• Consolidated net income from continuing operations increased to
• Diluted earnings per share (EPS) from continuing operations on a non-GAAP basis1 were
• Consolidated revenues increased 4% to
• Consolidated operating income increased 18% to
• Consolidated net income totaled
• Fourth quarter diluted EPS from continuing operations were
• Fourth quarter diluted EPS from continuing operations were
• The corporation expects 2014 EPS from continuing operations to be in a range of
1This release includes measures of financial performance and presentations of financial information that are not defined by generally accepted accounting principles (GAAP). Management believes that adjusting for certain one-time costs, such as debt prepayment premiums and presenting results on the basis of the expected future classification of continuing and discontinued operations will assist investors in making an evaluation of our performance against prior periods on a comparable basis. Management understands that there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not substitutes for GAAP measures for the purpose of analyzing financial performance. These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. This information should not be construed as an alternative to the reported results, which have been determined in accordance with GAAP.
"I am particularly pleased to report that all six
"We also lowered our debt burden when we retired
"These successes and actions validate our overarching strategy to enhance our financial stability, lower our risk profile, focus on operational excellence, and grow more predictably. Executing on that strategy in 2013 led us to earnings per share from continuing operations of
"Based on the strengths of our performance in 2013 and our outlook for 2014, the Board of Directors increased our indicated annualized dividend rate from
2013Earnings from Continuing Operations Exceeded Expectations
The following table sets forth actual results against the corporation's most recent forecast for 2013 on a GAAP basis, and also shows 2013 and 2012 results on a non-GAAP basis, reflecting the effects of the early retirements of debt in 2013 and 2012.
|2013 Earnings Per Share|
4Q 2013 Earnings
4Q 2012 Earnings
|Low||High||Per Share||Per Share||Per Share||Per Share|
|Corporate – Recurring Costs||
|Subtotal – Non-GAAP Basis1|
|Corporate – Loss on Debt Extinguishment||
|Corporate – Interest on Debt Related to Discontinued Operations|
|Total – Continuing Operations - GAAP Basis|
The corporation's consolidated cash flow from continuing operations in 2013 was
The following table presents the status of the corporation's lines of credit as of
In Use On||
Restricted due to |
Outstanding Letters of Credit
|Otter Tail Corporation Credit Agreement||$ --||$ 659|
|Otter Tail Power Company Credit Agreement||170,000||51,195||1,830||116,975|
2013 Segment Performance Summary
Electric revenues and net income were
The following table shows Degree Days for the electric utility business as a percent of normal:
Year ended ||
Three Months ended |
|Heating Degree Days||114.9%||83.9%||119.7%||103.5%|
|Cooling Degree Days||113.7%||141.2%||—||—|
Retail electric revenues increased
Wholesale electric revenues from company-owned generation increased
Net revenue from energy trading activities, including net mark-to-market gains on forward energy contracts, increased
Other electric operating revenues increased
Electric operating and maintenance expenses increased
Electric segment depreciation expense increased
Manufacturing revenues and net income were
• At BTD, revenues decreased
Plastics revenues and net income were
Construction segment revenues were
Corporate net-of-tax costs decreased
The financial position, results of operations and cash flows of the corporation's former waterfront equipment, wind tower manufacturing, health services, trucking and potato processing businesses are reported as discontinued operations in the corporation's consolidated financial statements provided at the end of this report. Following are summary presentations of the results of discontinued operations for the years ended
For the Year Ended |
|Operating Revenues||$ 2,016|
|Asset Impairment Charge||--||53,320|
|Income Tax Expense (Benefit)||9||(14,982)|
|Income (Loss) from Operations||481||(38,710)|
|Gain (Loss) on Disposition Before Taxes||216||(5,216)|
|Income Tax Expense on Disposition||6||315|
|Net Gain (Loss) on Disposition||210||(5,531)|
|Net Income (Loss)||$ 691|
Realigning the corporation's portfolio of businesses and refocusing its capital investment are important to reducing its risk profile, as well as better supporting its credit metrics, which enhances its ability to support the dividend and capitalize on available growth opportunities. The corporation may continue to pursue other opportunities for strategic realignment.
