OTTR - Earnings call transcript Q1 2019

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Operator

Good morning and welcome to the Otter Tail Corporation’s First Quarter 2019 Earnings Conference Call. Today’s call is being recorded. [Operator Instructions] I will now turn the call over to the company for their opening comments.

Loren Hanson

Good morning, everyone and welcome to our call. My name is Loren Hanson and I manage Otter Tail’s Investor Relations area. our XXXX announced results. we night, first earnings quarter Last

will this and available Tail Officer. President A Our call our today call Tail on release Otter MacFarlane, President With accompanying later replay available call Chief today. and website the are ottertail.com. complete earnings Moug, the at Vice and slides Financial CEO are Corporation’s me Kevin on Senior website on of Otter Chuck be Corporation’s our and

remind you statements to we we will forward-looking want Before begin, making that during be I call. this

X, noted on future current As to may materially. current our judgment are results They opinion Slide risks the these what actual statements uncertainties that differ cause represent of and subject or to holds.

on these So please any be of advised reliance statements. about undue placing

more to are Otter in our or Securities encourage statements with the which in otherwise. duty Exchange review. forward-looking you events, due to new forward-looking any filings update described and disclaims information, our Commission, future we to developments, revise or statements Corporation detail Tail Our

will remarks, CEO, and to over Tail Otter opening the call now President For Chuck Corporation’s MacFarlane. Mr. turn I

Chuck MacFarlane

Slide you, comments. as and morning, Loren. night, to Last released I first share remained increased per Thank earnings quarter quarter and refer Please begin first everyone. our my net revenues XXXX. Both results. quarter-over-quarter operating we income Good X slightly with consistent

demonstrate of commercial actions employee’s value to to business, the develop excellence and and performance achieve talent. our continues operational Our financial grow

Dakota wind our project an The on growth anticipate beginning of touch last other The approval Tail between wind projects largest regulatory at in was XXXX. Slide of of Merricourt approximate be on Otter along XXXX, April a agreement our received XX. generation with and Tail’s XXXX Turning Merricourt briefly station million. base agreement FERC and on to we these produce constructive capital of at transmission construction on environment. March closing filed X% We and rate will interconnection the first will on Power’s project and the Slide XX, reliability highlights. in several Merricourt will XXXX quarter annual The outlined half purchase look South generator rate projects. in Otter investments XX will Astoria FERC investment some XX, I $XXX and with

on Astoria station remains schedule.

Astoria natural a capacity will of combustion energy with and during megawatts be simple periods will provide highly demand. high efficient cycle gas of XXX turbine

COX reliable isn’t We will will complement have a our and emissions. wind low blowing generation wind backstop the flexible it providing by and options when operating

project, construction $XXX will peak which this XX in construction the includes jobs XX-month We approximately invest million during the of period.

We will in expect station XXXX. Astoria online be

We of southern transmission Dakota of our in transmission are service X March an of investment approximate Southeastern/South to improve project, in this will the service territory end $XX reliability into infrastructure line put our Phase for new from million capacity South was customers enhancing Dakota, and providing kV a XXXX. in territory. service XXX Lake increased Norden, provide that XX-mile Hetland

be to XXX a to Dakota We XXXX. kV expect Lake transmission from Toronto, service in X, Norden XX-mile line South in Phase

Turning to equity. on a except Utilities South XXXX, March on Slide settlement Public the issues review return our XX, X, Dakota on rate in Commission all approved

service $X.X Astoria the costs million business are station recovering Merricourt of for calls a net currently increase an phase-in a recovered partial request settlement and Our be a submit Tail until outlook those through projects. revenue includes for another plan plan. for projects also to in Otter suspends separate amount for year. a approximately rate case partial The Power phase-in settlement of will the a wind

the the the anniversary. rate touched celebrated by lives April, Since XXXX, company ROE, its including a second providing review, In in the expect XXXth Power has We quarter. Otter of on determination customers final Tail company XXX The customer, of in electricity Company services. Northern more XXXX. energy now Wahpeton XXX Light than April North served provides and of to Dakota customers It electricity Electric its in communities. in first reliable

provide We’re combination our to our a our cost-effective of reliable, to proud and XXX neighbors customers’ resources and of we’ll increasingly clean continue meet years energy serving needs.

