UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023 or

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-53713

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota (State or other jurisdiction of incorporation or organization)			27-0383995 (I.R.S. Employer Identification No.)

215 South Cascade Street, Box 496, Fergus Falls, Minnesota (Address of principal executive offices)			56538-0496 (Zip Code)

Registrant's telephone number, including area code: 866-410-8780

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $5.00 per share	OTTR	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☑

Accelerated Filer ☐

Non-Accelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

~~41,630,952~~41,710,521 Common Shares ($5 par value) as of ~~October 25, 2022.~~July 28, 2023.

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TABLE OF CONTENTS

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DEFINITIONS

The following abbreviations or acronyms are used in the text.

~~AGI~~AMDT

Advanced ~~Grid Infrastructure Rider~~Meter and Distribution Technology

~~OTC~~MISO

~~Otter Tail Corporation~~Midcontinent Independent System Operator, Inc.

ARP

Alternative Revenue Program

~~OTP~~MPUC

~~Otter Tail Power Company~~Minnesota Public Utilities Commission

BTD

BTD Manufacturing, Inc.

NDDEQ

North Dakota Department of Environmental Quality

CCS

Carbon Capture and Sequestration

OTC

Otter Tail Corporation

CIP

Conservation Improvement Program

OTP

Otter Tail Power Company

EGU

Electric Generating Units

PIR

Phase-In Rider

~~EAR~~EITE

Energy ~~Adjustment~~Intensive, Trade Exposed Rider

PSLRA

Private Securities Litigation Reform Act of 1995

EPA

Environmental Protection Agency

PTC

Production Tax Credits

ESSRP

Executive Survivor and Supplemental Retirement Plan

PVC

Polyvinyl chloride

EUIC

Electric Utility Infrastructure Cost Recovery Rider

RHR

Regional Haze Rule

FERC

Federal Energy Regulatory Commission

~~RHR~~ROE

~~Regional Haze Rule~~Return on equity

GCR

Generation Cost Recovery Rider

~~ROE~~

~~Return on equity~~

~~ISO~~

~~Independent System Operator~~

RRR

Renewable Resource Rider

~~IRP~~GHG

~~Integrated Resource Plan~~Greenhouse Gas

SEC

Securities and Exchange Commission

~~kwh~~ISO

~~kilowatt-hour~~

~~SOFR~~

~~Secured Overnight Funds Rate~~

~~Merricourt~~

~~Merricourt Wind Energy Center~~Independent System Operator

T.O. Plastics

T.O. Plastics, Inc.

~~MISO~~kwh

~~Midcontinent Independent System Operator, Inc.~~kilowatt-hour

TCR

Transmission Cost Recovery Rider

~~MPUC~~Merricourt

~~Minnesota Public Utilities Commission~~Merricourt Wind Energy Center


FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). When used in this Form 10-Q and in future filings by Otter Tail Corporation (the "Company") with the Securities and Exchange Commission (SEC), in the Company’s press releases and in oral statements, words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” "future," "goal," “intend,” "likely," “may,” “outlook,” “plan,” “possible,” “potential,” "probable," "projected," “should,” "target," “will,” “would” or similar expressions are intended to identify forward-looking statements within the meaning of the PSLRA. Such statements are based on current expectations and assumptions and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. The Company’s risks and uncertainties include, among other things, uncertainty of ~~the impact and duration of the COVID-19 pandemic, uncertainty of~~ future investments and capital expenditures, rate base levels and rate base growth, long-term investment risk, seasonal weather patterns and extreme weather events, counterparty credit risk, future business volumes with key customers, reductions in our credit ratings, our ability to access capital markets on favorable terms, assumptions and costs relating to funding our employee benefit plans, our subsidiaries’ ability to make dividend payments, cyber security threats or data breaches, the impact of government legislation and regulation including foreign trade policy and environmental, health and safety laws and regulations, the impact of climate change including compliance with legislative and regulatory changes to address climate change, operational and economic risks associated with our electric generating and manufacturing facilities, risks associated with energy markets, the availability and pricing of resource materials, inflation ~~rates,~~cost pressures, attracting and maintaining a qualified and stable workforce, expectations regarding regulatory proceedings, and changing macroeconomic and industry conditions. These and other risks and uncertainties are more fully described in our filings with the SEC, including our most recently filed Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.

PART I. FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

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OTTER TAIL CORPORATION

CONSOLIDATED BALANCE SHEETS (unaudited)


(in thousands, except share data)	(in thousands, except share data)	September 30, 2022		December 31, 2021		(in thousands, except share data)	June 30, 2023		December 31, 2022

Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	72,987	$	1,537	Cash and Cash Equivalents	$	150,578	$	118,996
Receivables, net of allowance for credit losses	Receivables, net of allowance for credit losses	193,797		174,953		Receivables, net of allowance for credit losses	194,951		144,393
Inventories	Inventories	146,376		148,490		Inventories	144,441		145,952
Regulatory Assets	Regulatory Assets	29,921		27,342		Regulatory Assets	19,058		24,999
Other Current Assets	Other Current Assets	17,412		17,032		Other Current Assets	15,084		18,412
Total Current Assets	Total Current Assets	460,493		369,354		Total Current Assets	524,112		452,752
Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Investments	Investments	52,966		56,690		Investments	59,882		54,845
Property, Plant and Equipment, net of accumulated depreciation	Property, Plant and Equipment, net of accumulated depreciation	2,186,643		2,124,605		Property, Plant and Equipment, net of accumulated depreciation	2,316,246		2,212,717
Regulatory Assets	Regulatory Assets	116,593		125,508		Regulatory Assets	96,128		94,655
Intangible Assets, net of accumulated amortization	Intangible Assets, net of accumulated amortization	8,218		9,044		Intangible Assets, net of accumulated amortization	7,393		7,943
Goodwill	Goodwill	37,572		37,572		Goodwill	37,572		37,572
Other Noncurrent Assets	Other Noncurrent Assets	35,419		32,057		Other Noncurrent Assets	52,653		41,177
Total Noncurrent Assets	Total Noncurrent Assets	2,437,411		2,385,476		Total Noncurrent Assets	2,569,874		2,448,909
Total Assets	Total Assets	$	2,897,904	$	2,754,830	Total Assets	$	3,093,986	$	2,901,661

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-Term Debt	Short-Term Debt	$	—	$	91,163	Short-Term Debt	$	50,197	$	8,204
Current Maturities of Long-Term Debt		—		29,983

Accounts Payable	Accounts Payable	121,995		135,089		Accounts Payable	104,661		104,400
Accrued Salaries and Wages	Accrued Salaries and Wages	27,454		31,704		Accrued Salaries and Wages	26,029		32,327
Accrued Taxes	Accrued Taxes	25,635		19,245		Accrued Taxes	31,900		19,340
Regulatory Liabilities	Regulatory Liabilities	21,114		24,844		Regulatory Liabilities	41,743		17,300
Other Current Liabilities	Other Current Liabilities	45,655		55,671		Other Current Liabilities	46,032		56,065
Total Current Liabilities	Total Current Liabilities	241,853		387,699		Total Current Liabilities	300,562		237,636
Noncurrent Liabilities	Noncurrent Liabilities					Noncurrent Liabilities
Pension Benefit Liability	Pension Benefit Liability	50,489		73,973		Pension Benefit Liability	33,198		33,210
Other Postretirement Benefits Liability	Other Postretirement Benefits Liability	67,352		66,481		Other Postretirement Benefits Liability	47,364		46,977
Regulatory Liabilities	Regulatory Liabilities	240,545		234,430		Regulatory Liabilities	245,935		244,497
Deferred Income Taxes	Deferred Income Taxes	212,838		188,268		Deferred Income Taxes	231,910		221,302
Deferred Tax Credits	Deferred Tax Credits	16,102		16,661		Deferred Tax Credits	15,544		15,916
Other Noncurrent Liabilities	Other Noncurrent Liabilities	60,942		62,527		Other Noncurrent Liabilities	67,093		60,985
Total Noncurrent Liabilities	Total Noncurrent Liabilities	648,268		642,340		Total Noncurrent Liabilities	641,044		622,887
Commitments and Contingencies (Note 9)	Commitments and Contingencies (Note 9)					Commitments and Contingencies (Note 9)
Capitalization	Capitalization					Capitalization
Long-Term Debt, net of current maturities		823,760		734,014
Long-Term Debt						Long-Term Debt	823,941		823,821
Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common Shares: 50,000,000 shares authorized, $5 par value; 41,630,952 and 41,551,524 outstanding at September 30, 2022 and December 31, 2021		208,155		207,758
Common Shares: 50,000,000 shares authorized, $5 par value; 41,710,521 and 41,631,113 outstanding at June 30, 2023 and December 31, 2022						Common Shares: 50,000,000 shares authorized, $5 par value; 41,710,521 and 41,631,113 outstanding at June 30, 2023 and December 31, 2022	208,553		208,156
Additional Paid-In Capital	Additional Paid-In Capital	422,448		419,760		Additional Paid-In Capital	425,867		423,034
Retained Earnings	Retained Earnings	560,398		369,783		Retained Earnings	693,138		585,212
Accumulated Other Comprehensive Loss		(6,978)		(6,524)
Accumulated Other Comprehensive Income						Accumulated Other Comprehensive Income	881		915
Total Shareholders' Equity	Total Shareholders' Equity	1,184,023		990,777		Total Shareholders' Equity	1,328,439		1,217,317
Total Capitalization	Total Capitalization	2,007,783		1,724,791		Total Capitalization	2,152,380		2,041,138
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	2,897,904	$	2,754,830	Total Liabilities and Shareholders' Equity	$	3,093,986	$	2,901,661

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per-share amounts)	(in thousands, except per-share amounts)	2022		2021		2022		2021		(in thousands, except per-share amounts)	2023		2022		2023		2022

Operating Revenues	Operating Revenues									Operating Revenues
Electric	Electric	$	142,747	$	118,775	$	404,112	$	348,629	Electric	$	113,763	$	130,949	$	265,671	$	261,365
Product Sales	Product Sales	241,109		197,519		754,688		514,983		Product Sales	223,953		269,091		411,126		513,579
Total Operating Revenues	Total Operating Revenues	383,856		316,294		1,158,800		863,612		Total Operating Revenues	337,716		400,040		676,797		774,944
Operating Expenses	Operating Expenses									Operating Expenses
Electric Production Fuel	Electric Production Fuel	24,972		17,698		54,538		44,576		Electric Production Fuel	14,833		14,714		26,326		29,567
Electric Purchased Power	Electric Purchased Power	19,913		9,878		64,604		40,273		Electric Purchased Power	5,212		24,162		47,037		44,691
Electric Operating and Maintenance Expenses	Electric Operating and Maintenance Expenses	39,799		36,465		126,460		114,615		Electric Operating and Maintenance Expenses	45,522		42,379		91,070		86,659
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	139,361		134,212		443,586		358,767		Cost of Products Sold (excluding depreciation)	120,658		152,466		233,027		304,225
Other Nonelectric Expenses	Other Nonelectric Expenses	16,524		16,224		50,981		45,587		Other Nonelectric Expenses	16,870		17,252		35,568		34,457
Depreciation and Amortization	Depreciation and Amortization	22,716		22,815		69,829		68,109		Depreciation and Amortization	24,232		23,566		48,089		47,113
Electric Property Taxes	Electric Property Taxes	4,438		4,474		13,304		13,136		Electric Property Taxes	4,336		4,435		8,957		8,866
Total Operating Expenses	Total Operating Expenses	267,723		241,766		823,302		685,063		Total Operating Expenses	231,663		278,974		490,074		555,578
Operating Income	Operating Income	116,133		74,528		335,498		178,549		Operating Income	106,053		121,066		186,723		219,366
Other Income and Expense
Interest Charges		9,259		9,648		27,198		28,601
Nonservice Cost Components of Postretirement Benefits		(52)		505		(824)		1,511
Other Income and (Expense)										Other Income and (Expense)
Interest Expense										Interest Expense	(9,696)		(8,991)		(19,111)		(17,939)
Nonservice Components of Postretirement Benefits										Nonservice Components of Postretirement Benefits	2,421		751		4,833		772
Other Income (Expense), net	Other Income (Expense), net	(174)		203		(802)		2,095		Other Income (Expense), net	3,253		(889)		5,370		(629)
Income Before Income Taxes	Income Before Income Taxes	106,752		64,578		308,322		150,532		Income Before Income Taxes	102,031		111,937		177,815		201,570
Income Tax Expense	Income Tax Expense	22,513		11,824		66,143		25,380		Income Tax Expense	20,062		26,000		33,365		43,630
Net Income	Net Income	$	84,239	$	52,754	$	242,179	$	125,152	Net Income	$	81,969	$	85,937	$	144,450	$	157,940

Weighted-Average Common Shares Outstanding:	Weighted-Average Common Shares Outstanding:									Weighted-Average Common Shares Outstanding:
Basic	Basic	41,600		41,504		41,582		41,487		Basic	41,678		41,597		41,655		41,573
Diluted	Diluted	41,974		41,869		41,930		41,795		Diluted	42,053		41,944		42,035		41,907
Earnings Per Share:	Earnings Per Share:									Earnings Per Share:
Basic	Basic	$	2.02	$	1.27	$	5.82	$	3.02	Basic	$	1.97	$	2.07	$	3.47	$	3.80
Diluted	Diluted	$	2.01	$	1.26	$	5.78	$	2.99	Diluted	$	1.95	$	2.05	$	3.44	$	3.77

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022

Net Income	Net Income	$	84,239	$	52,754	$	242,179	$	125,152	Net Income	$	81,969	$	85,937	$	144,450	$	157,940
Other Comprehensive Income (Loss):	Other Comprehensive Income (Loss):									Other Comprehensive Income (Loss):
Unrealized Loss on Available-for-Sale Securities, net of tax benefit of $46, $7, $127, and $27		(171)		(26)		(476)		(101)
Pension and Other Postretirement Benefits, net of tax expense of $(37), $(51), $(8), and $(154)		106		146		22		437
Unrealized Gain (Loss) on Available-for-Sale Securities, net of tax (expense) benefit of $16, $20, $(5) and $81										Unrealized Gain (Loss) on Available-for-Sale Securities, net of tax (expense) benefit of $16, $20, $(5) and $81	(61)		(74)		19		(305)
Pension and Other Postretirement Benefits, net of tax benefit (expense) of $9, $(37), $19 and $29										Pension and Other Postretirement Benefits, net of tax benefit (expense) of $9, $(37), $19 and $29	(27)		106		(53)		(84)
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	(65)		120		(454)		336		Total Other Comprehensive Income (Loss)	(88)		32		(34)		(389)
Total Comprehensive Income	Total Comprehensive Income	$	84,174	$	52,874	$	241,725	$	125,488	Total Comprehensive Income	$81,881		$85,969		$144,416		$157,551

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)


(in thousands, except common shares outstanding)	(in thousands, except common shares outstanding)	Common Shares Outstanding	Par Value, Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity		(in thousands, except common shares outstanding)	Common Shares Outstanding	Par Value, Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity

Balance, June 30, 2022		41,630,799	$	208,154	$	421,951	$	493,351	$	(6,913)	$	1,116,543
Balance, March 31, 2023													Balance, March 31, 2023	41,684,526	$	208,423	$	424,948	$	629,437	$	969	$	1,263,777

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	153	1		(1)		—		—		—		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	25,995	130		(130)		—		—		—
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(132)		—		—		(132)
Stock Issued Under Stock Purchase Plan, net of expenses													Stock Issued Under Stock Purchase Plan, net of expenses	—	—		(167)		—		—		(167)
Net Income	Net Income	—	—		—		84,239		—		84,239		Net Income	—	—		—		81,969		—		81,969
Other Comprehensive Loss	Other Comprehensive Loss	—	—		—		—		(65)		(65)		Other Comprehensive Loss	—	—		—		—		(88)		(88)
Stock Compensation Expense	Stock Compensation Expense	—	—		630		—		—		630		Stock Compensation Expense	—	—		1,216		—		—		1,216
Common Dividends ($0.4125 per share)		—	—		—		(17,192)		—		(17,192)
Balance, September 30, 2022		41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023
Common Dividends ($0.4375 per share)													Common Dividends ($0.4375 per share)	—	—		—		(18,268)		—		(18,268)
Balance, June 30, 2023													Balance, June 30, 2023	41,710,521	$	208,553	$	425,867	$	693,138	$	881	$	1,328,439

Balance, June 30, 2021		41,538,709	$	207,694	$	417,870	$	297,850	$	(8,291)	$	915,123
Balance, March 31, 2022													Balance, March 31, 2022	41,605,884	$	208,029	$	421,449	$	424,605	$	(6,945)	$	1,047,138

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	1,275	6		(132)		—		—		(126)		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	24,915	125		(105)		—		—		20

Net Income	Net Income	—	—		—		52,754		—		52,754		Net Income	—	—		—		85,937		—		85,937
Other Comprehensive Income	Other Comprehensive Income	—	—		—		—		120		120		Other Comprehensive Income	—	—		—		—		32		32
Stock Compensation Expense	Stock Compensation Expense	—	—		830		—		—		830		Stock Compensation Expense	—	—		607		—		—		607
Common Dividends ($0.39 per share)		—	—		—		(16,219)		—		(16,219)
Balance, September 30, 2021		41,539,984	$	207,700	$	418,568	$	334,385	$	(8,171)	$	952,482
Common Dividends ($0.4125 per share)													Common Dividends ($0.4125 per share)	—	—		—		(17,191)		—		(17,191)
Balance, June 30, 2022													Balance, June 30, 2022	41,630,799	$	208,154	$	421,951	$	493,351	$	(6,913)	$	1,116,543

Balance, December 31, 2022													Balance, December 31, 2022	41,631,113	$	208,156	$	423,034	$	585,212	$	915	$	1,217,317

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes													Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,408	397		(3,485)		—		—		(3,088)
Stock Issued Under Stock Purchase Plan, net of expenses													Stock Issued Under Stock Purchase Plan, net of expenses	—	—		(166)		—		—		(166)
Net Income													Net Income	—	—		—		144,450		—		144,450
Other Comprehensive Loss													Other Comprehensive Loss	—	—		—		—		(34)		(34)
Stock Compensation Expense													Stock Compensation Expense	—	—		6,484		—		—		6,484
Common Dividends ($0.875 per share)													Common Dividends ($0.875 per share)	—	—		—		(36,524)		—		(36,524)
Balance, June 30, 2023													Balance, June 30, 2023	41,710,521	$	208,553	$	425,867	$	693,138	$	881	$	1,328,439

Balance, December 31, 2021	Balance, December 31, 2021	41,551,524	$	207,758	$	419,760	$	369,783	$	(6,524)	$	990,777	Balance, December 31, 2021	41,551,524	$	207,758	$	419,760	$	369,783	$	(6,524)	$	990,777

