Financial Data and Key Metrics Changes - The company generated $1.86 of diluted earnings per share in Q3 2025, an 8% decrease from the same time last year, primarily due to declining plastics segment sales prices and earnings [5][19] - The midpoint of the 2025 earnings guidance was increased to $6.47 from $6.26 per share, driven by better-than-expected plastics segment financial results [6][20] - The balance sheet remains strong with $325 million in cash on hand and a leading return on equity of 16% [20] Business Line Data and Key Metrics Changes - Electric segment earnings decreased by $0.03 per share in Q3, primarily due to unfavorable weather and seasonal rate differences [17] - Manufacturing segment earnings increased by $0.04 per share, driven by a lower cost structure and enhanced production efficiencies [18] - Plastics segment earnings decreased by $0.26 per share, with average sales prices of PVC pipe declining 17% compared to the previous year [19] 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 [13][14] - The plastics segment's sales prices have steadily declined, but sales volumes increased by 4% due to capacity added to VinylTech [16] Company Strategy and Development Direction - The updated five-year capital spending plan totals $1.9 billion, targeting a rate base compounded annual growth rate of 10% [5][23] - The company aims to increase its long-term earnings per share growth rate to 7% to 9% from 6% to 8% [5][26] - The company is focused on customer-oriented growth, with plans to attract large loads to its electric utility [12][34] 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 economic challenges [13][12] - The company anticipates that the current low-demand environment will continue through most of 2026, with expectations for a rebound in the manufacturing segment thereafter [14][25] - Management noted that the plastics segment remains crucial for overall strategy, providing enhanced returns and cash flow to support utility growth [25][27] Other Important Information - The company filed a request for a net revenue increase of $44.8 million with the Minnesota Public Utilities Commission [6][7] - The South Dakota rate case is progressing, with interim rates expected to commence on December 1, 2025 [9] Q&A Session Summary Question: Long-term EPS growth rate expectations - Management expects utility earnings to grow in line with the rate base, with fluctuations year-to-year but a long-term target of 7%-9% growth post-2028 [28][30] Question: Update on antitrust case - There are ongoing civil litigation and investigations, with no specific deadline for court decisions anticipated until 2026 [31] Question: Long-term cash usage strategy - The primary focus is on investing in utility growth and returning capital to shareholders through dividends, with no external equity needs [32][33] Question: Structure of the large load customer agreement - The 155-megawatt customer is an interruptible load with minimal capacity needs, expected to reduce fixed costs without significant investment [35]

Core Insights - The article emphasizes the importance of enabling Javascript and cookies in browsers to prevent access issues [1] Group 1 - The article suggests that users may face blocks if ad-blockers are enabled, indicating a need for users to disable them for proper access [1]

Financial Performance - Q3 2025 diluted EPS was $1.86[10], compared to $2.03 in Q3 2024[12], a decrease of 8%[12] - Year-to-date 2025 diluted EPS was $5.32[12], compared to $5.87 in the same period of 2024[12], a decrease of 9%[12] - The company increased the 2025 EPS guidance midpoint to $6.47[10], a 3% increase[13] - The company's ROE (trailing twelve months) was 16% on an equity layer of 64%[10] Electric Platform - The company filed a Minnesota rate case requesting a net revenue increase of $44.8 million, a 17.7% increase, with a proposed ROE of 10.65% and an equity layer of 53.5%[16] - The company filed a South Dakota rate case requesting a net revenue increase of $5.7 million, a 12.5% increase, with a proposed ROE of 10.8% and an equity layer of 53.54%[19] - The company updated the rate base growth CAGR to 10%[10], with significant rate base growth from $1.89 billion in 2024 to $3.41 billion in 2030[22] Manufacturing Platform - Sales prices in the plastics segment decreased by 17% quarter-to-date and 14% year-to-date, while sales volumes increased by 4% quarter-to-date and 9% year-to-date[41] - The company is undertaking a multi-phase expansion project at Vinyltech Corporation, which is expected to increase plastics segment production capacity by 15% upon completion of Phase 1 and 2[46] - BTD Georgia expansion is expected to generate up to $35 million in incremental annual revenue[46] Investment and Growth - The company increased the long-term EPS growth rate target to 7-9% (2028 base year)[10] - The company's capital expenditure plan includes $1.918 billion for the electric segment and $129 million for manufacturing & plastics from 2026 to 2030[63] - The company targets a total shareholder return of 10-12%, a dividend yield of ~3%, and a dividend growth rate of 6-8%[69]

Financial Performance - Otter Tail Corporation reported diluted earnings per share of $1.86 for Q3 2025, with an increase in the midpoint of 2025 earnings guidance to $6.47, up by $0.21[10] - The Electric segment's operating revenues increased by $8.2 million, or 6.3%, to $138.6 million, while net income decreased by $1.2 million, or 4.3%, to $27.3 million[13] - The Manufacturing segment's operating revenues decreased by $2.9 million, or 3.7%, to $76.9 million, but net income increased by $1.7 million, or 80.1%, to $3.9 million[17] - The Plastics segment's operating revenues decreased by $17.7 million, or 13.9%, to $110.0 million, with net income down by $11.0 million, or 20.2%, to $43.5 million[19] - Operating revenues for the third quarter of 2025 were $325.6 million, compared to $338.0 million in the same period of 2024[31] - Net income for the nine months ended September 30, 2025, was $224.1 million, down from $246.8 million in 2024[31] - Basic earnings per share for the third quarter of 2025 were $1.87, compared to $2.04 in the same quarter of 2024[31] - Total operating revenues for the nine months ended September 30, 2025, were $995,959 thousand, a decrease of 3.1% from $1,027,437 thousand in 2024[34] - Net income for the nine months ended September 30, 2025, was $224,119 thousand, down 9.2% from $246,812 thousand in 2024[34] Capital Expenditures and Investments - The company introduced a new five-year capital spending plan totaling $1.9 billion, targeting a compounded annual growth rate of 10% for the rate base[6] - Total capital expenditures for 2024 amounted to $359 million, with a projected decrease to $321 million in 2025[25] - The Electric segment's total capital expenditures for 2024 were $301 million, expected to rise to $300 million in 2025[25] - The company anticipates a total capital expenditure of $1,918 million for the Electric segment from 2026 to 2030[25] - The Manufacturing and Plastics segments' capital expenditures totaled $129 million for 2024, with plans for additional capacity investments[25] - Capital expenditures for the nine months ended September 30, 2025, were $213,329 thousand, a decrease from $259,750 thousand in 2024[33] Liquidity and Assets - Total available liquidity as of September 30, 2025, was $705.3 million, including $325.8 million in cash and cash equivalents[12] - Total current assets increased to $737,243,000 from $630,041,000, representing a growth of approximately 17% year-over-year[32] - Cash and cash equivalents rose to $325,786,000 compared to $294,651,000, marking an increase of about 10.6%[32] - Total noncurrent assets reached $3,106,580,000, up from $3,022,041,000, indicating a growth of approximately 2.8%[32] - Total assets amounted to $3,843,823,000, compared to $3,652,082,000, reflecting an increase of around 5.2%[32] - Total current liabilities were $206,360,000, a rise from $199,790,000, which is an increase of about 3%[32] - Total liabilities and shareholders' equity stood at $3,843,823,000, consistent with total assets, indicating a balanced financial position[32] - Shareholders' equity totaled $1,831,451,000, compared to $1,668,499,000, representing an increase of approximately 