Otter Tail Corporation Announces Annual Earnings and Initiates 2026 Earnings Guidance

FERGUS FALLS, Minn.--( BUSINESS WIRE)--Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the quarter and year ended December 31, 2025.

SUMMARY

CEO OVERVIEW

"We are pleased with our 2025 financial results as they exceeded our expectations for the year,” said President and CEO Chuck MacFarlane. “Our results are fueled by our team members’ efforts, and I am proud of the ways they delivered for our customers and shareholders amidst dynamic market conditions.

“Throughout 2025, Otter Tail Power navigated a full agenda and our team members rose to the occasion. We made significant progress on a number of our capital projects, including our wind repowering, solar development and large regional transmission projects, all while executing on our regulatory priorities. We filed rate cases in South Dakota and Minnesota for the first time since 2018 and 2020, respectively. Even with the proposed increases, Otter Tail Power will continue to have some of the lowest electric rates in the region and country.

“Otter Tail Power’s capital spending plan for 2026 through 2030 remains robust. We have identified a pipeline of high-quality projects that provide safe, reliable and increasingly clean electric service for our customers. We are reaffirming our five-year rate base compounded annual growth rate of 10 percent.

“Our Manufacturing segment businesses continued to face soft end market demand following a sharp decline in sales volumes beginning in the third quarter of 2024. Our team members did an excellent job aligning our cost structure with the current demand environment while ensuring we remained well-positioned to respond when conditions improved. This positioning became important towards the end of 2025 as customer order activity picked up, enabling us to end the year with momentum.

“Our Plastics segment businesses continued to provide significant value to our organization even as segment earnings receded from record levels last year, and I am proud of how our team members navigated these changing market conditions. We benefitted from increased sales volumes enabled by the incremental production capacity and large-diameter capability added at Vinyltech in late 2024, partially offsetting the impact of lower PVC pipe sales prices. We expect to complete the second phase of our Vinyltech expansion project in early 2026.

“We are initiating our 2026 diluted earnings per share guidance range of $5.22 to $5.62 and affirming our long-term financial targets. The fundamentals of our business and diversified portfolio remain strong and we are confident in our ability to deliver on our growth plan for the benefit of our customers and shareholders. We continue to target a long-term earnings per share growth rate of 7 to 9 percent, resulting in a total shareholder return of 10 to 12 percent.”

CASH FLOWS AND LIQUIDITY

Our consolidated cash provided by operating activities was $386.0 million in 2025, compared to $452.7 million in 2024. The decrease was primarily driven by higher working capital requirements, including the timing of fuel cost and rider recoveries from our utility customers, and lower earnings.

Investing activities during the year included capital expenditures of $288.1 million. These expenditures were primarily within our Electric segment and included investments in our wind repowering initiatives, solar facilities, and other projects.

Financing activities in 2025 included the issuance of $100.0 million of long-term debt at Otter Tail Power, with the proceeds used to repay short-term borrowings, fund capital investments, and support operating activities. Other financing activities during the year included dividend payments of $88.1 million.

As of December 31, 2025, we had $319.3 million of available liquidity under our credit facilities and $386.2 million of available cash and cash equivalents, for total available liquidity of $705.5 million.

ANNUAL SEGMENT OPERATING RESULTS

Electric Segment

($ in thousands)

2025

2024

$ Change

% Change

Operating Revenues

566,756

524,515

42,241

8.1

Net Income

97,586

90,963

6,623

7.3

Retail MWh Sales

5,917,736

5,681,268

236,468

4.2

Heating Degree Days

6,117

5,313

804

15.1

Cooling Degree Days

492

440

11.8

The following table shows heating and cooling degree days as a percent of normal.

2025

2024

Heating Degree Days

97.1

83.7

Cooling Degree Days

102.5

93.8

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kilowatt-hour (kwh) sales under actual weather conditions and expected retail kwh sales under normal weather conditions in 2025 and 2024.

2025 vs

Normal

2025 vs

2024

2024 vs

Normal

Effect on Diluted Earnings Per Share

(0.03

)

0.10

(0.13

)

Operating Revenues increased $42.2 million largely due to increased fuel recovery revenues, recovery of our rate base investments, increased residential and commercial sales volumes, and the impact of favorable weather compared to last year. The increase in fuel recovery revenue was driven by increased customer demand as well as higher market energy and natural gas prices. These factors were partially offset by a net decrease in rider revenues resulting from higher production tax credits during the year following the completion of certain of our wind repowering projects and the commencement of tax credit generation which decreased income tax expense and offset rider revenue. These credits are passed through to customers, reducing operating revenue.

Net Income increased $6.6 million primarily due to higher retail revenues, as discussed above, and lower operating and maintenance expenses. These items were partially offset by higher depreciation and interest expense related to our rate base investments and the associated financing costs. In addition, a decrease in pension and postretirement related gains further offset the increase in operating revenues and decrease in operating and maintenance expenses.

