FERGUS FALLS, Minn., Oct. 29, 2009 (GLOBE NEWSWIRE) -- Otter Tail Corporation (Nasdaq:OTTR) today announced financial results for the quarter ended September 30, 2009.

Highlights

 * Consolidated net income improved 10.0% as net income in our
   electric and food ingredient processing segments increased $3.0
   million and $2.8 million, respectively, compared with the third
   quarter of 2008.
 * Consolidated revenues decreased 27.1% compared with last year's
   third quarter.
 * Diluted earnings per share totaled $0.29 compared with $0.31 in
   the third quarter of 2008.
 * Operating cash flow increased by $100.3 million for the nine
   months ended September 30, 2009 compared with the same period
   last year.

Announcements

 * On October 29, 2009 the Board of Directors declared a quarterly
   common stock dividend of 29.75 cents per share payable December
   10, 2009 to shareholders of record on November 13, 2009.
 * The Board also declared quarterly dividends on the corporation's
   four series of preferred stock, payable December 1, 2009, to
   shareholders of record on November 13, 2009.
 * The corporation expects its 2009 diluted earnings per share to
   be near the low end of its previously announced range of $0.70
   to $1.10.
 * On September 11, 2009 Otter Tail Power Company announced its
   withdrawal from participation in the planned construction of a
   500- to 600-megawatt generating unit at its Big Stone Plant site.
 * On July 1, 2009 the corporation completed its transition to a
   holding company structure.

CEO Overview

"Our results for the third quarter of 2009 reflect both the continuing challenges of a weak economy as well as the positive impact of initiatives in place across our entire organization, specifically, reducing expenses, improving efficiencies and maximizing cash flow," said John Erickson, president and chief executive officer of Otter Tail Corporation. "As a result of these initiatives, we realized meaningful improvements in both net income and operating cash flow during the quarter."

Erickson continued, "Otter Tail Power Company faced mixed market dynamics during the quarter, benefiting from rate increases in the Dakotas, and increased renewable energy and transmission rider revenues, while being impacted by a reduction in sales driven by an unseasonably cool summer in the Midwest, reduced demand from commercial and industrial customers and a deflated wholesale market. Many of our nonelectric businesses continued to face recessionary headwinds during the period. While year-over-year results are down in most of these businesses, we are pleased with the continuing solid performance of our food ingredient processing business and are mildly encouraged by recent stabilization in some of our other businesses. While these are hopeful signs, we expect continued short-term challenges at least through the end of 2009 and now anticipate our 2009 diluted earnings per share to be near the low end of our previously announced range of $0.70 to $1.10.

"The recession's challenges demand that we remain focused on managing the controllable aspects of our business and continue our efforts to optimize our market position in preparation for a sustained economic recovery. It also means closely scrutinizing our capital expenditures. During the quarter, Otter Tail Power Company announced its withdrawal from participation in Big Stone II, a 500- to 600-megawatt coal-fired power plant proposed near Milbank, South Dakota, which would have involved an estimated $400 million capital commitment by Otter Tail Power. The decision to withdraw came after evaluation by Otter Tail Power of many factors, including the broad economic downturn and high level of uncertainty associated with proposed federal climate legislation. Otter Tail Power continues to pursue other generation investment opportunities in addition to investing more than $300 million in wind energy generation during the last three years. We are pleased that our efforts to be fiscally conservative, along with the dedication of our employees across all of our businesses, have allowed us to remain financially strong and continue to serve our customers and shareholders well."

Liquidity and Cash Flow from Operations

"While total net income for the quarter ended September 30, 2009 increased over the same quarter a year ago, the corporation's earnings per share declined from $.31 to $.29 per share. This was due to the effect of the common shares issued for the $155 million equity offering completed in September 2008," said Kevin Moug, chief financial officer of Otter Tail Corporation. The proceeds of this equity offering were used to finance the construction of the Ashtabula Wind Center and the expansion of DMI Industries' manufacturing facilities. The equity offering also allowed the corporation to have the liquidity needed to handle the downturn in the economy during the recession.

The corporation's cash flow from operations increased to $140.6 million for the nine months ended September 30, 2009 compared with $40.2 million for the nine months ended September 30, 2008, primarily driven by a decrease in working capital of approximately $98.2 million.

Otter Tail Corporation maintains a strong liquidity position, including amounts available under our credit lines totaling $232.9 million on September 30, 2009: $155.2 million under the Otter Tail Power Company (OTP) credit facility and $77.7 million under the Otter Tail Corporation credit facility. "We believe we have the necessary liquidity to effectively conduct business operations for an extended period if current market conditions continue. We are committed to maintaining a strong balance sheet and an appropriate cost structure that provide Otter Tail Corporation with significant financial flexibility," said Moug.

Segment Performance Summary

Electric

Electric revenues and net income were $73.6 million and $9.5 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $82.9 million and net income of $6.5 million for the quarter 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. 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. 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.

Retail electric revenues increased 2.4% mainly due to:

 * a $0.8 million increase in North Dakota interim rates,
 * a $0.7 million increase in South Dakota rates, and
 * $0.4 million in accrued revenues related to transmission asset
   investments subject to recovery in Minnesota under a rate rider,
   partially offset by a decrease in revenues related to a 3.7%
   reduction in retail kilowatt-hour (kwh) sales.

Mild summer weather in 2009, which resulted in a 37.5% decrease in cooling-degree days between the quarters, was the main factor contributing to the reduction in retail kwh sales.