9.8%[32] Regulatory and Rate Changes - Otter Tail Power filed a request for a rate increase of approximately $44.8 million, or 17.7%, driven by infrastructure investments and inflation[3] Earnings Growth and Projections - The anticipated earnings mix for 2025 is approximately 36% from the Electric segment and 64% from Manufacturing and Plastics segments[22] - The updated long-term earnings per share growth rate target is set at 7% to 9%, with a targeted total shareholder return of 10% to 12%[6] - The company expects annual rate base growth of 11.8% in 2025 and 11.6% in 2026[25] Operational Performance - The Electric production fuel expense increased to $25.4 million in Q3 2025 from $15.0 million in Q3 2024[31] - Operating income for the electric segment for the three months ended September 30, 2025, was $35,750 thousand, slightly down from $36,471 thousand in 2024[34] - The plastics segment reported operating revenues of $110,015 thousand for the three months ended September 30, 2025, a decrease of 13.9% from $127,757 thousand in 2024[34] - The corporate segment reported an operating loss of $3,792 thousand for the three months ended September 30, 2025, compared to a loss of $5,358 thousand in 2024[34] - The manufacturing segment's operating income increased to $5,690 thousand for the three months ended September 30, 2025, from $2,683 thousand in 2024[34] Inventory and Goodwill - The company reported a net increase in inventories to $155,765,000 from $148,885,000, which is an increase of about 4.5%[32] - Regulatory assets decreased slightly to $9,433,000 from $9,962,000, a decline of approximately 5.3%[32] - Goodwill remained stable at $37,572,000, unchanged from the previous period[32] Debt and Financing - Proceeds from the issuance of long-term debt amounted to $100,000 thousand for the nine months ended September 30, 2025[33]

Core Insights - Otter Tail Corporation reported strong third-quarter financial results, leading to an increase in annual earnings guidance for 2025, with diluted earnings per share now expected to be between $6.32 and $6.62, up from a previous range of $6.06 to $6.46 [2][23]. Financial Performance - The company achieved diluted earnings per share of $1.86 for the third quarter of 2025, reflecting a positive trend in financial performance [7]. - Operating revenues for the Electric segment increased by $8.2 million, or 6.3%, compared to the same period last year, driven by higher fuel recovery revenue and increased sales volumes [13][15]. - Net income for the Electric segment decreased by $1.2 million, or 4.3%, primarily due to lower pension-related income and unfavorable weather conditions [13][16]. Segment Analysis - The Manufacturing segment experienced a revenue decline of $2.9 million, or 3.7%, attributed to an 8% decrease in sales volumes across various end markets [17][18]. - The Plastics segment's operating revenues decreased by $17.7 million, or 13.9%, due to a 17% drop in sales prices, although sales volumes increased by 4% [19][20]. Capital Expenditures and Investment Plans - Otter Tail Corporation introduced a new five-year capital spending plan totaling $1.9 billion, aiming for a compounded annual growth rate of 10% in the rate base [6]. - The capital expenditure plan includes investments in electric utility infrastructure and manufacturing capacity, supporting long-term growth [29]. Dividend Declaration - The Board of Directors declared a quarterly common stock dividend of $0.525 per share, payable on December 10, 2025 [8]. Cash Flow and Liquidity - Consolidated cash provided by operating activities for the nine months ended September 30, 2025, was $288.9 million, down from $322.8 million in the same period of 2024 [9]. - As of September 30, 2025, total available liquidity was $705.3 million, including $325.8 million in cash and cash equivalents [12].

Core Viewpoint - Otter Tail Corporation will announce its third quarter 2025 financial results on November 3, 2025, and will host a conference call on November 4, 2025, to discuss its financial and operational performance [1]. Group 1: Financial Results Announcement - The financial results will be released after the stock market closes on November 3, 2025 [1]. - A live conference call and webcast will take place on November 4, 2025, at 10:00 a.m. CT [1]. Group 2: Accessing the Webcast - Accompanying slides will be available on the corporation's website prior to the webcast [2]. - Participants are encouraged to visit the website in advance to download any necessary software [2]. - A recording of the webcast will be accessible on the corporation's website shortly after the call [2]. Group 3: Participation Information - Pre-registration for the conference call is required to obtain the dial-in number and passcode [3]. - Contact information for inquiries regarding participation is provided [3]. Group 4: Company Overview - Otter Tail Corporation operates in diversified sectors, including an electric utility and manufacturing businesses [4]. - The company's stock is traded on the NASDAQ Global Select Market under the symbol OTTR [4]. - Corporate offices are located in Fergus Falls, Minnesota, and Fargo, North Dakota [4].

Core Insights - The utilities sector is experiencing a trend of oversold stocks, presenting potential buying opportunities for undervalued companies [1] - The Relative Strength Index (RSI) is a key indicator used to assess stock performance, with values below 30 indicating oversold conditions [1] Company Summaries - **Companhia Energetica Minas Gerais ADR (NYSE:CIG)**: - Stock has decreased approximately 9% over the past month, reaching a 52-week low of $1.59 - Current RSI value is 19.3 - Recent price action shows shares fell 3.1% to close at $1.90 [6] - **Otter Tail Corp (NASDAQ:OTTR)**: - Stock fell around 10% in the last month, with a 52-week low of $71.66 - Current RSI value is 19.1 - Shares decreased by 1.7% to close at $75.05 on Friday - The company reported better-than-expected second-quarter results and provided FY25 EPS guidance above estimates [6]

Core Insights - Otter Tail Corporation (NASDAQ:OTTR) is recognized as one of the best diversified stocks to buy according to hedge funds [1][4] - Moody's has lowered the credit rating of Otter Tail Power Company, a subsidiary of Otter Tail Corporation, due to increased spending and borrowing, although the outlook remains stable [2] - The company reported strong second-quarter results with diluted EPS of $1.85, exceeding the forecast of $1.72, and revenue of $333.04 million, surpassing the expected $325.8 million, leading to a 6.14% increase in share price [3] Financial Performance - Otter Tail Corporation's diluted EPS was reported at $1.85, above the forecast of $1.72 [3] - Revenue for the quarter was $333.04 million, exceeding the forecast of $325.8 million [3] - Following the earnings release, the share price rose to $76.22, reflecting a solid cash position and an increase in 2025 earnings guidance [3] Business Segments - The company operates in electric utility, manufacturing, and plastic pipe businesses, indicating a diversified operational structure [4] - Otter Tail Corporation is focusing on renewable energy projects and strategic investments in manufacturing, positioning itself for future growth [3]