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,428	397		(3,321)		—		—		(2,924)		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,275	396		(3,320)		—		—		(2,924)
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(132)		—		—		(132)

Net Income	Net Income	—	—		—		242,179		—		242,179		Net Income	—	—		—		157,940		—		157,940
Other Comprehensive Loss	Other Comprehensive Loss	—	—		—		—		(454)		(454)		Other Comprehensive Loss	—	—		—		—		(389)		(389)
Stock Compensation Expense	Stock Compensation Expense	—	—		6,141		—		—		6,141		Stock Compensation Expense	—	—		5,511		—		—		5,511
Common Dividends ($1.2375 per share)		—	—		—		(51,564)		—		(51,564)
Balance, September 30, 2022		41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023

Balance, December 31, 2020		41,469,879	$	207,349	$	414,246	$	257,878	$	(8,507)	$	870,966

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes		70,105	351		(1,965)		—		—		(1,614)
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(67)		—		—		(67)
Net Income		—	—		—		125,152		—		125,152
Other Comprehensive Income		—	—		—		—		336		336
Stock Compensation Expense		—	—		6,354		—		—		6,354
Common Dividends ($1.17 per share)		—	—		—		(48,645)		—		(48,645)
Balance, September 30, 2021		41,539,984	$	207,700	$	418,568	$	334,385	$	(8,171)	$	952,482
Common Dividends ($0.825 per share)													Common Dividends ($0.825 per share)	—	—		—		(34,372)		—		(34,372)
Balance, June 30, 2022													Balance, June 30, 2022	41,630,799	$	208,154	$	421,951	$	493,351	$	(6,913)	$	1,116,543

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Operating Activities	Operating Activities					Operating Activities
Net Income	Net Income	$	242,179	$	125,152	Net Income	$	144,450	$	157,940
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:					Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization	Depreciation and Amortization	69,829		68,109		Depreciation and Amortization	48,089		47,113
Deferred Tax Credits	Deferred Tax Credits	(558)		(558)		Deferred Tax Credits	(372)		(373)
Deferred Income Taxes	Deferred Income Taxes	23,648		18,835		Deferred Income Taxes	8,708		25,160
Discretionary Contribution to Pension Plan	Discretionary Contribution to Pension Plan	(20,000)		(10,000)		Discretionary Contribution to Pension Plan	—		(20,000)
Allowance for Equity Funds Used During Construction		(938)		(427)
Investment (Gains) Losses						Investment (Gains) Losses	(4,295)		4,440
Stock Compensation Expense	Stock Compensation Expense	6,141		6,354		Stock Compensation Expense	6,484		5,511
Other, Net	Other, Net	5,477		(2,747)		Other, Net	161		(164)
Changes in Operating Assets and Liabilities:	Changes in Operating Assets and Liabilities:					Changes in Operating Assets and Liabilities:
Receivables	Receivables	(18,845)		(64,800)		Receivables	(50,558)		(50,885)
Inventories	Inventories	3,632		(22,450)		Inventories	2,396		2,889
Regulatory Assets	Regulatory Assets	170		5,301		Regulatory Assets	7,320		5,604
Other Assets	Other Assets	1,789		(18,708)		Other Assets	3,561		3,240
Accounts Payable	Accounts Payable	(10,681)		30,921		Accounts Payable	1,037		1,933
Accrued and Other Liabilities	Accrued and Other Liabilities	(13,970)		12,027		Accrued and Other Liabilities	(4,271)		(3,394)
Regulatory Liabilities	Regulatory Liabilities	(1,208)		2,350		Regulatory Liabilities	27,169		(3,859)
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	1,308		5,393		Pension and Other Postretirement Benefits	(5,382)		475
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	287,973		154,752		Net Cash Provided by Operating Activities	184,497		175,630
Investing Activities	Investing Activities					Investing Activities
Capital Expenditures	Capital Expenditures	(123,227)		(117,312)		Capital Expenditures	(151,516)		(70,791)
Proceeds from Disposal of Noncurrent Assets	Proceeds from Disposal of Noncurrent Assets	3,803		5,819		Proceeds from Disposal of Noncurrent Assets	2,970		2,840
Cash Used for Investments and Other Assets	Cash Used for Investments and Other Assets	(8,132)		(5,591)		Cash Used for Investments and Other Assets	(5,079)		(5,944)
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(127,556)		(117,084)		Net Cash Used in Investing Activities	(153,625)		(73,895)
Financing Activities	Financing Activities					Financing Activities
Net Borrowings (Repayments) on Short-Term Debt		(91,163)		16,860
Net Borrowings (Repayments) of Short-Term Debt						Net Borrowings (Repayments) of Short-Term Debt	41,993		(91,163)

Proceeds from Issuance of Long-Term Debt	Proceeds from Issuance of Long-Term Debt	90,000		—		Proceeds from Issuance of Long-Term Debt	—		90,000
Payments for Retirement of Long-Term Debt		(30,000)		(169)

Dividends Paid	Dividends Paid	(51,564)		(48,645)		Dividends Paid	(36,524)		(34,372)
Payments for Shares Withheld for Employee Tax Obligations	Payments for Shares Withheld for Employee Tax Obligations	(2,942)		(1,633)		Payments for Shares Withheld for Employee Tax Obligations	(3,088)		(2,942)
Other, net	Other, net	(3,298)		(3,972)		Other, net	(1,671)		(2,806)
Net Cash Used in Financing Activities		(88,967)		(37,559)
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	710		(41,283)
Net Change in Cash and Cash Equivalents	Net Change in Cash and Cash Equivalents	71,450		109		Net Change in Cash and Cash Equivalents	31,582		60,452
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	1,537		1,163		Cash and Cash Equivalents at Beginning of Period	118,996		1,537
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	72,987	$	1,272	Cash and Cash Equivalents at End of Period	$	150,578	$	61,989

Supplemental Disclosure of Noncash Investing Activities	Supplemental Disclosure of Noncash Investing Activities					Supplemental Disclosure of Noncash Investing Activities
Accrued Property, Plant and Equipment Additions	Accrued Property, Plant and Equipment Additions	$	12,438	$	14,358	Accrued Property, Plant and Equipment Additions	$	13,149	$	11,116

See accompanying notes to consolidated financial statements

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OTTER TAIL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Summary of Significant Accounting Policies

Overview

Otter Tail Corporation (OTC) and its subsidiaries (collectively, the "Company", "us", "our" or "we") form a diverse, multi-platform business consisting of a vertically integrated, regulated utility with generation, transmission and distribution facilities complemented by manufacturing businesses providing metal fabrication for custom machine parts and metal components, manufacturing of extruded and thermoformed plastic products, and manufacturing of polyvinyl chloride (PVC) pipe products. We classify our business into three segments: Electric, Manufacturing and Plastics.

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the SEC for interim reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles. In the opinion of management, we have included all adjustments, including normal recurring accruals, necessary for a fair presentation of the consolidated financial statements for the periods presented. The consolidated financial statements and condensed notes thereto should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Because of the seasonality of our businesses and other factors, the earnings for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 should not be taken as an indication of earnings for all or any part of the balance of the current year or as an indication of earnings for future years.

Use of Estimates

We use estimates based on the best information available in recording transactions and balances resulting from business operations. As better information becomes available or actual amounts are known, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying consolidated statements of ~~shareholders' equity and consolidated statements of~~ cash flows to maintain consistency and comparability between periods presented. Other, net operating cash flows previously reported for the six months ended June 30, 2022, included $4.4 million of investment losses, which are presented separately in the current period, and excluded $0.6 million of allowance for equity funds used during construction, which were previously presented separately. The reclassifications had no impact on previously reported ~~shareholders' equity,~~ net cash provided by operating activities, net cash used in investing activities, net cash ~~used in~~(used in) provided by financing activities, or cash and cash equivalents.

Concentration of Deposits and Investments

The Company has financial instruments that potentially subject us to a concentration risk, including cash and cash equivalents held in deposit and money market accounts with various financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Corporation up to an insurance limit of $250,000. Currently, our cash and cash equivalents significantly exceed federally insured levels.

2. Segment Information

We classify our business into three segments, Electric, Manufacturing, and Plastics consistent with our business strategy, organizational structure and our internal reporting and review processes used by our chief operating decision maker to make decisions regarding allocation of resources, to assess operating performance and to make strategic decisions.

Certain assets and costs are not allocated to our operating segments. Corporate operating costs include items such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of operating segment performance. Corporate assets consist primarily of cash and cash equivalents, prepaid expenses, investments and fixed assets. Corporate is not an operating segment, rather it is added to operating segment totals to reconcile to consolidated amounts.

Table of Contents

Information for each segment and our unallocated corporate costs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Operating Revenue
Electric $ 142,747 $ 118,775 $ 404,112 $ 348,629
Manufacturing 98,767 89,977 306,921 250,085
Plastics 142,342 107,542 447,767 264,898
Total $ 383,856 $ 316,294 $ 1,158,800 $ 863,612
Net Income (Loss)
Electric $ 24,847 $ 22,528 $ 62,938 $ 55,547
Manufacturing 6,219 4,200 17,858 15,290
Plastics 55,982 28,410 170,788 60,102
Corporate (2,809) (2,384) (9,405) (5,787)
Total $ 84,239 $ 52,754 $ 242,179 $ 125,152

~~Table of~~ ~~Contents~~


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022

Operating Revenue
Electric	$	113,763	$	130,949	$	265,671	$	261,365
Manufacturing	102,475		103,196		209,257		208,154
Plastics	121,478		165,895		201,869		305,425
Total	$	337,716	$	400,040	$	676,797	$	774,944
Net Income (Loss)
Electric	$	19,634	$	18,858	$	42,854	$	38,091
Manufacturing	5,969		7,555		12,831		11,639
Plastics	55,392		63,959		89,078		114,806
Corporate	974		(4,435)		(313)		(6,596)
Total	$	81,969	$	85,937	$	144,450	$	157,940

The following provides the identifiable assets by segment and corporate assets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Identifiable Assets	Identifiable Assets					Identifiable Assets
Electric	Electric	$	2,347,461	$	2,283,776	Electric	$	2,446,293	$	2,351,961
Manufacturing	Manufacturing	253,819		251,044		Manufacturing	260,050		245,869
Plastics	Plastics	179,925		162,565		Plastics	177,470		126,318
Corporate	Corporate	116,699		57,445		Corporate	210,173		177,513
Total	Total	$	2,897,904	$	2,754,830	Total	$	3,093,986	$	2,901,661

3. Revenue

Presented below are our operating revenues to external customers, in total and by amounts arising from contracts with customers and alternative revenue program (ARP) arrangements, disaggregated by revenue source and segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022

Operating Revenues	Operating Revenues									Operating Revenues
Electric Segment	Electric Segment									Electric Segment
Retail: Residential	Retail: Residential	$	35,122	$	33,902	$	108,883	$	100,067	Retail: Residential	$	26,974	$	33,011	$	70,951	$	73,743
Retail: Commercial and Industrial	Retail: Commercial and Industrial	83,022		60,557		232,532		185,376		Retail: Commercial and Industrial	64,989		78,521		155,474		149,527
Retail: Other	Retail: Other	2,033		1,979		6,004		5,687		Retail: Other	1,752		2,071		3,743		3,972
Total Retail	Total Retail	120,177		96,438		347,419		291,130		Total Retail	93,715		113,603		230,168		227,242
Transmission	Transmission	13,156		13,300		37,409		37,085		Transmission	14,829		11,697		26,936		24,254
Wholesale	Wholesale	7,196		6,944		13,196		14,711		Wholesale	2,670		3,537		4,508		6,000
Other	Other	2,218		2,093		6,088		5,703		Other	2,549		2,112		4,059		3,869
Total Electric Segment	Total Electric Segment	142,747		118,775		404,112		348,629		Total Electric Segment	113,763		130,949		265,671		261,365
Manufacturing Segment	Manufacturing Segment									Manufacturing Segment
Metal Parts and Tooling	Metal Parts and Tooling	84,054		76,455		261,923		210,141		Metal Parts and Tooling	89,396		88,296		179,463		177,869
Plastic Products and Tooling	Plastic Products and Tooling	12,723		10,198		36,584		30,624		Plastic Products and Tooling	10,068		11,416		24,211		23,860
Scrap Metal Sales	Scrap Metal Sales	1,990		3,324		8,414		9,320		Scrap Metal Sales	3,011		3,484		5,583		6,425
Total Manufacturing Segment	Total Manufacturing Segment	98,767		89,977		306,921		250,085		Total Manufacturing Segment	102,475		103,196		209,257		208,154
Plastics Segment	Plastics Segment									Plastics Segment
PVC Pipe	PVC Pipe	142,342		107,542		447,767		264,898		PVC Pipe	121,478		165,895		201,869		305,425
Total Operating Revenue	Total Operating Revenue	383,856		316,294		1,158,800		863,612		Total Operating Revenue	337,716		400,040		676,797		774,944
Less: Non-contract Revenues Included Above	Less: Non-contract Revenues Included Above									Less: Non-contract Revenues Included Above
Electric Segment - ARP Revenues	Electric Segment - ARP Revenues	(548)		(33)		(7,937)		(2,790)		Electric Segment - ARP Revenues	(334)		(4,928)		(1,545)		(7,388)
Total Operating Revenues from Contracts with Customers	Total Operating Revenues from Contracts with Customers	$	384,404	$	316,327	$	1,166,737	$	866,402	Total Operating Revenues from Contracts with Customers	$	338,050	$	404,968	$	678,342	$	782,332

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4. Select Balance Sheet Information

Receivables and Allowance for Credit Losses

Receivables as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

(in thousands) September 30,
2022 December 31,
2021
Receivables
Trade $ 167,480 $ 142,297
Other 9,052 10,591
Unbilled Receivables 18,813 23,901
Total Receivables 195,345 176,789
Less: Allowance for Credit Losses (1,548) (1,836)
Receivables, net of allowance for credit losses $ 193,797 $ 174,953

~~Table of~~ ~~Contents~~


(in thousands)	June 30, 2023		December 31, 2022

Receivables
Trade	$	166,267	$	112,126
Other	11,183		9,983
Unbilled Receivables	19,715		23,932
Total Receivables	197,165		146,041
Less: Allowance for Credit Losses	2,214		1,648
Receivables, net of allowance for credit losses	$	194,951	$	144,393

The following is a summary of activity in the allowance for credit losses for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Beginning Balance, January 1	Beginning Balance, January 1	$	1,836	$	3,215	Beginning Balance, January 1	$	1,648	$	1,836
Additions Charged to Expense	Additions Charged to Expense	518		177		Additions Charged to Expense	1,001		382
Reductions for Amounts Written Off, Net of Recoveries	Reductions for Amounts Written Off, Net of Recoveries	(806)		(1,060)		Reductions for Amounts Written Off, Net of Recoveries	(435)		(461)
Ending Balance, September 30		$	1,548	$	2,332
Ending Balance, June 30						Ending Balance, June 30	$	2,214	$	1,757

Inventories

Inventories consist of the following as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Raw Material, Fuel and Supplies	Raw Material, Fuel and Supplies	$	74,249	$	72,882	Raw Material, Fuel and Supplies	$	73,314	$	70,374
Work in Process	Work in Process	33,765		35,705		Work in Process	29,326		31,766
Finished Goods	Finished Goods	38,362		39,903		Finished Goods	41,801		43,812
Total Inventories	Total Inventories	$	146,376	$	148,490	Total Inventories	$	144,441	$	145,952

Investments

The following is a summary of our investments as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Corporate-Owned Life Insurance Policies	Corporate-Owned Life Insurance Policies	$	37,288	$	41,078	Corporate-Owned Life Insurance Policies	$	39,352	$	38,991
Debt Securities		8,710		9,202
Corporate and Government Debt Securities						Corporate and Government Debt Securities	8,926		8,761
Money Market Funds	Money Market Funds	1,854		949		Money Market Funds	4,069		1,560
Mutual Funds	Mutual Funds	5,084		5,432		Mutual Funds	7,505		5,503
Other Investments	Other Investments	30		29		Other Investments	30		30
Total Investments	Total Investments	$	52,966	$	56,690	Total Investments	$	59,882	$	54,845

The amount of unrealized gains and losses on debt securities as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was not material and no unrealized losses were deemed to be other-than-temporary. In addition, the amount of unrealized gains and losses on marketable equity securities still held as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was not material.

Table of Contents

Property, Plant and Equipment

Major classes of property, plant and equipment as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 include:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022

Electric Plant	Electric Plant					Electric Plant
Electric Plant in Service	Electric Plant in Service	$	2,795,649	$	2,758,445	Electric Plant in Service	$	2,933,603	$	2,844,379
Construction Work in Progress	Construction Work in Progress	130,486		74,926		Construction Work in Progress	141,249		113,932
Total Gross Electric Plant	Total Gross Electric Plant	2,926,135		2,833,371		Total Gross Electric Plant	3,074,852		2,958,311
Less Accumulated Depreciation and Amortization	Less Accumulated Depreciation and Amortization	850,741		817,302		Less Accumulated Depreciation and Amortization	888,374		859,988
Net Electric Plant	Net Electric Plant	2,075,394		2,016,069		Net Electric Plant	2,186,478		2,098,323
Nonelectric Property, Plant and Equipment	Nonelectric Property, Plant and Equipment					Nonelectric Property, Plant and Equipment
Nonelectric Property, Plant and Equipment in Service	Nonelectric Property, Plant and Equipment in Service	281,584		273,950		Nonelectric Property, Plant and Equipment in Service	297,908		293,928
Construction Work in Progress	Construction Work in Progress	20,746		16,611		Construction Work in Progress	34,147		15,170
Total Gross Nonelectric Property, Plant and Equipment	Total Gross Nonelectric Property, Plant and Equipment	302,330		290,561		Total Gross Nonelectric Property, Plant and Equipment	332,055		309,098
Less Accumulated Depreciation and Amortization	Less Accumulated Depreciation and Amortization	191,081		182,025		Less Accumulated Depreciation and Amortization	202,287		194,704
Net Nonelectric Property, Plant and Equipment	Net Nonelectric Property, Plant and Equipment	111,249		108,536		Net Nonelectric Property, Plant and Equipment	129,768		114,394
Net Property, Plant and Equipment	Net Property, Plant and Equipment	$	2,186,643	$	2,124,605	Net Property, Plant and Equipment	$	2,316,246	$	2,212,717

On January 3, 2023, we purchased the Ashtabula III wind farm, located in eastern North Dakota, which consists of 39 wind turbines and the related infrastructure, adding 62.4 megawatts of nameplate capacity to our owned generation assets. The total purchase price of the acquisition was $50.6 million. In addition to the acquired assets, we also recognized a $3.3 million asset retirement obligation liability associated with the wind farm and became party to the land easement agreements with the landowners of the wind farm.