Fourth Quarter 2013 Consolidated Results
Operating revenues were
Net income from continuing operations was
Fourth quarter 2013 Electric segment net income exceeded the corporation's expectations by approximately
Net income was
2014 Business Outlook
The corporation anticipates 2014 diluted earnings per share to be in the range of
Segment components of the corporation's 2014 earnings per share guidance range are as follows:
|2013 EPS||2014 EPS Guidance|
|Subtotal – Continuing Operations|
|Corporate – Loss on Debt Extinguishment||
|Total – Continuing Operations|
Contributing to the corporation's earnings guidance for 2014 are the following items:
• The corporation expects net income to increase significantly in its Electric segment in 2014 compared with 2013 based on the following items:
• Rider recovery increases, including environmental riders in• The corporation expects net income from its Manufacturing segment to be flat between the years due to the following factors:
Minnesotaand North Dakotarelated to the Big Stone AQCS environmental upgrades while under construction, and• A decrease in pension costs of approximately $2.0 millionas a result of an increase in the discount rate from 4.5% to 5.3%, offset by• An increase in interest costs as a result of $150 millionof fixed rate long term debt being put in place in the first quarter of 2014 to finance the Big Stone Plant AQCS and transmission projects, and• An increase in operating and maintenance costs primarily for increased labor and a planned outage for maintenance at Hoot Lake Plant.
• An increase at BTD due to increased order volume as a result of expanded relationships with customers in recreational vehicle, lawn and garden, industrial and commercial end markets BTD serves, offset by• A decrease in earnings from• The corporation expects net income in its Plastics segment to return to more normal levels in 2014 compared with 2013. The Plastics segment experienced its fourth best earnings year in its history in 2013 due to increased sales volumes in construction and housing markets in the South Central and Southwest regions of
T.O. Plasticsdue to a reduction in sales of a product the customer will be producing on its own in 2014.• Backlog for the manufacturing companies of approximately $136 millionfor 2014 compared with $124 million one year ago.
• The Corporation expects higher net income from its Construction segment in 2014 as a result of improved cost control processes in construction management and more selective bidding on projects with the potential for higher margins. Backlog in place for the construction businesses is
• Corporate costs are expected to be down in 2014 due to lower interest costs as a result of retiring
The corporation reviews its portfolio of companies annually to see where additional opportunities exist to improve its risk profile, improve credit metrics and generate additional sources of cash to support the future capital expenditure plans of its Electric segment.
The following table shows our 2013 capital expenditures and 2014 through 2018 anticipated capital expenditures and electric utility average rate base:
|Transmission||$ 53||$ 46||$ 97||$ 52||$ 56|
|Total Electric Segment||$ 141||$ 97||$ 102|
|Manufacturing and Infrastructure Segments||15||23||19||26||20||24|
|Total Capital Expenditures||$ 167||$ 117||$ 126|
|Total Electric Utility Average Rate Base|
Execution on the currently anticipated electric utility capital expenditure plan is expected to grow rate base and be a key driver in increasing utility earnings over the 2014 through 2018 timeframe.
CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on
The presentation will be posted on the corporation's website before the webcast. To access the live webcast go to www.ottertail.com/presentations.cfm and select "Webcast". Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the webcast. An archived copy of the webcast will be available on our website shortly following the call.
If you are interested in asking a question during the live webcast, the Dial-In Number is: 877-312-8789.
Risk Factors and Forward-Looking Statements that Could Affect Future Results
The information in this release includes certain forward-looking information, including 2014 expectations, made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the corporation believes its expectations are based on reasonable assumptions, actual results may differ materially from those expectations. The following factors, among others, could cause actual results for the corporation to differ materially from those discussed in the forward-looking statements:
• Federal and state environmental regulation could require the corporation to incur substantial capital expenditures and increased operating costs.