Manufacturing Segment

(in thousands)

2025

2024

$ Change

% Change

Operating Revenues

314,547

342,592

(28,045

)

(8.2

Net Income

11,517

13,681

(2,164

)

(15.8

)

Operating Revenues decreased $28.0 million primarily driven by a 6% decline in sales volumes, with reductions across several end markets, including agriculture, lawn and garden and recreational vehicles. Sales volumes were negatively affected by soft demand and inventory management efforts by manufacturers and dealers throughout much of the year, continuing a trend that began in the third quarter of 2024. A 1% decrease in steel costs, which are passed through to customers, also contributed to the decrease in operating revenues.

Net Income decreased $2.2 million primarily driven by lower sales volumes, as described above, and higher general and administrative expenses. These impacts were partially offset by higher profit margins from improved production efficiencies and reduced production costs, as we continue to align our cost structure with current demand levels.

Plastics Segment

(in thousands)

2025

2024

$ Change

% Change

Operating Revenues

422,755

463,441

(40,686

)

(8.8

Net Income

170,400

200,747

(30,347

)

(15.1

)

Operating Revenues decreased $40.7 million primarily driven by a 15% decline in average sales prices compared to last year. Prices have been declining for several years after peaking in late 2022. The impact of lower sales prices was partially offset by an 8% increase in sales volumes, largely driven by additional production capacity following the completion of the first phase of our expansion project at Vinyltech in late 2024.

Net Income decreased $30.3 million as a result of decreased sales prices, as described above, partially offset by a 14% decrease in PVC resin and other input material costs and the 8% increase in sales volumes.

Corporate

(in thousands)

2025

2024

$ Change

% Change

Net Loss

(3,610

)

(3,729

)

119

(3.2

FOURTH QUARTER OPERATING RESULTS

Consolidated Results

(in thousands, except per share amounts)

2025

2024

$ Change

% Change

Operating Revenues

308,099

303,111

4,988

1.6

Operating Expenses

240,480

236,287

4,193

1.8

Operating Income

67,619

66,824

795

1.2

Other Expense

6,014

3,821

2,193

57.4

Income Before Income Taxes

61,605

63,003

(1,398

)

(2.2

)

Income Tax Expense

9,831

8,153

1,678

20.6

Net Income

51,774

54,850

(3,076

)

(5.6

)

Diluted Earnings Per Share

1.23

1.30

(0.07

)

(5.4

Electric Segment

Electric segment net income was $26.4 million, a $4.9 million increase from the fourth quarter of 2024. The increase was primarily driven by lower operating and maintenance expenses, higher residential and commercial sales volumes, and the impact of favorable weather compared to the same period last year. These benefits were partially offset by higher depreciation and interest expense associated with our rate base investments and related financing costs.

Manufacturing Segment

Manufacturing segment net income was $2.6 million, an increase of $3.2 million from a net loss of $0.6 million in the fourth quarter of 2024. The increase was primarily driven by an 11% increase in sales volumes and improved profit margins compared to the same period in the prior year. For much of the year, sales volumes were impacted by soft end market demand and inventory destocking by manufacturers and dealers. In the fourth quarter, however, sales volumes increased as customers began replenishing inventories. These favorable impacts were partially offset by higher general and administrative expenses compared to the prior year.

Plastics Segment

Plastics segment net income was $30.4 million, an $8.6 million decrease from the fourth quarter of 2024. The decrease was primarily driven by lower sales prices, which continued to decline throughout the year and were 20% lower in the fourth quarter compared to the same period last year. The impact of lower sales prices was partially offset by decreases in PVC resin and other input material costs and by higher sales volumes. The cost of input materials, including PVC resin, decreased 22% largely due to global supply and demand dynamics. Sales volumes increased 4% compared to the same period last year, largely driven by our increased production capacity.

Corporate

Corporate net loss was $7.6 million, an increase of $2.6 million from the net loss of $5.0 million in the fourth quarter of 2024. This increase was primarily the result of higher income tax expense, driven by higher state income taxes compared to last year.

2026 OUTLOOK

We anticipate 2026 diluted earnings per share to be in the range of $5.22 to $5.62. We expect our earnings mix in 2026 to be approximately 49% from our Electric segment and 51% from our Manufacturing and Plastics segments, net of corporate costs. Our anticipated earnings mix in 2026 deviates from our long-term expected earnings mix of 70% Electric and 30% Non-Electric as we expect Plastics segment earnings to remain elevated in 2026 compared to our long-term view of normal earnings for this segment.

The segment components of our 2026 diluted earnings per share guidance compared with actual earnings for 2025 are as follows:

2025 EPS

by Segment

2026 EPS Guidance

Low

High

Electric

2.32

2.61

2.69

Manufacturing

0.27

0.26

0.32

Plastics

4.05

2.49

2.71

Corporate

(0.09

)

(0.14

)

(0.10

)

Total

6.55

5.22

5.62

Return on Equity

15.6

11.5

12.3

The following items contribute to our 2026 earnings guidance:

Electric Segment - We expect segment earnings to increase 14% in 2026 based on the following:

Manufacturing Segment - We expect segment earnings to increase 7% in 2026 based on the following assumptions:

Plastics Segment - We expect segment earnings to decline 36% in 2026 based on the following assumptions:

Corporate Costs - We expect our corporate costs to increase primarily from lower investment income and higher labor costs.