expedite and staffing despite to our and output, return Mother to factory warehouse partial Now Clearwater, improved facility. the shipping Otsego increased responded in and Nature expectations. with team collapse a And setting Manufacturing BTD, improving delivery in challenges our and our and still facilities. the in is at turning Clearwater XXXX Plastics roof results fabricator, financial segment, a a done on metal output snow-related the Overall, costs warehouse incredible XX inventory consolidated Operations to production facility demand built, effort contract has the and its produced levels get quarter another T.O. on-time year-over-year great sales levels. keeping balancing delays. job able to on minimize March, we’re Georgia basis adaptability levels improved the last of months. and In significantly had lease warehouse exceeded right of shipping volume our first and within highest Clearwater low pounds

the favorable excellence. Our XXXX, Plastics forecast. segment, first demonstrate to continued Vinyltech, Northern Pipe the Products segment of In quarter achieved to and operational financial results

Both results lower of in the the serve operating companies they continue by and responsiveness than As record historic were more flexibility QX margins as needs. prices levels customer by pipe driven have markets to to QX of anticipated, XXXX demonstrating decreased. improve

over it perspective. financial turn to Kevin will for the I Now

Kevin Moug

morning good Thanks, and Chuck everyone.

pleased earnings of as Manufacturing in well and with first by are ahead quarter Electric results our driven We per favorable as the our financial corporate center. is expectations segments our quarter share our Consolidated cost for results.

expectations. line pipe with PVC earnings earnings were Our company’s first in quarter our

anticipated year record XXXX current our plan indicated conditions, not would earnings which on Our and Plastics XXXX for market lower based be repeated. financial revenues

colder income went was increased parts tooling increase which $X.X segment The our material an resource settlement. improved this in to XX%. of product revenues October million impacted lower degree quarter-over-quarter. were refund increased with due quarter third $XX.X volume overall Weather our metal weather non-retail was to higher this goods higher $XXX,XXX increase had increase a to due reversal compared to $X.X offset BTD related share partial pricing. in for of O&M a with Plastics contributed under increased decreased our related impacting scrap expenses end ship the reduced also to the major first revenues for as life by start offset an industrial this Slide earnings decreased The expense resulting expenses and quarter-over-quarter operating part expected The before operating the flat rider million Electric the to with in driven loss increased revenues effect ship due income credits, products. quarter-over-quarter. the would indicate depreciation of Jobs of best a segment XXXX related be net due in items offset this Tax other This in increased customers lower mostly of revenues first to expense estimated XXXX; year the related revenues horticultural by to federal perspective. with $X.XX an discuss of an driving of requirements through to Dakota case roof and earnings in in were Please caused in results. These earnings Key evidenced to customers, earnings Dakota approximately of sales million heating for in XX% This lower relates of revenues this quarter-over-quarter. and million other between to industrial refund million partially offset timing. sales. expenditures of in net in rates horticultural revenues by in was increased and higher taxes our Cuts $XX.X guidance markets. by refunds XXXX earnings Net from rate items quarters partial higher Minnesota. lower not Manufacturing $X.X retail A are increase or due in XXXX. expired its containers associated days partially to follows: revenue the a tax earnings the scrap increased BTD, increase kilowatt to XXXX. due required rate items current net metal were: a quarter warehouse increase Act. hour XX sales Increased approximately to sales earnings. in segment in slow $XXX,XXX prices. by the to will decrease cost cost Key the and terms amount and sales were South pass tax associated production an revenues improvement also quarter Our associated to earnings tax I and Dakota $X to by In as costs in transmission due million November increase decrease T.O. refer recovery expenses, BTD’s sold revenues case scrap decrease in favorably all snow of renewable into Increased decreased collapse were balance by and South increase and Interim of the first science collapse. and and was with heavy quarters. between revenue the South drivers in roof

decreased a of pounds earnings sold million to decrease prices. pipe $X.X Plastics Our in due with segment in pipe XX.X% quarter-over-quarter decrease along X.X% a