```markdown [Definitions](index=3&type=section&id=Definitions) This section defines various abbreviations and acronyms used throughout the report, providing clarity for financial and operational terms - The report uses various abbreviations and acronyms, such as **ARO** (Asset Retirement Obligation), **ARP** (Alternative Revenue Program), **ASC** (Accounting Standards Codification), **EPA** (Environmental Protection Agency), **ESSRP** (Executive Survivor and Supplemental Retirement Plan), **EUIC** (Electric Utility Infrastructure Costs Rider), **FASB** (Financial Accounting Standards Board), **FERC** (Federal Energy Regulatory Commission), **GHG** (Greenhouse Gas), **kwh** (kilowatt-hour), **Merricourt** (Merricourt Wind Energy Center), **MISO** (Midcontinent Independent System Operator, Inc.), **MPUC** (Minnesota Public Utilities Commission), **OBBBA** (One Big Beautiful Bill Act), **OTC** (Otter Tail Corporation), **OTP** (Otter Tail Power Company), **PIR** (Phase-In Rider), **PSLRA** (Private Securities Litigation Reform Act of 1995), **PTC** (Production Tax Credits), **PVC** (Polyvinyl chloride), **RHR** (Regional Haze Rule), **ROE** (Return on equity), **RRR** (Renewable Resource Rider), **RTO** (Regional Transmission Organizations), **SDPUC** (South Dakota Public Utilities Commission), **SEC** (Securities and Exchange Commission), **SIP** (State Implementation Plan), **SOFR** (Secured Overnight Financing Rate), and **TCR** (Transmission Cost Recovery Rider)[6](index=6&type=chunk) [Forward-Looking Information](index=3&type=section&id=Forward-Looking%20Information) This section highlights the forward-looking nature of certain statements and identifies key risks and uncertainties that could impact future financial results and operations - Forward-looking statements are identified by words like 'anticipate,' 'believe,' 'estimate,' 'expect,' 'plan,' 'projected,' 'will,' and similar expressions[7](index=7&type=chunk) - Key risks and uncertainties include future investments and capital expenditures, rate base levels, long-term investment risk, seasonal weather, counterparty credit risk, credit ratings, access to capital markets, employee benefit plan funding, subsidiary dividend payments, cybersecurity threats, government legislation and regulation (including environmental and climate change policies), operational and economic risks of facilities, energy markets, resource material availability and pricing, inflation, workforce stability, regulatory proceedings, litigation, and macroeconomic conditions[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Otter Tail Corporation, including the balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows, along with their condensed notes, providing a detailed view of the company's financial position and performance for the reported periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) **Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands):** | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | **Assets** | | | | Total Current Assets | $674,410 | $630,041 | | Total Noncurrent Assets | $3,090,878 | $3,022,041 | | **Total Assets** | **$3,765,288** | **$3,652,082** | | **Liabilities & Shareholders' Equity** | | | | Total Current Liabilities | $203,480 | $309,790 | | Total Noncurrent Liabilities | $743,972 | $730,059 | | Long-Term Debt | $1,043,374 | $943,734 | | Total Shareholders' Equity | $1,774,462 | $1,668,499 | | **Total Liabilities & Shareholders' Equity** | **$3,765,288** | **$3,652,082** | - **Total Assets** increased by **$113.2 million** (**3.1%**) from December 31, 2024, to June 30, 2025[9](index=9&type=chunk) - **Total Current Liabilities** decreased significantly by **$106.3 million** (**34.3%**) due to the repayment of short-term debt[9](index=9&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) **Consolidated Statements of Income (Unaudited) - Key Figures (in thousands, except per-share amounts):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues | $333,043 | $342,336 | $670,396 | $689,404 | | Total Operating Expenses | $235,585 | $231,425 | $488,939 | $483,518 | | Operating Income | $97,458 | $110,911 | $181,457 | $205,886 | | Income Before Income Taxes | $91,380 | $107,587 | $169,564 | $199,733 | | Net Income | $77,728 | $86,995 | $145,827 | $161,333 | | Diluted Earnings Per Share | $1.85 | $2.07 | $3.46 | $3.84 | - **Net Income** decreased by **$9.3 million** (**10.7%**) for the three months ended June 30, 2025, compared to the same period in 2024[10](index=10&type=chunk) - **Diluted Earnings Per Share** decreased by **$0.22** (**10.6%**) for the three months ended June 30, 2025, compared to the same period in 2024[10](index=10&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) **Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $77,728 | $86,995 | $145,827 | $161,333 | | Total Other Comprehensive Income (Loss) | $0 | $(298) | $202 | $(385) | | Total Comprehensive Income | $77,728 | $86,697 | $146,029 | $160,948 | - **Total Other Comprehensive Income (Loss)** improved from a loss of **$(298) thousand** in Q2 2024 to **$0** in Q2 2025, and from a loss of **$(385) thousand** in H1 2024 to a gain of **$202 thousand** in H1 2025[11](index=11&type=chunk) [Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) **Consolidated Statements of Shareholders' Equity (Unaudited) - Key Figures (in thousands, except common shares outstanding):** | Item | Balance, March 31, 2025 | Balance, June 30, 2025 | Balance, December 31, 2024 | Balance, June 30, 2024 | | :----------------------------------- | :---------------------- | :--------------------- | :----------------------- | :--------------------- | | Common Shares Outstanding | 41,873,995 | 41,904,370 | 41,827,967 | 41,814,425 | | Total Shareholders' Equity | $1,717,361 | $1,774,462 | $1,668,499 | $1,565,652 | | Net Income (Q2) | $77,728 | | | $86,995 | | Common Dividends (Q2) | $(22,020) | | | $(19,569) | - **Total Shareholders' Equity** increased by **$105.96 million** (**6.3%**) from December 31, 2024, to June 30, 2025[12](index=12&type=chunk) - **Common Dividends** paid for the six months ended June 30, 2025, totaled **$44.023 million** (**$1.05 per share**), up from **$39.122 million** (**$0.9350 per share**) in the prior year period[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) **Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $159,379 | $223,461 | | Net Cash Used in Investing Activities | $(127,026) | $(228,065) | | Net Cash (Used In) Provided by Financing Activities | $(19,763) | $4,903 | | Net Change in Cash and Cash Equivalents | $12,590 | $299 | | Cash and Cash Equivalents at End of Period | $307,241 | $230,672 | - **Net cash provided by operating activities** decreased by **$64.1 million** (**28.7%**) for the six months ended June 30, 2025, compared to the prior year[13](index=13&type=chunk) - **Net cash used in investing activities** decreased by **$101.0 million** (**44.3%**) for the six months ended June 30, 2025, primarily due to lower capital expenditures and a prior year investment in U.S. treasuries[13](index=13&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=11&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) [1. Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This note provides an overview of Otter Tail Corporation's business segments, the basis of financial statement presentation, the use of estimates, and recent accounting pronouncements, including new FASB guidance on income taxes and disaggregated income statement expenses - **Otter Tail Corporation** operates in three segments: Electric (regulated utility), Manufacturing (metal fabrication, plastic products), and Plastics (PVC pipe manufacturing)[14](index=14&type=chunk) - The company anticipates adopting updated **FASB** guidance on **Income Taxes** (**ASC 740**) in its 2025 Form 10-K, applying it retrospectively[18](index=18&type=chunk) - New **FASB** guidance on Disaggregated Income Statement Expenses (**ASC 220**) is effective for annual periods beginning in 2027, and the company is evaluating its impact[19](index=19&type=chunk) [2. Segment Information](index=12&type=section&id=2.%20Segment%20Information) This note details the financial performance, capital expenditures, and identifiable assets for each of the company's three reportable segments: Electric, Manufacturing, and Plastics, along with corporate unallocated costs **Segment Net Income (in thousands):** | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Electric | $19,195 | $18,485 | $43,903 | $40,956 | | Manufacturing | $3,481 | $6,835 | $5,013 | $12,096 | | Plastics | $53,104 | $60,612 | $96,543 | $107,350 | | Corporate | $1,948 | $1,063 | $368 | $931 | | **Total Net Income** | **$77,728** | **$86,995** | **$145,827** | **$161,333** | **Segment Capital Expenditures (in thousands) - Six Months Ended June 30:** | Segment | 2025 | 2024 | | :---------------- | :----- | :----- | | Electric | $114,038 | $145,201 | | Manufacturing | $4,674 | $15,708 | | Plastics | $4,915 | $14,550 | | Corporate | $612 | $69 | | **Total** | **$124,239** | **$175,528** | **Identifiable Assets by Segment (in thousands):** | Segment | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Electric | $2,914,414 | $2,785,522 | | Manufacturing | $247,556 | $254,445 | | Plastics | $221,253 | $186,043 | | Corporate | $382,065 | $426,072 | | **Total** | **$3,765,288** | **$3,652,082** | [3. Revenue](index=15&type=section&id=3.