Increases 2014 Earnings Guidance to $1.60 to $1.80 per Share
Board of Directors Declares Quarterly Dividend
FERGUS FALLS, Minn., May 5, 2014 (GLOBE NEWSWIRE) -- Otter Tail Corporation (Nasdaq:OTTR) today announced financial results for the quarter ended March 31, 2014.
Summary:
CEO Overview
"With consolidated revenues up more than 10% and consolidated net income from continuing operations up over 40% compared with first quarter last year, we are more than pleased with our 2014 first quarter results," said Otter Tail Corporation CEO Jim McIntyre.
"Late last year and again this quarter investors saw an earnings uplift from our utility rate base growth strategy. The regulatory mechanisms we discussed in investor communications throughout last year have taken effect, allowing for a return on the funds we have invested in three CapX2020 transmission projects, two 345-kv transmission projects deemed 'multi-value projects,' or MVPs, by the Midcontinent Independent System Operator (MISO), and the environmental upgrade at Big Stone Plant.
"In addition, Otter Tail Power Company's electricity sales through a prolonged, colder-than-normal winter boosted our electric segment net income.
"Earnings from our manufacturing and infrastructure companies under Varistar, although down in some cases compared with first quarter last year, were generally in line with our expectations for first quarter this year—the result of our initiatives to drive operational excellence. Foley, in particular, continues to improve its profitability through better project management and bid estimating. And corporate costs were down significantly.
"On the strength of our discipline, strategy, and first quarter results, we are increasing our overall guidance for 2014 diluted earnings per share to $1.60 to $1.80 from our previously announced range of $1.55 to $1.75."
Cash Flow from Operations, Liquidity and Financing
The corporation's consolidated cash used in continuing operations for the quarter ended March 31, 2014 was $18.9 million compared with $10.2 million in cash provided by continuing operations for the quarter ended March 31, 2013. Contributing to the $29.1 million change between the quarters was a $21.2 million increase in cash used for working capital items associated with quarter over quarter revenue growth and a $10.0 million increase in discretionary contributions to the corporation's pension plan. The following table presents the status of the corporation's lines of credit as of March 31, 2014:
(in thousands) |
Line Limit |
In Use On March 31, 2014 |
Restricted due to Outstanding Letters of Credit |
Available on March 31, 2014 |
Otter Tail Corporation Credit Agreement | $ 150,000 | $ 11,899 | $ 659 | $ 137,442 |
Otter Tail Power Company Credit Agreement | 170,000 | -- | 3,830 | 166,170 |
Total | $ 320,000 | $ 11,899 | $ 4,489 | $ 303,612 |
On February 27, 2014 Otter Tail Power Company issued $150 million in senior unsecured notes under a Note Purchase Agreement entered into on August 14, 2013. A portion of the proceeds of the notes were used to retire Otter Tail Power Company's $40.9 million unsecured term loan and to repay $82.5 million of short-term debt then outstanding under the Otter Tail Power Company Credit Agreement. Remaining proceeds of the notes will be used to fund planned construction program expenditures.
Board of Directors Declared Quarterly Dividend
On May 2, 2014 the corporation's Board of Directors declared a quarterly common stock dividend of $0.3025 per share. This dividend is payable June 10, 2014 to shareholders of record on May 15, 2014.
Segment Performance Summary
Electric
Electric revenues and net income were $119.1 million and $16.7 million, respectively, compared with $101.0 million and $11.9 million for the first quarter of 2013.
The following table shows Heating Degree Days as a percent of normal:
Three Months ended March 31, | |
2014 | 2013 |
117.3% | 105.3% |
Retail electric revenues increased $13.2 million as a result of:
offset by:
Wholesale electric revenues from company-owned generation increased $3.3 million as a result of a 163% increase in revenue per wholesale kwh sold and a 13.9% increase in wholesale kwhs sold. The increase in wholesale kwh sales and prices was driven by increased wholesale market demand resulting from colder weather in the first quarter of 2014. Otter Tail Power Company was able to serve the higher demand from both wholesale and retail customers as a result of improved availability of Coyote Station, which was shut down for generator repairs during the first seven weeks of 2013, and as a result of a 30.9% increase in kwhs generated from company-owned wind turbines.
