Financial Performance - Otter Tail Corporation reported annual diluted earnings per share of $6.55 for 2025, with a consolidated return on equity of 16%[12]. - The company initiated 2026 diluted earnings per share guidance in the range of $5.22 to $5.62, targeting a long-term earnings per share growth rate of 7% to 9%[7]. - Net income for the twelve months ended December 31, 2025, is $275,893 thousand, down from $301,662 thousand in 2024[37]. - Net income for the twelve months ended December 2025 was $275,893,000, a decrease of 8.5% from $301,662,000 in 2024[39]. - Total operating revenues for the twelve months ended December 2025 were $1,304,058,000, down 2% from $1,330,548,000 in 2024[40]. - Total current assets increased to $799,725,000 in 2025 from $630,041,000 in 2024, representing a growth of approximately 27%[38]. - Cash and cash equivalents rose to $386,193,000 in 2025, up from $294,651,000 in 2024, indicating a growth of about 31%[38]. - Total assets reached $3,964,279,000 in 2025, compared to $3,652,082,000 in 2024, marking an increase of around 9%[38]. Segment Performance - The Electric segment achieved operating revenues of $566.8 million in 2025, an increase of 8.1% from $524.5 million in 2024[13]. - The Manufacturing segment experienced an 8.2% decline in operating revenues to $314.5 million, driven by a 6% decrease in sales volumes[17]. - The Plastics segment's operating revenues decreased by 8.8% to $422.8 million, primarily due to a 15% decline in average sales prices[19]. - Electric segment operating income increased to $121,549,000 in 2025 from $113,789,000 in 2024, reflecting a growth of 6.9%[40]. - Manufacturing segment reported an operating income of $16,900,000 in 2025, down from $19,092,000 in 2024, a decline of 11.4%[40]. - Plastics segment operating income decreased to $231,079,000 in 2025 from $271,905,000 in 2024, a decline of 15%[40]. Cash Flow and Liquidity - Consolidated cash provided by operating activities decreased to $386.0 million in 2025 from $452.7 million in 2024, primarily due to higher working capital requirements[8]. - Net cash provided by operating activities was $385,985,000 in 2025, down from $452,731,000 in 2024, a decrease of 14.7%[39]. - As of December 31, 2025, Otter Tail Corporation had total available liquidity of $705.5 million, including $386.2 million in cash and cash equivalents[11]. - The company reported a net change in cash and cash equivalents of $91,542,000 for the year, compared to $64,278,000 in 2024, an increase of 42.5%[39]. Capital Expenditures and Investments - Capital expenditures for 2025 were $288.1 million, mainly focused on electric segment projects including wind and solar initiatives[9]. - Total capital expenditures for 2025 are $288 million, with a projected total of $2,050 million from 2026 to 2030[30]. - The capital expenditure plan includes investments in solar and battery storage resources, transmission, and distribution assets[30]. Future Projections - The company expects Electric segment earnings to increase by 14% in 2026, while Manufacturing segment earnings are projected to rise by 7%[29]. - The Plastics segment is anticipated to see a 36% decline in earnings for 2026, reflecting ongoing challenges in pricing and market conditions[29]. - The Electric segment's average rate base is expected to grow from $2,108 million in 2025 to $3,423 million in 2030, reflecting an annual growth rate of 10%[30]. - The company expects a 14% increase in average rate base in 2026, contributing to revenue growth[33]. - Sales volumes of horticulture products are expected to increase due to improved end market conditions[33]. - Continued decline in average product sales prices is anticipated throughout 2026, as pricing recedes from the high point in 2022[33]. Asset and Liability Changes - Total noncurrent assets increased to $3,164,554,000 in 2025 from $3,022,041,000 in 2024, reflecting a growth of approximately 5%[38]. - Current liabilities decreased to $350,995,000 in 2025 from $390,790,000 in 2024, showing a reduction of about 10%[38]. - Long-term debt stood at $963,566,000 in 2025, compared to $943,734,000 in 2024, representing an increase of approximately 2%[38]. - Regulatory assets increased significantly to $20,437,000 in 2025 from $9,962,000 in 2024, indicating a growth of approximately 105%[38]. - Inventories rose to $158,598,000 in 2025 from $148,885,000 in 2024, reflecting an increase of about 7%[38]. - Other noncurrent assets increased to $80,770,000 in 2025 from $66,416,000 in 2024, showing a growth of approximately 21%[38].