%20Revenue) This note disaggregates the company's operating revenues by segment and revenue source, distinguishing between revenues from contracts with customers and alternative revenue program (ARP) arrangements **Operating Revenues by Segment (in thousands):** | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Electric | $128,731 | $112,828 | $278,451 | $254,317 | | Manufacturing | $78,726 | $96,684 | $160,412 | $196,065 | | Plastics | $125,586 | $132,824 | $231,533 | $239,022 | | **Total Operating Revenues** | **$333,043** | **$342,336** | **$670,396** | **$689,404** | - **Electric Segment revenues** increased by **$15.9 million** (**14.1%**) for the three months ended June 30, 2025, driven by retail, transmission, and wholesale increases[27](index=27&type=chunk) - **Manufacturing Segment revenues** decreased by **$17.9 million** (**18.6%**) for the three months ended June 30, 2025, primarily due to declines in metal parts and tooling sales[27](index=27&type=chunk) - **Plastics Segment revenues** decreased by **$7.2 million** (**5.4%**) for the three months ended June 30, 2025, mainly due to lower **PVC** pipe sales prices[27](index=27&type=chunk) [4. Select Balance Sheet Information](index=15&type=section&id=4.%20Select%20Balance%20Sheet%20Information) This note provides detailed breakdowns of key balance sheet accounts, including receivables, inventories, investments, and property, plant, and equipment, highlighting changes between June 30, 2025, and December 31, 2024 **Receivables, net of allowance for credit losses (in thousands):** | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Trade Receivables | $152,430 | $112,169 | | Total Receivables | $183,180 | $147,884 | | Less: Allowance for Credit Losses | $2,357 | $1,920 | | **Receivables, net** | **$180,823** | **$145,964** | **Inventories (in thousands):** | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Raw Material, Fuel and Supplies | $39,693 | $43,345 | | Work in Process | $22,012 | $22,637 | | Finished Goods | $89,853 | $82,903 | | **Total Inventories** | **$151,558** | **$148,885** | **Net Property, Plant and Equipment (in thousands):** | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Net Electric Plant | $2,578,757 | $2,513,784 | | Net Nonelectric Property, Plant and Equipment | $175,311 | $178,676 | | **Net Property, Plant and Equipment** | **$2,754,068** | **$2,692,460** | [5. Regulatory Matters](index=19&type=section&id=5.%20Regulatory%20Matters) This note outlines the company's regulatory assets and liabilities, including expected recovery/refund periods, and provides an update on the South Dakota rate case filing by Otter Tail Power (OTP) seeking a revenue increase **Regulatory Assets and Liabilities (in thousands):** | Item | June 30, 2025 (Current) | June 30, 2025 (Long-Term) | December 31, 2024 (Current) | December 31, 2024 (Long-Term) | | :----------------------------------- | :---------------------- | :------------------------ | :-------------------------- | :-------------------------- | | Total Regulatory Assets | $8,946 | $99,010 | $9,962 | $98,673 | | Total Regulatory Liabilities | $24,580 | $289,546 | $29,307 | $288,928 | - **OTP** filed a request with the **SDPUC** for a net annual revenue increase of **$5.7 million** (**12.50%**), based on an allowed **ROE** of **10.80%**[35](index=35&type=chunk) - **OTP** may increase rates on an interim basis starting December 1, 2025, if the **SDPUC** does not issue a decision within **180 days**, with interim revenues subject to potential refund[36](index=36&type=chunk) [6. Short-Term and Long-Term Borrowings](index=21&type=section&id=6.%20Short-Term%20and%20Long-Term%20Borrowings) This note summarizes the company's short-term and long-term debt, including credit facilities, recent long-term debt issuances by OTP, and compliance with financial covenants **Short-Term Debt - Lines of Credit (in thousands):** | Item | June 30, 2025 (Amount Outstanding) | June 30, 2025 (Amount Available) | December 31, 2024 (Amount Available) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | OTC Credit Agreement | $0 | $170,000 | $170,000 | | OTP Credit Agreement | $0 | $210,978 | $141,613 | | **Total** | **$0** | **$380,978** | **$311,613** | **Long-Term Debt (in thousands):** | Borrower | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | OTC Guaranteed Senior Notes | $80,000 | $80,000 | | OTP Senior Unsecured Notes (various series) | $967,000 | $867,000 | | **Total Long-Term Debt, Net** | **$1,043,374** | **$943,734** | - **OTP** issued **$100.0 million** in senior unsecured notes (Series 2025A and 2025B) in March and June 2025, with maturities in **2035** and **2055**, respectively[38](index=38&type=chunk) - As of June 30, 2025, **OTC** and **OTP** were in compliance with all financial covenants, including debt to total capitalization and interest and dividend coverage ratios[40](index=40&type=chunk) [7. Employee Postretirement Benefits](index=22&type=section&id=7.%20Employee%20Postretirement%20Benefits) This note details the components of net periodic benefit cost (income) for the company's defined benefit pension plans and other postretirement benefits, and the impact of regulation on their recognition **Net Periodic Benefit Cost (Income) (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pension Benefits (Pension Plan) | $(654) | $(1,072) | $(1,308) | $(2,143) | | Pension Benefits (ESSRP) | $473 | $474 | $947 | $948 | | Postretirement Benefits | $(425) | $(1,053) | $(848) | $(2,106) | | **Total Net Periodic Benefit Cost (Income)** | **$(606)** | **$(1,651)** | **$(1,209)** | **$(3,301)** | - **Net Periodic Benefit Cost (Income)** recognized, after the impact of regulation, was **$143 thousand** for Q2 2025, compared to **$(1,295) thousand** for Q2 2024[42](index=42&type=chunk) [8. Income Taxes](index=23&type=section&id=8.%20Income%20Taxes) This note discusses the company's effective tax rate, which decreased primarily due to increased production tax credits (PTCs) from wind and solar assets, and outlines the potential impacts of the recently enacted One Big Beautiful Bill Act (OBBBA) on tax credits and corporate income tax rules **Effective Tax Rate:** | Period | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Three Months Ended June 30, | 14.9% | 19.2% | | Six Months Ended June 30, | 14.0% | 19.2% | - The decrease in the **effective tax rate** was primarily due to an increase in **PTCs** from wind and solar generation assets, including a new wind repowering project completed in late 2024[43](index=43&type=chunk) - The **One Big Beautiful Bill Act (OBBBA)**, enacted July 4, 2025, alters renewable energy tax credit timing and eligibility, reinstates **100%** bonus depreciation, and modifies business interest expense limitations[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk] [9. Commitments and Contingencies](index=25&type=section&id=9.%20Commitments%20and%20Contingencies) This note details the company's commitments, including a solar facility acquisition, and significant contingencies such as ongoing class action lawsuits and a DOJ investigation related to PVC pipe antitrust allegations, as well as regulatory matters concerning transmission upgrade self-funding - **OTP** has an agreement to acquire a solar facility for **$23.6 million**, with closing expected in late 2025 or early 2026, subject to regulatory approvals[49](index=49&type=chunk) - The company is involved in class action lawsuits and a **DOJ** investigation regarding alleged antitrust violations in **PVC** pipe pricing, with potential material impact on financial condition if a violation is found[54](index=54&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - **FERC** is reviewing transmission owners' unilateral authority to self-fund generator interconnection upgrades, which could impact **OTP's** financial results if the authority is eliminated[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) [10. Shareholders' Equity](index=26&type=section&id=10.