• Volatile financial markets and changes in the corporation's debt ratings could restrict its ability to access capital and could increase borrowing costs and pension plan and postretirement health care expenses.
• The corporation relies on access to both short- and long-term capital markets as a source of liquidity for capital requirements not satisfied by cash flows from operations. If the corporation is not able to access capital at competitive rates, its ability to implement its business plans may be adversely affected.
• Disruptions, uncertainty or volatility in the financial markets can also adversely impact the corporation's results of operations, the ability of its customers to finance purchases of goods and services, and its financial condition, as well as exert downward pressure on stock prices and/or limit its ability to sustain its current common stock dividend level.
• The corporation made
• Any significant impairment of the corporation's goodwill would cause a decrease in its asset values and a reduction in its net operating income.
• Declines in projected operating cash flows at any of the corporation's reporting units may result in goodwill impairments that could adversely affect its results of operations and financial position, as well as financing agreement covenants.
• The corporation currently has
• The inability of the corporation's subsidiaries to provide sufficient earnings and cash flows to allow the corporation to meet its financial obligations and debt covenants and pay dividends to its shareholders could have an adverse effect on the corporation.
• Economic conditions could negatively impact the corporation's businesses.
• If the corporation is unable to achieve the organic growth it expects, its financial performance may be adversely affected.
• The corporation's plans to grow and realign its business mix through capital projects, acquisitions and dispositions may not be successful, which could result in poor financial performance.
• The corporation may, from time to time, sell assets to provide capital to fund investments in its electric utility business or for other corporate purposes, which could result in the recognition of a loss on the sale of any assets sold and other potential liabilities. The sale of any of the corporation's businesses could expose the corporation to additional risks associated with indemnification obligations under the applicable sales agreements and any related disputes.
• The corporation's plans to grow and operate its manufacturing and infrastructure businesses could be limited by state law.
• Significant warranty claims and remediation costs in excess of amounts normally reserved for such items could adversely affect the corporation's results of operations and financial condition.
• The corporation is subject to risks associated with energy markets.
• The corporation is subject to risks and uncertainties related to the timing and recovery of deferred tax assets which could have a negative impact on the corporation's net income in future periods.
• The corporation relies on its information systems to conduct its business, and failure to protect these systems against security breaches could adversely affect its business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, the corporation's business could be harmed.
• The corporation may experience fluctuations in revenues and expenses related to its electric operations, which may cause its financial results to fluctuate and could impair its ability to make distributions to its shareholders or scheduled payments on its debt obligations, or to meet covenants under its borrowing agreements.
• Actions by the regulators of the corporation's electric operations could result in rate reductions, lower revenues and earnings or delays in recovering capital expenditures.
• Changes to regulation of generating plant emissions, including but not limited to carbon dioxide (CO2) emissions, could affect
• Competition from foreign and domestic manufacturers, the price and availability of raw materials and general economic conditions could affect the revenues and earnings of our manufacturing businesses.
• The corporation's Plastics segment is highly dependent on a limited number of vendors for PVC resin, many of which are located in the
• The corporation's plastic pipe companies compete against a large number of other manufacturers of PVC pipe and manufacturers of alternative products. Customers may not distinguish the pipe companies' products from those of its competitors.
• Reductions in PVC resin prices can negatively impact PVC pipe prices, profit margins on PVC pipe sales and the value of PVC pipe held in inventory.
• A significant failure or an inability to properly bid or perform on projects or contracts by the corporation's construction businesses could lead to adverse financial results and could lead to the possibility of delay or liquidated damages.
• The corporation's construction subsidiaries enter into contracts which could expose them to unforeseen costs and costs not within their control, which may not be recoverable and could adversely affect the corporation's results of operations and financial condition.
