced leveraging of fixed manufacturing costs resulting from decreased production and sales volumes. The impacts of lower sales volumes were partially offset by reduced general and administrative expenses.

Plastics Segment

Plastics segment net income was $38.9 million, a $0.6 million decrease from the fourth quarter of 2023. The decrease was primarily due to decreased sales prices and increased general and administrative costs. Sales prices steadily declined throughout the year and decreased 11% compared to the same period last year. The impact of decreased sales prices and increased general and administrative costs was largely offset by the impact of increased sales volumes. Sales volumes increased 23% compared to the same period in the prior year driven by customer sales volume growth and strong distributor and end market demand.

Corporate

Corporate net loss was $5.0 million, a $5.1 million decrease from $0.1 million of net income in the fourth quarter of 2023, primarily due to increased insurance expense driven by higher claims costs associated with our self-funded insurance programs, as well as increased variable compensation based on the current year financial performance.

2025 OUTLOOK

We anticipate 2025 diluted earnings per share to be in the range of $5.68 to $6.08. We expect our earnings mix in 2025 to be approximately 39% from our Electric segment and 61% from our Manufacturing and Plastics segments, net of corporate costs. Our anticipated earnings mix in 2025 deviates from our long-term expected earnings mix of 65% Electric / 35% Non-Electric as we expect Plastics segment earnings to remain elevated in 2025 compared to our long-term view of normal earnings for this segment.

The segment components of our 2025 diluted earnings per share guidance compared with actual earnings for 2024 are as follows:

	*2024 EPS* *by Segment*			*2025 EPS Guidance*
	*2024 EPS* *by Segment*			*Low*			*High*
Electric	$	2.16		$	2.29		$	2.35
Manufacturing		0.33			0.21			0.27
Plastics		4.77			3.26			3.50
Corporate		(0.09	)		(0.08	)		(0.04	)
Total	$	7.17		$	5.68		$	6.08
Return on Equity		19.3	%		13.8	%		14.6	%

The following items contribute to our 2025 earnings guidance:

Electric Segment - We expect segment earnings to increase 7% in 2025 based on the following assumptions:

Normal weather conditions in 2025.
Returns generated from an increase in average rate base of 12% in 2025 compared to 2024.
A planned maintenance outage at Coyote Station in 2025 (there were no planned outages in 2024).
Increased depreciation and interest expense from capital expenditures and associated financing.

Manufacturing Segment - We expect segment earnings to decline 27% in 2025 based on the following assumptions:

Lower sales volumes in our contract metal fabrication business as soft end market demand continues, partially offset by some volume recovery in our horticulture plastic products business.
Sales mix and product pricing pressure in the current sales volume environment, and lower scrap revenues within our metal fabrication business from lower production volumes.
Compressed operating margins from the deleveraging of manufacturing costs due to lower production and sales volumes.

Plastics Segment - We expect segment earnings to decline 29% in 2025 based on the following assumptions:

Continued decline in product sales prices throughout 2025 as pricing continues to retreat from the 2022 high point.
Modest increase in sales volumes driven by new capacity at our Phoenix facility, partially offset by macroeconomic uncertainty.

Corporate Costs - We expect our corporate costs to decrease primarily from lower incentive compensation costs compared to 2024.

CAPITAL EXPENDITURES

The following provides a summary of actual capital expenditures for the year ended December 31, 2024, and anticipated annual capital expenditures for the next five years, along with average rate base and annual rate base growth of our Electric segment:

*(in millions)*		*2024*			*2025*			*2026*			*2027*			*2028*			*2029*		*Total* 2025 - 2029
Electric Segment:
Renewable Generation	$	134		$	101		$	127		$	118		$	179		$	4		$	529
Transmission		60			59			93			162			114			100			528
Distribution		46			37			37			36			37			34			181
Other		61			54			51			31			27			25			188
Total Electric Segment		301			251			308			347			357			163			1,426
Manufacturing and Plastics Segments		58			27			27			27			25			23			129
Total Capital Expenditures	$	359		$	278		$	335		$	374		$	382		$	186		$	1,555