%20Shareholders'%20Equity) This note provides information on the company's registration statements for securities offerings and dividend reinvestment plans, and outlines restrictions on dividend payments from OTC's subsidiaries due to statutory limitations or financing agreements - The company has a shelf registration statement for equity, debt, or other securities, expiring in May 2027, and a second registration statement for up to **1,500,000** common shares under an Automatic Dividend Reinvestment and Share Purchase Plan[60](index=60&type=chunk)[61](index=61&type=chunk) - As of June 30, 2025, **1,379,019 shares** were available for purchase or issuance under the dividend reinvestment plan[61](index=61&type=chunk) - Dividend payments from **OTC's** subsidiaries are subject to restrictions, including financial covenants in credit agreements and **MPUC** requirements for **OTP's** equity-to-total-capitalization ratio (between **47.2%** and **57.7%**)[62](index=62&type=chunk)[64](index=64&type=chunk) [11. Accumulated Other Comprehensive Income (Loss)](index=28&type=section&id=11.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note presents the changes in accumulated other comprehensive income (loss), detailing the components such as unrealized gains/losses on available-for-sale securities and pension/other postretirement benefits **Changes in Accumulated Other Comprehensive Income (Loss) (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance, Beginning of Period | $734 | $1,061 | $532 | $1,148 | | Total Other Comprehensive Income (Loss) | $0 | $(298) | $202 | $(385) | | **Balance, End of Period** | **$734** | **$763** | **$734** | **$763** | - **Total Other Comprehensive Income (Loss)** for the six months ended June 30, 2025, was a gain of **$202 thousand**, a significant improvement from a loss of **$(385) thousand** in the prior year[65](index=65&type=chunk) [12. Share-Based Payments](index=30&type=section&id=12.%20Share-Based%20Payments) This note outlines the stock compensation expense recognized by the company and provides details on restricted stock awards and stock performance awards, including their vesting schedules, fair value determination, and activity for the period **Stock Compensation Expense (in millions):** | Period | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Three Months Ended June 30, | $1.6 | $1.3 | | Six Months Ended June 30, | $7.4 | $6.8 | - **Restricted stock awards** vest over three or four years, or upon retirement, and are granted to executive officers, key employees, and Board members[67](index=67&type=chunk) - **Stock performance awards** vest after a three-year performance period, with the number of shares awarded ranging from zero to **150%** of the target based on total shareholder return relative to peers and **ROE**[69](index=69&type=chunk) [13. Earnings Per Share](index=31&type=section&id=13.%20Earnings%20Per%20Share) This note details the computation of basic and diluted earnings per share, including the weighted-average common shares outstanding and the dilutive effect of potential common shares from stock awards and employee stock purchase plans **Weighted-Average Common Shares Outstanding (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 41,874 | 41,784 | 41,850 | 41,754 | | Dilutive Effect of Potential Common Shares | 244 | 284 | 240 | 297 | | **Diluted** | **42,118** | **42,068** | **42,090** | **42,051** | [14. Derivative Instruments](index=31&type=section&id=14.%20Derivative%20Instruments) This note describes OTP's use of derivative instruments to manage exposure to market energy price variability, which are recorded at fair value and economically hedge against price volatility, with gains/losses deferred through regulatory assets/liabilities until settlement - **OTP** uses pay-fixed, receive-variable swap agreements with settlement dates extending to December 31, 2026, to manage energy price risk[75](index=75&type=chunk) **Derivative Instruments (in thousands):** | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Megawatt hours of electricity (notional) | 347 | 167 | | Derivative Assets (Current) | $746 | $0 | | Total Derivative Liabilities | $1,724 | $1,989 | - Losses from settled derivative instruments were **$2.6 million** for the six months ended June 30, 2025, compared to **$2.7 million** in the prior year, and are recovered from electric customers through fuel recovery mechanisms[76](index=76&type=chunk) [15. Fair Value Measurements](index=32&type=section&id=15.%20Fair%20Value%20Measurements) This note presents the company's assets and liabilities measured at fair value on a recurring basis, categorized by input levels (Level 1, 2, 3), and provides the carrying value and estimated fair value for financial instruments not recorded at fair value **Assets and Liabilities Measured at Fair Value (in thousands) - June 30, 2025:** | Item | Level 1 | Level 2 | Level 3 | | :----------------------------------- | :------ | :------ | :------ | | Money Market Funds | $1,372 | $0 | $0 | | Mutual Funds | $15,338 | $0 | $0 | | Corporate Debt Securities | $0 | $1,684 | $0 | | Government Debt Securities | $0 | $61,918 | $0 | | Derivative Instruments (Assets) | $0 | $746 | $0 | | Derivative Instruments (Liabilities) | $0 | $1,724 | $0 | - Level 2 fair value measurements for debt securities and derivative instruments are determined using observable market inputs and industry-accepted valuation models[78](index=78&type=chunk)[79](index=79&type=chunk) **Carrying Value and Estimated Fair Value of Financial Instruments (in thousands) - June 30, 2025:** | Item | Carrying Amount | Fair Value | | :----------------------------------- | :-------------- | :--------- | | Cash and Cash Equivalents | $307,241 | $307,241 | | Short-Term Debt | $0 | $0 | | Long-Term Debt | $1,043,374 | $923,102 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of Otter Tail Corporation's financial condition and results of operations, covering economic conditions, segment-specific performance for both quarter-to-date and year-to-date periods, regulatory matters, liquidity, capital resources, and critical accounting policies [ECONOMIC CONDITIONS](index=35&type=section&id=ECONOMIC%20CONDITIONS) This section discusses the potential impacts of broad changes in U.S. trade and tariff policy, including increased costs, supply chain disruptions, and reduced demand, on the company's business operations and financial performance - Changes in U.S. trade and tariff policy could significantly impact domestic macroeconomic conditions and the company's operations, potentially increasing Electric segment capital expenditures and Manufacturing segment steel costs[84](index=84&type=chunk) - Broader macroeconomic conditions, such as rising inflation and recession risk, could lead to increased operating and investment costs, reduced demand for electric service and products, and elevated interest rates[85](index=85&type=chunk) [RESULTS OF OPERATIONS – QUARTER TO DATE](index=35&type=section&id=RESULTS%20OF%20OPERATIONS%20%E2%80%93%20QUARTER%20TO%20DATE) This section analyzes the company's consolidated and segment-specific operating results for the three months ended June 30, 2025, compared to the same period in 2024, highlighting key revenue and expense drivers and their impact on net income [CONSOLIDATED RESULTS](index=35&type=section&id=CONSOLIDATED%20RESULTS%20(Quarter%20to%20Date)) Consolidated operating revenues decreased by $9.3 million, primarily due to lower sales in Manufacturing and Plastics, partially offset by Electric segment growth. Net income declined by $9.3 million, influenced by increased operating expenses and interest expense, despite a decrease in income tax expense **Consolidated Operating Results (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Operating Revenues | $333,043 | $342,336 | $(9,293) | (2.7)% | | Operating Expenses | $235,585 | $231,425 | $4,160 | 1.8% | | Operating Income | $97,458 | $110,911 | $(13,453) | (12.1)% | | Net Income | $77,728 | $86,995 | $(9,267) | (10.7)% | - **Operating Revenues** decreased by **$9.3 million**, mainly due to decreased sales volumes in Manufacturing and lower sales prices in Plastics, partially offset by increased Plastics sales volumes and Electric segment fuel recovery revenue[88](index=88&type=chunk) - **Income Tax Expense** decreased by **$6.9 million**, driven by lower income before taxes and an increase in **Production Tax Credits** (**PTCs**) from increased wind and solar generation, including a new wind repowering project[91](index=91&type=chunk) [ELECTRIC SEGMENT