Otter Tail Corp. (OTTR) filed Quarterly Report for the period ended 2009-09-30.
OTTER TAIL's primary business is the production, transmission, distribution and sale of electric energy. The Company, through its subsidiaries, is also engaged in other businesses which are referred to as Health Services Operations and Diversified Operations. Otter Tail Corp. has a market cap of $838.66 million; its shares were traded at around $23.55 with a P/E ratio of 25.88 and P/S ratio of 0.64. The dividend yield of Otter Tail Corp. stocks is 5.05%. Otter Tail Corp. had an annual average earning growth of 1.9% over the past 10 years. GuruFocus rated Otter Tail Corp. the business predictability rank of 2-star.
Highlight of Business Operations:
Consolidated operating revenues were $257.4 million for the three months ended September 30, 2009 compared with $352.9 million for the three months ended September 30, 2008. Operating income was $17.5 million for the three months ended September 30, 2009 compared with $19.7 million for the three months ended September 30, 2008. The Company recorded diluted earnings per share of $0.29 for the three months ended September 30, 2009 compared with $0.31 for the three months ended September 30, 2008.
Wholesale electric revenues from company-owned generation were $3.2 million for the quarter ended September 30, 2009 compared with $9.1 million for the quarter ended September 30, 2008. A 34.1% decrease in wholesale kwh sales due to reduced plant availability and lower wholesale demand, combined with a 47.5% decrease in revenue per kwh sold due to lower wholesale prices, resulted in the decrease in wholesale electric revenues. Net gains from energy trading activities, including net mark-to-market gains on forward energy contracts, were $1.2 million for the quarter ended September 30, 2009 compared with net gains of $0.8 million for the quarter ended September 30, 2008. Other electric operating revenues decreased $5.3 million as a result of a decrease in revenues from construction work completed for other entities on regional energy projects.
The decrease in other electric operating and maintenance expenses reflects the following: (1) a $4.5 million decrease in costs associated with construction work completed for other entities on regional energy projects, commensurate with a $5.3 million decrease in related revenue, (2) recognition, in the third quarter of 2008, of $1.5 million in costs eligible for recovery through the Minnesota Resource Recovery Rider that had been deferred pending approval of the rider, (3) a $1.2 million reduction in external services expenses for power-plant maintenance and tree trimming, (4) a $1.0 million reduction in employee incentive expenses, (5) a $0.5 million reduction in travel expenses related to decreased fuel costs and decreased vehicle usage for operations and reductions in employee training expenses, and (6) a $0.5 million decrease in material and operating supply expenses mainly related to boiler maintenance expenses incurred in the third quarter of 2008. The increase in depreciation expense mainly is due to the addition of 32 wind turbines at the Ashtabula Wind Energy Center to utility plant in service at the end of 2008.
Revenues from scanning and other related services were down $2.9 million and revenues from equipment sales and servicing decreased $1.2 million for the three months ended September 30, 2009 compared with the three months ended September 30, 2008. The decrease in cost of goods sold was directly related to the decreases in sales revenue, but was negatively impacted by higher-than-expected service and maintenance costs. The increase in operating expenses reflects a $0.6 million gain on the sale of fixed assets in the third quarter of 2008 which more than offset expense reductions in the third quarter of 2009. The imaging side of the business continues to be affected by less than optimal utilization of certain imaging assets.
The $2.8 million decrease in income taxes between the quarters is partly the result of a $1.9 million (13.8%) decrease in income before income taxes for the three months ended September 30, 2009 compared with the three months ended September 30, 2008. The effective tax rate for the three months ended September 30, 2009 was lower than the effective tax rate for the three months ended September 30, 2008. The reduction from the federal statutory rate mainly reflects the benefit of federal production tax credits and North Dakota wind energy credits related to OTP’s wind projects of approximately $1.6 million in the third quarter of 2009 compared with $0.7 million in the third quarter of 2008. Federal production tax credits are recognized as wind energy is generated based on a per kwh rate prescribed in applicable federal statutes. North Dakota wind energy credits are based on dollars invested in qualifying facilities and are being recognized on a straight-line basis over 25 years.
Consolidated operating revenues were $781.5 million for the nine months ended September 30, 2009 compared with $976.8 million for the nine months ended September 30, 2008. Operating income was $32.3 million for the nine months ended September 30, 2009 compared with $47.1 million for the nine months ended September 30, 2008. The Company recorded diluted earnings per share of $0.48 for the nine months ended September 30, 2009 compared with $0.69 for the nine months ended September 30, 2008.
OTTR is in the portfolios of John Keeley of Keeley Fund Management.
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