Otter Tail Corporation Announces First Quarter Earnings and Increases 2021 Earnings Per Share Guidance
Otter Tail Corporation (OTTR) reported a significant financial performance for Q1 2021, with operating revenues rising 11.5% to $261.7 million and net income increasing 25.0% to $30.3 million. The diluted earnings per share rose 21.7% to $0.73. The company has revised its 2021 EPS guidance to $2.47-$2.62, reflecting growth of 5% to 12% from 2020's $2.34. Key drivers include strong performance in the Plastics segment and improvements in utility operations.
- Operating revenues increased 11.5% to $261.7 million.
- Net income rose 25.0% to $30.3 million.
- Diluted earnings per share increased 21.7% to $0.73.
- Revised 2021 EPS guidance increased to $2.47-$2.62.
- Strong performance in the Plastics segment due to increased PVC pipe prices.
- Retail sales revenue decreased $0.9 million due to lower kWh sales primarily from COVID-19 impacts.
- Electric segment guidance revised downward due to unfavorable first-quarter weather.
- Lower Commercial and Industrial revenues expected due to ongoing COVID-19 effects.
Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the quarter ended March 31, 2021.
SUMMARY
-
Consolidated operating revenues increased
11.5% to$261.7 million . -
Consolidated net income increased
25.0% to$30.3 million primarily driven by strong Plastics segment performance. -
Diluted earnings per share increased
21.7% to$0.73 per share. -
The corporation increases its 2021 diluted earnings per share guidance range to
$2.47 t o$2.62 reflecting a range of5% to12.0% growth off of 2020 reported$2.34 .
CEO OVERVIEW
“Otter Tail Corporation employees achieved outstanding financial results in the first quarter of 2021 with earnings per share increasing
“Otter Tail Power’s generation performed well and was largely online and available for dispatch during the February cold weather event, insulating our customers from exposure to extremely high electricity prices seen across the central United States.
“Astoria Station, our
“Progress continues on Otter Tail Power’s announced
“Otter Tail Power continues to enhance its generation mix as it transitions to a cleaner energy future while maintaining low rates in the region for its customers. By 2023, up to
“Otter Tail Power implemented approved interim rates in Minnesota on January 1, 2021 in connection with its revenue increase request filed with the MPUC in November 2020. Investment in cleaner energy generation and smarter technologies are primarily driving this request along with rising costs for providing electric service. In a filing submitted to the MPUC on April 30, 2021, Otter Tail Power lowered its requested net annual revenue increase from its initial request of
“Otter Tail Power continues to benefit from strong rate base growth investments. These investments represent over 85 percent of our total capital spending over the next five years and include regulated investments in renewable generation, technology and infrastructure, and transmission assets. We expect this to result in a projected compounded annual growth rate of approximately 5 percent in utility rate base from year-end 2020 through 2025 and to deliver value to customers and shareholders. We continue to make system investments to meet our customers’ expectations, reduce operating and maintenance costs, reduce emissions and improve reliability and safety.
“Our Manufacturing Segment increased revenues and net income
“In our Plastics Segment, PVC resin availability in the first quarter was constrained due to the impact of the February winter storms and led to increased sales prices for PVC pipe and increased operating margins resulting in a record first quarter. These supply constraints continue for PVC resin in the second quarter.
“Our long-term focus remains on executing our growth strategies. For the utility, our strategy is to continue to invest in rate base growth opportunities and drive efficiency within our operating and maintenance expenses, which will lower our overall risk, create a more predictable earnings stream, maintain our credit quality and preserve our ability to pay dividends. Over time, we expect the electric utility business will provide approximately 75 percent of our overall earnings.
“The utility is complemented by well-run, strategic manufacturing and plastic pipe businesses, which provide organic growth opportunities from new products and services, market expansion and increased efficiencies. We expect these companies will provide approximately 25 percent of our earnings over the long term.