RESULTS](index=37&type=section&id=ELECTRIC%20SEGMENT%20RESULTS%20(Quarter%20to%20Date)) The Electric segment saw a 14.1% increase in total operating revenues, driven by higher retail, transmission, and wholesale revenues, and favorable weather conditions. Net income increased by 3.8%, despite higher production fuel, purchased power, and operating & maintenance expenses **Electric Segment Operating Results (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Total Operating Revenues | $128,731 | $112,828 | $15,903 | 14.1% | | Production Fuel | $16,292 | $12,324 | $3,968 | 32.2% | | Purchased Power | $15,497 | $9,249 | $6,248 | 67.6% | | Operating Income | $23,633 | $22,597 | $1,036 | 4.6% | | Net Income | $19,195 | $18,485 | $710 | 3.8% | | Retail kwh Sales (in thousands) | 1,337,696 | 1,315,504 | 22,192 | 1.7% | - **Retail Revenues** increased by **$13.7 million**, primarily due to an **$8.7 million** increase in fuel recovery revenues, a **$2.4 million** net increase in rider revenues, and a **$1.6 million** increase from favorable weather[95](index=95&type=chunk)[102](index=102&type=chunk) - **Purchased Power** costs increased by **$6.2 million** (**67.6%**) due to a **60%** increase in the cost of purchased power, driven by higher market energy and natural gas prices[96](index=96&type=chunk) - **Income Tax Benefit** increased by **$3.1 million** due to higher **PTCs** from increased wind and solar generation[98](index=98&type=chunk) [MANUFACTURING SEGMENT RESULTS](index=39&type=section&id=MANUFACTURING%20SEGMENT%20RESULTS%20(Quarter%20to%20Date)) The Manufacturing segment experienced an 18.6% decrease in operating revenues, mainly due to a 9% decline in sales volumes across various end markets and a 7% decrease in pass-through steel costs. Net income fell by 49.1% as a result of lower sales and reduced profit margins **Manufacturing Segment Operating Results (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Operating Revenues | $78,726 | $96,684 | $(17,958) | (18.6)% | | Cost of Products Sold | $59,037 | $71,797 | $(12,760) | (17.8)% | | Operating Income | $5,065 | $9,600 | $(4,535) | (47.2)% | | Net Income | $3,481 | $6,835 | $(3,354) | (49.1)% | - **Operating Revenues** decreased by **$18.0 million**, primarily due to a **9%** decrease in sales volumes in agriculture, recreational vehicles, lawn and garden, and construction end markets, and a **7%** decrease in pass-through steel costs[99](index=99&type=chunk) - **Cost of Products Sold** decreased by **$12.8 million**, largely due to lower sales volumes, enhanced profit margins from timing of steel cost fluctuations, and decreased steel costs[100](index=100&type=chunk) [PLASTICS SEGMENT RESULTS](index=41&type=section&id=PLASTICS%20SEGMENT%20RESULTS%20(Quarter%20to%20Date)) The Plastics segment experienced a 5.4% decrease in operating revenues, mainly due to a 15% decline in sales prices, partially offset by an 11% increase in sales volumes driven by strong demand and increased production capacity. Net income decreased by 12.4% **Plastics Segment Operating Results (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Operating Revenues | $125,586 | $132,824 | $(7,238) | (5.4)% | | Cost of Products Sold | $46,929 | $44,998 | $1,931 | 4.3% | | Operating Income | $72,034 | $82,089 | $(10,055) | (12.2)% | | Net Income | $53,104 | $60,612 | $(7,508) | (12.4)% | - **Operating Revenues** decreased by **$7.2 million** due to a **15%** decrease in sales prices, partially offset by an **11%** increase in sales volumes driven by strong demand and increased production capacity[103](index=103&type=chunk) - **Cost of Products Sold** increased by **$1.9 million** due to higher sales volumes, partially offset by a **15%** reduction in **PVC** resin costs[104](index=104&type=chunk) [CORPORATE COSTS](index=41&type=section&id=CORPORATE%20COSTS%20(Quarter%20to%20Date)) Corporate costs showed a net loss of $1.9 million for the quarter, an increase from the prior year's loss, primarily due to changes in nonservice components of postretirement benefits and other income **Corporate Operating Results (in thousands):** | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Operating Loss | $(3,274) | $(3,375) | $101 | (3.0)% | | Net Loss | $1,948 | $1,063 | $885 | 83.3% | [RESULTS OF OPERATIONS – YEAR TO DATE](index=42&type=section&id=RESULTS%20OF%20OPERATIONS%20%E2%80%93%20YEAR%20TO%20DATE) This section analyzes the company's consolidated and segment-specific operating results for the six months ended June 30, 2025, compared to the same period in 2024, detailing revenue and expense trends, and their impact on overall profitability [CONSOLIDATED RESULTS](index=42&type=section&id=CONSOLIDATED%20RESULTS%20(Year%20to%20Date)) Consolidated operating revenues decreased by $19.0 million, mainly due to lower Plastics sales prices and Manufacturing sales volumes, partially offset by increased Electric fuel recovery and favorable weather. Net income declined by $15.5 million, impacted by higher operating and interest expenses, despite a significant decrease in income tax expense **Consolidated Operating Results (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Operating Revenues | $670,396 | $689,404 | $(19,008) | (2.8)% | | Operating Expenses | $488,939 | $483,518 | $5,421 | 1.1% | | Operating Income | $181,457 | $205,886 | $(24,429) | (11.9)% | | Net Income | $145,827 | $161,333 | $(15,506) | (9.6)% | - **Operating Revenues** decreased by **$19.0 million**, primarily due to decreased sales prices in Plastics and lower sales volumes in Manufacturing, partially offset by increased fuel recovery revenues and favorable weather in Electric[106](index=106&type=chunk) - **Income Tax Expense** decreased by **$14.7 million**, mainly due to increased **PTCs** from wind and solar generation and a decrease in income before income taxes[109](index=109&type=chunk) [ELECTRIC SEGMENT RESULTS](index=43&type=section&id=ELECTRIC%20SEGMENT%20RESULTS%20(Year%20to%20Date)) The Electric segment's total operating revenues increased by 9.5%, driven by higher retail revenues from fuel recovery, favorable weather, and rate increases in North Dakota. Net income grew by 7.2%, despite significant increases in purchased power, operating & maintenance, and depreciation expenses **Electric Segment Operating Results (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Total Operating Revenues | $278,451 | $254,317 | $24,134 | 9.5% | | Purchased Power | $46,367 | $31,771 | $14,596 | 45.9% | | Operating Income | $52,676 | $51,639 | $1,037 | 2.0% | | Net Income | $43,903 | $40,956 | $2,947 | 7.2% | | Retail kwh Sales (in thousands) | 3,010,700 | 2,896,355 | 114,345 | 3.9% | - **Retail Revenues** increased by **$22.6 million**, primarily due to a **$14.7 million** increase in fuel recovery revenues, a **$5.3 million** increase from favorable weather, and rate increases in North Dakota[112](index=112&type=chunk)[113](index=113&type=chunk) - **Purchased Power** costs increased by **$14.6 million** (**45.9%**) due to a **34%** increase in price and a **9%** increase in volume[114](index=114&type=chunk) - **Income Tax Benefit** increased by **$8.3 million** due to higher **PTCs** from increased wind and solar generation[116](index=116&type=chunk) [MANUFACTURING SEGMENT RESULTS](index=45&type=section&id=MANUFACTURING%20SEGMENT%20RESULTS%20(Year%20to%20Date)) The Manufacturing segment's operating revenues decreased by 18.2%, driven by an 11% decline in sales volumes across various end markets and a 5% decrease in pass-through steel costs. Net income fell by 58.6% due to reduced sales and increased depreciation **Manufacturing Segment Operating Results (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Operating Revenues | $160,412 | $196,065 | $(35,653) | (18.2)% | | Cost of Products Sold | $123,337 | $148,709 | $(25,372) | (17.1)% | | Operating Income | $7,492 | $17,014 | $(9,522) | (56.0)% | | Net Income | $5,013 | $12,096 | $(7,083) | (58.6)% | - **Operating Revenues** decreased by **$35.7 million** due to an **11%** decrease in sales volumes across multiple end markets and a **5%** decrease in pass-through steel costs[117](index=117&type=chunk) - **Depreciation and Amortization** increased by **$0.9 million** due to increased capital investment in manufacturing equipment and facilities[118](index=118&type=chunk) [PLASTICS SEGMENT