Performance in 2025 exceeded original expectations despite a 9% year-over-year EPS decline, as record-level earnings in the Plastics segment began to recede toward historical norms. Otter Tail Power achieved significant regulatory milestones, including the implementation of interim rates in South Dakota and Minnesota to support its robust rate base growth plan. The Manufacturing segment faced demand-related headwinds in lawn, garden, and agriculture end markets due to high dealer inventory levels and ...

Core Viewpoint - Otter Tail Corporation reported strong financial results for the year ended December 31, 2025, with a focus on earnings per share and return on equity [1] Financial Performance - The company produced annual diluted earnings per share of $6.55 [1] - Achieved a consolidated return on equity of 16% with an equity ratio of 63% [1] - Initiated guidance for 2026 diluted earnings per share in the range of $5.22 to $5.62, projecting a return on equity of 12% at the midpoint [1] Management Commentary - The CEO expressed satisfaction with the 2025 financial results, indicating they exceeded expectations [1]

Core Viewpoint - Otter Tail Corporation will announce its 2025 financial results on February 16, 2026, after market close, followed by a conference call on February 17, 2026, to discuss financial and operational performance [1]. Group 1 - The conference call will be accessible via a live webcast, with accompanying slides available on the corporation's website prior to the event [2]. - Participants are encouraged to pre-register for the conference call to obtain dial-in numbers and passcodes [3]. - Otter Tail Corporation is a member of the S&P SmallCap 600 Index, involved in diversified operations including electric utility and manufacturing businesses [4].

Core Viewpoint - Otter Tail Corporation has announced an increase in its quarterly common stock dividend, reflecting its financial strength and commitment to returning value to shareholders [1] Dividend Announcement - The quarterly common stock dividend has been raised to $0.5775 per share [1] - This increase results in an annual indicated dividend rate of $2.31 per share, which represents a $0.21 increase, or 10 percent, over the 2025 rate [1] - This marks the second consecutive year that the company has announced a double-digit increase in its dividend [1]

Core Viewpoint - Otter Tail Corporation has announced the appointment of two new members to its Board of Directors, effective January 1, 2026, while an outgoing member will conclude his service in April 2026 [1] Group 1 - Mr. Chris Clark from Minnetonka, Minnesota, and Mr. Steve Rasche from St. Louis, Missouri, have been appointed to the Board of Directors [1] - Outgoing Board Member Steve Fritze has been an independent Board member since 2013 and will serve his last day at the upcoming Annual Meeting of Shareholders in April 2026 [1] - Nathan Partain, Chairman of the Board of Directors, expressed gratitude for the contributions of the outgoing member [1]

Core Insights - Otter Tail (OTTR) operates in the Upper Midwest, managing both an electric utility and various industrial businesses, providing power to homes and businesses in multiple states [1] Company Overview - The utility division of Otter Tail is responsible for supplying electricity, indicating a dual focus on energy and industrial sectors [1] Investment Focus - The analysis emphasizes a focus on small- to mid-cap companies, which are often overlooked by investors, while also occasionally reviewing large-cap companies for a broader market perspective [1]