Net revenue from energy trading activities, including net mark-to-market gains and losses on forward energy contracts, decreased $0.6 million mainly as a result of decreased trading activity and the incurrence of losses on contracts entered into and settled in the first quarter of 2014.
Other electric operating revenues increased $2.2 million, reflecting:
Production fuel costs increased $4.1 million as a result of a 13.4% increase in kwhs generated from Otter Tail Power Company's steam-powered and combustion turbine generators in combination with an 8.2% increase in the cost of fuel per kwh generated. The increase in kwh generation was facilitated by improved availability of Coyote Station. The cost of purchased power to serve retail customers increased $5.1 million due to a 43.2% increase in costs per kwh purchased, partially offset by an 8.5% decrease in kwhs purchased. The increase in costs per kwh purchased was driven by increased wholesale market demand resulting from colder weather.
Electric operating and maintenance expenses increased $2.2 million as a result of:
offset by:
Manufacturing
Manufacturing revenues and net income were $55.4 million and $2.9 million, respectively, compared with $53.2 million and $3.3 million for the first quarter of 2013.
Plastics
Plastics revenues and net income were $40.5 million and $3.5 million, respectively, compared with $37.4 million and $3.9 million for the first quarter of 2013. The increase in revenues is the result of a 10.3% increase in pounds of polyvinyl chloride (PVC) pipe sold, partially offset by a 1.8% decrease in the price per pound of pipe sold. States with significant increases in sales were Colorado, California, Arizona, Nevada, Texas and Minnesota. Cost of products sold increased by $3.3 million, mostly due to the increase in sales volume, but also due to a 1.1% increase in the cost per pound of pipe sold related to higher PVC resin costs. A $0.7 million increase in operating expenses, mainly related to increased wage and benefit costs, in combination with the $0.2 million reduction in gross margins was partially offset by a $0.5 million decrease in income tax expense, resulting in the $0.4 million decline in Plastics segment net income between the quarters.
Construction
Construction revenues and net loss were $25.5 million and $0.6 million, respectively, compared with $26.4 million and $1.1 million for the first quarter of 2013.
Corporate
2014 Business Outlook
The corporation is increasing its consolidated diluted earnings per share guidance for 2014 to be in the range of $1.60 to $1.80 from its previously announced range of $1.55 to $1.75. This updated guidance reflects the current mix of businesses owned by the corporation. It considers the cyclical nature of some of the corporation's businesses and reflects challenges, as well as the corporation's plans and strategies for improving future operating results.
Segment components of the corporation's 2014 earnings per share guidance range are as follows:
Previous 2014 EPS Guidance |
Current 2014 EPS Guidance |
|||
Low | High | Low | High | |
Electric | $1.19 | $1.23 | $1.21 | $1.25 |
Manufacturing | $0.29 | $0.33 | $0.29 | $0.33 |
Plastics | $0.25 | $0.29 | $0.27 | $0.31 |
Construction | $0.07 | $0.11 | $0.07 | $0.11 |
Corporate | ($0.25) | ($0.21) | ($0.24) | ($0.20) |
Total – Continuing Operations | $1.55 | $1.75 | $1.60 | $1.80 |
Contributing to our updated earnings guidance for 2014 are the following items:
The corporation reviews its portfolio of companies at least annually to see where additional opportunities exist to improve its risk profile, improve credit metrics and generate additional sources of cash to support the future capital expenditure plans of its Electric segment.