Lower across resulted margins. territory XXXX, overall adverse also to quarter volumes sold pound sales in the sales lower in decrease of to XX% with per sales. be contributed in in increase prices a pipe combined an the expect we down the While the conditions first weather our cost gross

of benefits. due $XXX,XXX corporate life net nontaxable pretax expense $XXX,XXX a Our primarily quarter-over-quarter tax in increase decreased insurance and losses to

XX.X% on segment. capitalization equity businesses our of cyclical based well return future manufacturing reaffirming as earnings includes our $X.XX. to XXXX ratio share on our business XX%. we for guidance an This strategies total our of factors facing Slide on XX, nature equates guidance of to XX.X% a This estimated range to consolidated to results per current improving Moving outlook our on as $X.XX to Electric regulatory of equity are of

be is and the planned from $X.XX, Our Dakota per Electric outcome of Cuts XXXX XXXX. share to retain by earnings for positively the a XXXX allowed workers’ Merricourt the natural higher the approximately lower and in revenues net recovery Increased cost related case. revenues settlement with projects, completion gas wind to a tax plant, and impact XXXX transmission retiree Tax us The medical and impacts decrease This Astoria to station. Ellendale AFUDC reliability in the transmission additional on compensation Act rates through from benefits. project, investments on rate our generation capital project due rider on Dakota settlement of increased medical return income January Astoria station favorable related operating South of the expenses than increased all Big on decreased except and along South Jobs to project maintenance South Stone’s equity based XXXX including segment’s our the North our to expected Dakota pension issues October from

of X.X% expense for X.X% is Station higher These outage. and and offset outage the rotator into early due in stages service blade discount that items of from increasing the a in pension rate put to Our at being an XXXX discovered projects capital turbine interest by plan due driven extension rates. the was planned higher tax Coyote planned damage property to are to the by depreciation

Manufacturing expect segment by increased XXXX manufacturing. in our driven from We BTD primarily earnings

T.O. sales a to for we both segment to and due margins to $XXX the compared tax, last $XXX income at for net experienced and the net from expected lowering be for the year. to expected volumes compared increasing XXXX corporate impact from this to guidance quarter However, resin roof with backlog than be XXXX. million XXXX lower volume is ends during Plastics. approximately anticipated warehouse ago, XXXX costs, prices Plastics million we XXXX lower segment similar range in expect of collapse on this operating are softness The of are year In the due lower

This X Tail and environments and The an gas first driven renewable growth regulatory value. at next generation. Over rate of quarter This delivering Power two our to base support services, growth will time. provide Plastics demonstrate the are earnings. annual time, grow natural expected is over the XX% products increased around approximately segments new to and XX% electric efficiencies. organic to rate investments in commitment compounded over X% results from expansion by growth. Company of comes and earnings and positioned years. ongoing provide shareholder also segments market our is overall the These The its Manufacturing utility Otter our provide well

X% to to are expect our is X% be XXXX growth expected to first, total We rate shareholder approximately increase results; able of of share per dividend consists X%. two to deliver our off return earnings second, XX%. a X% to at components: current yield This of

share to expected balance on grow our while corporate we XX%. strong earnings to would a in dividend credit our sheet ratings. maintaining company of line payout with And rate, footings forward, per a XX% the dividend ratio expect Looking is with solid and growth

We’re now ready to take your questions.

Operator

comes you. Our Chris question first from Instructions] Thank Ellinghaus [Operator Williams with Capital.

Chris Ellinghaus

you? how are guys, Hi

Chuck MacFarlane

Good, Chris.