~~Table of~~ ~~Contents~~

5. Regulatory Matters

Regulatory Assets and Liabilities

The following presents our current and long-term regulatory assets and liabilities as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 and the period we expect to recover or refund such amounts:


		Period of	September 30, 2022				December 31, 2021					Period of	June 30, 2023				December 31, 2022
(in thousands)	(in thousands)	Recovery/Refund	Current		Long-Term		Current		Long Term		(in thousands)	Recovery/Refund	Current		Long-Term		Current		Long-Term

Regulatory Assets	Regulatory Assets										Regulatory Assets
Pension and Other Postretirement Benefit Plans1	Pension and Other Postretirement Benefit Plans1	Various	$	7,791	$	110,183	$	7,791	$	114,961	Pension and Other Postretirement Benefit Plans1	Various	$	—	$	90,602	$	—	$	88,354
Alternative Revenue Program Riders2	Alternative Revenue Program Riders2	Up to 2 years	7,528		1,988		11,889		5,564		Alternative Revenue Program Riders2	Up to 2 years	6,563		79		5,679		2,508
Asset Retirement Obligations1	Asset Retirement Obligations1	Asset lives	—		1,323		—		742		Asset Retirement Obligations1	Asset lives	—		2,327		—		1,467

Deferred Income Taxes											Deferred Income Taxes	Asset lives	—		847		—		—
ISO Cost Recovery Trackers1	ISO Cost Recovery Trackers1	Up to 2 years	660		740		—		1,342		ISO Cost Recovery Trackers1	Up to 2 years	288		207		575		314
Unrecovered Project Costs1	Unrecovered Project Costs1	Up to 5 years	320		1,063		2,136		1,455		Unrecovered Project Costs1	Up to 4 years	349		1,048		320		990
Deferred Rate Case Expenses1	Deferred Rate Case Expenses1	Various	412		848		607		1,131		Deferred Rate Case Expenses1	Up to 3 years	377		566		377		754
Debt Reacquisition Premiums1		10 years	25		222		100		240
Fuel Clause Adjustments1	Fuel Clause Adjustments1	Up to 1 year	13,185		—		4,819		—		Fuel Clause Adjustments1	Up to 1 year	9,935		—		10,893		—
Derivative Instruments1											Derivative Instruments1	Up to 2 years	1,521		207		7,130		—
Other1	Other1	Various	—		226		—		73		Other1	Various	25		245		25		268
Total Regulatory Assets	Total Regulatory Assets		$	29,921	$	116,593	$	27,342	$	125,508	Total Regulatory Assets		$	19,058	$	96,128	$	24,999	$	94,655
Regulatory Liabilities	Regulatory Liabilities										Regulatory Liabilities
Deferred Income Taxes	Deferred Income Taxes	Asset lives	$	—	$	128,397	$	—	$	129,437	Deferred Income Taxes	Asset lives	$	—	$	129,567	$	—	$	131,480
Plant Removal Obligations	Plant Removal Obligations	Asset lives	8,526		106,008		8,306		101,595		Plant Removal Obligations	Asset lives	8,474		106,393		8,509		105,733
Fuel Clause Adjustments	Fuel Clause Adjustments	Up to 1 year	—		—		1,554		—		Fuel Clause Adjustments	Up to 1 year	22,358		—		365		—
Alternative Revenue Program Riders	Alternative Revenue Program Riders	Various	4,178		6,048		5,772		3,336		Alternative Revenue Program Riders	Up to 1 year	4,560		—		2,504		—
North Dakota PTC Refunds											North Dakota PTC Refunds	Asset lives	—		9,512		—		7,136
Pension and Other Postretirement Benefit Plans	Pension and Other Postretirement Benefit Plans	Up to 1 year	2,603		—		2,603		—		Pension and Other Postretirement Benefit Plans	Up to 1 year	5,589		—		5,589		—

Derivative Instruments		Various	5,532		—		6,214		—

Other	Other	Various	275		92		395		62		Other	Various	762		463		333		148
Total Regulatory Liabilities	Total Regulatory Liabilities		$	21,114	$	240,545	$	24,844	$	234,430	Total Regulatory Liabilities		$	41,743	$	245,935	$	17,300	$	244,497

1Costs subject to recovery without a rate of return.	1Costs subject to recovery without a rate of return.										1Costs subject to recovery without a rate of return.
2Amount eligible for recovery includes an incentive or rate of return.	2Amount eligible for recovery includes an incentive or rate of return.										2Amount eligible for recovery includes an incentive or rate of return.

~~Minnesota Rate Case~~

On November 2, 2020, Otter Tail Power Company (OTP) filed an initial request with the Minnesota Public Utilities Commission (MPUC) for an increase in revenue recoverable through base rates in Minnesota, and on December 3, 2020, the MPUC approved an interim annual rate increase

Table of ~~$6.9 million, or 3.2%, effective January 1, 2021.~~Contents

On February 1, 2022, the MPUC issued its written order on final rates. The key provisions of the order included a revenue requirement of $209.0 million, based on a return on rate base of 7.18% and an allowed return on equity of 9.48% on an equity ratio of 52.5%. The order also authorized recovery of our remaining Hoot Lake Plant net asset over a five-year period and approved the requested decoupling mechanism for most residential and commercial customer rate groups with a cap of 4% of annual base revenues.

On May 12, 2022, OTP's final rate case compliance filing was approved by the MPUC. The filing included final revenue calculations, rate design and resulting tariff revisions, along with a determination of the interim rate refund, which resulted in an increase in revenues during the second quarter of 2022 of $4.1 million. Final rates took effect on July 1, 2022, and interim rate refunds of $15.3 million were applied to customer accounts in the third quarter of 2022.

6. Short-Term and Long-Term Borrowings

The following is a summary of our outstanding short- and long-term borrowings by borrower, OTC or ~~OTP,~~Otter Tail Power Company (OTP), as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~

~~Table of~~ ~~Contents~~

2022:

Short-Term Debt

The following is a summary of our lines of credit as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

September 30, 2022 December 31,
2021
(in thousands) Borrowing Limit Amount Outstanding Letters
of Credit Amount Available Amount Available
OTC Credit Agreement $ 170,000 $ — $ — $ 170,000 $ 147,363
OTP Credit Agreement 170,000 — 9,919 160,081 88,315
Total $ 340,000 $ — $ 9,919 $ 330,081 $ 235,678

On October 31, 2022, OTC entered into a Fifth Amended and Restated Credit Agreement and OTP entered into a Fourth Amended and Restated Credit Agreement, in each case amending and restating the previously existing credit agreements to extend the maturity date of each credit facility from September 30, 2026 to October 29, 2027, and to replace LIBOR as a benchmark interest rate with the Secured Overnight Finance Rate (SOFR). The adoption of SOFR as a benchmark interest rate is in advance of the scheduled elimination of LIBOR as a benchmark interest rate on June 30, 2023. No other significant terms or conditions, including borrowing capacity, credit spreads or financial covenants, were modified under these amendments and restatements.


			June 30, 2023						December 31, 2022
(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available

OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	170,000
OTP Credit Agreement	170,000		50,197		9,573		110,230		152,223
Total	$	340,000	$	50,197	$	9,573	$	280,230	$	322,223

Long-Term Debt

The following is a summary of outstanding long-term debt by borrower as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

(in thousands)
Borrower Debt Instrument Rate Maturity September 30,
2022 December 31,
2021
OTC Guaranteed Senior Notes 3.55% 12/15/26 $ 80,000 $ 80,000
OTP Series 2007B Senior Unsecured Notes 6.15% 08/20/22 — 30,000
OTP Series 2007C Senior Unsecured Notes 6.37% 08/02/27 42,000 42,000
OTP Series 2013A Senior Unsecured Notes 4.68% 02/27/29 60,000 60,000
OTP Series 2019A Senior Unsecured Notes 3.07% 10/10/29 10,000 10,000
OTP Series 2020A Senior Unsecured Notes 3.22% 02/25/30 10,000 10,000
OTP Series 2020B Senior Unsecured Notes 3.22% 08/20/30 40,000 40,000
OTP Series 2021A Senior Unsecured Notes 2.74% 11/29/31 40,000 40,000
OTP Series 2007D Senior Unsecured Notes 6.47% 08/20/37 50,000 50,000
OTP Series 2019B Senior Unsecured Notes 3.52% 10/10/39 26,000 26,000
OTP Series 2020C Senior Unsecured Notes 3.62% 02/25/40 10,000 10,000
OTP Series 2013B Senior Unsecured Notes 5.47% 02/27/44 90,000 90,000
OTP Series 2018A Senior Unsecured Notes 4.07% 02/07/48 100,000 100,000
OTP Series 2019C Senior Unsecured Notes 3.82% 10/10/49 64,000 64,000
OTP Series 2020D Senior Unsecured Notes 3.92% 02/25/50 15,000 15,000
OTP Series 2021B Senior Unsecured Notes 3.69% 11/29/51 100,000 100,000
OTP Series 2022A Senior Unsecured Notes 3.77% 05/20/52 90,000 —
Total $ 827,000 $ 767,000
Less: Current Maturities, Net of Unamortized Debt Issuance Costs — 29,983
Unamortized Long-Term Debt Issuance Costs 3,240 3,003
Total Long-Term Debt, Net of Unamortized Debt Issuance Costs $ 823,760 $ 734,014

On June 10, 2021, OTP entered into a Note Purchase Agreement pursuant to which OTP agreed to issue, in a private placement transaction, $230.0 million of senior unsecured notes consisting of (a) $40.0 million of 2.74% Series 2021A Senior Unsecured Notes due November 29, 2031, (b) $100.0 million of 3.69% Series 2021B Senior Unsecured Notes due November 29, 2051 and (c) $90.0 million of 3.77% Series 2022A Senior Unsecured Notes due May 20, 2052. In November 2021, OTP issued its Series 2021A and Series 2021B Notes for aggregate proceeds of $140.0 million, which were used to repay the Series 2011A Notes in full. In May 2022, OTP issued its Series 2022A Notes for proceeds of $90.0 million, which were used to repay the Series 2007B Senior Unsecured Notes at their maturity in August 2022, to repay short-term borrowings, to fund capital expenditures, and for other general corporate purposes.


					(in thousands)
Borrower		Debt Instrument	Rate	Maturity	June 30, 2023		December 31, 2022

OTC		Guaranteed Senior Notes	3.55%	12/15/26	$	80,000	$	80,000
OTP		Series 2007C Senior Unsecured Notes	6.37%	08/02/27	42,000		42,000
OTP		Series 2013A Senior Unsecured Notes	4.68%	02/27/29	60,000		60,000
OTP		Series 2019A Senior Unsecured Notes	3.07%	10/10/29	10,000		10,000
OTP		Series 2020A Senior Unsecured Notes	3.22%	02/25/30	10,000		10,000
OTP		Series 2020B Senior Unsecured Notes	3.22%	08/20/30	40,000		40,000
OTP		Series 2021A Senior Unsecured Notes	2.74%	11/29/31	40,000		40,000
OTP		Series 2007D Senior Unsecured Notes	6.47%	08/20/37	50,000		50,000
OTP		Series 2019B Senior Unsecured Notes	3.52%	10/10/39	26,000		26,000
OTP		Series 2020C Senior Unsecured Notes	3.62%	02/25/40	10,000		10,000
OTP		Series 2013B Senior Unsecured Notes	5.47%	02/27/44	90,000		90,000
OTP		Series 2018A Senior Unsecured Notes	4.07%	02/07/48	100,000		100,000
OTP		Series 2019C Senior Unsecured Notes	3.82%	10/10/49	64,000		64,000
OTP		Series 2020D Senior Unsecured Notes	3.92%	02/25/50	15,000		15,000
OTP		Series 2021B Senior Unsecured Notes	3.69%	11/29/51	100,000		100,000
OTP		Series 2022A Senior Unsecured Notes	3.77%	05/20/52	90,000		90,000
Total					$	827,000	$	827,000

Less:	Unamortized Long-Term Debt Issuance Costs				3,059		3,179
Total Long-Term Debt, Net of Unamortized Debt Issuance Costs					$	823,941	$	823,821

Financial Covenants

Certain of OTC's and OTP's short- and long-term debt agreements require the borrower, whether OTC or OTP, to maintain certain financial covenants, including a maximum debt to total capitalization ratio of 0.60 to 1.00, a minimum interest and dividend coverage ratio of 1.50 to 1.00, and a maximum level of priority indebtedness. As of ~~September~~June 30, ~~2022,~~2023, OTC and OTP were in compliance with these financial covenants.

~~Table of~~ ~~Contents~~

7. Employee Postretirement Benefits

Pension Plan and Other Postretirement Benefits

The Company sponsors a noncontributory funded pension plan (the "Pension Plan"), an unfunded, nonqualified Executive Survivor and Supplemental Retirement Plan (the "ESSRP"), both accounted for as defined benefit pension plans, and a postretirement healthcare plan accounted for as an other postretirement benefit plan.

Table of Contents

The following ~~tables include~~table includes the components of net periodic benefit cost of(income) related to our defined benefit pension plans and other postretirement benefits for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,													Three Months Ended June 30,
		Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits					Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits
(in thousands)	(in thousands)	2022		2021		2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022		2023		2022

Service Cost	Service Cost	$	1,644	$	1,866	$	48	$	47	$	335	$	430	Service Cost	$	924	$	1,644	$	18	$	49	$	153	$	334
Interest Cost	Interest Cost	3,086		2,915		335		307		510		472		Interest Cost	4,109		3,086		473		336		669		511
Expected Return on Assets	Expected Return on Assets	(5,921)		(5,590)		—		—		—		—		Expected Return on Assets	(6,478)		(5,921)		—		—		—		—
Amortization of Prior Service Cost	Amortization of Prior Service Cost	—		—		—		—		(1,433)		(1,432)		Amortization of Prior Service Cost	—		—		—		—		(1,434)		(1,434)
Amortization of Net Actuarial Loss	Amortization of Net Actuarial Loss	1,966		2,728		141		154		765		943		Amortization of Net Actuarial Loss	—		1,967		—		142		—		766
Net Periodic Benefit Cost		$	775	$	1,919	$	524	$	508	$	177	$	413
Net Periodic Benefit Cost (Income)														Net Periodic Benefit Cost (Income)	$	(1,445)	$	776	$	491	$	527	$	(612)	$	177

		Nine Months Ended September 30,													Six Months Ended June 30,
		Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits					Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits
(in thousands)	(in thousands)	2022		2021		2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022		2023		2022

Service Cost	Service Cost	$	4,932	$	5,597	$	146	$	140	$	1,004	$	1,291	Service Cost	$	1,849	$	3,288	$	36	$	98	$	306	$	669
Interest Cost	Interest Cost	9,258		8,745		1,006		921		1,531		1,418		Interest Cost	8,218		6,172		945		671		1,338		1,021
Expected Return on Assets	Expected Return on Assets	(17,763)		(16,769)		—		—		—		—		Expected Return on Assets	(12,957)		(11,842)		—		—		—		—
Amortization of Prior Service Cost	Amortization of Prior Service Cost	—		—		—		—		(4,300)		(4,299)		Amortization of Prior Service Cost	—		—		—		—		(2,867)		(2,867)
Amortization of Net Actuarial Loss	Amortization of Net Actuarial Loss	5,899		8,185		425		465		2,297		2,830		Amortization of Net Actuarial Loss	—		3,933		—		284		—		1,532
Net Periodic Benefit Cost		$	2,326	$	5,758	$	1,577	$	1,526	$	532	$	1,240
Net Periodic Benefit Cost (Income)														Net Periodic Benefit Cost (Income)	$	(2,890)	$	1,551	$	981	$	1,053	$	(1,223)	$	355

The following table includes the impact of regulation on the recognition of periodic benefit cost (income) arising from pension and other postretirement benefits for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022

Net Periodic Benefit Cost		$	1,476	$	2,840	$	4,435	$	8,524
Net Periodic Benefit Cost (Income)										Net Periodic Benefit Cost (Income)	$	(1,566)	$	1,480	$	(3,132)	$	2,959
Net Amount Amortized (Deferred) Due to the Effect of Regulation	Net Amount Amortized (Deferred) Due to the Effect of Regulation	499		8		823		15		Net Amount Amortized (Deferred) Due to the Effect of Regulation	240		(204)		490		324
Net Periodic Benefit Cost Recognized		$	1,975	$	2,848	$	5,258	$	8,539
Net Periodic Benefit Cost (Income) Recognized										Net Periodic Benefit Cost (Income) Recognized	$	(1,326)	$	1,276	$	(2,642)	$	3,283

We had no minimum funding requirements for our Pension Plan or any other postretirement benefit plans as of December 31, ~~2021, but~~2022. We did not make any contributions to our Pension Plan during the six months ended June 30, 2023. We made a discretionary contribution ~~of $20.0 million~~ to our Pension Plan ~~in February~~of $20.0 million during the six months ended June 30, 2022.