On November 4, 2008 the electric utility filed for a general rate increase of 5.1% or $6 million in North Dakota. An interim rate increase of 4.1% or $4.8 million was granted effective January 1, 2009. The electric utility has entered into a proposed settlement agreement which is subject to approval by the North Dakota Public Service Commission. The settlement includes a proposed increase in North Dakota retail electric rates of $3.9 million or approximately 3.3%. Interim rates will remain in effect for all North Dakota customers until final, approved rates go into effect. As of September 30, 2009, OTP had reserved $0.7 million for revenues collected under interim rates in excess of the rate increase agreed to in a proposed settlement, which will be credited to North Dakota customers after final rates have been approved.

Fuel costs related to retail use were down due to a 15.0% reduction in kwh generation for retail use combined with a 10% reduction in cost of fuel per kwh generated resulting from a 180% increase in generation from OTP's zero-fuel-cost wind turbines, which provided 12.2% of the electricity generated by OTP to serve retail customers in the third quarter of 2009. Despite a 78.1% increase in kwh purchases to serve retail customers, purchased power costs increased by only 6.3% as a result of a 40.3% decrease in the cost per kwh purchased. Decreases in natural gas prices, increased output from regional hydroelectric plants, increased efficiency in wholesale electric markets and a decline in industrial demand for electricity are factors that have contributed to a significant decline in wholesale electric prices in 2009.

A $9.8 million decrease in electric operating and maintenance expenses reflects:

 * 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,
 * 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,
 * a $1.2 million reduction in external services expenses for
   power-plant maintenance and tree trimming,
 * a $1.0 million reduction in employee incentive expenses,
 * a $0.5 million reduction in travel expenses related to
   decreased fuel costs, an increase in travel expenses capitalized
   and reductions in employee training expenses, and
 * a $0.5 million decrease in material and operating supply expenses
   mainly related to boiler maintenance expenses incurred in the
   third quarter of 2008.

Depreciation expense increased $1.2 million mainly due to the construction of 32 wind turbines at the Ashtabula Wind Energy Center in 2008. OTP's interest costs increased by $2.2 million as a result of debt incurred to finance a portion of OTP's recent investments in wind-powered generation, including 33 wind turbines completed and placed in service at its Luverne Wind Farm in September 2009. The electric utility received approximately $30.2 million in October 2009 relating to its U.S. Treasury grant application under the American Recovery and Reinvestment Act of 2009.

Plastics

Plastics revenues and net income were $27.4 million and $1.3 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $36.7 million and net income of $1.6 million for the quarter ended September 30, 2008. The decrease in revenues and net income was due to a 28.3% decrease in the price per pound of pipe sold partially offset by a 4.0% increase in pounds sold. Beginning in 2008, significant reductions in new home construction in markets served by the plastic pipe companies have resulted in reduced demand and lower prices for PVC pipe products. Costs per pound of pipe sold decreased 31.1% between the quarters.

Manufacturing

Manufacturing revenues and net income were $75.9 million and $0.1 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $127.8 million and net income of $0.4 million for the quarter ended September 30, 2008.

 * At DMI, revenues decreased $28.6 million mainly as a result of
   lower volumes of wind towers being sold related to the 2009
   slowdown of installed megawatts of wind energy, but net income
   increased by $0.9 million as a result of improved productivity
   and cost control measures implemented in 2009. Also, in the third
   quarter of 2008, DMI's costs of goods sold included $1.5 million
   related to start-up inefficiencies at its Oklahoma plant.
 * At BTD, revenues decreased $14.5 million and net income was
   down $2.4 million as a result of a decline in sales volume.
 * At T.O. Plastics, revenues decreased $2.1 million and net income
   was down $0.3 million as a result of lower sales volume.
 * At ShoreMaster, revenues decreased $6.6 million while net losses
   decreased $1.5 million. The decrease in revenues mainly reflects
   revenues recognized on a commercial construction project in the
   third quarter of 2008. Revenues also decreased as a result of a
   reduction in sales of residential products between the quarters.
   ShoreMaster's net loss in the third quarter of 2008 included a
   $0.8 million after-tax loss from the operation and closure of a
   production facility in California. Additional cuts in operating
   and sales expenses of $1.5 million also contributed to the
   reduction in net losses at ShoreMaster.

Health Services

Health services revenues and net loss were $27.1 million and $0.6 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $31.1 million and net income of $0.3 million for the quarter ended September 30, 2008. Decreases in revenues of $2.9 million from scanning and other related services and $1.2 million from equipment sales and servicing were partially offset by decreases in costs of goods sold of $2.5 million, resulting in a net loss between the quarters. Third quarter 2009 results also were negatively impacted by higher-than-expected service and maintenance costs. The imaging side of the business continues to be affected by less-than-optimal utilization of certain imaging assets.

Food Ingredient Processing

Food ingredient processing revenues and net income were $18.7 million and $1.8 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $15.3 million and a net loss of $1.1 million for the quarter ended September 30, 2008. The $3.4 million increase in revenues is due to a 4.8% increase in pounds of product sold, combined with a 16.3% increase in the price per pound of product sold. Cost of goods sold decreased $1.9 million, despite the increase in sales volume, due to a 16.7% decrease in the cost per pound of product sold.

Other Business Operations

Other business operations revenues and net loss were $36.1 million and $0.2 million, respectively, for the quarter ended September 30, 2009 compared with revenues of $59.6 million and net income of $4.3 million for the quarter ended September 30, 2008. At the construction companies, revenues and net income decreased $19.5 million and $3.6 million, respectively, as a result of a reduction in work volume from 2008 to 2009 due to the current economic recession and increased competition for available work.