“We are increasing our 2021 earnings per share guidance to a range of
QUARTERLY DIVIDEND
On May 3, 2021 the corporation’s Board of Directors declared a quarterly common stock dividend of
CASH FLOWS AND LIQUIDITY
Our consolidated cash provided by operating activities for the three months ended March 31, 2021 was
Investing activities for the three months ended March 31, 2021 included capital expenditures of
Financing activities for the three months ended March 31, 2021 included net proceeds from short-term borrowings of
The following table presents the status of the corporation’s lines of credit at March 31, 2021 and December 31, 2020:
|
|
|
2021 |
|
2020 |
||||||||||||||
(in thousands) |
Line Limit |
|
Amount
|
|
Letters
|
|
Amount
|
|
Amount
|
||||||||||
Otter Tail Corporation Credit Agreement |
$ |
170,000 |
|
|
$ |
78,206 |
|
|
$ |
— |
|
|
$ |
91,794 |
|
|
$ |
104,834 |
|
Otter Tail Power Company Credit Agreement |
170,000 |
|
|
56,645 |
|
|
12,671 |
|
|
100,684 |
|
|
140,068 |
|
|||||
Total |
$ |
340,000 |
|
|
$ |
134,851 |
|
|
$ |
12,671 |
|
|
$ |
192,478 |
|
|
$ |
244,902 |
|
Both credit agreements are in place until October 31, 2024.
SEGMENT PERFORMANCE
Electric Segment
|
Three Months Ended March 31, |
|
|
|
|
|||||||||
($ in thousands) |
2021 |
|
2020 |
|
$ Change |
|
% Change |
|||||||
Retail Electric Revenues |
$ |
105,706 |
|
|
$ |
106,603 |
|
|
$ |
(897 |
) |
|
(0.8 |
)% |
Transmission Services Revenues |
11,944 |
|
|
10,841 |
|
|
1,103 |
|
|
10.2 |
|
|||
Wholesale Electric Revenues |
4,507 |
|
|
876 |
|
|
3,631 |
|
|
414.5 |
|
|||
Other Electric Revenues |
1,542 |
|
|
1,556 |
|
|
(14 |
) |
|
(0.9 |
) |
|||
Total Electric Revenues |
123,699 |
|
|
119,876 |
|
|
3,823 |
|
|
3.2 |
|
|||
Net Income |
$ |
17,587 |
|
|
$ |
16,182 |
|
|
$ |
1,405 |
|
|
8.7 |
% |
|
|
|
|
|
|
|
|
|||||||
Retail mwh Sales |
1,348,519 |
|
|
1,429,910 |
|
|
(81,391 |
) |
|
(5.7 |
)% |
|||
Heating Degree Days (HDDs) |
3,078 |
|
|
3,272 |
|
|
(194 |
) |
|
(5.9 |
) |
|||
The following table shows heating and cooling degree days as a percent of normal.
|
Three Months Ended March 31, |
||||
|
2021 |
|
2020 |
||
HDDs |
89.5 |
% |
|
95.6 |
% |
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 2021 and 2020.
|
2021 vs
|
|
2021 vs
|
|
2020 vs
|
||||||
Effect on Diluted Earnings Per Share |
$ |
(0.04) |
|
|
$ |
(0.02) |
|
|
$ |
(0.02) |
|
Retail Sales Revenue decreased
-
A
$2.8 million decrease in retail revenue mainly due to decreased kwh sales to commercial and industrial customers, exclusive of the impact of milder weather on sales, due to ongoing impacts of COVID-19 on first quarter 2021 kwh sales. COVID-19 did not impact electric revenues in the first quarter of 2020. -
A
$1.5 million decrease in fuel recovery revenue mainly due to credits provided to customers from increased margins on wholesale kwh sales and a5.7% reduction in retail kwh sales between the quarters. -
A
$0.9 million decrease in retail revenues related to decreased consumption due to milder weather in the first quarter of 2021 compared with the first quarter of 2020, evidenced by a5.9% decrease in heating-degree days between the quarters.
These decreases in revenue were partially offset by:
-
A
$2.3 million increase in new retail revenues, net of an estimated refund, related to an interim rate increase in Minnesota effective January 1, 2021 in connection with OTP's current Minnesota rate case filed in November 2020. -
A
$0.7 million increase in conservation rider revenues related to the recovery of increased conservation improvement program spending in Minnesota and South Dakota. -
A
$0.5 million increase in renewable rider revenues in North Dakota related to recovery of Merricourt operating expenses and returns on increased investment in the project, which was placed in service in the fourth quarter of 2020. -
A
$0.5 million increase in retail revenue due to a positive price variance resulting from varying kwh sales to customers under different tariffs. -
A
$0.3 million net increase in North Dakota and South Dakota generation, transmission and phase-in rider revenues related to the recovery of Astoria Station and transmission project costs.
Transmission Services Revenues increased
Wholesale Electric Revenue increased
Production Fuel costs increased
Purchased Power costs to serve retail customers increased
Operating and Maintenance Expense increased
-
$1.2 million in Merricourt operating and maintenance expenses incurred in the first quarter of 2021 as the wind farm is now commercially operational. -
A
$0.7 million increase in conservation improvement program expenditures, which are being recovered through retail rate riders in Minnesota and South Dakota.