~~Table of~~ ~~Contents~~

8. Income Taxes

The reconciliation of the statutory federal income tax rate to our effective tax rate for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,								Six Months Ended June 30,
		2022		2021		2022		2021			2023				2022				2023				2022

Federal Statutory Rate		21.0	%	21.0	%	21.0	%	21.0	%
Income Taxes at Federal Statutory Rate										Income Taxes at Federal Statutory Rate	$	21,426	21.0	%	$	23,507	21.0	%	$	37,341	21.0	%	$	42,330	21.0	%
Increases (Decreases) in Tax from:	Increases (Decreases) in Tax from:									Increases (Decreases) in Tax from:
State Taxes on Income, Net of Federal Tax	State Taxes on Income, Net of Federal Tax	5.0		5.0		5.0		5.0		State Taxes on Income, Net of Federal Tax	5,104		5.0		5,596		5.0		8,893		5.0		10,078		5.0
Production Tax Credits (PTCs)	Production Tax Credits (PTCs)	(3.6)		(5.0)		(4.1)		(6.0)		Production Tax Credits (PTCs)	(4,574)		(4.5)		(4,719)		(4.2)		(9,229)		(5.2)		(8,686)		(4.3)
Amortization of Excess Deferred Income Taxes	Amortization of Excess Deferred Income Taxes	(0.9)		(1.6)		(0.7)		(2.0)		Amortization of Excess Deferred Income Taxes	(622)		(0.6)		99		—		(1,420)		(0.8)		(1,078)		(0.5)

North Dakota Wind Tax Credit Amortization, Net of Federal Tax	North Dakota Wind Tax Credit Amortization, Net of Federal Tax	(0.1)		(0.2)		(0.2)		(0.3)		North Dakota Wind Tax Credit Amortization, Net of Federal Tax	(146)		(0.1)		(155)		(0.1)		(310)		(0.2)		(355)		(0.2)
Corporate-Owned Life Insurance	Corporate-Owned Life Insurance	0.2		(0.3)		0.4		(0.6)		Corporate-Owned Life Insurance	(460)		(0.5)		965		0.8		(878)		(0.5)		1,142		0.6

Other, Net	Other, Net	(0.5)		(0.6)		0.1		(0.2)		Other, Net	(666)		(0.6)		707		0.7		(1,032)		(0.5)		199		—
Effective Tax Rate		21.1	%	18.3	%	21.5	%	16.9	%
Income Tax Expense / Effective Tax Rate										Income Tax Expense / Effective Tax Rate	$	20,062	19.7	%	$	26,000	23.2	%	$	33,365	18.8	%	$	43,630	21.6	%

Table of Contents

9. Commitments and Contingencies

Commitments

~~Ashtabula III Purchase.~~Land Easements. ~~On June 23, 2022, OTP exercised its option to acquire the Ashtabula III wind farm, a 62.4 megawatt wind farm located in eastern North Dakota, for $49.7 million, subject to certain closing adjustments.~~ Since 2013, OTP ~~has~~had purchased the wind-generated electricity from the Ashtabula III wind farm pursuant to a power purchase ~~power agreement, and that~~agreement. That agreement granted ~~OTP~~us the option to purchase the wind ~~farm. The~~farm and on January 3, 2023, we completed the purchase ~~has received regulatory approval. We anticipate~~for $50.6 million. In connection with the ~~transaction will close, subject~~purchase, we assumed 51 land easements, not classified as leases, which require annual payments. As of June 30, 2023, the remaining payments to ~~certain customary closing conditions, in January 2023.~~be made under the easements total $4.1 million and the remaining terms of the agreements extend into 2034.

Contingencies

FERC ~~ROE.~~Return on Equity (ROE). In November 2013 and February 2015, customers filed complaints with the Federal Energy Regulatory Commission (FERC) seeking to reduce the return on equity ~~(ROE)~~ component of the transmission rates that Midcontinent Independent System Operator, Inc. (MISO) transmission owners, including OTP, may collect under the MISO tariff rate. FERC's most recent order, issued on November 19, 2020, adopted a revised ROE methodology and set the base ROE at 10.02% (10.52% with an adder) effective for the fifteen-month period from November 2013 to February 2015 and on a prospective basis beginning in September 2016. The order also dismissed any complaints covering the period from February 2015 to May 2016. On August 9, 2022, the U.S. Court of Appeals for the District of Columbia Circuit vacated the FERC order citing a lack of reasoned explanation by FERC in its adoption of its revised ROE methodology as outlined in its November 2020 order. The U.S. Court of Appeals remanded the matter to FERC to reopen the proceedings.

Significant uncertainty exists as to how FERC will proceed upon remand and there is no prescribed timeline under which FERC must act. We have deferred recognition and recorded a refund liability of ~~$2.5~~$2.7 million as of ~~September~~June 30, ~~2022.~~2023. This refund liability reflects our best estimate of amounts previously collected from customers under the MISO tariff rate that may be required to be refunded to customers once all regulatory and judicial proceedings are complete and a final ROE is established for the periods outlined above.

Regional Haze Rule (RHR). The RHR was adopted in an effort to improve visibility in national parks and wilderness areas. The RHR requires states, in coordination with the Environmental Protection Agency (EPA) and other governmental agencies, to develop and implement plans to achieve natural visibility conditions. The second RHR implementation period covers the years 2018-2028. States are required to submit a state implementation plan to assess reasonable progress with the RHR and determine what additional emission reductions are appropriate, if any.

Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota state implementation plan. The North Dakota Department of Environmental Quality (NDDEQ) submitted its state implementation plan to the EPA for approval in August, 2022. In its plan, the NDDEQ concluded it is not reasonable to require additional emission controls during this planning period. The EPA has previously expressed disagreement with the NDDEQ's recommendation to forgo additional emission controls and has indicated that such a plan is not likely to be accepted.

We cannot predict with certainty the impact the state implementation plan may have on our business until the ~~state implementation~~ plan has been approved or otherwise acted on by the EPA. However, significant emission control investments could be required and the recovery of such costs from customers would require regulatory approval. Alternatively, investments in emission control equipment may prove to be uneconomic and result in the early retirement of or the sale of our interest in Coyote Station, subject to regulatory approval. We cannot estimate the ultimate financial effects such a retirement or sale may have on our consolidated operating results, financial position or cash flows, but such amounts could be material and the recovery of such costs in rates would be subject to regulatory approval.

Self-Funding of Transmission Upgrades. The FERChas granted transmission owners within MISO the unilateral authority to determine the funding mechanism for interconnection transmission upgrades that are necessary to accommodate new generation facilities connecting to the electrical grid. Under existing FERC orders, transmission owners can unilaterally determine whether the generator pays the transmission owner in advance for the transmission upgrade or, alternatively, the transmission owner can elect to fund the upgrade and recover over time from the generator the cost of and a return on the upgrade investment (a self-funding). FERC’s orders granting transmission owners this unilateral funding authority has been judicially contested on the basis that transmission owners may be motivated to discriminate among generators in making funding determinations. In the most recent judicial proceedings, the petitioners argued to the U.S. Court of Appeals for the District of Columbia that FERC did not comply with a previous judicial order to fully develop a record regarding the risk of discrimination and the financial risk absorbed by transmission owners for generator-funded upgrades. On December 2, 2022, the Court of Appeals ruled in favor of the petitioners remanding the matter to FERC, instructing the agency to adequately explain the basis of its orders. The Court of Appeals decision did not vacate transmission owners’ unilateral funding authority.

OTP, as a transmission owner in MISO, has exercised its authority and elected to self-fund previous transmission upgrades necessary to accommodate new system generation. Under such an election, OTP is recovering the cost of the transmission upgrade and a return on that investment from the generator over a contractual period of time. Should FERC, on remand from the Court of Appeals, eliminate transmission owners’ unilateral funding authority, on either a prospective or retrospective basis, our financial results would be impacted. We cannot at this time reasonably predict the outcome of this matter given the uncertainty as to how and when FERC may respond to the judicial remand.

Other Contingencies. We are party to litigation and regulatory matters arising in the normal course of business. We regularly analyze relevant information and, as necessary, estimate and record accrued liabilities for legal, regulatory enforcement and other matters in which a loss is probable of occurring and can be reasonably estimated. We believe the effect on our consolidated operating results, financial position and cash flows, if any, for the disposition of all matters pending as of ~~September~~June 30, ~~2022,~~2023, other than those discussed above, will not be material.

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10. Stockholders' Equity

Registration Statements

On May 3, 2021, we filed a shelf registration statement with the SEC under which we may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement. No new debt or equity has been issued pursuant to the registration statement. The registration statement expires in May 2024.

On May 3, 2021, we filed a second registration statement with the SEC for the issuance of up to 1,500,000 common shares under an Automatic Dividend Reinvestment and a Share Purchase Plan, which provides shareholders, retail customers of OTP and other interested investors methods of purchasing our common shares, by reinvesting their dividends or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we issued ~~97,046~~56,311 shares under this plan. We repurchased a sufficient number of shares on the open market to satisfy issuance under the plan; accordingly, no proceeds from the issuance were received. As of ~~September~~June 30, ~~2022,~~2023, there were ~~1,287,774~~1,194,682 shares available for purchase or issuance under the plan. The registration statement expires in May 2024.

Dividend Restrictions

OTC is a holding company with no significant operations of its own. The primary source of funds for payments of dividends to OTC's shareholders is from dividends paid or distributions made by OTC's subsidiaries. As a result of certain statutory limitations or regulatory or financing agreements, the amount of distributions allowed to be made by OTC's subsidiaries or the amount of dividends paid by OTC could be restricted. Both the OTC Credit Agreement and OTP Credit Agreement contain restrictions on the payment of cash dividends upon a default or event of default, including failure to maintain certain financial covenants. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with these financial covenants.

Under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account. What constitutes “funds properly included in a capital account” is undefined in the Federal Power Act or the related regulations; however, the FERC has consistently interpreted the provision to allow dividends to be paid as long as i) the source of the dividends is clearly disclosed, ii) the dividend is not excessive and iii) there is no self-dealing on the part of corporate officials.

The ~~MPUC~~Minnesota Public Utilities Commission (MPUC) indirectly limits the amount of dividends OTP can pay to OTC by requiring an equity-to-total-capitalization ratio between ~~48.0%~~47.5% and ~~58.7%~~58.0% based on OTP’s capital structure petition effective by order of the MPUC on ~~January 26,~~November 8, 2022. As of ~~September~~June 30, ~~2022,~~2023, OTP’s equity-to-total-capitalization ratio, including short-term debt, was ~~54.9%~~53.8% and its net assets restricted from distribution totaled approximately ~~$686.6~~$778.6 million. Under the MPUC order, total capitalization for OTP cannot exceed ~~$1.7~~$1.8 billion.

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11. Accumulated Other Comprehensive Income (Loss)

The following ~~shows~~presents the changes in accumulated other comprehensive loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,																	Three Months Ended June 30,
		2022								2021									2023								2022
(in thousands)	(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, Beginning of Period	Balance, Beginning of Period	$	(6,621)		$	(292)		$	(6,913)	$	(8,425)		$	134		$	(8,291)	Balance, Beginning of Period	$	1,308		$	(339)		$	969	$	(6,727)		$	(218)		$	(6,945)
Other Comprehensive Loss Before Reclassifications, net of tax	Other Comprehensive Loss Before Reclassifications, net of tax	—			(172)			(172)		—			(26)			(26)		Other Comprehensive Loss Before Reclassifications, net of tax	—			(62)			(62)		—			(75)			(75)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	106		(1)	1		(2)	107		146		(1)	—		(2)	146		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(27)		(1)	1		(2)	(26)		106		(1)	1		(2)	107
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	106			(171)			(65)		146			(26)			120		Total Other Comprehensive Income (Loss)	(27)			(61)			(88)		106			(74)			32
Balance, End of Period	Balance, End of Period	$	(6,515)		$	(463)		$	(6,978)	$	(8,279)		$	108		$	(8,171)	Balance, End of Period	$	1,281		$	(400)		$	881	$	(6,621)		$	(292)		$	(6,913)

		Nine Months Ended September 30,																	Six Months Ended June 30,
		2022								2021									2023								2022
(in thousands)	(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, Beginning of Period	Balance, Beginning of Period	$	(6,537)		$	13		$	(6,524)	$	(8,716)		$	209		$	(8,507)	Balance, Beginning of Period	$	1,334		$	(419)		$	915	$	(6,537)		$	13		$	(6,524)
Other Comprehensive Loss Before Reclassifications, net of tax		—			(477)			(477)		—			(58)			(58)
Other Comprehensive Income (Loss) Before Reclassifications, net of tax																		Other Comprehensive Income (Loss) Before Reclassifications, net of tax	—			18			18		—			(306)			(306)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	22		(1)	1		(2)	23		437		(1)	(43)		(2)	394		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	(53)		(1)	1		(2)	(52)		(84)		(1)	1		(2)	(83)
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	22			(476)			(454)		437			(101)			336		Total Other Comprehensive Income (Loss)	(53)			19			(34)		(84)			(305)			(389)
Balance, End of Period	Balance, End of Period	$	(6,515)		$	(463)		$	(6,978)	$	(8,279)		$	108		$	(8,171)	Balance, End of Period	$	1,281		$	(400)		$	881	$	(6,621)		$	(292)		$	(6,913)
(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.	(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.																	(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.
(2) Included in other income (expense), net on the accompanying consolidated statements of income.	(2) Included in other income (expense), net on the accompanying consolidated statements of income.																	(2) Included in other income (expense), net on the accompanying consolidated statements of income.

12. Share-Based Payments

Stock Compensation Expense

Stock-based compensation expense arising from our employee stock purchase plan and share-based compensation plans recognized within operating expenses in the consolidated statements of income amounted to ~~$0.6~~$1.2 million and ~~$0.8~~$0.6 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$6.1~~$6.5 million and ~~$6.4~~$5.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Restricted Stock Awards. We grant restricted stock awards to members of our Board of Directors and restricted stock units to certain key employees. The awards vest, depending on award type and recipient, either ratably over periods of three or four years or cliff vest after four years. Vesting is accelerated in certain circumstances, including on retirement.

The following is a summary of stock award activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:


		Shares	Weighted Average Grant-Date Fair Value			Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2022		138,093	$	44.48
Nonvested, January 1, 2023					Nonvested, January 1, 2023	141,551	$	49.83
Granted	Granted	51,439	59.96		Granted	55,205	68.03
Vested	Vested	(47,981)	45.30		Vested	(45,493)	50.02
Forfeited	Forfeited	—	—		Forfeited	(1,300)	50.00
Nonvested, September 30, 2022		141,551	$	49.83
Nonvested, June 30, 2023					Nonvested, June 30, 2023	149,963	$	56.47

The fair value of vested awards was ~~$3.0~~$3.1 million and ~~$2.1~~$3.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

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Stock Performance Awards. Stock performance awards are granted to executive officers and certain other key employees. The awards vest at the end of a three-year performance period. The number of common shares awarded, if any, at the end of the performance period ranges from zero to 150% of the target amount based on two performance measures: i) total shareholder return relative to a peer group and ii) return on equity. Vesting of the awards is accelerated in certain circumstances, including on retirement. The ~~amount~~number of common shares awarded on an accelerated vesting is based either on actual performance at the end of the performance period or the ~~amount~~number of common shares earned at target.

The grant date fair value of stock performance awards granted during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was determined using a Monte Carlo fair value simulation model incorporating the following assumptions:


		2022		2021			2023		2022

Risk-free interest rate	Risk-free interest rate	1.52	%	0.18	%	Risk-free interest rate	4.15	%	1.52	%
Expected term (in years)	Expected term (in years)	3.00		3.00		Expected term (in years)	3		3
Expected volatility	Expected volatility	32.00	%	32.00	%	Expected volatility	34.00	%	32.00	%
Dividend yield	Dividend yield	2.90	%	3.60	%	Dividend yield	2.50	%	2.90	%

The risk-free interest rate was derived from yields on U.S. government bonds of a similar term. The expected term of the award is equal to the three-year performance period. Expected volatility was estimated based on actual historical volatility of our common stock. Dividend yield was estimated based on ~~historic~~historical and future yield estimates.

The following is a summary of stock performance award activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 (share amounts reflect awards at target):


		Shares	Weighted Average Grant-Date Fair Value			Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2022		189,600	$	42.54
Nonvested, January 1, 2023					Nonvested, January 1, 2023	189,800	$	45.95
Granted	Granted	55,800	54.91		Granted	59,400	61.97
Vested	Vested	(55,600)	43.30		Vested	(55,000)	47.79
Forfeited	Forfeited	—	—		Forfeited	—	—
Nonvested, September 30, 2022		189,800	$	45.95
Nonvested, June 30, 2023					Nonvested, June 30, 2023	194,200	$	50.33

The fair value of vested awards was ~~$5.1~~$5.3 million and ~~$2.5~~$5.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

13. Earnings Per Share

The numerator used in the calculation of both basic and diluted earnings per common share is net income. The denominator used in the calculation of basic earnings per common share is the ~~weighted average~~weighted-average number of common shares outstanding during the period. The denominator used in the calculation of diluted earnings per common share is derived by adjusting basic shares outstanding for the dilutive effect of potential common shares outstanding, which consist of time and ~~performance based~~performance-based stock awards and employee stock purchase plan shares.

The following includes the computation of the denominator for basic and diluted weighted-average shares outstanding for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)	(in thousands)	2022	2021	2022	2021		(in thousands)	2023	2022	2023	2022

Weighted Average Common Shares Outstanding – Basic		41,600	41,504	41,582	41,487
Weighted-Average Common Shares Outstanding – Basic							Weighted-Average Common Shares Outstanding – Basic	41,678	41,597	41,655	41,573
Effect of Dilutive Securities:	Effect of Dilutive Securities:						Effect of Dilutive Securities:
Stock Performance Awards	Stock Performance Awards	276	262	251	209		Stock Performance Awards	281	259	281	239
Restricted Stock Awards	Restricted Stock Awards	97	88	96	82		Restricted Stock Awards	92	85	97	94
Employee Stock Purchase Plan Shares and Other	Employee Stock Purchase Plan Shares and Other	1	15	1	17		Employee Stock Purchase Plan Shares and Other	2	3	2	1
Dilutive Effect of Potential Common Shares	Dilutive Effect of Potential Common Shares	374	365	348	308		Dilutive Effect of Potential Common Shares	375	347	380	334
Weighted Average Common Shares Outstanding – Diluted		41,974	41,869	41,930	41,795
Weighted-Average Common Shares Outstanding – Diluted							Weighted-Average Common Shares Outstanding – Diluted	42,053	41,944	42,035	41,907

The ~~amount~~number of shares excluded from diluted weighted-average common shares outstanding because such shares were anti-dilutive was not material for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

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14. Derivative Instruments

OTP enters into derivative instruments to manage its exposure to future market energy price variability and reduce volatility in prices for our retail customers. These derivative instruments are not designated as qualifying hedging transactions but provide for an economic hedge against future market energy price variability. The instruments are recorded at fair value on the consolidated balance sheets. In accordance with rate-making and cost recovery processes, we recognize a regulatory asset or liability to defer losses or gains from derivative activity until settlement of the associated derivative instrument.

As of ~~September~~June 30, ~~2022,~~2023, OTP had multiple outstanding pay-fixed, receive-variable swap agreements with an aggregate notional amount of ~~156,800~~195,400 megawatt-hours of electricity, ~~which will be settled periodically throughout 2022 and 2023.~~with various settlement dates extending to December 31, 2024. As of ~~September~~June 30, ~~2022,~~2023, the fair value of these derivative instruments was ~~$5.4~~$1.7 million, of which ~~$5.5~~$1.5 million is included in other current ~~assets~~liabilities and ~~$0.1~~$0.2 million ~~which~~ is included in other noncurrent liabilities, on the consolidated balance sheets. As of December 31, ~~2021,~~2022, the fair value of these types of derivative contracts was ~~$6.2~~$7.1 million, which is included in other current ~~assets. No~~liabilities. There were no contracts ~~settled~~which matured during the three months ended ~~September~~June 30, 2023 or 2022. During the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, contracts matured and were settled in an aggregate amount of a $16.0 million loss and a $2.8 ~~million. There were no contracts settled during~~million gain, respectively. Gains and losses recognized on the ~~three~~settlement of derivative instruments are recorded in electric purchased power in the consolidated statements of income. Such settlement gains and losses are returned to or ~~nine months ended September 30, 2021.~~recovered from our electric customers through fuel recovery mechanisms in each state.