The following table shows our 2013 capital expenditures and 2014 through 2018 anticipated capital expenditures and electric utility average rate base:
(in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
Capital Expenditures: | ||||||
Electric Segment: | ||||||
Transmission | $ 53 | $ 46 | $ 97 | $ 52 | $ 56 | |
Environmental | 82 | 61 | -- | -- | -- | |
Other | 37 | 38 | 44 | 45 | 46 | |
Total Electric Segment | $ 149 | $ 172 | $ 145 | $ 141 | $ 97 | $ 102 |
Manufacturing and Infrastructure Segments | 15 | 23 | 19 | 26 | 20 | 24 |
Total Capital Expenditures | $ 164 | $ 195 | $ 164 | $ 167 | $ 117 | $ 126 |
Total Electric Utility Average Rate Base | $ 885 | $ 991 | $1,062 | $1,120 | $1,152 |
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 2014 through 2018 timeframe.
CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on Tuesday, May 6, 2014, at 10:00 a.m. CDT to discuss the company's financial and operating performance.
The presentation will be posted on the corporation's website before the webcast. To access the live webcast go to www.ottertail.com/presentations.cfm and select "Webcast". Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the webcast. An archived copy of the webcast will be available on our website shortly following the call.
If you are interested in asking a question during the live webcast, the Dial-In Number is: 877-312-8789.
Risk Factors and Forward-Looking Statements that Could Affect Future Results
The information in this release includes certain forward-looking information, including 2014 expectations, made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the corporation believes its expectations are based on reasonable assumptions, actual results may differ materially from those expectations. The following factors, among others, could cause actual results for the corporation to differ materially from those discussed in the forward-looking statements:
For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the Securities and Exchange Commission.
About The Corporation: Otter Tail Corporation has interests in diversified operations that include an electric utility and manufacturing and infrastructure businesses consisting of its Manufacturing, Plastics and Construction segments. 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 located in Fergus Falls, Minnesota, and Fargo, North Dakota.
See Otter Tail Corporation's results of operations for the three months ended March 31, 2014 and 2013 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. For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the Securities and Exchange Commission.
Otter Tail Corporation | ||
Consolidated Statements of Income | ||
In thousands, except share and per share amounts | ||
(not audited) | ||
Quarter Ended March 31, |
||
2014 | 2013 | |
Operating Revenues by Segment | ||
Electric | $ 119,088 | $ 101,010 |
Manufacturing | 55,435 | 53,166 |
Plastics | 40,483 | 37,400 |
Construction | 25,506 | 26,425 |
Corporate Revenue and Intersegment Eliminations | (40) | (47) |
Total Operating Revenues | 240,472 | 217,954 |
Operating Expenses | ||
Fuel and Purchased Power | 43,815 | 34,592 |
Nonelectric Cost of Goods Sold (depreciation included below) | 96,301 | 92,062 |
Electric Operating and Maintenance Expense | 37,593 | 35,363 |
Nonelectric Operating and Maintenance Expense | 13,561 | 13,778 |
Depreciation and Amortization | 14,780 | 14,920 |
Total Operating Expenses | 206,050 | 190,715 |
Operating Income (Loss) by Segment | ||
Electric | 26,917 | 20,424 |
Manufacturing | 5,391 | 6,349 |
