FERGUS FALLS, Minn., Nov. 1 /PRNewswire-FirstCall/ -- Otter Tail Corporation (Nasdaq: OTTR) announced financial results for the quarter ended September 30, 2007 with the following highlights:
-- Record third quarter revenues of $302.2 million.
-- Consolidated net income of $13.3 million for the third quarter of 2007
compared with $13.5 million for the third quarter of 2006.
-- Diluted earnings per share of $0.44 for the third quarter of 2007
compared with $0.45 for the third quarter of 2006.
-- On November 1, 2007 the Board of Directors declared a quarterly common
stock dividend of 29.25 cents per share, payable December 10. The Board
also declared quarterly dividends on the corporation's four series of
preferred stock, payable December 1. Dividends are payable to
shareholders of record as of November 15.
-- The corporation reaffirms its 2007 diluted earnings per share guidance
from continuing operations to be in the range of $1.60 to $1.80.
"Our third quarter financial results were in line with our expectations," said John Erickson, president and chief executive officer of Otter Tail Corporation. "Electric segment earnings were consistent with the same quarter a year ago, and increased profits from our manufacturing and food ingredient processing segments offset the anticipated reduction in earnings from our plastics segment. DMI Industries, our manufacturer of wind towers, produced excellent growth for the quarter. We reaffirm our 2007 earnings per share guidance to be within the range of $1.60 to $1.80."
For the nine months ended September 30, 2007 net income from continuing operations was heets - Liabilities and Equity
Otter Tail Corporation
Consolidated Statements of Income
For the three and nine months ended September 30, 2007 and 2006
In thousands, except share and per share amounts
Quarter Ended Year-to-date
September 30, September 30,
2007 2006 2007 2006
Operating revenues by segment:
Electric $72,110 $71,206 $232,662 $227,308
Plastics 36,975 45,941 114,319 136,731
Manufacturing 95,330 76,667 286,341 226,555
Health services 31,360 35,432 96,775 100,341
processing 15,714 11,474 53,612 30,635
operations 51,956 40,739 129,012 99,397
eliminations (1,210) (917) (3,521) (2,714)
revenues 302,235 280,542 909,200 818,253
Fuel and purchase
power 23,493 24,436 91,027 87,098
Nonelectric cost of
goods sold (excludes
included below) 179,868 161,148 521,500 449,905
Electric operating and
maintenance expense 29,750 28,693 88,329 85,318
expense 30,211 29,543 92,346 85,097
amortization 13,366 12,552 39,406 37,155
expenses 276,688 256,372 832,608 744,573
Operating income (loss) by
Electric 12,286 11,647 33,805 35,658
Plastics 2,515 7,792 13,383 24,046
Manufacturing 7,953 5,944 25,098 19,793
Health services 348 749 3,631 2,693
processing 1,979 (1,602) 5,064 (4,792)
operations 466 (360) (4,389) (3,718)
operations 25,547 24,170 76,592 73,680
Interest charges 4,927 5,078 14,821 14,622
Other income 619 1,060 1,232 2,147
Income taxes - continuing
operations 7,907 6,676 23,160 21,737
Net income (loss) by
segment - continuing
Electric 6,493 6,494 17,491 19,485
Plastics 1,384 4,578 7,610 14,177
Manufacturing 3,477 2,456 11,351 8,861
Health services 53 300 1,709 1,141
processing 993 (1,078) 2,985 (3,504)
operations 932 726 (1,303) (692)
Total net income -
operations 13,332 13,476 39,843 39,468
operations net of
taxes of $0; $0; $0
and $28 for the
respective periods - - - 26
Net gain on disposition
operations - net of
taxes of $0; $0; $0
and $224 for the
respective periods - - - 336
Net income from
discontinued operations - - - 362
Total net income 13,332 13,476 39,843 39,830
Preferred stock dividend 184 183 552 551
Balance for common: $13,148 $13,293 $39,291 $39,279
Average number of common
shares outstanding -
basic 29,745,600 29,412,526 29,644,866 29,377,158
Average number of common
shares outstanding -
diluted 29,995,660 29,805,897 29,887,510 29,764,752
Basic earnings per common
(net of preferred
dividend requirement) $0.44 $0.45 $1.33 $1.33
operations $- $- $- $0.01
$0.44 $0.45 $1.33 $1.34
Diluted earnings per
(net of preferred
dividend requirement) $0.44 $0.45 $1.31 $1.31
operations $- $- $- $0.01
$0.44 $0.45 $1.31 $1.32
Otter Tail Corporation
Consolidated Balance Sheets
September 30, December 31,
Cash and cash equivalents $704 $6,791
Trade - net 161,684 135,011
Other 12,713 10,265