15. Fair Value Measurements

The following tables present our assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 classified by the input method used to measure fair value:


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		(in thousands)	Level 1		Level 2		Level 3

September 30, 2022
June 30, 2023								June 30, 2023
Assets:	Assets:							Assets:
Investments:	Investments:							Investments:
Money Market Funds	Money Market Funds	$	1,854	$	—	$	—	Money Market Funds	$	4,069	$	—	$	—
Mutual Funds	Mutual Funds	5,084		—		—		Mutual Funds	7,505		—		—
Corporate Debt Securities	Corporate Debt Securities	—		1,424		—		Corporate Debt Securities	—		1,456		—
Government-Backed and Government-Sponsored Enterprises’ Debt Securities	Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,286		—		Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,470		—
Derivative Instruments		—		5,532		—

Total Assets	Total Assets	$	6,938	$	14,242	$	—	Total Assets	$	11,574	$	8,926	$	—
Liabilities:	Liabilities:							Liabilities:
Derivative Instruments	Derivative Instruments	$	—	$	169	$	—	Derivative Instruments	$	—	$	1,728	$	—
Total Liabilities	Total Liabilities	$	—	$	169	$	—	Total Liabilities	$	—	$	1,728	$	—

December 31, 2021
December 31, 2022								December 31, 2022
Assets:	Assets:							Assets:
Investments:	Investments:							Investments:
Money Market Funds	Money Market Funds	$	949	$	—	$	—	Money Market Funds	$	1,560	$	—	$	—
Mutual Funds	Mutual Funds	5,432		—		—		Mutual Funds	5,503		—		—
Corporate Debt Securities	Corporate Debt Securities	—		1,333		—		Corporate Debt Securities	—		1,434		—
Government-Backed and Government-Sponsored Enterprises’ Debt Securities	Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,869		—		Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,327		—

Total Assets								Total Assets	$	7,063	$	8,761	$	—
Liabilities:								Liabilities:
Derivative Instruments	Derivative Instruments	—		6,214		—		Derivative Instruments	—		7,130		—
Total Assets		$	6,381	$	15,416	$	—
Total Liabilities								Total Liabilities	$	—	$	7,130	$	—

Level 1 fair value measurements are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

The level 2 fair value measurements for government-backed and government-sponsored enterprises and corporate debt securities are determined based on ~~the basis of~~ valuations provided by a third-party pricing service which utilizes industry accepted valuation models and observable market inputs to determine valuation. Some valuations or model inputs used by the pricing service may be based on broker quotes.

The level 2 fair value measurements for derivative instruments are determined by using inputs such as forward electric commodity prices, adjusted for location differences. These inputs are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

In addition to assets recorded at fair value on a recurring basis, we also hold financial instruments that are not recorded at fair value in the consolidated balance sheets but for which disclosure of the fair value of these financial instruments is provided.

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The following reflects the carrying value and estimated fair value of these assets and liabilities as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
(in thousands)	(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:	Assets:									Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	72,987	$	72,987	$	1,537	$	1,537	Cash and Cash Equivalents	$	150,578	$	150,578	$	118,996	$	118,996
Total	Total	72,987		72,987		1,537		1,537		Total	150,578		150,578		118,996		118,996
Liabilities:	Liabilities:									Liabilities:
Short-Term Debt	Short-Term Debt	—		—		91,163		91,163		Short-Term Debt	50,197		50,197		8,204		8,204
Long-Term Debt	Long-Term Debt	823,760		679,360		763,997		878,272		Long-Term Debt	823,941		698,831		823,821		681,615
Total	Total	$	823,760	$	679,360	$	855,160	$	969,435	Total	$	874,138	$	749,028	$	832,025	$	689,819

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash Equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments.

Short-Term Debt: The carrying amount approximates fair value because the debt obligations are short-term and the balances outstanding are subject to variable rates of interest which reset frequently, a Level 2 fair value input.

Long-Term Debt: The fair value of long-term debt is estimated based on current market indications for borrowings of similar maturities, a Level 2 fair value input.

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ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing under Item 1 of this Quarterly Report on Form 10-Q, and our annual financial statements and the related notes along with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Otter Tail Corporation and its subsidiaries form a diverse group of businesses with operations classified into three segments: Electric, Manufacturing and Plastics. Our Electric segment business is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve our customers in western Minnesota, eastern North Dakota and northeastern South Dakota. Our Manufacturing segment provides metal fabrication for custom machine parts and metal components and manufactures extruded and thermoformed plastic products. Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects.

~~STEEL AVAILABILITY AND PRICING~~

Steel is a key material input to BTD Manufacturing, Inc. (BTD), our metal fabrication business within our Manufacturing segment. Steel prices increased rapidly throughout 2021, peaking in the fourth quarter at historically high levels. Steel prices have been highly volatile in 2022, but began to steadily decline at the end of the second quarter and continued to decline throughout the third quarter. The increase in steel prices in the first half of 2022 led to increased sale prices for our products at BTD as we passed along material cost increases to our customers. Consistent with steel prices, scrap metal prices also increased throughout 2021 and remained elevated in the first half of 2022, positively impacting our financial results during this period, but began to decline at the end of the second quarter and declined sharply in the third quarter of 2022. We expect steel and scrap metal prices to decline modestly in the fourth quarter of 2022 and be near historical levels by the end of the year.

PVC PIPE SUPPLY AND DEMAND CONDITIONS

Extraordinary supply and demand conditions in the PVC industry beginning in 2021 have led to a significant expansion in operating margins and elevated earnings in our Plastics segment. Periodic disruptions in the supply of resin, is the primary material input of the PVC pipe manufactured by our Plastics segment businesses. Resin supply disruptions throughout 2021, along with robust domestic and global demand for PVC resin, led to significantly increased resin prices. Supply disruptions for resin and other additives and ingredients used in the manufacturing ~~process also resulted~~of PVC pipe, coupled with robust demand for resin, led to a significant increase in ~~reduced manufacturing~~the cost of resin over the last two years. Low industry volumes of PVC pipe and ~~low pipe inventories across the industry. This combination of disrupted raw material supply and the resulting low PVC pipe inventories along with~~ robust end market demand for ~~PVC pipe~~the product led to ~~rapidly increasing sale~~a rapid and significant increase in sales prices for PVC pipe, ~~throughout 2021 and the first half of 2022. The increase in sale prices has outpaced~~significantly outpacing the increase in ~~PVC~~ resin input costs, leading to ~~expanding gross profit margins. Beginning in the third quarter of 2022, demand~~widening margins within our Plastics segment.

Demand for PVC pipe began to ~~decline~~soften in the second half of 2022 and softening demand continued through the first half of 2023 as ~~multiple, larger than anticipated, resin price reductions caused PVC pipe~~ distributors and contractors ~~to reduce~~have reduced purchase volumes in ~~an effort~~response to ~~reduce inventory levels.~~uncertain and competitive market conditions. Resin prices have declined over this time frame but sales prices for PVC pipe remain elevated, continuing to produce expanded operating margins.

~~The~~These unique market dynamics ~~experienced by~~impacting our Plastics segment ~~businesses in 2021 and thus far in 2022 have~~ resulted in a significant increase in earnings in 2022 compared to prior periods. We currently expect earnings of our Plastics segment to remain elevated ~~relative~~in 2023 compared to ~~historical~~pre-2021 levels, ~~through the end of 2022 and into 2023,~~ but as the industry supply and demand conditions normalize, we expect segment earnings to normalize in the last half of 2024.

STEEL PRICING

Volatility in the price of steel, a key material input to our Manufacturing segment, significantly impacted our operating results in the last two years. Steel prices were elevated at the beginning of 2022 but began to steadily decline at the end of the second quarter and returned to near historical levels by the end of the year. Elevated steel prices led to increased sales prices in ~~2024.~~2022 for our products at BTD Manufacturing, Inc. (BTD), our metal fabrication business within our Manufacturing segment, as we passed along material cost increases to our customers. Steel prices in the first half of 2023 had significantly declined from the same period in the previous year, impacting our comparative operating results.

The marketplace dynamics impacting both our Manufacturing and Plastics segments are fluid and subject to change ~~which~~and may impact our operating results prospectively.


RESULTS OF OPERATIONS – QUARTER TO DATE

Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments: Electric, Manufacturing and Plastics. In addition to the segment results, we provide an overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.

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CONSOLIDATED RESULTS

The following table summarizes consolidated operating results for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	383,856	$	316,294	$	67,562	21.4	%	Operating Revenues	$	337,716	$	400,040	$	(62,324)	(15.6)	%
Operating Expenses	Operating Expenses	267,723		241,766		25,957		10.7		Operating Expenses	231,663		278,974		(47,311)		(17.0)
Operating Income	Operating Income	116,133		74,528		41,605		55.8		Operating Income	106,053		121,066		(15,013)		(12.4)
Interest Charges		9,259		9,648		(389)		(4.0)
Nonservice Cost Components of Postretirement Benefits		(52)		505		(557)		(110.3)
Interest Expense										Interest Expense	(9,696)		(8,991)		(705)		7.8
Nonservice Components of Postretirement Benefits										Nonservice Components of Postretirement Benefits	2,421		751		1,670		222.4
Other Income (Expense)	Other Income (Expense)	(174)		203		(377)		(185.7)		Other Income (Expense)	3,253		(889)		4,142		(465.9)
Income Before Income Taxes	Income Before Income Taxes	106,752		64,578		42,174		65.3		Income Before Income Taxes	102,031		111,937		(9,906)		(8.8)
Income Tax Expense	Income Tax Expense	22,513		11,824		10,689		90.4		Income Tax Expense	20,062		26,000		(5,938)		(22.8)
Net Income	Net Income	$	84,239	$	52,754	$	31,485	59.7	%	Net Income	$	81,969	$	85,937	$	(3,968)	(4.6)	%

Operating Revenues ~~increased $67.6~~decreased $62.3 million primarily due to ~~increases in PVC pipe sale prices~~decreased sales volumes within our Plastics segment, decreased fuel recovery revenues in our Electric segment and decreased steel prices in our Manufacturing segment. These decreases were partially offset by increased transmission services revenue, increased rider revenue, and higher commercial and industrial sales in our Electric segment and increased ~~retail revenues within~~sales volumes in our ~~Electric~~Manufacturing segment. In our Plastics segment, PVC pipe sale volumes decreased as customer demand softened from the same

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period a year ago amid changing market conditions. Decreased sales prices ~~increased~~in our Manufacturing segment were primarily due to ~~the unique industry supply and demand dynamics described above.~~decreased steel prices, which are passed through to customers. In our Electric segment, ~~increased~~decreased fuel recovery revenues were driven by ~~higher fuel and~~lower purchased power costs and ~~increased commercial and industrial sales volumes contributed to higher operating revenues. In addition, increased sales volumes resulted in increased operating revenues in our Manufacturing segment.~~volumes. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating Expenses ~~increased $26.0~~decreased $47.3 million primarily due to ~~increased~~lower sales volumes in our Plastics segment, lower purchased power ~~and fuel~~ costs in our Electric ~~segment. Operating expenses~~segment and lower material costs in our Manufacturing segment, ~~increased primarily due to increased sales volumes. These increases were partially offset by a decrease in operating expenses in our Plastics segment, due to lower sales volumes.~~as discussed above. See our segment disclosures below for additional discussion of items impacting operating expenses.

Interest ~~Charges~~Expense ~~decreased $0.4~~increased $0.7 million due to ~~a decrease in the~~increased interest ~~rate~~rates on our ~~$140.0 million of fixed-rate long-term~~short-term variable rate debt ~~that was refinanced in December 2021,~~ and a ~~lower~~higher level of average ~~short-term borrowings outstanding in 2022 compared to 2021.~~borrowings.

Nonservice ~~Cost~~ Components of Postretirement Benefits ~~decreased $0.6~~improved by $1.7 million, having a positive impact on net income, primarily due to ~~the amortization of~~a change in actuarial ~~gains resulting from the increase in the discount rates~~assumptions used to measure our pension benefit and postretirement benefit ~~liabilities as of December 31, 2021.~~obligations, including an increase in the discount rate applied and an increase in the expected return on assets assumption.

Other Income ~~decreased $0.4~~increased $4.1 million primarily due to ~~investment losses~~gains on our corporate-owned life insurance policies ~~and other investments~~ during the ~~third~~second quarter of ~~2022~~2023 compared to investment ~~gains~~losses in the ~~same period of the~~ previous ~~year.~~year and investment income earned on our short-term cash equivalent investments.

Income Tax Expense ~~increased $10.7~~decreased $5.9 million primarily due to ~~increased~~decreased income before income taxes. Our effective tax rate was ~~21.1%~~19.7% in the ~~third~~second quarter of ~~2022~~2023 and ~~18.3%~~23.2% in the ~~third~~second quarter of ~~2021.~~2022. The ~~increase~~decrease in our effective tax rate was ~~driven by an increase in~~primarily due to non-taxable gains on our ~~income before income taxes without a corresponding increase in tax credits and other permanent differences that impact our effective tax rate.~~corporate-owned life insurance policy investments. See Note 8 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding factors impacting our effective tax rate in ~~2022~~2023 and ~~2021.~~2022.

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ELECTRIC SEGMENT RESULTS

The following table summarizes Electric segment operating results for the three months ended ~~September~~June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Retail Revenues	$	93,715	$	113,603	$	(19,888)	(17.5)	%
Transmission Services Revenues	14,829		11,697		3,132		26.8
Wholesale Revenues	2,670		3,537		(867)		(24.5)
Other Electric Revenues	2,549		2,112		437		20.7
Total Operating Revenues	113,763		130,949		(17,186)		(13.1)
Production Fuel	14,833		14,714		119		0.8
Purchased Power	5,212		24,162		(18,950)		(78.4)
Operating and Maintenance Expenses	45,522		42,379		3,143		7.4
Depreciation and Amortization	18,672		18,390		282		1.5
Property Taxes	4,336		4,435		(99)		(2.2)
Operating Income	$	25,188	$	26,869	$	(1,681)	(6.3)	%

	2023		2022		change		% change

Electric kilowatt-hour (kwh) Sales (in thousands)
Retail kwh Sales	1,345,830		1,286,419		59,411		4.6	%
Wholesale kwh Sales – Company Generation	87,032		56,514		30,518		54.0
Heating Degree Days	639		716		(77)		(10.8)
Cooling Degree Days	254		154		100		64.9

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating degree days and cooling degree days as a percent of normal for the three months ended June 30, 2023 and 2022.


	2023		2022

Heating Degree Days	120.6	%	135.1	%
Cooling Degree Days	215.3	%	129.4	%

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions in 2023 and 2022, and ~~2021:~~between years.

(in thousands) 2022 2021 $ change % change
Retail Revenues $ 120,177 $ 96,438 $ 23,739 24.6 %
Transmission Services Revenues 13,156 13,300 (144) (1.1)
Wholesale Revenues 7,196 6,944 252 3.6
Other Electric Revenues 2,218 2,093 125 6.0
Total Operating Revenues 142,747 118,775 23,972 20.2
Production Fuel 24,972 17,698 7,274 41.1
Purchased Power 19,913 9,878 10,035 101.6
Operating and Maintenance Expenses 39,799 36,465 3,334 9.1
Depreciation and Amortization 17,669 17,874 (205) (1.1)
Property Taxes 4,438 4,474 (36) (0.8)
Operating Income $ 35,956 $ 32,386 $ 3,570 11.0 %
2022 2021 change % change
Electric kilowatt-hour (kwh) Sales (in thousands)

Retail kwh Sales 1,275,051 1,076,580 198,471 18.4 %
Wholesale kwh Sales – Company Generation 99,890 174,187 (74,297) (42.7)
Heating Degree Days 22 3 19 633.3
Cooling Degree Days 376 463 (87) (18.8)


	2023 vs Normal		2023 vs 2022		2022 vs Normal

Effect on Diluted Earnings Per Share	$	0.04	$	0.01	$	0.03

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Retail Revenues decreased $19.9 million primarily due to a $19.2 million decrease in fuel recovery revenues, due to decreased purchased power costs and volumes, as described below. Also, our Minnesota rate case was finalized in the second quarter of 2022, which included a determination of the final interim rate refund and resulted in an additional $4.1 million of retail revenue in the second quarter of 2022. These decreases, were partially offset by:

•A $1.6 million increase in retail revenues from increased sales volumes to commercial and industrial customers.

•A $2.1 million increase in renewable resource rider revenue, including recovery of costs related to our Hoot Lake Solar project and the Ashtabula III wind farm.

Transmission Services Revenue increased $3.1 million primarily due to increased sales volumes compared to same period in the prior year.

Purchased Power costs to serve retail customers decreased $19.0 million due to a 72% decrease in the price of purchased power per kwh, primarily due to decreased market energy costs, and a 23% decrease in the volume of purchased power, primarily due to the planned outage at Coyote Station in the second quarter of 2022, which resulted in higher purchase volumes last year, as well as the acquisition of the Ashtabula III wind farm in the current year. Prior to the acquisition of Ashtabula III, OTP purchased the wind generated electricity from the facility under the terms of a power purchase agreement.

Operating and MaintenanceExpenses increased $3.1 million primarily due to increased labor costs, increased maintenance and transmission service activities at our wind farm facilities, including the incremental costs associated with the Ashtabula III facility that was purchased during the year, maintenance expenses related to an outage at Big Stone Plant, increased vegetative management expenses, and increased MISO tariff expenses. These increases were partially offset by decreased maintenance and other expenses related to Coyote Station, as the second quarter of 2022 includes costs associated with a planned outage at Coyote Station.

MANUFACTURING SEGMENT RESULTS

The following table summarizes Manufacturing segment operating results for the three months ended June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Operating Revenues	$	102,475	$	103,196	$	(721)	(0.7)	%
Cost of Products Sold (excluding depreciation)	79,154		78,515		639		0.8
Other Operating Expenses	10,470		9,890		580		5.9
Depreciation and Amortization	4,531		4,091		440		10.8
Operating Income	$	8,320	$	10,700	$	(2,380)	(22.2)	%

Operating Revenues decreased $0.7 million primarily due to decreased steel prices, which impacted revenues at BTD Manufacturing, as well as decreased sales volumes at T.O. Plastics. Steel prices declined compared to the second quarter of 2022, resulting in a 15% decrease in material costs, which are passed through to customers. The impact of decreased steel prices was offset by a 14% increase in sales volumes, driven by strong customer and end market demand in the construction, agriculture, and energy markets, as well as sales price increases which were implemented in response to labor and non-steel material cost inflation. Lower scrap metal prices also impacted operating revenues as scrap metal revenues decreased $0.5 million from the previous year. Operating revenues at T.O. Plastics decreased primarily due to decreased sales volumes of horticulture products in response to changing market conditions as order and delivery lead times began to normalize.