Plastics | 5,771 | 6,717 |
Construction | (1,218) | (1,699) |
Corporate | (2,439) | (4,552) |
Total Operating Income | 34,422 | 27,239 |
Interest Charges | 6,595 | 6,980 |
Other Income | 1,823 | 861 |
Income Tax Expense – Continuing Operations | 8,288 | 5,886 |
Net Income (Loss) by Segment – Continuing Operations | ||
Electric | 16,653 | 11,931 |
Manufacturing | 2,896 | 3,318 |
Plastics | 3,460 | 3,887 |
Construction | (620) | (1,092) |
Corporate | (1,027) | (2,810) |
Net Income from Continuing Operations | 21,362 | 15,234 |
Discontinued Operations | ||
Income (Loss) - net of Income Tax Expense (Benefit) of $49 in 2014 and ($205) in 2013 | 68 | (81) |
Gain on Disposition - net of Income Tax Expense of $6 in 2013 | -- | 210 |
Net Income from Discontinued Operations | 68 | 129 |
Net Income | 21,430 | 15,363 |
Preferred Dividend Requirement and Other Adjustments | -- | 513 |
Balance for Common | $ 21,430 | $ 14,850 |
Average Number of Common Shares Outstanding | ||
Basic | 36,240,350 | 36,075,131 |
Diluted | 36,431,915 | 36,259,115 |
Basic Earnings Per Common Share: | ||
Continuing Operations (net of preferred dividend requirement and other adjustments) | $ 0.59 | $ 0.41 |
Discontinued Operations | -- | -- |
$ 0.59 | $ 0.41 | |
Diluted Earnings Per Common Share: | ||
Continuing Operations (net of preferred dividend requirement and other adjustments) | $ 0.59 | $ 0.41 |
Discontinued Operations | -- | -- |
$ 0.59 | $ 0.41 |
Otter Tail Corporation | ||
Consolidated Balance Sheets | ||
ASSETS | ||
in thousands | ||
(not audited) | ||
March 31, | December 31, | |
2014 | 2013 | |
Current Assets | ||
Cash and Cash Equivalents | $ 6,613 | $ 1,150 |
Accounts Receivable: | ||
Trade—Net | 99,892 | 83,572 |
Other | 11,523 | 9,790 |
Inventories | 81,875 | 72,681 |
Deferred Income Taxes | 39,352 | 35,452 |
Unbilled Revenues | 16,902 | 18,157 |
Costs and Estimated Earnings in Excess of Billings | 3,719 | 4,063 |
Regulatory Assets | 20,199 | 17,940 |
Other | 11,336 | 7,747 |
Assets of Discontinued Operations | 38 | 38 |
Total Current Assets | 291,449 | 250,590 |
Investments | 8,753 | 9,362 |
Other Assets | 29,605 | 28,834 |
Goodwill | 38,808 | 38,971 |
Other Intangibles—Net | 13,084 | 13,328 |
Deferred Debits | ||
Unamortized Debt Expense | 4,498 | 4,188 |
Regulatory Assets | 78,839 | 83,730 |
Total Deferred Debits | 83,337 | 87,918 |
Plant | ||
Electric Plant in Service | 1,473,685 | 1,460,884 |
Nonelectric Operations | 196,500 | 194,872 |
Construction Work in Progress | 207,442 | 187,461 |
Total Gross Plant | 1,877,627 | 1,843,217 |
Less Accumulated Depreciation and Amortization | 686,460 | 676,201 |
Net Plant | 1,191,167 | 1,167,016 |
Total | $1,656,203 | $ 1,596,019 |
Otter Tail Corporation | ||
Consolidated Balance Sheets | ||
LIABILITIES AND EQUITY | ||
in thousands | ||
(not audited) | ||
March 31, | December 31, | |
2014 | 2013 | |
Current Liabilities | ||
Short-Term Debt | $ 11,899 | $ 51,195 |
Current Maturities of Long-Term Debt | 191 | 188 |
Accounts Payable | 104,486 | 113,457 |
Accrued Salaries and Wages | 13,556 | 19,903 |
Billings In Excess Of Costs and Estimated Earnings | 10,077 | 13,707 |
Accrued Taxes | 14,057 | 12,491 |
Derivative Liabilities | 8,252 | 11,782 |
Other Accrued Liabilities | 8,272 | 6,532 |
Liabilities of Discontinued Operations | 3,442 | 3,637 |
Total Current Liabilities | 174,232 | 232,892 |
Pensions Benefit Liability | 50,129 | 69,743 |
Other Postretirement Benefits Liability | 45,547 | 45,221 |
Other Noncurrent Liabilities | 21,367 | 25,209 |
Deferred Credits | ||
Deferred Income Taxes | 212,682 | 195,603 |