Chris Ellinghaus

the year, the expecting run first a rate. Kevin, that sort the some guidance PVC improvements year? below for maybe later suggest little that bit you’re was quarter the in Does that of

Kevin Moug

Chris, Yes, to the year? referring the are rate for run you

Chris Ellinghaus

I’m earnings Yes. results? run that the just year rate little a in that at – mean later guidance slightly you’re the the the suggest expecting in would quarter looking or bit the for Plastics in below is does better

Chuck MacFarlane

lower a are, first Yes, were in I we quarter. expected we we mean Chris, part, –

look the territory year, we impacted move the up. – last to expect volumes, we the that weather we rest across as course, that Of that but of – the the out affected had

Chris Ellinghaus

yes, you roof for, mentioned quantify the Can at came either those? T.O. said weather issue Okay, the impacted you also quarter. of you

Chuck MacFarlane

write-off at net roof from the The warehouse book $XXX,XXX the issue value just had as related to operating the damage. expenses increase pre-tax to was in an charge we of T.O.

the on T.O. the first in guidance us side. that. – February but was that and given T.O. particularly the sorry, in to with down that’s production for bringing Shipping what’s plan, expense. that’s Manufacturing causing are by It’s $X.XX difficulties range bring the I’m slowness sales, quarter each – slightly our in shipping for March below O&M and that So, the in we was

Chris Ellinghaus

Okay.

So, the to issue? just on is sort weather of quantify or that a were Plastics, able you that qualitative impact

Kevin Moug

of about the we Well, plan. in were X plan, terms – our our against down pounds million against

affected of don’t that. to I weather the so, that piece probably And XX% XX% that by, know, of

Chris Ellinghaus

color rotor cost you little the And Okay. on a of give Can timing that? mentioned and issue. us you Coyote

Chuck MacFarlane

same blades, its it overall the there, we weeks Stone Sure, Chris, capitalized, Big last have was will the delay that – time we in it outage the an one-row some had this identified – a turbine similar is to the cracking, had overhaul impact majority it Chuck. was an exact believe similar the of while This it is and – of very did we X repair O&M will issue. approximately We by is approximately the $XXX,XXX. at

Chris Ellinghaus

the phase-in cost Okay, plan, how great. works Chuck, South can the that you Dakota describe recovery? with

Chuck MacFarlane

ability South projects. there’s on Dakota, capital In Sure. an major

and to those. Merricourt in the and phase-in set initial construction, on rates should you a into basis, for up period on them they effect like annual the writer, recovery. the have develop increase into total go you go will you If of start you ‘XX. but timeframe, it we are plan so of rate, is of Astoria phase-in annual writer ‘XX sort each approval getting on commission allowed during of that then lot a costs that before can the pre-approval, a you once you so And number both on which an an you filing define begin have maybe and a a It’s and acts it not

Chris Ellinghaus

year effective? When the they become during will

Chuck MacFarlane

it file occur don’t when close think and I – the to those would in and we XX we next Merricourt filings on after month we when project, the but hope on the depends start should within days that. I

Chris Ellinghaus

Okay.

Georgia? Chuck, us give on can the you any continuing in improvement Lastly, color

Chuck MacFarlane

allowed orders $X.X sales million a plant to meaning into of month issues, We’ve of a able to to and made weren’t a we – amount Sure. a warehouse were and running and quantities customers’ that therefore changes operational and we’ve wanted as needed on-time within child – we more just added delivery. million our approximately would the larger produce that we we of meeting a us we expedite of were whatnot carry inventory facility we probably factory, had $X to run to and number that’s as significant due, parts

in of plus quarter a and the of sort As on-time ‘XX. from XX% we’ve on on-time XX% in of ‘XX delivery to of XX% half delivery first XXXX a that, more to early last benchmark the improved

Chris Ellinghaus

Great. I guys. it, for the color. Thanks appreciate

Chuck MacFarlane

Okay.

Kevin Moug

Chris. Thanks,

Operator

comes you. [Operator with from Group. next Thank Our Instructions] question Maxim Sullivan Tate

Tate Sullivan

you the comment and facility. what you facilities it market some expansion refer your at organic, does that adding morning. potential are Manufacturing Otter Hi, and PVC Kevin, is warehouse Good for expansion looking market businesses in more warehouse facilities or thank you. on to? Thanks or mentioned that –

Kevin Moug

PVC we as relates business, the we grow still to Tate, can business. it that in capacity have that into

there’s or So, of for no PVC. for need type any expansion current warehouse anything

total facilities. XXX between have capacity pounds We of X roughly million the

years, last we’ve that out over back somewhere the look between selling you capacity. few XX% been XX% to If of

probably present have and grow through So, we share that room capacity market take to on to the those volumes mostly – we have additional through themselves. opportunities

Tate Sullivan

Okay. Manufacturing in – And

Kevin Moug

that to was referring warehouse was Chuck for The BTD-Georgia.