Cost of Products Sold increased $0.6 million primarily due to increased sales volumes, as described above, largely offset by decreased material costs, as well as unfavorable cost absorption at BTD. Increased labor costs and lower productivity contributed to unfavorable cost absorption and lower profit margins. The increase in labor costs and the lower level of productivity during the quarter resulted from increased incentives and overtime wages combined with increased staffing levels to meet higher business volumes and the time required for new employees to achieve peak productivity.

Other Operating Expenses increased $0.6 million primarily due to increased salaries, benefits, and other compensation costs.

PLASTICS SEGMENT RESULTS

The following table summarizes Plastics segment operating results for the three months ended June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Operating Revenues	$	121,478	$	165,895	$	(44,417)	(26.8)	%
Cost of Products Sold (excluding depreciation)	41,504		73,951		(32,447)		(43.9)
Other Operating Expenses	3,936		4,340		(404)		(9.3)
Depreciation and Amortization	1,003		1,043		(40)		(3.8)
Operating Income	$	75,035	$	86,561	$	(11,526)	(13.3)	%

Operating Revenues decreased $44.4 million primarily due to a 26% decrease in sales volumes compared to the same period last year. Sales volume decreases in the second quarter were driven by general end market softness and distributors continuing to manage inventory levels. Sales prices declined 1% from the second quarter of 2022 but remained elevated compared to pre-2021 levels.

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Cost of Products Sold decreased $32.4 million due to decreased sales volumes, as described above, and decreased PVC resin costs. PVC resin and other input material costs decreased 37% compared to the same period in the previous year as the unique supply and demand conditions, which caused significant increases in resin costs, have subsided and resin costs have stabilized.

CORPORATE COSTS

The following table summarizes Corporate operating results for the three months ended June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Other Operating Expenses	$	2,464	$	3,022	$	(558)	(18.5)	%
Depreciation and Amortization	26		42		(16)		(38.1)
Operating Loss	$	2,490	$	3,064	$	(574)	(18.7)	%

Other Operating Expenses decreased $0.6 million primarily due to decreased employee benefit expenses related to decreases in our employee health insurance claim costs.


RESULTS OF OPERATIONS – YEAR TO DATE

CONSOLIDATED RESULTS

The following table summarizes consolidated operating results for the six months ended June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Operating Revenues	$	676,797	$	774,944	$	(98,147)	(12.7)	%
Operating Expenses	490,074		555,578		(65,504)		(11.8)
Operating Income	186,723		219,366		(32,643)		(14.9)
Interest Expense	(19,111)		(17,939)		(1,172)		6.5
Nonservice Components of Postretirement Benefits	4,833		772		4,061		526.0
Other Income (Expense)	5,370		(629)		5,999		(953.7)
Income Before Income Taxes	177,815		201,570		(23,755)		(11.8)
Income Tax Expense	33,365		43,630		(10,265)		(23.5)
Net Income	$	144,450	$	157,940	$	(13,490)	(8.5)	%

Operating Revenues decreased $98.1 million primarily due to lower sales volumes within our Plastics segment and decreased steel prices in our Manufacturing segment. These decreases were partially offset by increased sales volumes, due to strong customer demand, in our Manufacturing segment and increased retail and transmission services revenues, due to increased sales volumes and rider revenues, within our Electric segment. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating Expenses decreased $65.5 million primarily due to lower sales volumes within our Plastics segment, as discussed above. In addition to lower sales volumes, operating expenses in our Plastics segment also decreased due to decreased PVC resin and other input costs. Decreased operating expenses in our Manufacturing segment primarily due to lower material costs at BTD, driven by lower steel prices, were largely offset by higher sales volumes and increases in other operating expenses. Operating expenses in our Electric segment increased primarily due to higher labor costs, maintenance expenses related to an outage at Big Stone Plant, increased maintenance expenses associated with our wind generation assets, and increased vegetative management expenses. See our segment disclosures below for additional discussion of items impacting operating expenses.

Interest Expense increased $1.2 million due to increased interest rates on our short-term variable rate debt, partially offset by a lower level of average borrowings.

Nonservice Components of Postretirement Benefits improved by $4.1 million, having a positive impact on net income, primarily due to a change in actuarial assumptions used to measure our pension benefit and postretirement benefit obligations, including an increase in the discount rate applied and an increase in the expected return on assets assumption.

Other Income increased $6.0 million primarily due to gains on our corporate-owned life insurance policies during the second quarter of 2023 compared to investment losses in the same period of the previous year and investment income earned on our short-term cash equivalent investments.

Income Tax Expense decreased $10.3 million primarily due to decreased income before income taxes. Our effective tax rate was 18.8% for the six months ended June 30, 2023 and 21.6% for the same period in the previous year. The decrease in our effective tax rate was driven by non-taxable gains on our corporate-owned life insurance policy investments and an increase in production tax credits from our wind generation assets in the current period. See Note 8 to our consolidated financial statements included in the report on Form 10-Q for additional information regarding factors impacting our effective tax rate.

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ELECTRIC SEGMENT RESULTS

The following table summarizes Electric segment operating results for the six months ended June 30, 2023 and 2022:


(in thousands)	2023		2022		$ change		% change

Retail Revenues	$	230,168	$	227,242	$	2,926	1.3	%
Transmission Services Revenues	26,936		24,254		2,682		11.1
Wholesale Revenues	4,508		6,000		(1,492)		(24.9)
Other Electric Revenues	4,059		3,869		190		4.9
Total Operating Revenues	265,671		261,365		4,306		1.6
Production Fuel	26,326		29,567		(3,241)		(11.0)
Purchased Power	47,037		44,691		2,346		5.2
Operating and Maintenance Expenses	91,070		86,659		4,411		5.1
Depreciation and Amortization	36,997		36,772		225		0.6
Property Taxes	8,957		8,866		91		1.0
Operating Income	$	55,284	$	54,810	$	474	0.9	%

	2023		2022		change		% change

Electric kilowatt-hour (kwh) Sales (in thousands)
Retail kwh Sales	2,981,076		2,801,716		179,360		6.4	%
Wholesale kwh Sales – Company Generation	148,886		122,701		26,185		21.3
Heating Degree Days	4,371		4,537		(166)		(3.7)
Cooling Degree Days	254		154		100		64.9

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating and cooling degree days as a percent of normal for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.


		2022		2021			2023		2022

Heating Degree Days	Heating Degree Days	43.1	%	5.8	%	Heating Degree Days	109.9	%	114.9	%
Cooling Degree Days	Cooling Degree Days	108.4	%	132.7	%	Cooling Degree Days	215.3	%	129.4	%

2022 vs
Normal
2022 vs
2021
2021 vs
Normal
Effect on Diluted Earnings Per Share $ 0.01 $ (0.02) $ 0.03


	2023 vs Normal		2023 vs 2022		2022 vs Normal

Effect on Diluted Earnings Per Share	$	0.07	$	—	$	0.07

Retail Revenues increased ~~$23.7~~$2.9 million primarily due to the following:

•~~A $16.0 million increase in fuel recovery revenues due to increased production fuel and purchased power costs as described below.~~

•A $4.3 million increase in retail revenues from increased sales volumes from commercial and industrial customers, including the impact of a new commercial customer load in North ~~Dakota.~~Dakota that came online during the first quarter of 2022.

•A ~~$1.2~~$3.4 million increase in renewable resource rider revenue, including recovery of costs related to our Hoot Lake Solar project and the Ashtabula III wind farm.

These increases were partially offset by a decrease in ~~consumption from the impact of unfavorable weather~~fuel recovery revenues, primarily due to decreased fuel and market energy costs, as described below. Also, our Minnesota rate case was finalized in the ~~third~~second quarter of 2022, ~~compared to~~which included a determination of the ~~same period last year.~~

~~Retail revenues in the third quarter of 2021 were negatively impacted by adjustments to our estimated~~final interim rate ~~refund.~~refund and resulted in an additional $4.1 million of retail revenue in 2022.

Production Fuel costs ~~increased $7.3~~decreased $3.2 million primarily asdue to a ~~result of a 28% increase~~10% decrease in fuel cost per ~~kwh. Increased generation~~kwh resulting from ~~our fuel-burning plants~~decreases in ~~the third quarter of 2022, as compared to the same period last year, also contributed to the increase in production fuel costs.~~natural gas prices.

Purchased Powercosts to serve retail customers increased ~~$10.0~~$2.3 million due to a ~~45% increase in the price of purchased power per kwh, resulting from increased natural gas and market energy prices, and a 39%~~13% increase in the volume of purchased power due to increased customer ~~demand.~~demand and favorable market energy prices, partially offset by a 7% decrease in the price of purchased power per kwh, resulting from decreased natural gas and market energy prices.

Operating and MaintenanceExpense increased ~~$3.3~~$4.4 million, primarily due to ~~an increase in~~increased labor costs, maintenance ~~activities, including our planned~~expenses related to an outage at ~~Coyote Station,~~Big Stone Plant, increased maintenance and transmission service activities at our wind farm facilities, including the incremental costs associated with the Ashtabula III facility that was purchased during the year, increased vegetative management expenses, higher insurance expenses, and ~~vegetation management, as well as~~ increased ~~transmission~~MISO tariff expenses. These increases were partially offset by decreased maintenance and other expenses related to Coyote Station, as the second quarter of 2022 included costs associated with a planned outage at the facility.

2224

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MANUFACTURING SEGMENT RESULTS

The following table summarizes Manufacturing segment operating results for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	98,767	$	89,977	$	8,790	9.8	%	Operating Revenues	$	209,257	$	208,154	$	1,103	0.5	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	77,764		70,148		7,616		10.9		Cost of Products Sold (excluding depreciation)	161,381		164,676		(3,295)		(2.0)
Other Operating Expenses	Other Operating Expenses	8,627		10,161		(1,534)		(15.1)		Other Operating Expenses	21,047		18,736		2,311		12.3
Depreciation and Amortization	Depreciation and Amortization	3,996		3,794		202		5.3		Depreciation and Amortization	9,000		8,105		895		11.0
Operating Income	Operating Income	$	8,380	$	5,874	$	2,506	42.7	%	Operating Income	$	17,829	$	16,637	$	1,192	7.2	%

Operating Revenuesincreased ~~$8.8~~$1.1 million primarily due to a 17% increase in sales volumes at BTD, ~~partially~~as well as sales price increases which were implemented in response to labor and non-steel material cost inflation. Increased sales volumes and pricing were largely offset by ~~lower steel prices, which resulted in~~ a ~~$5.4 million~~18% decrease in material costs, ~~that~~which are passed through to ~~customers. Declines in scrap metal prices resulted in~~customers, as a ~~$1.3 million decrease in scrap revenue. End market demand remains strong, however, supply chain disruptions experienced by our customers have continued to cause unpredictable shipments~~result of ~~our products to our customers. Increases in~~lower steel prices. Increased sales prices ~~and volumes~~ at T.O. Plastics, ~~due to continued strong customer demand,~~partially offset by a decrease in sales volumes of horticulture products, also contributed to the ~~segment~~ increase in operating revenues.

Cost of Products Sold ~~increased $7.6~~decreased $3.3 million primarily due to ~~higher~~lower material costs at BTD, as discussed above, largely offset by increased sales volumes ~~as described above, as well as~~and unfavorable cost absorption. Unfavorable cost absorption was primarily due to increased labor costs ~~partially offset by favorable~~and lower productivity. The increase in labor costs and the lower level of productivity during the current year resulted from increased incentives and overtime wages combined with increased staffing levels to meet higher production volumes, and the time required for new employees to achieve peak productivity. Decreased sales volumes at T.O. Plastics, as discussed above, also contributed to the decrease in cost ~~absorption and decreased material costs related to lower steel prices.~~of products sold.

Other Operating Expenses ~~decreased $1.5~~increased $2.3 million ~~primarily~~ due to ~~decreased incentive compensation~~variable costs ~~based on current year~~associated with increased business activity and financial performance ~~relative to established targets.~~during the period.

PLASTICS SEGMENT RESULTS

The following table summarizes Plastics segment operating results for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	142,342	$	107,542	$	34,800	32.4	%	Operating Revenues	$	201,869	$	305,425	$	(103,556)	(33.9)	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	61,597		64,064		(2,467)		(3.9)		Cost of Products Sold (excluding depreciation)	71,646		139,549		(67,903)		(48.7)
Other Operating Expenses	Other Operating Expenses	3,921		3,832		89		2.3		Other Operating Expenses	7,465		8,304		(839)		(10.1)
Depreciation and Amortization	Depreciation and Amortization	1,023		1,099		(76)		(6.9)		Depreciation and Amortization	2,040		2,150		(110)		(5.1)
Operating Income	Operating Income	$	75,801	$	38,547	$	37,254	96.6	%	Operating Income	$	120,718	$	155,422	$	(34,704)	(22.3)	%

Operating Revenues ~~increased $34.8~~decreased $103.6 million, primarily due to a ~~57%~~36% decrease in sales volumes compared to the same period last year, partially offset by a 3% increase in ~~the~~sales price per pound of PVC pipe ~~sold,~~sold. Sales volume decreases continue to be attributable to distributor customer inventory management as ~~sales prices remain high due~~distributors continue to ~~extraordinary~~closely manage their inventory levels and make strategic purchasing decisions amid uncertain and competitive market conditions. Demand for PVC pipe began to soften during the third quarter as customers started to consume high priced inventory instead of buying additional PVC pipe. Sales volumes for the quarter decreased 15% due to softening customer demand.

Cost of Products Sold decreased ~~$2.5~~$67.9 million ~~primarily~~ due to decreased sales volumes, as ~~described~~discussed above, ~~partially offset by increased~~as well as a 30% decrease in PVC resin and other input material costs, which increased 14.5% due to the market conditions described above. Resin prices in the third quarter of 2022 increased compared to the same period in the previous year, but decreased compared to the second quarter of 2022.costs.

CORPORATE COSTS

The following table summarizes Corporate operating results for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Other Operating Expenses	Other Operating Expenses	$	3,976	$	2,231	$	1,745	78.2	%	Other Operating Expenses	$	7,056	$	7,417	$	(361)	(4.9)	%
Depreciation and Amortization	Depreciation and Amortization	28		48		(20)		(41.7)		Depreciation and Amortization	52		86		(34)		(39.5)
Operating Loss	Operating Loss	$	4,004	$	2,279	$	1,725	75.7	%	Operating Loss	$	7,108	$	7,503	$	(395)	(5.3)	%

Other Operating Expenses ~~increased $1.7~~decreased $0.4 million primarily due to ~~increased~~decreased employee benefit expenses related to decreases in our employee health ~~care costs and increased professional service~~insurance claim costs.

2325

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~~RESULTS OF OPERATIONS – YEAR TO DATE~~

~~CONSOLIDATED RESULTS~~

~~The following table summarizes consolidated operating results for the nine months ended September 30, 2022 and 2021:~~
(in thousands) 2022 2021 $ change % change
Operating Revenues $ 1,158,800 $ 863,612 $ 295,188 34.2 %
Operating Expenses 823,302 685,063 138,239 20.2
Operating Income 335,498 178,549 156,949 87.9
Interest Charges 27,198 28,601 (1,403) (4.9)
Nonservice Cost Components of Postretirement Benefits (824) 1,511 (2,335) (154.5)
Other Income (802) 2,095 (2,897) (138.3)
Income Before Income Taxes 308,322 150,532 157,790 104.8
Income Tax Expense 66,143 25,380 40,763 160.6
Net Income $ 242,179 $ 125,152 $ 117,027 93.5 %

~~Operating Revenues~~ increased $295.2 million primarily due to higher PVC pipe prices within our Plastics segment and increased sales volumes and material costs, which resulted in higher sales prices, in our Manufacturing segment. Increased retail revenues within our Electric segment due to increased fuel recovery revenues, increased sales volumes from commercial and industrial customers, and favorable weather impacts also contributed to the higher operating revenues in 2022. See our segment disclosures below for additional discussion of items impacting operating revenues.

~~Operating Expense~~s increased $138.2 million due to increased expenses across all three of our operating segments. Operating expenses in our Electric segment increased primarily from higher purchased power costs due to an increase in the volume and cost of purchased power, increased production fuel costs, and higher operating and maintenance expenses, due to increased planned outage maintenance costs, increased labor costs related to various maintenance activities, and increased transmission tariff expenses. Operating expenses in our Manufacturing segment increased primarily due to higher material costs, largely driven by higher steel prices and higher sales volumes at BTD. Operating expenses in our Plastics segment increased primarily due to increased PVC resin and other input costs, partially offset by decreased sales volumes. See our segment disclosures below for additional discussion of items impacting operating expenses.

~~Interest Charges~~ decreased $1.4 million due to a lowering of our average interest rate on our long-term debt as a result of refinancing activity in 2021 and 2022, and a decrease in our average short-term borrowings compared to the previous year.

~~Nonservice Cost Components of Postretirement Benefits~~ decreased $2.3 million primarily due to the amortization of actuarial gains resulting from the increase in the discount rates used to measure our pension benefit and postretirement benefit liabilities as of December 31, 2021.

~~Other Income~~ decreased $2.9 million primarily due to investment losses on our corporate-owned life insurance policies and other investments during the nine months ended September 30, 2022 compared to investment gains in the same period last year.

~~Income Tax Expense~~ increased $40.8 million primarily due to increased income before income taxes. Our effective tax rate was 21.5% for the nine months ended September 30, 2022 and 16.9% for the same period in the previous year. The increase in our effective tax rate was driven by an increase in our income before income taxes without a corresponding increase in tax credits and other permanent differences that impact our effective tax rate. See ~~Note 8~~ ~~to our consolidated financial statements included in the report on Form 10-Q for additional information regarding factors impacting our effective tax rate.~~

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~~ELECTRIC SEGMENT RESULTS~~

~~The following table summarizes Electric segment operating results for the nine months ended September 30, 2022 and 2021:~~

(in thousands) 2022 2021 $ change % change
Retail Revenues $ 347,419 $ 291,130 $ 56,289 19.3 %
Transmission Services Revenues 37,409 37,085 324 0.9
Wholesale Revenues 13,196 14,711 (1,515) (10.3)
Other Electric Revenues 6,088 5,703 385 6.8
Total Operating Revenues 404,112 348,629 55,483 15.9
Production Fuel 54,538 44,576 9,962 22.3
Purchased Power 64,604 40,273 24,331 60.4
Operating and Maintenance Expenses 126,460 114,615 11,845 10.3
Depreciation and Amortization 54,441 53,335 1,106 2.1
Property Taxes 13,304 13,136 168 1.3
Operating Income $ 90,765 $ 82,694 $ 8,071 9.8 %
2022 2021 change % change
Electric kilowatt-hour (kwh) Sales (in thousands)

Retail kwh Sales 4,076,769 3,511,730 565,039 16.1 %
Wholesale kwh Sales – Company Generation 222,591 358,761 (136,170) (38.0)
Heating Degree Days 4,559 3,614 945 26.1
Cooling Degree Days 530 700 (170) (24.3)

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating and cooling degree days as a percent of normal for the nine months ended September 30, 2022 and 2021.