For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the
About The Corporation:
|Consolidated Statements of Income|
|In thousands, except share and per share amounts|
|Quarter Ended ||Year-to-Date |
|Operating Revenues by Segment|
|Electric||$ 103,385||$ 93,235||$ 373,540||$ 350,765|
|Corporate Revenue and Intersegment Eliminations||(17)||(22)||(91)||(100)|
|Total Operating Revenues||233,202||212,632||893,313||859,239|
|Nonelectric Cost of Goods Sold (depreciation included below)||105,213||95,264||416,687||417,138|
|Electric Operating and Maintenance Expense||36,740||32,532||144,706||131,789|
|Nonelectric Operating and Maintenance Expense||13,119||13,316||51,930||52,621|
|Asset Impairment Charge||--||--||--||432|
|Depreciation and Amortization||15,091||15,024||59,885||59,764|
|Total Operating Expenses||204,501||188,479||796,462||777,212|
|Operating Income (Loss) by Segment|
|Total Operating Income||28,701||24,153||96,851||82,027|
|Loss on Early Retirement of Debt||10,252||--||10,252||13,106|
|Income Tax Expense – Continuing Operations||430||1,933||13,543||2,133|
|Net Income (Loss) by Segment – Continuing Operations|
|Net Income from Continuing Operations||12,610||17,091||50,174||38,968|
|Income (Loss) - net of Income Tax Expense|
Impairment Loss - net of Income Tax (Benefit) of |
|(Loss) Gain on Disposition - net of Income Tax Expense|
|Net Income (Loss) from Discontinued Operations||53||(14,124)||691||(44,241)|
|Total Net Income (Loss)||12,663||2,967||50,865||(5,273)|
|Preferred Dividend Requirement and Other Adjustments||--||185||513||736|
|Balance for Common||$ 12,663||$ 2,782||$ 50,352||$ (6,009)|
|Average Number of Common Shares Outstanding:|
|Basic Earnings (Loss) Per Common Share:|
|Continuing Operations (net of preferred dividend requirement)||$ 0.35||$ 0.47||$ 1.37||$ 1.06|
|$ 0.35||$ 0.08||$ 1.39||$ (0.17)|
|Diluted Earnings (Loss) Per Common Share:|
|Continuing Operations (net of preferred dividend requirement)||$ 0.35||$ 0.47||$ 1.37||$ 1.05|
|$ 0.35||$ 0.08||$ 1.39||$ (0.17)|
|Consolidated Balance Sheets|
|Cash and Cash Equivalents||$ 1,150||$ 52,362|
|Deferred Income Taxes||14,421||30,964|
|Costs and Estimated Earnings in Excess of Billings||4,063||3,663|
|Assets of Discontinued Operations||38||19,092|
|Total Current Assets||229,559||323,632|
|Unamortized Debt Expense||4,188||5,529|
|Total Deferred Debits||87,918||140,284|
|Electric Plant in Service||1,460,884||1,423,303|
|Construction Work in Progress||187,461||77,890|
|Total Gross Plant||1,843,217||1,687,287|
|Less Accumulated Depreciation and Amortization||676,201||637,835|
|Consolidated Balance Sheets|
|LIABILITIES AND EQUITY|
|Short-Term Debt||$ 51,195||$ --|
|Current Maturities of Long-Term Debt||188||176|
|Accrued Salaries and Wages||19,903||20,571|
|Billings In Excess Of Costs and Estimated Earnings||13,707||16,204|
|Other Accrued Liabilities||6,532||6,334|
|Liabilities of Discontinued Operations||3,637||11,156|
|Total Current Liabilities||232,892||173,128|
|Pensions Benefit Liability||69,743||116,541|
|Other Postretirement Benefits Liability||45,221||58,883|
|Other Noncurrent Liabilities||25,209||22,244|
|Deferred Income Taxes||174,572||171,787|
|Deferred Tax Credits||28,288||31,299|
|Total Deferred Credits||277,504||272,387|
|Long-Term Debt, Net of Current Maturities||389,589||421,680|
|Cumulative Preferred Shares||--||15,500|
|Cumulative Preference Shares||--||--|