Financial Performance - Consolidated operating revenues for Q3 2025 were $325.6 million, a decrease of $12.5 million or 3.7% compared to Q3 2024[97] - Net income for Q3 2025 was $78.3 million, down $7.2 million or 8.4% from $85.5 million in Q3 2024[97] - Consolidated operating revenues for the nine months ended September 30, 2025, decreased by $31.5 million to $995.9 million, a 3.1% decline, primarily due to decreased sales prices in the Plastics segment[118] - Net Income decreased by $21.8 million, or 13.5%, to $140.0 million, reflecting a decrease in income before income taxes[133] Segment Performance - Electric segment operating revenues increased by $8.2 million or 6.3% to $138.6 million in Q3 2025, driven by a 124% increase in wholesale sales volumes[101] - Manufacturing segment operating revenues decreased by $2.9 million or 3.7% to $76.9 million, primarily due to an 8% decrease in sales volumes across several end markets[110] - Plastics segment operating revenues decreased by $17.7 million to $110.0 million, a 13.9% decline, primarily due to a 17% decrease in sales prices, partially offset by a 4% increase in sales volumes[114] - Electric segment total operating revenues increased by $32.4 million to $417.0 million, an 8.4% increase, driven by a $23.5 million increase in retail revenues[122] - Manufacturing segment operating revenues decreased by $38.6 million to $237.4 million, a 14.0% decline, primarily due to a 12% decrease in sales volumes in the metal fabrication business[130] - Net income for the Plastics segment decreased by $10.98 million to $43.5 million, a 20.2% decline[114] - Net income for the Manufacturing segment decreased by $5.3 million to $8.9 million, a 37.4% decline[130] Costs and Expenses - Production fuel costs in the Electric segment rose by $10.5 million or 69.7% due to increased natural gas prices and generation[106] - Cost of products sold in the Plastics segment decreased by $2.9 million, driven by a 16% decrease in input material costs, including PVC resin[115] - Cost of Products Sold increased by $1.3 million, driven by increased sales volumes, while input material costs, including PVC resin, decreased by 13% compared to the prior year[134] - Selling, General, and Administrative Expenses rose by $1.3 million, mainly due to ongoing litigation costs related to PVC pipe pricing[135] - Depreciation and Amortization Expense increased by $1.5 million due to capital investments in new equipment and facilities at Vinyltech[136] Tax and Income - Income tax expense decreased by $5.9 million in Q3 2025, resulting in an effective tax rate of 14.1%, down from 17.9% in the same period last year[100] - Income tax expense for the nine months ended September 30, 2025, decreased by $20.5 million to $36.6 million, a 36.0% decline, primarily due to a decrease in income before income taxes[121] Liquidity and Capital Structure - The company maintains strong liquidity, with compliance in all financial covenants as of September 30, 2025[151] - As of September 30, 2025, the company had $379.5 million of available liquidity under credit facilities and $325.8 million in cash and cash equivalents, totaling $705.3 million in available liquidity[153] - Net cash provided by operating activities decreased by $33.8 million to $288.9 million for the nine months ended September 30, 2025, compared to $322.8 million in 2024[154] - Net cash used in investing activities decreased by $96.2 million to $216.0 million for the nine months ended September 30, 2025, primarily due to a $46.4 million decrease in capital expenditures[155] - The company issued $100.0 million of long-term debt at OTP, which was used to repay short-term borrowings and fund construction expenditures[157] - Total capital expenditures for 2025 are anticipated to be $321 million, with the electric segment accounting for $300 million[160] - As of September 30, 2025, the company had $1.0 billion of principal outstanding under long-term debt arrangements, with maturities ranging from 2026 to 2055[168] Debt and Ratings - OTC's interest-bearing debt to total capitalization was 0.37 to 1.00, with an interest and dividend coverage ratio of 8.3 to 1.00 as of September 30, 2025[169] - OTP's interest-bearing debt to total capitalization was 0.45 to 1.00, with an interest and dividend coverage ratio of 2.93 to 1.00 as of September 30, 2025[170] - The company paid dividends totaling $66.0 million, or $1.58 per share, in the first nine months of 2025[163] - Moody's revised OTP's long-term issuer default rating from A3 to Baa1, with a stable outlook as of September 30, 2025[172] Regulatory Matters - The North Dakota Rate Case resulted in a revenue requirement of $225.6 million, with a net increase of $13.1 million, or 6.18%, effective March 15, 2025[139] - OTP requested a net increase in annual revenue of $5.7 million, or 12.50%, in the South Dakota Rate Case, based on an allowed rate of return of 8.29%[140] - In the Minnesota Rate Case, OTP requested a net increase in annual revenue of $44.8 million, or 17.7%, with an interim rate request for $31.8 million, or 12.6%[141][142] Market Risks - The company is facing potential impacts from U.S. trade and tariff policies, which could disrupt supply chains and increase costs[93] - There have been no material changes in market risk compared to the disclosures in the Annual Report on Form 10-K for the year ended December 31, 2024[174]