Inventories 97,757 103,002
Deferred income taxes 8,221 8,069
Accrued utility revenues 12,693 23,931
Costs and estimated earnings in
excess of billings 44,055 38,384
Other 13,637 9,611
Assets of discontinued operations - 289
Total current assets 351,464 335,353
Investments and other assets 32,959 29,946
Goodwill - net 99,242 98,110
Other intangibles - net 20,698 20,080
Unamortized debt expense and
reacquisition premiums 5,813 6,133
Regulatory assets and other deferred
debits 46,882 50,419
Total deferred debits 52,695 56,552
Electric plant in service 946,727 930,689
Nonelectric operations 255,913 239,269
Total 1,202,640 1,169,958
Less accumulated depreciation and
amortization 503,295 479,557
Plant - net of accumulated depreciation
and amortization 699,345 690,401
Construction work in progress 86,621 28,208
Net plant 785,966 718,609
Total $1,343,024 $1,258,650
Otter Tail Corporation
Consolidated Balance Sheets
Liabilities and Equity
September 30, December 31,
Short-term debt $78,781 $38,900
Current maturities of long-term debt 3,019 3,125
Accounts payable 111,550 120,195
Accrued salaries and wages 26,660 28,653
Accrued federal and state income taxes 4,308 2,383
Other accrued taxes 10,075 11,509
Other accrued liabilities 13,843 10,495
Liabilities of discontinued operations - 197
Total current liabilities 248,236 215,457
Pensions benefit liability 42,260 44,035
Other postretirement benefits liability 33,335 32,254
Other noncurrent liabilities 21,581 18,866
Deferred income taxes 114,843 112,740
Deferred investment tax credit 7,328 8,181
Regulatory liabilities 64,614 63,875
Other 255 281
Total deferred credits 187,040 185,077
Long-term debt, net of current maturities 278,378 255,436
Class B stock options of subsidiary 1,255 1,255
Cumulative preferred shares 15,500 15,500
Cumulative preference shares - authorized
1,000,000 shares without par value;
outstanding - none - -
Common shares, par value $5 per share 149,139 147,609
Premium on common shares 107,502 99,223
Retained earnings 258,129 245,005
Accumulated other comprehensive
income (loss) 669 (1,067)
Total common equity 515,439 490,770
Total capitalization 810,572 762,961
Total $1,343,024 $1,258,650$39.8 million compared with $39.5 million for the nine months ended September 30, 2006. Diluted earnings per share from continuing operations were $1.31 for both the nine months ended September 30, 2007 and September 30, 2006.
Segment Performance Summary
Electric revenues increased 1.3% to $72.1 million in the third quarter of 2007 compared with $71.2 million in the third quarter of 2006 due to increases of $0.6 million in other electric revenues, $0.2 million in retail electric revenues and $0.1 million in net revenues from wholesale sales and energy trading activities, including mark-to-market losses on forward energy contracts. Electric segment third quarter 2007 net income of $6.5 million was unchanged from third quarter 2006 net income.
The main contributor to the increase in other electric revenues was an increase in revenue from electric construction work performed for other companies. The increase in retail revenues reflects $0.5 million related to a 4.1% increase in retail kilowatt-hour (kwh) sales, offset by a $0.3 million decrease in Fuel Clause Adjustment (FCA) revenues related to a 6.6% decrease in fuel and purchased power costs per kwh generated and purchased for system use. The increase in retail kwh sales reflects increased consumption by commercial and pipeline customers. Electric operating expenses, including fuel and purchased power, increased $0.3 million between the quarters mainly as a result of increases of $0.8 million in material costs related to construction work performed for others and $0.4 million in property taxes and depreciation expense related to an increase in plant in service between the quarters, offset by a $0.9 million reduction in fuel and purchased power expenses.
The plastics segment's revenues and net income were $37.0 million and $1.4 million, respectively, in the quarter ended September 30, 2007 compared with $45.9 million and $4.6 million in the quarter ended September 30, 2006. The decrease in revenues and net income is mainly the result of a 19% decline in sales prices between the quarters. The decrease in pipe prices reflects a continuing but anticipated softening of the pipe market.