Deferred Tax Credits | 27,834 | 28,288 |
Regulatory Liabilities | 75,365 | 73,926 |
Other | 733 | 718 |
Total Deferred Credits | 316,614 | 298,535 |
Capitalization | ||
Long-Term Debt, Net of Current Maturities | 498,640 | 389,589 |
Cumulative Preferred Shares | -- | -- |
Cumulative Preference Shares | -- | -- |
Common Equity | ||
Common Shares, Par Value $5 Per Share | 182,062 | 181,358 |
Premium on Common Shares | 259,454 | 255,759 |
Retained Earnings | 109,878 | 99,441 |
Accumulated Other Comprehensive Loss | (1,720) | (1,728) |
Total Common Equity | 549,674 | 534,830 |
Total Capitalization | 1,048,314 | 924,419 |
Total | $ 1,656,203 | $ 1,596,019 |
Otter Tail Corporation | ||
Consolidated Statements of Cash Flows | ||
In thousands | ||
(not audited) | ||
For the Three Months Ended March 31, |
||
In thousands | 2014 | 2013 |
Cash Flows from Operating Activities | ||
Net Income | $ 21,430 | $ 15,363 |
Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities: | ||
Net Gain from Sale of Discontinued Operations | -- | (210) |
Net (Income) Loss from Discontinued Operations | (68) | 81 |
Depreciation and Amortization | 14,780 | 14,920 |
Deferred Tax Credits | (454) | (483) |
Deferred Income Taxes | 12,872 | 6,139 |
Change in Deferred Debits and Other Assets | (888) | 4,800 |
Discretionary Contribution to Pension Plan | (20,000) | (10,000) |
Change in Noncurrent Liabilities and Deferred Credits | (2,408) | 1,975 |
Allowance for Equity/Other Funds Used During Construction | (340) | (293) |
Change in Derivatives Net of Regulatory Deferral | 118 | 378 |
Stock Compensation Expense – Equity Awards | 358 | 392 |
Other—Net | (255) | 25 |
Cash (Used for) Provided by Current Assets and Current Liabilities: | ||
Change in Receivables | (17,884) | (13,423) |
Change in Inventories | (9,234) | (4,062) |
Change in Other Current Assets | (1,599) | (3,025) |
Change in Payables and Other Current Liabilities | (16,363) | (3,440) |
Change in Interest and Income Taxes Receivable/Payable | 1,013 | 1,076 |
Net Cash (Used in) Provided by Continuing Operations | (18,922) | 10,213 |
Net Cash Used in Discontinued Operations | (135) | (2,400) |
Net Cash (Used in) Provided by Operating Activities | (19,057) | 7,813 |
Cash Flows from Investing Activities | ||
Capital Expenditures | (37,690) | (23,327) |
Proceeds from Disposal of Noncurrent Assets | 1,505 | 729 |
Net Increase in Other Investments | (989) | (923) |
Net Cash Used in Investing Activities - Continuing Operations | (37,174) | (23,521) |
Net Proceeds from Sale of Discontinued Operations | -- | 10,465 |
Net Cash Provided by (Used in) Investing Activities - Discontinued Operations | 7 | (208) |
Net Cash Used in Investing Activities | (37,167) | (13,264) |
Cash Flows from Financing Activities | ||
Net Short-Term (Repayments) Borrowings | (39,296) | 1,335 |
Proceeds from Issuance of Common Stock | 3,666 | 1,156 |
Payments for Retirement of Capital Stock | (242) | (15,500) |
Proceeds from Issuance of Long-Term Debt | 150,000 | 40,900 |
Short-Term and Long-Term Debt Issuance Expenses | (502) | (7) |
Payments for Retirement of Long-Term Debt | (40,946) | (25,178) |
Dividends Paid and Other Distributions | (10,993) | (11,307) |
Net Cash Provided by (Used in) Financing Activities | 61,687 | (8,601) |
Net Change in Cash and Cash Equivalents – Discontinued Operations | -- | (778) |
Net Change in Cash and Cash Equivalents | 5,463 | (14,830) |
Cash and Cash Equivalents at Beginning of Period | 1,150 | 52,362 |
Cash and Cash Equivalents at End of Period | $ 6,613 | $ 37,532 |