Financial Data and Key Metrics Changes - The company generated $1.86 of diluted earnings per share in Q3, an 8% decrease from the same time last year, primarily due to declining sales prices in the plastics segment [5][18] - The midpoint of the 2025 earnings guidance was increased to $6.47 from $6.26 per share, driven by better-than-expected financial results in the plastics segment [6][22] Business Line Data and Key Metrics Changes - Electric segment earnings decreased by $0.03 per share in Q3, impacted by unfavorable weather and seasonal rate differences [18] - Manufacturing segment earnings increased by $0.04 per share, attributed to a lower cost structure and enhanced production efficiencies [19] - Plastic segment earnings decreased by $0.26 per share, driven by a 17% decline in average sales prices, partially offset by lower input material costs and a 4% increase in sales volumes [20] Market Data and Key Metrics Changes - The lawn and garden and agricultural end markets continue to face demand-related headwinds, while recreational vehicle and construction markets showed signs of improvement [14] - The cost of PVC resin decreased due to global supply and demand dynamics, benefiting the company's cost structure [16] Company Strategy and Development Direction - The updated five-year capital spending plan totals $1.9 billion, with a targeted long-term earnings per share growth rate increased to 7% to 9% [5][27] - The company aims to convert its rate-based growth into earnings per share growth at an approximate one-to-one ratio [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage costs and maintain low electric rates despite ongoing economic challenges [12][13] - The company anticipates the current low-demand environment in the manufacturing segment to persist through most of 2026 [15] Other Important Information - The company filed a request for a net revenue increase of $44.8 million with the Minnesota Public Utilities Commission, driven by infrastructure investments and inflation impacts [7][8] - The company is closely monitoring developments related to a complaint filed at FERC against MISO's Tranche 2.1 projects, which may cause potential delays [11] Q&A Session Summary Question: Inquiry about the updated EPS long-term growth rate - Management expects utility earnings to grow in line with the rate base, with year-to-year fluctuations anticipated [31] Question: Update on the antitrust case and DOJ involvement - Management provided an update on ongoing civil litigation and the DOJ's intervention, indicating no specific deadline for court decisions but anticipating developments in 2026 [33] Question: Discussion on cash usage and long-term strategy - Management emphasized prioritizing investments in utility growth and potential opportunistic M&A, while maintaining a focus on shareholder returns through dividends [38][39]

Financial Data and Key Metrics Changes - The company generated $1.86 of diluted earnings per share in Q3, an 8% decrease from the same time last year, primarily due to declining sales prices in the plastics segment [5][18] - The midpoint of the 2025 earnings guidance was increased to $6.47 from $6.26 per share, driven by better-than-expected financial results in the plastics segment [6][23] - The balance sheet remains strong with $325 million in cash on hand and a leading return on equity of 16% [21][22] Business Line Data and Key Metrics Changes - Electric segment earnings decreased by $0.03 per share due to unfavorable weather and seasonal rate differences, although higher sales volumes partially offset this [18] - Manufacturing segment earnings increased by $0.04 per share, driven by a lower cost structure and enhanced production efficiencies [19] - Plastic segment earnings decreased by $0.26 per share, with a 17% decline in average sales prices of PVC pipe, partially offset by lower input material costs and a 4% increase in sales volumes [20] Market Data and Key Metrics Changes - The lawn and garden and agricultural end markets continue to face demand-related headwinds, while recreational vehicle and construction markets show signs of improvement [14] - The company expects the current low-demand environment to persist through most of 2026 [15] Company Strategy and Development Direction - The updated five-year capital spending plan totals $1.9 billion, with a targeted long-term earnings per share growth rate increased to 7%-9% [5][27] - The company aims to convert rate-based growth into earnings per share growth at an approximate one-to-one ratio [28] - The long-term earnings mix target has been updated to expect 70% of earnings from the electric platform and 30% from the manufacturing platform by 2028 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth plan despite dynamic market conditions and emphasized the importance of affordability for customers [4][12] - The company is focused on identifying cost-effective investment projects and managing costs prudently [13] - Management anticipates that plastic segment earnings will normalize by 2028, contributing positively to the overall strategy [26] Other Important Information - The company filed a request for a net revenue increase of $44.8 million with the Minnesota Public Utilities Commission, driven by infrastructure investments and inflation impacts [7][8] - The South Dakota rate case is progressing, with interim rates expected to commence on December 1, 2025 [9] Q&A Session Summary Question: Inquiry about the updated EPS long-term growth rate - Management expects utility earnings to grow in line with the rate base, with year-to-year fluctuations anticipated [31] Question: Update on the antitrust case - Management provided an update on ongoing civil litigation and the involvement of the Department of Justice, indicating a timeline for potential decisions in 2026 [33] Question: Discussion on cash usage and M&A opportunities - Management indicated that cash will primarily be used for utility growth and dividends, with potential for opportunistic M&A in the future [38][39]