The manufacturing segment's revenues and net income were $95.3 million and $3.5 million, respectively, in the quarter ended September 30, 2007 compared with $76.7 million and $2.5 million in the quarter ended September 30, 2006. DMI Industries, Inc. recorded increases of $15.0 million in revenue and $0.7 million in net income between the quarters as a result of increased production levels and productivity gains. DMI's third quarter 2007 operating expenses include $0.3 million in pre-production start-up costs for its new plant in Tulsa, Oklahoma. At ShoreMaster, Inc., revenues increased $2.6 million and net losses decreased $0.2 million between the quarters as a result of strong commercial sales. The Aviva Sports product line, acquired by ShoreMaster in February 2007, contributed $0.5 million to the increase in revenues. At BTD Manufacturing, Inc., revenues increased $0.6 million while net income decreased $0.1 million between the quarters. The increase in revenues is primarily related to the acquisition of Pro Engineering in May 2007. Increases in payroll costs and depreciation expenses at BTD more than offset a $0.3 million increase in gross margins on sales, resulting in the reduction in net income between the quarters. At T.O. Plastics, Inc., revenues increased $0.5 million and net income increased $0.3 million as a result of increased sales volume between the quarters.
The health services segment's revenues and net income were $31.4 million and $0.1 million, respectively, in the quarter ended September 30, 2007 compared with $35.4 million and $0.3 million in the quarter ended September 30, 2006. Revenues from scanning and other related services decreased $2.2 million as a result of fewer interim installations and a 2.8% decrease in scan revenues. Revenues from equipment sales and servicing decreased $1.9 million between the quarters. Cost of goods sold decreased $3.9 million between the quarters. The decrease in equipment sales revenues and cost of goods sold reflect a change in mix between the quarters to more commission-based compensation for sales to customers from traditional dealership distribution of products. A $0.2 million increase in operating and depreciation expenses contributed to the decrease in health services net income between the quarters.
Food Ingredient Processing
The food ingredient processing segment recorded revenues of $15.7 million and net income of $1.0 million in the quarter ended September 30, 2007 compared with revenues of $11.5 million and a net loss of $1.1 million in the quarter ended September 30, 2006. The increase in revenue was the result of an increase in pounds of product sold combined with an increase in the price per pound of product sold. The increase in revenue combined with a decrease in the cost per pound of product sold due to lower potato and natural gas prices were the main factors contributing to the increase in net income between the quarters.
Other Business Operations
Other business operations had revenues of $52.0 million and net income of $0.9 million in the quarter ended September 30, 2007 compared with revenues of $40.7 million and net income of $0.7 million in the quarter ended September 30, 2006. Revenues and net income from the corporation's construction companies increased $11.4 million and $0.4 million, respectively, between the quarters as a result of an increase in construction activity between the quarters. Net income at the corporation's flatbed trucking company decreased $0.2 million between the quarters.
Otter Tail Corporation anticipates 2007 diluted earnings per share from continuing operations to be in a range from $1.60 to $1.80. Contributing to the earnings guidance for 2007 are the following items:
-- The corporation expects electric segment earnings in the range of
$19.0 million to $24.0 million in 2007, which is consistent with 2007
prior guidance. A major maintenance shutdown of Big Stone Plant planned
for the third quarter of 2007 was rescheduled for the fourth quarter of
2007, resulting in a shift in anticipated expenditures and plant
availability between the quarters.
-- The corporation expects the plastics segment's earnings performance to
be in the range of $6.0 million to $8.5 million, which is consistent
with 2007 prior guidance.
-- Continued enhancements in productivity and capacity utilization and
strong backlogs are expected to result in increased net income in the
manufacturing segment in 2007.
-- The corporation expects flat to slightly declining earnings in the
health services segment in 2007 primarily due to lower sales at the
diagnostic imaging services company. This is a change from prior
guidance of moderate net income growth from this segment in 2007.
-- The corporation expects its food ingredient processing business to
generate net income in the range of $3.0 million to $4.5 million in
2007, a change from prior guidance of $2.5 million to $4.5 million.
-- The other business operations segment is expected to have lower
earnings in 2007 compared with 2006 due to an expected return to more
normal corporate cost levels. The construction companies are expected
to have a strong 2007 given performance in the first nine months of
2007 and current backlogs.
Risk Factors and Forward-Looking Statements that Could Affect Future Results
The information in this release includes certain forward-looking information, including 2007 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:
-- The corporation is subject to federal and state legislation,
regulations and actions that may have a negative impact on its business
and results of operations.
-- Future operating results of the electric segment will be impacted by
the outcome of a rate case filed in Minnesota on October 1, 2007,
requesting an overall increase in Minnesota rates of 6.66%. The filing
includes a request for an interim rate increase of 5.41% beginning
November 30, 2007. If approved by the Minnesota Public Utilities
Commission (MPUC), interim rates will remain in effect for all
Minnesota customers until the MPUC makes a final determination on the
electric utility's request, which is expected by August 1, 2008. If
final rates are lower than interim rates, the electric utility will
refund Minnesota customers the difference with interest.