2022 2021
Heating Degree Days 114.0 % 89.9 %
Cooling Degree Days 113.7 % 150.9 %

2022 vs
Normal
2022 vs
2021
2021 vs
Normal
Effect on Diluted Earnings Per Share $ 0.08 $ 0.06 $ 0.02

~~Retail Revenues~~ ~~increased $56.3 million primarily due to the following:~~

•A $35.0 million increase in fuel recovery revenues primarily due to increased purchased power and production fuel costs, as described below, and a decrease in credits provided to retail customers from decreased margins recognized on wholesale sales.

•~~A $11.5 million increase in retail revenues from increased sales volumes from commercial and industrial customers, including the impact of a new commercial customer load in North Dakota.~~

•~~A $4.1 million increase in interim rate revenue due to the finalization of the interim rate refund, as approved by the MPUC in the second quarter of 2022.~~

•~~A $3.0 million increase in revenues from the favorable impact of weather in the first nine months of 2022 compared to the same period last year.~~

Retail revenues also benefited from increased transmission, renewable and phase-in rider revenue in the first nine months of 2022. These increases were partially offset by a decrease in conservation improvement program (CIP) revenue as a result of decreased CIP spending and related cost recovery. Retail revenues in 2021 were negatively impacted by adjustments to our estimated interim rate refund.

~~Production Fuel~~ ~~costs~~increased $10.0 million due to a 32% increase in fuel cost per kwh, which was partially offset by a decrease in kwhs generated from our fuel-burning plants due to our planned outage at Coyote Station in 2022 and the retirement of Hoot Lake Plant in May 2021.

~~Purchased Power~~ costs to serve retail customers increased $24.3 million due to a 44% increase in the volume of purchased power, resulting from the planned outage at Coyote Station, the retirement of Hoot Lake Plant and increased customer demand, and an 11% increase in the price of purchased power per kwh, resulting from increased natural gas and market energy prices.

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~~Operating and Maintenance Expense~~ ~~increased $11.8 million, primarily due the following:~~

•~~Higher maintenance costs primarily arising from our planned outage at Coyote Station and increased maintenance costs at our wind generation assets.~~

•~~Increased transmission tariff expenses.~~

•~~Higher labor costs associated with increased maintenance activities, including vegetative management and other activities.~~

•~~Increased travel costs driven by higher fuel costs for our vehicle fleet and increased travel activities.~~

~~Partially offsetting these increases were lower CIP expenses compared to the previous year and a decrease in expenses from our Minnesota rate case compared to 2021.~~

~~MANUFACTURING SEGMENT RESULTS~~

~~The following table summarizes Manufacturing segment operating results for the nine months ended September 30, 2022 and 2021:~~

(in thousands) 2022 2021 $ change % change
Operating Revenues $ 306,921 $ 250,085 $ 56,836 22.7 %
Cost of Products Sold (excluding depreciation) 242,440 189,183 53,257 28.2
Other Operating Expenses 27,363 28,109 (746) (2.7)
Depreciation and Amortization 12,101 11,395 706 6.2
Operating Income $ 25,017 $ 21,398 $ 3,619 16.9 %

~~Operating Revenues~~ increased $56.8 million primarily due to a $35.6 million increase in material costs at BTD, which are passed through to customers, as a result of higher steel prices. Steel prices have been highly volatile in 2022 and were higher on average compared to the previous year, which resulted in increased revenues as we sold through high-priced inventory. Operating revenues also increased due to a 7.6% increase in sales volumes and price increases related to inflationary costs being experienced across the business. Increases in sales prices and volumes at T.O. Plastics, primarily due to strong customer demand in the horticulture sector, also contributed to the increase in operating revenues.

~~Cost of Products Sold~~ increased $53.3 million primarily due to higher material costs and sales volumes at BTD. The increase in material cost was largely driven by increased steel prices as mentioned above. Cost of products sold at BTD was positively impacted by favorable cost absorption in the first nine months of 2022 compared to the prior year. Increased sales volumes and material costs at T.O. Plastics also contributed to the increase in cost of products sold.

~~PLASTICS SEGMENT RESULTS~~

~~The following table summarizes Plastics segment operating results for the nine months ended September 30, 2022 and 2021:~~

(in thousands) 2022 2021 $ change % change
Operating Revenues $ 447,767 $ 264,898 $ 182,869 69.0 %
Cost of Products Sold (excluding depreciation) 201,146 169,584 31,562 18.6
Other Operating Expenses 12,225 10,450 1,775 17.0
Depreciation and Amortization 3,173 3,200 (27) (0.8)
Operating Income $ 231,223 $ 81,664 $ 149,559 183.1 %

~~Operating Revenues~~ increased $182.9 million, primarily due to a 83% increase in the price per pound of PVC pipe sold. As discussed above, PVC pipe sale prices increased due to strong demand for PVC pipe products, limited PVC pipe inventories, and increases in the cost of resin. Resin and other material input supply constraints negatively impacted our production volumes, which coupled with low inventory levels, impacted sales volumes, which were down 7.5% compared to the previous year.

~~Cost of Products Sold~~ increased $31.6 million primarily due to increased PVC resin and other input costs, which increased 29% due to the market conditions described above, partially offset by decreased sales volumes. Labor and overhead costs also increased from the previous year.

~~Other Operating Expenses~~ increased $1.8 million primarily due to increased incentive compensation costs and sales commissions, which increased as a result of increased operating revenues and earnings compared to the previous year.

~~CORPORATE COSTS~~

~~The following table summarizes Corporate operating results for the nine months ended September 30, 2022 and 2021:~~

(in thousands) 2022 2021 $ change % change
Other Operating Expenses $ 11,393 $ 7,028 $ 4,365 62.1 %
Depreciation and Amortization 114 179 (65) (36.3)
Operating Loss $ 11,507 $ 7,207 $ 4,300 59.7 %

~~Other Operating Expenses~~ increased $4.4 million primarily due to increased employee health care costs, increased professional service costs, increased incentive compensation costs based on the current year financial and operating performance, and increased travel costs.

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REGULATORY ~~RATE~~ MATTERS

The following provides a summary of ~~general rate case filings,~~ rate rider filings and other regulatory filings that have or are expected to have a material impact on our operating results, financial position or cash flows.

~~GENERAL RATES~~

~~Minnesota Rate Case:~~ On November 2, 2020, OTP filed an initial request with the MPUC for an increase in revenue recoverable through base rates in Minnesota, and on December 3, 2020, the MPUC approved an interim annual rate increase of $6.9 million, or 3.2%, effective January 1, 2021.

RATE RIDERS

The following table includes a summary of pending and recently concluded rate rider proceedings:

Recovery

Filing

Amount

Effective

Mechanism

Jurisdiction

Status

Date

(in millions)

Date

~~Notes~~Description

RRR - 2022

Approved

11/01/22

17.5

07/01/23

Recovery of Hoot Lake Solar costs, Ashtabula III costs, and true up for PTCs from Merricourt.

CIP - 2022

Approved

04/01/22

10.8

10/01/22

~~Includes recovery~~Recovery of energy conservation improvement costs as well as a demand side management financial incentive.

CIP - ~~2021~~2023

Approved

04/~~01/21~~03/23

~~9.4~~9.7

~~12/~~10/01/2123

~~Includes recovery~~Recovery of energy conservation improvement costs as well as a demand side management financial incentive.

TCR - 2021

Approved

11/23/21

7.2

08/01/22

~~Includes recovery~~Recovery of ~~two new~~ transmission ~~projects.~~project costs.

RRR - 2021

Approved

12/06/21

7.0

08/01/22

~~Includes return on~~Recovery of Hoot Lake Solar ~~construction costs~~ and ~~costs associated with the acquisition of the~~ Ashtabula III ~~wind farm.~~costs.

EITE - 2023

Approved

04/14/23

2.2

01/01/24

Biennial update to Energy-Intensive, Trade-Exposed rider.

EUIC - 2023

Requested

03/20/23

1.3

07/01/23

Recovery of advanced metering infrastructure, outage management and demand response system projects.

RRR - ~~2021~~2023

Approved

~~03/07/21~~12/30/22

~~11.8~~12.2

~~04/~~05/01/2123

~~Includes recovery~~Recovery of Merricourt, ~~investment~~Ashtabula III and ~~operating~~other costs.

RRR - 2022

Approved

01/05/22

7.8

04/01/22

~~Includes~~Recovery of Merricourt ~~recovery, the proposed purchase of~~costs, Ashtabula III costs, and ~~credits related to~~ deferred taxes and production tax credits.

TCR - 2022

~~Requested~~Approved

09/15/22

7.5

01/01/23

~~Includes recovery of three new transmission projects, one transmission rebuild project and six transmission projects related to extending the useful life~~Recovery of transmission ~~assets.~~project costs.

TCR - 2021

Approved

09/15/21

6.1

01/01/22

~~Includes recovery~~Recovery of ~~three new~~ transmission ~~projects/programs.~~

~~TCR - 2020~~

~~Approved~~

~~11/18/20~~

~~5.6~~

~~01/01/21~~

~~Includes recovery of eight new transmission projects.~~

~~GCR - 2021~~

~~Approved~~

~~03/01/21~~

~~5.2~~

~~07/01/21~~

~~Includes recovery of Astoria Station, net of anticipated savings associated with the retirement of Hoot Lake Plant.~~project costs.

GCR - 2022

Approved

03/01/22

3.3

07/01/22

Annual update to generation cost recovery rider.

~~AGI~~AMDT - 2022

~~Requested~~Approved

07/08/22

3.1

01/01/23

~~Includes recovery~~Recovery of ~~the~~ advanced metering infrastructure, outage management system and demand response projects.

GCR - 2023

Approved

03/03/23

2.2

07/01/23

Recovery of Astoria Station, net of anticipated savings associated with the retirement of Hoot Lake Plant.

PIR - 2022

Approved

06/01/22

3.0

09/01/22

~~Includes recovery~~Recovery of ~~the~~ Ashtabula III, ~~wind farm purchase,~~ Merricourt, Astoria Station, ~~and the~~ Advanced Grid Infrastructure project ~~as well as~~costs, and impact of load growth credits.

TCR - ~~2020~~2022

Approved

11/01/~~29/20~~22

~~2.3~~3.0

03/~~02/20~~01/23

~~Annual update to~~Recovery of transmission ~~cost recovery rider.~~project costs.

PIR - 2023

Requested

06/01/23

2.6

09/01/23

Recovery of Ashtabula III, Merricourt, Astoria Station, Advanced Grid Infrastructure project costs, and impact of load growth credits.

TCR - ~~2022~~2021

Approved

10/29/21

2.2

03/01/22

~~Annual update to~~Recovery of transmission ~~cost recovery rider.~~

~~TCR - 2021~~

~~Approved~~

~~02/19/21~~

~~2.2~~

~~03/01/21~~

~~Includes recovery of two new transmission projects.~~project costs.

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~~Energy Adjustment Rider:~~ On October 20, 2022, OTP filed supplemental comments in the Minnesota 2023 Energy Adjustment Rider (EAR) docket. As part of this filing, OTP proposed to refund the Minnesota portion of capacity auction revenues (see below for further details) through this rider and proposed a mechanism to address load reallocation due to the impact of a recent load addition in North Dakota. The filing proposed an assessment in 2022 and 2023 to determine whether actual, weather normalized earnings, as measured based on ROE, including the crediting of capacity auction revenues, are above or below our authorized ROE in Minnesota (9.48%). Under our proposal, should OTP under or over earn its authorized ROE, an adjustment to recover amounts from, or refund amounts to, Minnesota customers would be effectuated through the EAR. OTP proposed three ROE ranges above or below the allowed ROE for which a surcharge or refund would be calculated, including a 20 basis point range in which no surcharge or refund would be assessed, a 21 to 100 basis point range in which 50% of the over or under earning in this range would be collected from or refunded to customers, and a range above 100 basis points in which 100% of the over or under earning in this range would be collected from or refunded to customers. Our proposal is still pending before the MPUC. Should our proposal be accepted without modification, as of September 30, 2022, we estimated no refund or surcharge would be assessed under the requested mechanism.

~~MISO CAPACITY AUCTION~~

OTP offered 88 megawatts of excess capacity into the annual MISO planning resource auction for the period June 2022 through May 2023. As a result of a capacity shortage in the MISO region, capacity prices cleared the auction at maximum pricing. As a result, the 88 megawatts of auctioned capacity will generate approximately $9.3 million of net capacity auction revenues over the twelve month period beginning in June 2022. Through September 30, 2022, OTP has received approximately $2.9 million of excess capacity auction revenues. We anticipate a portion of the capacity auction revenues will be used to mitigate customer rate increases or returned to customers through various mechanisms in each jurisdiction.

INTEGRATED RESOURCE PLAN

On ~~September 1, 2021,~~March 31, 2023, OTP ~~filed its~~submitted a supplemental resource plan filing to the MPUC, the NDPSC, and the South Dakota Public Utilities Commission. The supplemental filing updates OTP’s original 2022 Integrated Resource Plan (2022 IRP) ~~concurrently with regulators in~~, which was filed on September 1, 2021. In the ~~three states where~~supplemental filing, OTP ~~operates, Minnesota, North Dakota and South Dakota. The 2022 IRP included OTP’s preferred~~outlined its updated plan for meeting customers’ anticipated capacity and energy needs while maintaining system reliability and low electric service ~~rates.~~rates, in light of several changes that have occurred since the original filing, including significant winter and spring reserve planning margins adopted by MISO, tax credits made available for renewable energy projects under the Inflation Reduction Act, the enactment of the Clean Energy Bill in Minnesota, and recent volatility in energy and capacity markets.

The ~~components of~~major requests in OTP's ~~preferred plan~~supplemental filing include:

–•the addition of ~~dual~~on-site liquefied natural gas fuel ~~capability~~storage at our Astoria Station natural gas ~~plant;~~plant in 2026;

–•the addition of ~~150~~approximately 200 megawatts of solar generation in ~~2025;~~2027-2028;

–•undertaking the ~~addition of 100~~initial steps necessary to add approximately 200 megawatts of wind generation in ~~2027;~~2029; and

–•~~the commencement of the process of withdrawing~~a withdrawal from our 35 percent ownership interest in Coyote Station, a ~~jointly owned,~~jointly-owned coal-fired generation plant, ~~by December 31, 2028; and~~in the event we are required to make a major, non-routine capital investment in the plant.

–Consistent with the ~~addition of 50 megawatts of solar generation in 2033.~~

~~Although the~~original 2022 IRP, ~~includes planned actions beyond 2026, regulators will not act on or approve planned actions in periods beyond 2026 as part of our 2022 IRP filing.~~

~~Subject~~the supplemental filing proposes to, subject to regulatory approval, ~~the preferred plan proposes to~~ create a regulatory asset ~~as a vehicle~~ to recover costs related to aany future withdrawal from Coyote ~~Station, including~~Station. Should such a withdrawal occur, we anticipate the regulatory asset would include the net

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book value of the plant on the withdrawal date, anticipated decommissioning costs, and any ~~required~~ costs incurred ~~as a result of an early termination of~~if the existing lignite sales agreement, under which Coyote Station acquires all of its lignite coal, ~~from a nearby mine.~~must be terminated. As part of an economic analysis included in the filing, OTP developed an estimate of the reasonably foreseeable costs of withdrawing from Coyote Station, which was determined to be $68.5 million, assuming a withdrawal at the end of ~~2028 of $68.5 million.~~2028. These costs may differ from actual results due to the uncertainty and timing of future events ~~associated with the terms and conditions of~~which could result in a ~~withdrawal.~~

On October 14, 2022, OTP submitted a supplemental filing to update its 2022 IRP, requesting the procedural schedule in Minnesota be amended to allow for additional time to update our resource modeling given significant changes in the energy industry since the original 2022 IRP filing, while maintaining the original procedural schedule as it relates to adding dual fuel capability at Astoria Station. Our original filing proposed fuel oil as the secondary on-site fuel at Astoria Station and our supplemental filing reflects revised cost estimates and liquified natural gas as the most cost-effective secondary fuel source. The recent changes which led to our request include FERC’s approval of MISO’s new seasonal resource adequacy construct, MISO’s proposal to significantly increase winter and spring planning reserve margins, and enactment of the Inflation Reduction Act. On November 1, 2022, the MPUC approved OTP's requested changes to the procedural schedule for the 2022 IRP. OTP plans to file an updated resource plan in March 2023, as approved under the amended schedule. In conjunction with the updated resource plan, OTP's preferred plan could change based on the results of the updated resource modeling incorporating the factors listed above, as well as other changes. A change to the preferred plan could ultimately impact the nature, timing and amount of future capital investments, as well as the potential for OTP's withdrawal from Coyote Station. ~~A notice~~

ENVIRONMENTAL REGULATION

Climate Change and Greenhouse Gas Regulation

In May 2023, the EPA proposed new regulations under Section 111 of the ~~request submitted~~Clean Air Act to regulate greenhouse gas (GHG) emissions from existing and new fossil fuel-based electric generating units (EGU). The proposal provides requirements for different types of fossil fuel-based EGUs with various compliance dates.

For existing coal-fired steam generating units that were in operation before January 8, 2014 and that plan to operate past December 31, 2039, the proposal would (subject to certain exceptions) set emissions standards that reflect the use of carbon capture and sequestration (CCS) with 90% capture of carbon dioxide emissions beginning in 2030.

For existing coal-fired steam generating units that are scheduled to be retired between January 1, 2032 and December 31, 2039, the proposed rule would, in general, set emissions standards that reflect the use of co-firing 40% natural gas with coal beginning in 2030.

For existing coal-fired steam generating units that will either (a) retire by January 1, 2032, or (b) retire between 2032 and December 21, 2034 and will operate at a 20% annual capacity factor limit in the meantime, the proposed rule would simply require routine maintenance and no increase in emission rate.