These increases in expense were partially offset by:
-
A
$0.6 million decrease in steam generation plant maintenance and operating expenses. -
A
$0.5 million decrease in bad debt expense due to improved customer collections in the first quarter of 2021.
Depreciation and Amortization expense increased
Property Taxes increased
Interest Charges increased
Nonservice Cost Components of Postretirement Benefits decreased
Other Income decreased
Income Tax Expense decreased
Manufacturing Segment
|
Three Months Ended March 31, |
|
|
|
|
|||||||||
(in thousands) |
2021 |
|
2020 |
|
$ Change |
|
% Change |
|||||||
Operating Revenues |
$ |
75,825 |
|
|
$ |
68,479 |
|
|
$ |
7,346 |
|
|
10.7 |
% |
Net Income |
5,385 |
|
|
4,927 |
|
|
458 |
|
|
9.3 |
|
|||
BTD’s parts revenues increased
Cost of products sold at BTD increased
T.O. Plastics net income increased
Plastics Segment
|
Three Months Ended March 31, |
|
|
|
|
|||||||||
(in thousands) |
2021 |
|
2020 |
|
$ Change |
|
% Change |
|||||||
Operating Revenues |
$ |
62,186 |
|
|
$ |
46,397 |
|
|
$ |
15,789 |
|
|
34.0 |
% |
Net Income |
9,147 |
|
|
5,449 |
|
|
3,698 |
|
|
67.9 |
|
|||
Plastics segment revenues and net income increased
Corporate Costs
|
Three Months Ended March 31, |
|
|
|
|
|||||||||
(in thousands) |
2021 |
|
2020 |
|
$ Change |
|
% Change |
|||||||
Losses before Income Taxes |
$ |
(2,412 |
) |
|
$ |
(3,650 |
) |
|
$ |
1,238 |
|
|
(33.9 |
)% |
Income Tax Savings |
(622 |
) |
|
(1,360 |
) |
|
738 |
|
|
(54.3 |
) |
|||
Net Loss |
$ |
1,790 |
|
|
$ |
2,290 |
|
|
$ |
(500 |
) |
|
(21.8 |
)% |
Corporate losses before income taxes decreased
2021 BUSINESS OUTLOOK
We are increasing our 2021 diluted earnings per share guidance range to
Segment components of our revised 2021 diluted earnings per share guidance range compared with 2020 actual earnings and February 15, 2021 guidance are as follows:
|
2020 EPS
|
|
2021 EPS Guidance
|
|
2021 EPS Guidance
|
||||||||||||||||
|
|
Low |
|
High |
|
Low |
|
High |
|||||||||||||
Electric |
$ |
1.63 |
|
|
$ |
1.80 |
|
|
|
$ |
1.83 |
|
|
|
$ |
1.71 |
|
|
$ |
1.74 |
|
Manufacturing |
0.27 |
|
|
0.28 |
|
|
|
0.32 |
|
|
|
0.28 |
|
|
0.32 |
|
|||||
Plastics |
0.67 |
|
|
0.52 |
|
|
|
0.56 |
|
|
|
0.73 |
|
|
0.77 |
|
|||||
Corporate |
(0.23 |
) |
|
(0.21 |
) |
|
(0.17 |
) |
|
(0.25 |
) |
|
(0.21 |
) |
|||||||
Total |
$ |
2.34 |
|
|
$ |
2.39 |
|
|
|
$ |
2.54 |
|
|
|
$ |
2.47 |
|
|
$ |
2.62 |
|
Return on Equity |
11.6 |
% |
|
11.1 |
|
% |
|
11.8 |
|
% |
|
11.5 |
% |
|
12.2 |
% |
|||||
The following items contribute to our 2021 earnings guidance:
-
We are revising our Electric segment guidance downward from our February 15, 2021 guidance based on:
- Unfavorable weather in the first quarter which negatively impacted first quarter earnings by $.04 per share. We plan for normal weather for the remainder of 2021.
- Our Commercial and Industrial revenues are expected to be lower based on continuing impacts from COVID-19.
- The level of self-funded interconnection interim projects revenue is pending FERC approval, and we have also had lower levels of capital expenditures and lower transmission revenue requirements resulting in a lower level of earnings than originally expected.
- Lower MISO revenues due to lower revenue requirements.
