Otter Tail (US:OTTR)2025-11-05 21:19Financial 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]