Otter Tail (US:OTTR)2023-05-03 17:32Financial Performance - Consolidated operating revenues for Q1 2023 were $339.1 million, a decrease of $35.8 million or 9.6% compared to Q1 2022 [79]. - Operating income for Q1 2023 was $80.7 million, down $17.6 million or 17.9% from the previous year [79]. - Net income for Q1 2023 was $62.5 million, a decrease of $9.5 million or 13.2% compared to Q1 2022 [79]. - Corporate operating loss for Q1 2023 was $4.618 million, a 4.0% increase from $4.440 million in Q1 2022 [97]. Segment Performance - The Electric segment reported a 20.1% increase in retail revenues to $136.5 million, driven by higher sales volumes and increased fuel recovery revenues [86]. - The Manufacturing segment's operating revenues increased by 1.7% to $106.8 million, supported by a 19% increase in sales volumes [93]. - The Plastics segment experienced a significant decline in operating revenues, down 42.4% to $80.4 million, primarily due to a 46% decrease in sales volumes [95]. Operating Expenses and Cash Flow - Operating expenses decreased by $18.2 million in Q1 2023, mainly due to lower sales volumes in the Plastics segment and reduced material costs in the Manufacturing segment [82]. - Net cash provided by operating activities increased by $10.1 million to $55.553 million in Q1 2023 compared to $45.416 million in Q1 2022, primarily due to the absence of a pension plan contribution [106]. Capital Expenditures and Investments - Net cash used in investing activities rose by $68.9 million to $100.379 million in Q1 2023, driven by higher capital investments, including the $50.6 million purchase of the Ashtabula III wind farm [107]. - The company has increased its Electric segment five-year capital expenditure plan by approximately $45 million to incorporate proposed investments through 2027 [110]. - Total capital expenditures for 2022 were $1,281 million, with anticipated expenditures of $1,102 million from 2023 to 2027 [111]. - The electric segment's total capital expenditures for 2023 are projected to be $214 million, increasing to $247 million in 2024 [111]. Debt and Financing - As of March 31, 2023, the company had $827 million of principal outstanding under long-term debt arrangements [121]. - The OTC Credit Agreement has a borrowing limit of $170 million, with an accordion feature allowing it to increase to $290 million [120]. - As of March 31, 2023, OTC's interest-bearing debt to total capitalization was 0.412 to 1.00, and its interest and dividend coverage ratio was 10.62 to 1.00 [122]. - OTP's interest-bearing debt to total capitalization was 0.467 to 1.00, with an interest and dividend coverage ratio of 3.73 to 1.00 as of March 31, 2023 [123]. Future Expectations - The company expects Plastics segment earnings to normalize beginning in 2024 as supply and demand conditions stabilize [75]. - The company anticipates a regulatory asset of $68.5 million related to potential withdrawal from Coyote Station, assuming withdrawal occurs at the end of 2028 [103]. - The company expects to generate approximately $9.3 million in net capacity auction revenues from 88 megawatts of excess capacity auctioned in the MISO planning resource auction [101]. - The company plans to add approximately 200 megawatts of solar generation in 2027-2028 and 200 megawatts of wind generation in 2029 [104]. Tax and Material Costs - The effective tax rate for Q1 2023 was 17.6%, down from 19.7% in Q1 2022, influenced by increased production tax credits [85]. - PVC resin and other input material costs decreased by 20% compared to the same period last year, stabilizing after previous volatility [96]. Dividends - The company paid dividends totaling $18.3 million, or $0.4375 per share, in the first three months of 2023 [116].