Tate Sullivan

Okay. Can you go capacity on addition you into do plans have And detail in that? Manufacturing?

Kevin Moug

capacity don’t We growth Plastics. current at footprint we have because to grow plenty capacity of into T.O. plants our plans still have any across organic and or BTD

our the and to So, years Manufacturing side investments the capital pretty business as in are you over depreciation look amortization. X next fund of much out the

have grow in capacity We good place into. to

organic – new shape through in we capital So, standpoint. existing customers good a potential customers, growth and we’re from with

Tate Sullivan

sales a Thank a income you or you continue to the quarter Have the that see target Okay. do net or little as had I was margin net And – just have quarter your you income for detail. in above well, Manufacturing in X%. Manufacturing? return in on

Kevin Moug

total for return X%, this on target Our is segment, sales for yes. Manufacturing

Tate Sullivan

purposes, revenues are business review some the in tooling please? me, for your just And what for

Kevin Moug

have to up. look to that going I’m

Tate Sullivan

they are, you you No, are – selling are I mean on just background what tools? making

Kevin Moug

Yes.

the tools from so, with then our cases, product to those the in number for come for produce tooling. us a and and product that particular we product design for product customers, We’re they’ll making a a design tooling of will for

Tate Sullivan

consistent message ones and you about last year a for comments can do with been PVC give in the year. this relative demand your Can in outlook to what the of general? like you year as for me, one what look PVC And have record last PVC Okay. or any

Kevin Moug

Demand down the We’ve quarter-over-quarter. as we right the to volumes year, The continue obviously levels earlier what call – it’s being not our that year, demand be volume about out they to last the softened seeing now we in at last look expect going year. similar talked has last particularly that we’re be we to saw been were from our year. through

they’re volumes – flat, terms in I’m flat expect I mean, territory starts housing the conditions Overall, on the based down we while similar our in nothing. sales follow. So, we they’re certainly quarter. first they’re in construction sure the starts, of certainly in that

Tate Sullivan

And the Is total last corporate CAGR X Thanks. that an Okay. the of years for this Is your rate target to X% X% year? next on versus the X% targets. target growth for correct? EPS EPS it

Kevin Moug

No.

So, target X% per using rate our results. share compounded X% is growth earnings to XXXX growth

Tate Sullivan

Okay. Did I miss that?

Kevin Moug

utility, which in you the The presentation, the our rate in growth our a X% same look at think to out Slide if X% we on is – XX rate Tate, is XXXX period Slide show base that the of CAGR base. And growth rate laid referred using we base I the – over that’s X%.

Tate Sullivan

Great.

Okay, a well, thank for you day. Have very the detail. all much good

Kevin Moug

you’re Yes, welcome.

Operator

over any turn Instructions] remarks. [Operator the you. further for questions I I’m closing like now back management to to queue time. no at showing the this would Speakers, call Thank in

Chuck MacFarlane

shareholder Manufacturing and Well, execution remain growth confident profitability. continue thank our value. XXXX, your in to we strong on improve performance questions our deliver Tail Corporation. Otter ability support platform, we to you projects In for utility in With at BTD and operational continued

on and growth Tail to We And Otter Northern call. in forward to will us our T.O. and long-term $X.XX for allow appreciate Vinyltech look projects. for to organic We you major our are Pipe, Plastics. this transmission Power’s joining execute technology generation, we Tail you further continue speaking share. a XXXX your our believe refining We with guidance interest Otter quarter. to and on next Thank $X.XX Corporation deliver of strategy

Operator

Ladies joining call. today’s and for gentlemen, thank you

disconnect, a day. You may have now wonderful and

Otter Tail (OTTR) 13 May 192019 Q1 Earnings call transcript