Common Shares, Par Value ||181,358||180,842|
|Premium on Common Shares||255,759||253,296|
|Accumulated Other Comprehensive Loss||(1,728)||(4,385)|
|Total Common Equity||534,830||521,974|
|Consolidated Statements of Cash Flows|
|For the Year Ended |
|Cash Flows from Operating Activities|
|Net Income (Loss)||$ 50,865||$ (5,273)|
|Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:|
|Net (Gain) Loss from Sale of Discontinued Operations||(210)||5,531|
|Net (Income) Loss from Discontinued Operations||(481)||38,710|
|Depreciation and Amortization||59,885||59,764|
|Asset Impairment Charge||--||432|
|Premium Paid for Early Retirement of Long-Term Debt||9,889||12,500|
|Deferred Tax Credits||(1,925)||(2,091)|
|Deferred Income Taxes||16,201||11,459|
|Change in Deferred Debits and Other Assets||56,720||(4,802)|
|Discretionary Contribution to Pension Plan||(10,000)||(10,000)|
|Change in Noncurrent Liabilities and Deferred Credits||(42,226)||32,718|
Allowance for ||(1,823)||(1,168)|
|Change in Derivatives Net of Regulatory Deferral||8||718|
|Stock Compensation Expense – Equity Awards||1,456||1,311|
|Cash Provided by (Used for) Current Assets and Current Liabilities:|
|Change in Receivables||8,335||2,430|
|Change in Inventories||(3,345)||(687)|
|Change in Other Current Assets||(4,216)||7,019|
|Change in Payables and Other Current Liabilities||11,321||30,056|
|Change in Interest Payable and Income Taxes Receivable/Payable||(513)||(14,141)|
|Net Cash Provided by Continuing Operations||150,582||168,986|
|Net Cash (Used in) Provided by Discontinued Operations||(2,502)||64,561|
|Net Cash Provided by Operating Activities||148,080||233,547|
|Cash Flows from Investing Activities|
|Proceeds from Disposal of Noncurrent Assets||3,764||4,889|
|Net Increase in Other Investments||(1,845)||(1,037)|
|Net Cash Used in Investing Activities - Continuing Operations||(162,544)||(111,910)|
|Net Proceeds from Sale of Discontinued Operations||12,842||42,229|
|Net Cash Provided by (Used in) Investing Activities - Discontinued Operations||505||(13,896)|
|Net Cash Used in Investing Activities||(149,197)||(83,577)|
|Cash Flows from Financing Activities|
|Net Short-Term Borrowings||51,195||--|
|Proceeds from Issuance of Common Stock||1,522||--|
|Common Stock Issuance Expenses||(3)||(370)|
|Payments for Retirement of Capital Stock||(15,723)||(111)|
|Proceeds from Issuance of Long-Term Debt||40,900||--|
|Short-Term and Long-Term Debt Issuance Expenses||(522)||(897)|
|Payments for Retirement of Long-Term Debt||(72,981)||(50,224)|
|Premium Paid for Early Retirement of Long-Term Debt||(9,889)||(12,500)|
|Dividends Paid and Other Distributions||(43,818)||(43,976)|
|Net Cash Used in Financing Activities - Continuing Operations||(49,319)||(108,078)|
|Net Cash Used in Financing Activities - Discontinued Operations||--||(4,278)|
|Net Cash Used in Financing Activities||(49,319)||(112,356)|
|Net Change in Cash and Cash Equivalents – Discontinued Operations||(776)||(1,246)|
|Net Change in Cash and Cash Equivalents||(51,212)||36,368|
|Cash and Cash Equivalents at Beginning of Period||52,362||15,994|
|Cash and Cash Equivalents at End of Period||$ 1,150||$ 52,362|
CONTACT: Media contact:
Cris Oehler, Vice President of Corporate Communications (218) 531-0099 or (866) 410-8780 Investor contact: Loren Hanson, Manager of Investor Relations (218) 739-8481 or (800) 664-1259