RESULTS](index=45&type=section&id=PLASTICS%20SEGMENT%20RESULTS%20(Year%20to%20Date)) The Plastics segment's operating revenues decreased by 3.1%, primarily due to a 13% decline in sales prices, partially offset by a 12% increase in sales volumes driven by strong demand and expanded production capacity. Net income decreased by 10.1% **Plastics Segment Operating Results (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Operating Revenues | $231,533 | $239,022 | $(7,489) | (3.1)% | | Cost of Products Sold | $87,016 | $82,809 | $4,207 | 5.1% | | Operating Income | $130,909 | $145,392 | $(14,483) | (10.0)% | | Net Income | $96,543 | $107,350 | $(10,807) | (10.1)% | - **Operating Revenues** decreased by **$7.5 million** due to a **13%** decrease in sales prices, partially offset by a **12%** increase in sales volumes from strong demand and increased production capacity[121](index=121&type=chunk) - **Cost of Products Sold** increased by **$4.2 million** due to higher sales volumes, partially offset by an **11%** decrease in **PVC** resin costs[122](index=122&type=chunk) - **Selling, General, and Administrative Expenses** increased by **$1.9 million** due to costs associated with ongoing **PVC** pipe pricing litigation[123](index=123&type=chunk) [CORPORATE COSTS](index=47&type=section&id=CORPORATE%20COSTS%20(Year%20to%20Date)) Corporate costs resulted in a net loss of $368 thousand for the six months, a decrease from the prior year's loss, primarily due to increased general and administrative expenses from higher employee health insurance claims **Corporate Operating Results (in thousands):** | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | General and Administrative Expenses | $9,534 | $8,111 | $1,423 | 17.5% | | Operating Loss | $(9,620) | $(8,159) | $(1,461) | 17.9% | | Net Loss | $368 | $931 | $(563) | (60.4)% | - **General and Administrative Expenses** increased by **$1.4 million**, primarily due to increased employee health insurance claim costs[124](index=124&type=chunk) [REGULATORY MATTERS](index=47&type=section&id=REGULATORY%20MATTERS) This section provides updates on general rate cases in North and South Dakota, summarizes significant rate rider proceedings, and discusses recent environmental regulations from the EPA, including the Clean Air Act, Mercury and Air Toxics Standards, and the Regional Haze Rule [GENERAL RATES](index=47&type=section&id=GENERAL%20RATES) This subsection details the outcomes of the North Dakota rate case, which approved a $13.1 million net annual revenue increase for OTP, and the ongoing South Dakota rate case, where OTP is seeking a $5.7 million increase - The North Dakota Public Service Commission approved a settlement for **OTP's** general rate case, resulting in a net annual revenue increase of **$13.1 million** (**6.18%**), effective March 15, 2025[126](index=126&type=chunk) - **OTP** filed a request with the South Dakota Public Utilities Commission for a **$5.7 million** (**12.50%**) increase in annual revenue, with a proposed **ROE** of **10.80%**[127](index=127&type=chunk) Interim rates may be implemented by December 1, 2025, if no decision is made within **180 days**[127](index=127&type=chunk) [RATE RIDERS](index=49&type=section&id=RATE%20RIDERS) This subsection summarizes various approved and requested rate rider proceedings across Minnesota, North Dakota, and South Dakota, detailing their revenue impacts and recovery mechanisms for specific costs and investments **Summary of Rate Rider Proceedings (in millions):** | Recovery Mechanism | Jurisdiction | Status | Amount | Effective Date | | :----------------- | :----------- | :----- | :----- | :------------- | | RRR - 2023 | MN | Approved | $17.5 | 07/01/23 | | ECO - 2023 | MN | Approved | $9.7 | 10/01/23 | | ECO - 2025 | MN | Requested | $9.5 | 11/01/25 | | RRR - 2024 | MN | Approved | $8.0 | 09/01/24 | | EUIC - 2025 | MN | Approved | $4.1 | 02/01/25 | | RRR - 2023 | ND | Approved | $12.2 | 05/01/23 | | TCR - 2024 | ND | Approved | $4.5 | 01/01/24 | | MDT - 2025 | ND | Requested | $3.7 | 01/01/26 | | PIR - 2024 | SD | Approved | $3.2 | 09/01/24 | | PIR - 2025 | SD | Approved | $3.2 | 09/01/25 | | TCR - 2023 | SD | Approved | $3.0 | 03/01/23 | [ENVIRONMENTAL REGULATION](index=49&type=section&id=ENVIRONMENTAL%20REGULATION) This subsection discusses recent EPA regulations and proposed repeals concerning greenhouse gas emissions under the Clean Air Act, Mercury and Air Toxics Standards (MATS), and the Regional Haze Rule (RHR), which could impact the company's fossil fuel-fired power plants - The **EPA** finalized new regulations under the Clean Air Act in May 2024 to regulate **GHG** emissions from fossil fuel-fired power plants, impacting Coyote Station and Big Stone Plant[129](index=129&type=chunk) - In June 2025, the **EPA** proposed to repeal existing **GHG** emission standards and the 2024 **MATS** for coal-fired power plants, with public comment periods open until August 2025[130](index=130&type=chunk)[131](index=131&type=chunk) - The **EPA** partially disapproved North Dakota's State Implementation Plan (**SIP**) for the **Regional Haze Rule** in December 2024, but granted a request to reconsider this ruling in April 2025[134](index=134&type=chunk)[135](index=135&type=chunk) [LIQUIDITY](index=51&type=section&id=LIQUIDITY) This section assesses the company's liquidity position, including available cash, credit facilities, and cash flow activities, and discusses capital requirements, dividend policies, and capital resources, emphasizing compliance with financial covenants [LIQUIDITY OVERVIEW](index=51&type=section&id=LIQUIDITY%20OVERVIEW) The company maintains a strong financial condition with ample liquidity from cash, liquid assets, operating cash flows, credit lines, and capital market access, supported by investment-grade credit ratings and compliance with financial covenants - As of June 30, 2025, the company had **$381.0 million** of available liquidity under its credit facilities and **$307.2 million** in cash and cash equivalents, totaling **$688.2 million** in available liquidity[138](index=138&type=chunk) **Status of Lines of Credit (in thousands) - June 30, 2025:** | Item | Borrowing Limit | Amount Outstanding | Letters of Credit | Amount Available | | :----------------------------------- | :-------------- | :----------------- | :---------------- | :--------------- | | OTC Credit Agreement | $170,000 | $0 | $0 | $170,000 | | OTP Credit Agreement | $220,000 | $0 | $9,022 | $210,978 | | **Total** | **$390,000** | **$0** | **$9,022** | **$380,978** | [CASH FLOWS](index=51&type=section&id=CASH%20FLOWS) Net cash provided by operating activities decreased by $64.1 million, primarily due to timing differences in fuel cost and rider recoveries and operating cost payments. Net cash used in investing activities decreased by $101.0 million due to lower capital expenditures and a prior year investment. Financing activities shifted from providing to using cash, influenced by long-term debt issuance and short-term debt repayments **Cash Flows (in thousands) - Six Months Ended June 30:** | Item | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Net Cash Provided by Operating Activities | $159,379 | $223,461 | | Net Cash Used in Investing Activities | $(127,026) | $(228,065) | | Net Cash (Used in) Provided by Financing Activities | $(19,763) | $4,903 | - **Net cash provided by operating activities** decreased by **$64.1 million**, mainly due to the timing of fuel cost and rider recoveries from utility customers, operating cost payments, and a decrease in earnings[139](index=139&type=chunk) - **Net cash used in investing activities** decreased by **$101.0 million**, including a **$51.3 million** decrease in capital expenditures and a **$50.1 million** investment in U.S. treasuries in the prior year[141](index=141&type=chunk) - Financing activities for H1 2025 included the issuance of **$100.0 million** in long-term debt by **OTP**, net repayments of **$69.6 million** in short-term debt, and **$44.0 million** in dividend payments[142](index=142&type=chunk)[143](index=143&type=chunk) [CAPITAL REQUIREMENTS](index=52&type=section&id=CAPITAL%20REQUIREMENTS) The company's capital expenditure plan involves investments in electric generation, transmission, distribution, manufacturing equipment, and IT systems, subject