-- Certain costs currently included in the Fuel Clause Adjustment (FCA) in
retail rates may be excluded from recovery through the FCA but may be
subject to recovery through rates established in a general rate case.
Further, all, or portions of, gross margins on asset-based wholesale
electric sales may become subject to refund through the FCA as a result
of a general rate case.
-- Weather conditions or changes in weather patterns can adversely affect
the corporation's operations and revenues.
-- Electric wholesale margins could be further reduced as the Midwest
Independent Transmission System Operator market becomes more efficient.
-- Electric wholesale trading margins could be reduced or eliminated by
losses due to trading activities.
-- The corporation's electric generating facilities are subject to
operational risks that could result in unscheduled plant outages,
unanticipated operation and maintenance expenses and increased power
-- Wholesale sales of electricity from excess generation could be affected
by reductions in coal shipments to the Big Stone and Hoot Lake plants
due to supply constraints or rail transportation problems beyond the
-- The corporation's electric segment has capitalized $8.1 million in
costs related to the planned construction of a second electric
generating unit at its Big Stone Plant site as of September 30, 2007.
Should approvals of permits not be received on a timely basis, the
project could be at risk. If the project is abandoned for permitting or
other reasons, these capitalized costs and others incurred in future
periods may be subject to expense and may not be recoverable.
-- The corporation's manufacturer of wind towers operates in a market that
has been dependent on the Federal Production Tax Credit. This tax
credit is currently in place through December 31, 2008. Should this tax
credit not be renewed, the revenues and earnings of this business could
-- Federal and state environmental regulation could cause the corporation
to incur substantial capital expenditures which could result in
increased operating costs.
-- Existing or new laws or regulations addressing climate change or
reductions of greenhouse gas emissions by federal or state authorities,
such as mandated levels of renewable generation or mandatory reductions
in carbon dioxide (CO2) emission levels or taxes on CO2 emissions, that
result in increases in electric service costs could negatively impact
the corporation's net income, financial position and operating cash
flows if such costs cannot be recovered through rates granted by
ratemaking authorities in the states where the electric utility
provides service or through increased market prices for electricity.
-- The corporation's plans to grow and diversify through acquisitions may
not be successful and could result in poor financial performance.
-- The corporation's plan to grow its nonelectric businesses could be
limited by state law.
-- Competition is a factor in all of the corporation's businesses.
-- Economic uncertainty could have a negative impact on the corporation's
future revenues and earnings.
-- Volatile financial markets and changes in the corporation's debt rating
could restrict the corporation's ability to access capital and could
increase borrowing costs and pension plan expenses.
-- The price and availability of raw materials could affect the revenue
and earnings of the corporation's manufacturing segment.
-- The corporation's food ingredient processing segment operates in a
highly competitive market and is dependent on adequate sources of raw
materials for processing. Should the supply of these raw materials be
affected by poor growing conditions, this could negatively impact the
results of operations for this segment. This segment could also be
impacted by foreign currency changes between Canadian and United States
currency and prices of natural gas.
-- The corporation's plastics segment is highly dependent on a limited
number of vendors for PVC resin, many of which are located in the Gulf
Coast regions, and a limited supply of resin. The loss of a key vendor
or an interruption or delay in the supply of PVC resin could result in
reduced sales or increased costs for this business. Reductions in PVC
resin prices could negatively impact PVC pipe prices, profit margins on
PVC pipe sales and the value of PVC pipe held in inventory.
-- Changes in the rates or method of third-party reimbursements for
diagnostic imaging services could result in reduced demand for those
services or create downward pricing pressure, which would decrease
revenues and earnings for the corporation's health services segment.
-- The corporation's health services businesses may not be able to retain
or comply with the dealership arrangement and other agreements with
-- A significant failure or an inability to properly bid or perform on
projects by the corporation's construction businesses could lead to
adverse financial results.
For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the Securities and Exchange Commission.
About The Corporation: Otter Tail Corporation has interests in diversified operations that include an electric utility, manufacturing, health services, food ingredient processing and infrastructure businesses which include plastics, construction and transportation. Otter Tail Corporation stock trades on the NASDAQ Global Select Market under the symbol OTTR. The latest investor and corporate information is available at http://www.ottertail.com. Corporate offices are located in Fergus Falls, Minnesota, and Fargo, North Dakota.
See Otter Tail Corporation's results of operations for the three and
nine months ended September 30, 2007 and 2006 in the attached financial
statements. Consolidated Statements of Income, Consolidated Balance Sheets
- Assets, Consolidated Balance S
|SOURCE Otter Tail Corporation|
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