-
We continue to expect Electric segment earnings in 2021 will exceed 2020 earnings driven by the following factors:
-
Our Merricourt and Astoria Station projects being commercially operational and our
$410 million total investment in these projects fully reflected in our rate base, with a recovery mechanism in place in all three jurisdictions, partially offset by increased operating and maintenance, depreciation and property tax expense associated with these investments, and increased interest expense due to debt issuances in 2020. -
The impact of our filed Minnesota 2021 rate case. The MPUC has approved an interim rate increase of
3.2% or$6.9 million in annual revenues.
These increases are partially offset by: -
Increased non-labor operating and maintenance expenses related to a planned outage at Big Stone Plant of
$3.9 million in 2021 and increased postretirement expense caused by a decrease in the discount rate and long-term rate of return on plan assets.
-
Our Merricourt and Astoria Station projects being commercially operational and our
-
We are maintaining our February 15, 2021 guidance for our Manufacturing segment and continue to expect segment earnings to increase compared with 2020 based on:
- An expected increase in sales at BTD driven mostly by improving end markets as our customers continue to build inventory to fill the shortages created by the COVID-19 pandemic. Scrap metal revenues are expected to improve based on higher scrap metal prices between the years.
- An increase in earnings from T.O. Plastics mainly driven by year-over-year sales growth in horticulture and life science end markets partially offset by lower sales in our industrial end markets.
- Decreased mill capacity due to COVID-19 has created raw material availability challenges as the steel mills struggle to keep up with demand. This has created concerns over our ability to obtain the steel needed to meet customer demands and continues to keep steel prices elevated above historic levels. We continue to work on increasing staffing levels to keep up with strong demand and to mitigate the impact of increasing expedited freight costs while maintaining or improving labor efficiencies.
-
Backlog for the manufacturing companies of approximately
$201 million for 2021 compared with$127 million one year ago.
- We are increasing our 2021 guidance from our Plastics segment and now expect 2021 segment earnings to be more than 2020 earnings. Sales prices of PVC pipe in the first quarter were higher than expected and are expected to continue to be higher throughout the year. Pounds of pipe sold in 2021 are still expected to be lower than 2020. Resin suppliers continue to increase prices for raw materials due to market conditions such as availability constraints related to feedstock supplies for resin and a strong export market that has higher resin prices than the domestic market.
- Corporate costs, net of tax, are now expected to be in line with 2020. Items driving this are higher employee benefit costs and likely contributions to the Otter Tail Corporation Foundation.
CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on Tuesday, May 4, 2021, 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 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.
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,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “should,” “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 include statements regarding 2021 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 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 the impact and duration of the COVID-19 pandemic, 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, cyber security threats or data breaches, the impact of government legislation and regulation, including foreign trade policy and environmental laws and regulations, the impact of climate change, including compliance with legislative and regulatory changes to address climate change, operational and economic risks associated with our electric generating and manufacturing facilities, risks associated with energy markets, the availability and pricing of resource materials, attracting and maintaining a qualified and stable workforce, and changing macroeconomic and industry conditions. 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 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 March 31, |
||||||
(in thousands, except per-share amounts) |
2021 |
|
2020 |
||||
|
|
|
|
||||
Operating Revenues |
|
|
|
||||
Electric |
$ |
123,699 |
|
|
$ |
119,870 |
|
Product Sales |
138,011 |
|
|
114,877 |
|
||
Total Operating Revenues |
261,710 |
|
|
234,747 |
|
||
Operating Expenses |
|
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FAQ
What are the financial results of Otter Tail Corporation for Q1 2021?
Otter Tail Corporation reported Q1 2021 operating revenues of $261.7 million, net income of $30.3 million, and diluted EPS of $0.73.
What is the updated EPS guidance for Otter Tail Corporation for 2021?
The updated EPS guidance for 2021 is $2.47 to $2.62.
What factors contributed to Otter Tail's Q1 performance?
The strong performance in the Plastics segment and improvements in utility operations, especially related to PVC pipe pricing, contributed to the Q1 performance.
How did COVID-19 impact Otter Tail's revenues in Q1 2021?
COVID-19 led to a decrease of $0.9 million in retail sales revenue due to lower kWh sales among commercial and industrial customers.
What is the outlook for Otter Tail Corporation's Electric segment?
The Electric segment outlook was revised downward due to unfavorable weather in Q1 and expected lower revenues from COVID-19 impacts.
Otter Tail Corp
NASDAQ:OTTROTTR RankingsOTTR Latest NewsOTTR Stock Data
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40.86M
2.28%
71.43%
9.49%
Utilities - Diversified
Electric Services
United States of America
FERGUS FALLS
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