Otter Tail (US:OTTR)2023-02-15 18:57Financial Performance - Total operating revenues for 2022 reached $1,460,209,000, a 22% increase from $1,196,844,000 in 2021[306]. - Net income for 2022 was $284,184,000, representing a 61% increase compared to $176,769,000 in 2021[307]. - Basic earnings per share increased to $6.83 in 2022, up from $4.26 in 2021, reflecting a 60% growth[306]. - Operating income for 2022 was $390,439,000, a 56.4% increase from $249,708,000 in 2021[306]. - The company reported a total comprehensive income of $291,623,000 for 2022, compared to $178,752,000 in 2021, marking a 63.1% increase[307]. - Total assets as of December 31, 2022, were $2,901,661,000, an increase of 5.3% from $2,754,830,000 in 2021[305]. - Total current liabilities decreased significantly to $237,636,000 in 2022, down 38.6% from $387,699,000 in 2021[305]. - Shareholders' equity increased to $1,217,317,000 in 2022, a 22.9% rise from $990,777,000 in 2021[305]. - Net cash provided by operating activities increased to $389,309,000 in 2022 from $231,243,000 in 2021, representing a 68.4% growth[309]. Segment Performance - The Electric segment generated $549,699,000 in revenue for 2022, up 14% from $480,321,000 in 2021[357]. - The Plastics segment saw a revenue increase of 35% in 2022, reaching $512,527,000 compared to $380,229,000 in 2021[357]. - The Manufacturing segment earns revenue from the production and delivery of custom-made or standardized parts, recognizing revenue at the point of shipment[317]. - The Electric segment generates revenue primarily from the sale of electricity to retail customers at rates approved by state regulatory commissions[316]. - The Plastics segment generates revenue predominantly from the sale of standardized PVC pipe products, with revenue recognized at the point of shipment[319]. Debt and Financing - As of December 31, 2022, the company had $8.2 million and $91.2 million of short-term debt outstanding, with a one percentage point change in interest rates potentially impacting interest charges by approximately $0.3 million[290]. - Long-term debt, net of current maturities, rose to $823,821,000 in 2022, up from $734,014,000 in 2021[305]. - The company issued $90.0 million of Series 2022A Senior Unsecured Notes in 2022, which were used to repay short-term borrowings and fund capital expenditures[383]. - OTP's total outstanding short- and long-term borrowings amounted to $832.0 million as of December 31, 2022, compared to $855.2 million in 2021[379]. - The weighted-average interest rate on all outstanding borrowings as of December 31, 2022, was 5.61%, compared to 1.42% in 2021[381]. Asset Management - Total inventories decreased to $145,952,000 in 2022 from $148,490,000 in 2021, a decline of 1.0%[324]. - Receivables decreased to $146,041,000 in 2022 from $176,789,000 in 2021, reflecting a reduction in trade receivables[358]. - Identifiable assets increased to $2,901,661,000 in 2022 from $2,754,830,000 in 2021, showing growth in asset base[354]. - Cash and cash equivalents at the end of 2022 were $118,996,000, up from $1,537,000 at the end of 2021[309]. Risk Management - The Electric segment's exposure to commodity price risk is largely mitigated by the ratemaking process, allowing recovery of purchased power and fuel costs from electric customers[285]. - The Manufacturing segment is exposed to commodity price risk from raw materials like steel and aluminum, with potential impacts on operating revenues if cost management efforts are unsuccessful[287]. - The Plastics segment is sensitive to PVC resin price volatility, affecting sales volumes and gross profit margins significantly[288]. - The company does not engage in hedging activities for commodity price risk within its Manufacturing and Plastics segments[289]. - The company has not used hedging instruments to manage interest rate risk, maintaining a ratio of fixed-rate debt to total debt within a specified range[292]. Pension and Employee Benefits - The company’s pension plan assets totaled $313.8 million as of December 31, 2022, down from $387.2 million in 2021[395]. - The actual allocation for Return Enhancement investments was 48% in 2022, within the permitted range of 35% to 60%[393]. - The net periodic benefit cost for the pension plan was $3.1 million in 2022, down from $7.7 million in 2021, representing a decrease of approximately 60%[398]. - The accumulated benefit obligation of the pension plan was $283.2 million in 2022, down from $378.3 million in 2021, a decrease of about 25%[396]. - The company contributed $20 million to the pension plan in 2022, up from $10 million in 2021[396]. Taxation - The total provision for income taxes in 2022 was $73.351 million, with an effective tax rate of 20.5%, compared to $36.052 million and 16.9% in 2021[405]. - The company has deferred tax assets totaling $168.098 million and deferred tax liabilities of $389.400 million as of December 31, 2022, resulting in deferred income taxes of $(221.302) million[406]. Investments and Acquisitions - The company acquired the Ashtabula III wind farm for $50.6 million on January 3, 2023, enhancing its renewable energy portfolio[408]. - OTP's construction work in progress increased to $113.9 million in 2022 from $74.9 million in 2021, reflecting ongoing investments[371]. Compliance and Governance - The company maintains effective internal control over financial reporting, as confirmed by independent auditors[294]. - Financial covenants require a maximum debt to total capitalization ratio of 0.60 to 1.00 and a minimum interest and dividend coverage ratio of 1.50 to 1.00; as of December 31, 2022, the company was in compliance[386].