Total Electric Utility Average Rate Base	$	1,892		$	2,118		$	2,303		$	2,524		$	2,762		$	2,909
Annual Rate Base Growth		8.6	%		11.9	%		8.7	%		9.6	%		9.4	%		5.3	%

Our updated five-year capital expenditure plan includes Electric segment investments in wind and solar resources, transmission and distribution assets, and investments in system reliability and technology. Our Electric segment capital expenditure plan produces a compounded annual growth rate on average rate base of 9.0% over the next five years and will serve as a key driver in increasing Electric segment earnings over this timeframe. Our capital expenditure plan in our Manufacturing and Plastics segments includes a mix of investments to replace and upgrade existing equipment and investments to add additional capacity or productivity to our operations.

CONFERENCE CALL AND WEBCAST

The corporation will host a live webcast on Tuesday, February 18, 2025, 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," "opportunity," "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 2025 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; 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, assigned service areas, the 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 December 31,*						*Twelve Months Ended December 31,*
*(in thousands, except per-share amounts)*		*2024*			*2023*			*2024*			*2023*
Operating Revenues
Electric	$	139,818		$	132,362		$	524,515		$	528,359
Product Sales		163,293			181,951			806,033			820,807
Total Operating Revenues		303,111			314,313			1,330,548			1,349,166
Operating Expenses
Electric Production Fuel		15,936			14,410			60,945			60,339
Electric Purchased Power		19,055			20,360			61,561			78,292
Electric Operating and Maintenance Expense		54,055			56,659			190,422			191,263
Cost of Products Sold (excluding depreciation)		91,560			102,793			434,522			454,122
Nonelectric Selling, General, and Administrative Expenses		24,169			21,230			80,065			72,663
Depreciation and Amortization		27,541			25,319			107,121			97,954
Electric Property Taxes		3,971			3,462			15,662			16,614
Total Operating Expenses		236,287			244,233			950,298			971,247
Operating Income		66,824			70,080			380,250			377,919
Other Income and (Expense)
Interest Expense		(10,591	)		(9,392	)		(41,815	)		(37,677	)
Nonservice Components of Postretirement Benefits		2,412			3,475			9,609			10,597
Other Income (Expense), net		4,358			4,808			18,848			12,650
Income Before Income Taxes		63,003			68,971			366,892			363,489
Income Tax Expense		8,153			11,205			65,230			69,298
Net Income	$	54,850		$	57,766		$	301,662		$	294,191

Weighted-Average Common Shares Outstanding:
Basic		41,801			41,680			41,778			41,668
Diluted		42,088			42,065			42,072			42,039
Earnings Per Share:
Basic	$	1.31		$	1.39		$	7.22		$	7.06
Diluted	$	1.30		$	1.37		$	7.17		$	7.00

*OTTER TAIL CORPORATION* CONSOLIDATED BALANCE SHEETS (unaudited)
	*December 31,*
*(in thousands)*		*2024*		*2023*
Assets
Current Assets
Cash and Cash Equivalents	$	294,651	$	230,373
Receivables, net of allowance for credit losses		145,964		157,143
Inventories		148,885		149,701
Regulatory Assets		9,962		16,127
Other Current Assets		30,579		16,826
Total Current Assets		630,041		570,170
Noncurrent Assets
Investments		121,177		62,516
Property, Plant and Equipment, net of accumulated depreciation		2,692,460		2,418,375
Regulatory Assets		98,673		95,715
Intangible Assets, net of accumulated amortization		5,743		6,843
Goodwill		37,572		37,572
Other Noncurrent Assets		66,416		51,377
Total Noncurrent Assets		3,022,041		2,672,398
Total Assets	$	3,652,082	$	3,242,568

Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Debt	$	69,615	$	81,422
Accounts Payable		113,574		94,428
Accrued Salaries and Wages		34,398		38,134
Accrued Taxes		17,314		26,590
Regulatory Liabilities		29,307		25,408
Other Current Liabilities		45,582		43,775
Total Current Liabilities		309,790		309,757
Noncurrent Liabilities and Deferred Credits
Pensions Benefit Liability		32,614		33,101
Other Postretirement Benefits Liability		27,385		27,676
Regulatory Liabilities		288,928		276,547
Deferred Income Taxes		267,745		237,273
Deferred Tax Credits		14,990		15,172
Other Noncurrent Liabilities		98,397		75,977
Total Noncurrent Liabilities and Deferred Credits		730,059		665,746
Commitments and Contingencies
Capitalization
Long-Term Debt		943,734		824,059
Shareholders' Equity
Common Shares		209,140		208,553
Additional Paid-In Capital		429,089		426,963
Retained Earnings		1,029,738		806,342
Accumulated Other Comprehensive Income		532		1,148
Total Shareholders' Equity		1,668,499		1,443,006
Total Capitalization		2,612,233		2,267,065
Total Liabilities and Shareholders' Equity	$	3,652,082	$	3,242,568

*OTTER TAIL CORPORATION* CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	*Twelve Months Ended December 31,*
*(in thousands)*		*2024*			*2023*
Operating Activities
Net Income	$	301,662		$	294,191
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		107,121			97,954
Deferred Tax Credits		(182	)		(744	)
Deferred Income Taxes		23,057			13,508
Investment (Gains) Losses		(5,482	)		(7,222	)
Stock Compensation Expense		9,529			7,753
Other, net		(3,111	)		(423	)
Change in Operating Assets and Liabilities:
Receivables		11,179			(12,750	)
Inventories		3,691			(2,450	)
Regulatory Assets		5,194			12,479
Other Assets		(11,640	)		2,817
Accounts Payable		14,826			(9,988	)
Accrued and Other Liabilities		(10,371	)		6
Regulatory Liabilities		16,821			20,973
Pension and Other Postretirement Benefits		(9,563	)		(11,605	)
Net Cash Provided by Operating Activities		452,731			404,499
Investing Activities
Capital Expenditures		(358,650	)		(287,134	)
Proceeds from Disposal of Noncurrent Assets		8,849			6,225
Purchases of Investments and Other Assets		(61,573	)		(8,378	)
Net Cash Used in Investing Activities		(411,374	)		(289,287	)
Financing Activities
Net (Repayments) Borrowings on Short-Term Debt		(11,807	)		73,218
Proceeds from Issuance of Long-Term Debt		120,000			—
Dividends Paid		(78,266	)		(73,061	)
Payments for Shares Withheld for Employee Tax Obligations		(6,457	)		(3,088	)
Other, net		(549	)		(904	)
Net Cash Provided by (Used in) Financing Activities		22,921			(3,835	)
Net Change in Cash and Cash Equivalents		64,278			111,377
Cash and Cash Equivalents at Beginning of Period		230,373			118,996
Cash and Cash Equivalents at End of Period	$	294,651		$	230,373

*OTTER TAIL CORPORATION* SEGMENT RESULTS (unaudited)
	*Three Months Ended December 31,*					*Twelve Months Ended December 31,*
*(in thousands)*		*2024*			*2023*		*2024*			*2023*
Operating Revenues
Electric	$	139,818		$	132,362	$	524,515		$	528,359
Manufacturing		66,632			92,846		342,592			402,781
Plastics		96,661			89,105		463,441			418,026
Total Operating Revenues	$	303,111		$	314,313	$	1,330,548		$	1,349,166

Net Income (Loss)
Electric	$	21,478		$	17,005	$	90,963		$	84,424
Manufacturing		(590	)		1,177		13,681			21,454
Plastics		38,919			39,508		200,747			187,748
Corporate		(4,957	)		76		(3,729	)		565
Total Net Income	$	54,850		$	57,766	$	301,662		$	294,191

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Otter Tail Corporation Announces Record Annual Earnings and Increases Long-Term Financial Targets