to ongoing review and adjustment based on various factors. Contractual obligations primarily consist of debt payments, coal/energy commitments, postretirement benefits, and leasing arrangements - The capital expenditure plan is subject to review and revision based on energy demand, technology, environmental laws, regulatory approvals, business expansion, costs, and financial condition[144](index=144&type=chunk) - Contractual obligations include principal and interest payments on debt, commitments for coal, energy, and capacity, postretirement benefit obligations, and land easements/leasing arrangements[145](index=145&type=chunk) - There were no material changes in contractual obligations outside the ordinary course of business during the six months ended June 30, 2025[146](index=146&type=chunk) [COMMON STOCK DIVIDENDS](index=52&type=section&id=COMMON%20STOCK%20DIVIDENDS) The company paid $44.0 million in common stock dividends ($1.05 per share) during the first six months of 2025. Future dividend amounts are determined quarterly by the Board of Directors, considering financial condition, earnings, cash flows, capital expenditures, and business prospects, and are subject to statutory and regulatory restrictions **Common Stock Dividends Paid:** | Period | Amount (in millions) | Per Share | | :----------------------------------- | :------------------- | :-------- | | Six Months Ended June 30, 2025 | $44.0 | $1.05 | | Six Months Ended June 30, 2024 | $39.1 | $0.9350 | - Future dividend payments depend on financial condition, earnings, cash flows, capital expenditures, and business prospects, and are subject to statutory and regulatory limitations[147](index=147&type=chunk) [CAPITAL RESOURCES](index=52&type=section&id=CAPITAL%20RESOURCES) The company maintains financial flexibility through operating cash flows, unused credit lines, and capital market access, supported by strong financial coverages and investment-grade credit ratings. It plans debt financing for refinancing and capital investments, and remains in compliance with all financial covenants for both OTC and OTP - Financial flexibility is provided by operating cash flows, unused lines of credit, and access to capital markets, supported by strong financial coverages and investment-grade credit ratings[148](index=148&type=chunk) - **OTP** issued **$100.0 million** of senior unsecured notes in March and June 2025, and no additional long-term debt is anticipated for 2025[151](index=151&type=chunk) - As of June 30, 2025, **OTC's interest-bearing debt to total capitalization** was **0.37 to 1.00**, and **OTP's** was **0.45 to 1.00**, both well within the maximum allowed ratios (**0.60 to 1.00** or **0.65 to 1.00**)[153](index=153&type=chunk)[154](index=154&type=chunk) [CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES](index=55&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20INVOLVING%20SIGNIFICANT%20ESTIMATES) This section states that there have been no material changes to the company's critical accounting policies and estimates from those disclosed in its most recent Annual Report on Form 10-K - No material changes to critical accounting policies and estimates have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[155](index=155&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section indicates that there have been no material changes in the company's market risk disclosures since its most recent Annual Report on Form 10-K - No material changes in market risk have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[156](index=156&type=chunk) [ITEM 4. Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms that the company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2025, and found them to be effective. It also states that there were no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[157](index=157&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[158](index=158&type=chunk) [PART II. OTHER INFORMATION](index=55&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=55&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 9 for a detailed discussion of ongoing legal proceedings, specifically class action complaints alleging antitrust violations related to PVC pipe pricing against OTC and other parties - Several class action complaints have been filed against **OTC** and other parties, alleging antitrust violations related to fixing, raising, maintaining, and stabilizing **PVC** municipal water and electrical conduit pipe prices[159](index=159&type=chunk) [ITEM 1A. Risk Factors](index=55&type=section&id=ITEM%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[160](index=160&type=chunk) [ITEM 5. Other Information](index=55&type=section&id=ITEM%205.%20Other%20Information) This section indicates that there is no other information to report under this item - No other information to report[161](index=161&type=chunk) [ITEM 6. Exhibits](index=56&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of, or incorporated by reference into, this report, including certifications, XBRL taxonomy documents, and the interactive data file - Exhibits include certifications from the **CEO** and **CFO** (Sections 302 and 906 of Sarbanes-Oxley Act), Inline **XBRL** Taxonomy Extension Schema, Calculation, Label, Presentation, and Definition Linkbase Documents, and the Cover Page Interactive Data File[163](index=163&type=chunk) [Signatures](index=57&type=section&id=Signatures) - The report was signed by Todd R Wahlund, Vice President and Chief Financial Officer, on August 6, 2025[165](index=165&type=chunk) ```

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $1.85 in Q2 2025, down from $2.07 in the same period last year, reflecting a decline in earnings [7][23] - Despite the decline, the midpoint of the 2025 earnings guidance was increased to $6.26 from $5.88 due to better-than-expected performance in the Plastics segment [8][29] - The company maintains its original earnings guidance for all other segments, with an expected year-over-year growth of over 7% for the electric segment [30] Business Line Data and Key Metrics Changes - Electric segment earnings increased by $0.02 per share in Q2 2025, driven by timely recovery on capital investments and favorable weather conditions [23][24] - Manufacturing segment earnings decreased by $0.08 per share primarily due to lower product pricing and decreased sales volumes [25] - The Plastics segment experienced a decline in earnings of $0.18 per share, attributed to a 15% decrease in sales prices, although sales volumes increased by 11% [26][27] Market Data and Key Metrics Changes - The company continues to have some of the lowest electric rates in the nation, with 2024 rates being 30% below the national average and 16% below regional peers [18] - The construction and lawn and garden end markets are improving, while recreational vehicle and agricultural end markets are still facing challenges due to high inventory levels [19] Company Strategy and Development Direction - The company is focused on a significant capital investment plan totaling $1.4 billion over five years, aimed at benefiting customers and driving earnings growth [9][30] - The electric segment is projected to have a compounded annual growth rate of 9% through 2029, with a focus on customer-centric investments [12][31] - The company is also working on expanding its manufacturing capabilities, including the BTD Georgia facility and Vinyltech expansion [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the manufacturing segment despite current down cycles, emphasizing a strong track record of performance during market rebounds [25][31] - The company is monitoring legislative changes that may impact renewable energy projects but expects its current capital investment plan to remain intact [9][10] Other Important Information - The company filed a request with the South Dakota Public Utilities Commission to increase base electric rates for the first time since 2018, proposing to increase net revenues by approximately $5.7 million [11] - The company is finalizing a cost of service analysis in Minnesota and anticipates filing a rate case later this year [12] Q&A Session Summary Question: No questions were raised during the Q&A session - The operator noted that there were no questions in the queue and concluded the call [35][37]