The proposal also includes emission standards for existing large (greater than 300 mega-watt), frequently-used (those that operate at a capacity factor over 50%) natural gas combustion turbines, including the use of CCS or co-firing with low-GHG hydrogen. Under the proposed rule, each state must submit a plan to the ~~MPUC was also provided~~EPA to implement standards that are at least as stringent as the ~~North Dakota Public Service Commission~~EPA’s emission guidelines. The EPA is proposing to require states to submit their plans within 24 months of the effective date of the regulation.

We continue to review and ~~South Dakota Public Utilities Commission.~~evaluate the proposal and its impact, if adopted as proposed, on our EGUs and the potential impact to our operating results, financial condition and liquidity. Coyote Station and Big Stone Plant, our two co-owned coal-fired power plants, would be within the scope of the proposed regulations. We do not believe our combustion turbines would be within the scope of the regulation given their size and operating frequency.


LIQUIDITY

LIQUIDITY OVERVIEW

We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability, because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our short-term and long-term capital expenditure plans and satisfy our obligations as they become due. Our liquidity, including our operating cash flows and access to capital markets, ~~can~~could be impacted by macroeconomic factors outside of our control, including higher interest rates and debt capital costs and diminished credit availability. In addition, our liquidity could be impacted by ~~non-~~

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~~compliance~~non-compliance with certain financial covenants under our various debt instruments. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with all financial covenants (see the Financial Covenants section under Capital Resources below).

The following table presents the status of our lines of credit as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


				2022						2021					2023						2022
(in thousands)	(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available		(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available

OTC Credit Agreement	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	147,363	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	170,000
OTP Credit Agreement	OTP Credit Agreement	170,000		—		9,919		160,081		88,315		OTP Credit Agreement	170,000		50,197		9,573		110,230		152,223
Total	Total	$	340,000	$	—	$	9,919	$	330,081	$	235,678	Total	$	340,000	$	50,197	$	9,573	$	280,230	$	322,223

We have an internal risk tolerance metric to maintain a minimum of $50 million of liquidity under the OTC Credit Agreement. Should additional liquidity be needed, this agreement includes an accordion feature allowing us to increase the amount available to $290 million, subject to certain terms and conditions. The OTP Credit Agreement also includes an accordion feature allowing OTP to increase that facility to $250 million, subject to certain terms and conditions.

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CASH FLOWS

The following is a discussion of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	287,973	$	154,752	Net Cash Provided by Operating Activities	$	184,497	$	175,630

Net Cash Provided by Operating Activities increased ~~$133.2~~$8.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily due ~~primarily~~ to the ~~$117.0~~absence of a pension plan contribution in 2023 due to the plan's funded status, whereas a $20.0 million ~~increase~~discretionary contribution was made in ~~net income, largely~~February 2022, as well as increases to certain regulatory liabilities for fuel cost recovery due to increased customer collections that will be returned to customers in future periods. Increases to operating cash flows were partially offset by lower earnings ~~from our Plastics segment,~~ and ~~a lower level of~~higher working ~~capital needs in the first nine months of 2022 compared to the prior year.~~capital.
(in thousands) 2022 2021
Net Cash Used in Investing Activities $ 127,556 $ 117,084


(in thousands)	2023		2022

Net Cash Used in Investing Activities	$	153,625	$	73,895

Net Cash Used in Investing Activities increased ~~$10.5~~$79.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The increase in cash used in investing activities was primarily due to a higher amount of Electric segment capital investment compared to last ~~year.~~year, including the purchase of the Ashtabula III wind farm for $50.6 million in January 2023. Capital expenditures in our Manufacturing and Plastics segments increased $14.0 million as a result of investments in additional equipment and a facility expansion project at our Plastics segment facility in Phoenix, Arizona.


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Net Cash Used in Financing Activities		$	88,967	$	37,559
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	$	710	$	(41,283)

Net Cash ~~Used in~~Provided by (Used in) Financing Activities increased ~~$51.4~~$42.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 included net proceeds from short-term borrowings of $42.0 million under the ~~issuance of $90.0 million of long-term debt at~~ OTP credit agreement, which ~~was~~were primarily used to ~~repay $30.0 million~~fund the acquisition of ~~long-term debt that matured in August 2022, to repay short-term borrowings, fund~~Ashtabula III and other capital ~~expenditures,~~investments, and ~~for other general corporate purposes.~~dividend payments of $36.5 million. Financing activities for the ~~nine~~six months ended ~~September~~June 30, 2022 ~~also~~ included net repayments of short-term borrowings of $91.2 million, the issuance of $90.0 million of long-term debt, and dividend payments of ~~$51.6 million. Financing activities for the nine months ended September 30, 2021 included net proceeds from short-term borrowings of $16.9 million and dividend payments of $48.6~~$34.4 million.


CAPITAL REQUIREMENTS

CAPITAL EXPENDITURES

We have a capital expenditure program for expanding, upgrading and improving our plants and operating equipment. Typical uses of cash for capital expenditures are investments in electric generation facilities and environmental upgrades, transmission and distribution lines, manufacturing facilities and upgrades, equipment used in the manufacturing process, and computer hardware and information systems. Our capital expenditure program is subject to review and regulatory approval and is revised in light of changes in demands for energy, technology, environmental laws, tax laws, regulatory changes, business expansion opportunities, the costs of labor, materials and equipment, and our financial condition.

We have updated our capital expenditure plans in our Electric segment in light of recent changes in the energy industry and recent regulatory actions, including FERC’s approval of MISO’s new seasonal resource adequacy construct, MISO’s proposal to significantly increase winter and spring planning reserve margins, MISO's approval of certain projects as part of its long-range transmission plan, and the enactment of the Inflation Reduction Act. The significant changes to our anticipated capital investments over the next five years include additional investment in multiple transmission projects, the modification of investments in wind generation, including the incorporation of wind repowering into our current capital investment plan, and a reduction in planned solar generation. The table below reflects these changes, as well as all other currently anticipated capital investments over the next five years in our Electric, Manufacturing, and Plastics segments.

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The following provides a summary of actual capital expenditures for the year ended December 31, ~~2021,~~2022, anticipated annual capital expenditures for the current year ending December 31, ~~2022,~~2023, and ~~anticipated capital expenditures for~~ the ~~next five~~subsequent four years, along with electric utility average rate base and annual rate base growth:


(in millions)	(in millions)	2021		2022(1)			2023			2024			2025			2026			2027			Total 2023 - 2027		(in millions)	2022			2023(1)			2024			2025			2026			2027			Total 2023 - 2027

Electric Segment:
Electric Segment																								Electric Segment
Renewables and Natural Gas Generation	Renewables and Natural Gas Generation			$	33		$	88		$	119		$	88		$	79		$	10		$	384	Renewables and Natural Gas Generation				$	88		$	119		$	88		$	85		$	49		$	429
Technology and Infrastructure	Technology and Infrastructure			9			33			30			6			5			1			75		Technology and Infrastructure				33			30			6			5			1			75
Distribution Plant Replacements	Distribution Plant Replacements			40			33			37			38			38			43			189		Distribution Plant Replacements				33			37			38			38			43			189
Transmission (includes replacements)	Transmission (includes replacements)			38			34			36			46			87			78			281		Transmission (includes replacements)				34			36			46			87			78			281
Other	Other			30			26			25			30			25			22			128		Other				26			25			30			24			23			128
Total Electric Segment	Total Electric Segment	$	140	$	150		$	214		$	247		$	208		$	234		$	154		$	1,057	Total Electric Segment	$	148		$	214		$	247		$	208		$	239		$	194		$	1,102
Manufacturing and Plastics Segments	Manufacturing and Plastics Segments	32		34			48			53			29			25			24			179		Manufacturing and Plastics Segments	23			48			53			29			25			24			179
Total Capital Expenditures	Total Capital Expenditures	$	172	$	184		$	262		$	300		$	237		$	259		$	178		$	1,236	Total Capital Expenditures	$	171		$	262		$	300		$	237		$	264		$	218		$	1,281

Total Electric Utility Average Rate Base	Total Electric Utility Average Rate Base	$	1,575	$	1,620		$	1,750		$	1,850		$	1,990		$	2,110		$	2,210				Total Electric Utility Average Rate Base	$	1,624		$	1,748		$	1,851		$	1,990		$	2,111		$	2,230
Annual Rate Base Growth	Annual Rate Base Growth			2.9		%	8.0		%	5.7		%	7.6		%	6.0		%	4.7		%			Annual Rate Base Growth	3.1		%	7.6		%	5.9		%	7.5		%	6.1		%	5.6		%

(1) Includes actual results for the nine months ended September 30, 2022, and anticipated capital expenditures for the fourth quarter of 2022.
(1) Includes actual results for the six months ended June 30, 2023, and anticipated capital expenditures for the remaining six months of 2023.																								(1) Includes actual results for the six months ended June 30, 2023, and anticipated capital expenditures for the remaining six months of 2023.

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CONTRACTUAL OBLIGATIONS

Our contractual obligations primarily include principal and interest payments due under our outstanding debt obligations, commitments to acquire coal, energy and capacity commitments, payments to meet our postretirement benefit obligations, and payment obligations under land easements and leasing arrangements.

On June 23, 2022, OTP exercised its option to acquire the Ashtabula III wind farm, a 62.4 megawatt wind farm located in eastern North Dakota, for $49.7 million, subject to certain closing adjustments. The purchase has received regulatory approval. We anticipate the transaction will close, subject to certain customary closing conditions, in January 2023.

Our contractual obligations as of December 31, ~~2021~~2022 are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Except for the obligations arising from new land easements assumed in connection with the purchase of Ashtabula III, ~~wind farm purchase described above,~~ there were no material changes in our contractual obligations outside of the ordinary course of ~~our~~ business during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

~~Off-Balance Sheet Arrangements~~

In connection with the purchase of the Ashtabula III wind farm in January 2023, we assumed 51 land easements not classified as leases, which require annual payments. As of ~~September~~June 30, ~~2022, we have outstanding letters~~2023, the remaining payments to be made under the easements were $4.1 million and the remaining terms of credit totaling $13.0 million, a portion of which reduces our borrowing capacity under our lines of credit. No outstanding letters of credit are reflected in outstanding short-term debt on our consolidated balance sheets. We do not have any other off-balance sheet arrangements or any relationships with unconsolidated entities or financial partnerships that have, or are reasonably likely to have, a material current or future effect on our financial condition. These entities are often referred to as structured finance special purpose entities or variable interest entities, which are established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We are not exposed to any financing, liquidity, market or credit risk that could arise if we had such relationships.agreements extend into 2034.

COMMON STOCK DIVIDENDS

We paid dividends to our common stockholders totaling ~~$51.6~~$36.5 million, or ~~$1.2375~~$0.875 per share, in the first ~~nine~~six months of ~~2022.~~2023. The determination of the amount of future cash dividends to be paid will depend on, among other things, our financial condition, our actual or expected level of earnings and cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory limitations or regulatory or financing agreements, the amount of dividends we are allowed to pay could be restricted. See Note 10 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. The decision to declare ~~a dividend~~dividends is reviewed quarterly by our Board of Directors.


CAPITAL RESOURCES

Financial flexibility is provided by operating cash flows, unused lines of credit and access to capital markets, ~~which~~and is aided by strong financial coverages and investment grade credit ratings. Debt financing will be required in the five-year period from ~~2022~~2023 through ~~2026~~2028 to refinance maturing debt and to finance our capital investments. Our financing plans are subject to change and are impacted by our planned level of capital investments, and decisions to reduce borrowings under our lines of credit, to refund or retire early any of our outstanding debt, to complete acquisitions, or to use capital for other corporate purposes.

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REGISTRATION STATEMENTS

On May 3, 2021, we filed a second registration statement with the SEC for the issuance of up to 1,500,000 common shares under an Automatic Dividend Reinvestment and Share Purchase Plan, which provides shareholders, retail customers of OTP and other interested investors methods of purchasing our common shares by reinvesting their dividends or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of ~~September~~June 30, ~~2022,~~2023, there were ~~1,287,774~~1,194,682 shares available for purchase or issuance under the plan. The registration statement expires in May 2024.

SHORT-TERM DEBT

OTC and OTP are each party to a credit agreement (the OTC Credit Agreement and the OTP Credit Agreement, respectively) which each provide for unsecured revolving lines of credit. The following is a summary of key provisions and borrowing information as of, and for the ~~nine~~six months ended, ~~September 30, 2022:~~

(in thousands, except interest rates) OTC Credit Agreement OTP Credit Agreement
Borrowing Limit $ 170,000 $ 170,000
Borrowing Limit if Accordion Exercised1
290,000 250,000
Amount Restricted Due to Outstanding Letters of Credit as of September 30, 2022 — 9,919
Amount Outstanding as of September 30, 2022 — —
Average Amount Outstanding During the Nine Months Ended September 30, 2022 15,625 30,235
Maximum Amount Outstanding During the Nine Months Ended September 30, 2022 58,715 74,519
Interest Rate as of September 30, 2022 4.64 % 4.39 %
Maturity Date September 30, 2026 September 30, 2026
1Each facility includes an accordion featuring allowing the borrower to increase the borrowing limit if certain terms and conditions are met.

On October 31, 2022, OTC entered into a Fifth Amended and Restated Credit Agreement and OTP entered into a Fourth Amended and Restated Credit Agreement, in each case amending and restating the previously existing credit agreements to extend the maturity date of each agreement from September 30, 2026 to October 29, 2027 and to replace LIBOR as a benchmark interest rate with the Secured Overnight Finance Rate (SOFR). The adoption of SOFR as a benchmark interest rate is in advance of the scheduled elimination of LIBOR as a benchmark interest rate on June 30, 2023. We do not expect this change in benchmark interest rates will have a material impact on our operating results or cash flows. No other significant terms or conditions, including borrowing capacity, credit spreads or financial covenants, were modified under these amendments and restatements.2023:


(in thousands, except interest rates)	OTC Credit Agreement			OTP Credit Agreement

Borrowing Limit	$	170,000		$	170,000
Borrowing Limit if Accordion Exercised1	290,000			250,000
Amount Restricted Due to Outstanding Letters of Credit as of June 30, 2023	—			9,573
Amount Outstanding as of June 30, 2023	—			50,197
Average Amount Outstanding During the Six Months Ended June 30, 2023	—			48,846
Maximum Amount Outstanding During the Six Months Ended June 30, 2023	—			61,006
Interest Rate as of June 30, 2023	6.64		%	6.48		%
Maturity Date	October 29, 2027			October 29, 2027


1Each facility includes an accordion featuring allowing the borrower to increase the borrowing limit if certain terms and conditions are met.

LONG-TERM DEBT

As of ~~September~~June 30, ~~2022,~~2023, we had $827.0 million of principal outstanding under long-term debt arrangements. These instruments generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2052. Pursuant to a Note Purchase Agreement executed in June 2021, OTP issued its Series 2022A Notes due May 20, 2052, in May 2022 for aggregate proceeds of $90.0 million, a portion of which was used to repay the $30.0 million Series 2007B Notes at their maturity in August 2022.

Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q includes additional information regarding these short-term and long-term debt instruments.

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Financial Covenants

Certain of our short- and long-term debt agreements require OTC and OTP to maintain certain financial covenants. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with these financial covenants as further described below:

OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 10 percent of its total capitalization. As of ~~September~~June 30, ~~2022,~~2023, OTC's interest-bearing debt to total capitalization was ~~0.41~~0.40 to 1.00, OTC's interest and dividend coverage ratio was ~~11.37~~10.18 to 1.00, and OTC had no priority indebtedness outstanding.

OTP, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority ~~debt~~indebtedness to exceed 20 percent of its total capitalization. As of ~~September~~June 30, ~~2022,~~2023, OTP's interest-bearing debt to total capitalization was ~~0.45~~0.46 to 1.00, OTP's interest and dividend coverage ratio was 3.65 to 1.00, and OTP had no priority indebtedness outstanding.


CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The discussion and analysis of our results of operations are based on financial statements prepared in accordance with generally accepted accounting principles in the United States of America. Certain of our accounting policies require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related ~~disclosure~~disclosures of contingent assets and liabilities in the

~~Table of~~ ~~Contents~~

preparation of our consolidated financial statements. We have disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 the critical accounting policies that affect our most significant estimates and assumptions used in preparing our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in the most recent Annual Report on Form ~~10-K.~~10-K.


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk from those disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.


ITEM 4.			CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of ~~September~~June 30, ~~2022,~~2023, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

We are the subject of various legal and regulatory proceedings in the ordinary course of our business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance. We record a liability in our consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where we have assessed that a loss is probable, and an amount can be reasonably estimated. Material proceedings are described under Note 9, Commitments and Contingencies, to the consolidated financial statements, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, Regulatory ~~Rate~~ Matters.

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 5.

OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers. During the three months ended June 30, 2023, none of our directors or executive officers adopted, amended, or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

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ITEM 6.

EXHIBITS

The following Exhibits are filed as part of, or incorporated by reference into, this report.



No.									Description
10.1									—Fifth Amended And Restated Credit Agreement, dated as of October 31, 2022, by and between Otter Tail Corporation, as Borrower, and the banks named therein, with U.S. Bank National Association, as Administrative Agent2023 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Otter Tail Corporation on ~~November 1, 2022)~~April 19, 2023)
10.2									—~~Fourth Amended And Restated Credit~~Form of 2023 Restricted Stock Award Agreement ~~dated as of October 31, 2022, by and between Otter Tail Power Company, as Borrower, and the banks named therein, with U.S. Bank National Association, as Administrative Agent~~for Directors (incorporated by reference to Exhibit 10.2 to the Form 8-K filed by Otter Tail Corporation on ~~November 1, 2022)~~April 19, 2023)
10.3									—Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.3 to the Form 8-K filed by Otter Tail Corporation on April 19, 2023)
31.1									—Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2									—Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1									—Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2									—Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH									—Inline XBRL Taxonomy Extension Schema Document
101.CAL									—Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB									—Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE									—Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF									—Inline XBRL Taxonomy Extension Definition Linkbase Document
104									—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			OTTER TAIL CORPORATION

			By:			/s/ Kevin G. Moug
						Kevin G. Moug Chief Financial Officer and Senior Vice President (duly authorized officer and principal financial officer)

						Dated: ~~November~~August 2, ~~2022~~2023

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	Description	Page

	Definitions	2
	Forward Looking Information	2
PART I
ITEM 1.	Financial Statements:
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Shareholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Condensed Notes to Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3230
ITEM 4.	Controls and Procedures	3230
PART II
ITEM 1.	Legal Proceedings	3230
ITEM 1A.	Risk Factors	3230

ITEM 5.	Other Information	30
ITEM 6.	Exhibits	3331
Signatures		3432


	2022 vs Normal		2022 vs 2021		2021 vs Normal

Effect on Diluted Earnings Per Share	$	0.01	$	(0.02)	$	0.03