CAPITAL EXPENDITURES

The following provides a summary of actual capital expenditures for the year ended December 31, 2025, and anticipated annual capital expenditures for the next five years, along with average rate base and annual rate base growth of our Electric segment:

(in millions)

2025

2026

2027

2028

2029

2030

Total

2026 - 2030

Electric Segment:

Renewable Generation and Storage

251

295

645

Transmission

167

186

255

855

Distribution

268

Other

153

Total Electric Segment

271

436

547

333

267

338

1,921

Manufacturing and Plastics Segments

129

Total Capital Expenditures

288

467

574

362

290

357

2,050

Total Electric Utility Average Rate Base

2,108

2,403

2,773

3,108

3,260

3,423

Annual Rate Base Growth

11.4

14.0

15.4

12.1

4.9

5.0

Our updated five-year capital expenditure plan includes Electric segment investments in solar and battery storage resources, transmission and distribution assets, and investments in system reliability and technology. Our Electric segment capital expenditure plan produces a compounded annual growth rate on average rate base of 10% over the next five years and will serve as a key driver in increasing Electric segment earnings over this timeframe. Our capital expenditure plan in our Manufacturing and Plastics segments includes a mix of investments to replace and upgrade existing equipment and investments to add additional capacity or productivity to our operations.

CONFERENCE CALL AND WEBCAST

The corporation will host a live webcast on Tuesday, February 17, 2026, at 10:00 a.m. CT to discuss its financial and operating performance.

The presentation will be posted on our website before the webcast. To access the live webcast, go to www.ottertail.com/presentations and select “Webcast.” Please allow time prior to the call to visit the site and download any software needed to listen in. An archived copy of the webcast will be available on our website shortly after the call.

If you are interested in asking a question during the live webcast, visit and follow the link provided in the press release announcing the upcoming conference call.

FORWARD-LOOKING STATEMENTS

Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “can,” “confident,” “could,” “estimate,” “expect,” “future,” “goal,” “intend,” “likely,” “may,” “optimistic,” “opportunity,” “outlook,” “plan,” “possible,” “position,” “potential,” “predict,” “probable,” “projected,” “should,” “target,” “will,” “would” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of management. Forward-looking statements made herein, which may include statements regarding 2026 earnings and earnings per share, long-term earnings, earnings per share growth and earnings mix, anticipated levels of energy generation from renewable resources, anticipated reductions in carbon dioxide emissions, future investments and capital expenditures, rate base levels and rate base growth, future raw materials costs, future raw materials availability and supply constraints, future operating revenues and operating results, and expectations regarding regulatory proceedings, as well as other assumptions and statements, involve known and unknown risks and uncertainties that may cause our actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, uncertainty of future investments and capital expenditures; rate base levels and rate base growth; risks associated with energy markets; the availability and pricing of resource materials; inflationary cost pressures; attracting and maintaining a qualified and stable workforce; changing macroeconomic and industry conditions that impact the demand for our products, pricing and margin; long-term investment risk; seasonal weather patterns and extreme weather events; 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; cybersecurity threats or data breaches; the impact of government executive orders, legislation and regulation including foreign trade policy; environmental, health and safety laws and regulations; changes in tax laws and regulations; the impact of climate change including compliance with legislative and regulatory changes to address climate change; expectations regarding regulatory proceedings, assigned service areas, the construction of major facilities, capital structure, and allowed customer rates; actual and threatened claims or litigation; and operational and economic risks associated with our electric generating and manufacturing facilities. These and other risks are more fully described in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.

Category: Earnings

About the Corporation: Otter Tail Corporation, a member of the S&P SmallCap 600 Index, has interests in diversified operations that include an electric utility and manufacturing businesses. Otter Tail Corporation stock trades on the Nasdaq Global Select Market under the symbol OTTR. The latest investor and corporate information is available at www.ottertail.com. Corporate offices are in Fergus Falls, Minnesota, and Fargo, North Dakota.

OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

(in thousands, except per-share amounts)

2025

2024

2025

2024

Operating Revenues

Electric

149,708

139,818

566,756

524,515

Product Sales

158,391

163,293

737,302

806,033

Total Operating Revenues

308,099

303,111

1,304,058

1,330,548

Operating Expenses

Electric Production Fuel

18,993

15,936

75,048

60,945

Electric Purchased Power

22,796

19,055

78,658

61,561

Electric Operating and Maintenance Expense

47,479

54,055

184,310

190,422

Cost of Products Sold (excluding depreciation)

91,113

91,560

402,664

434,522

Nonelectric Selling, General, and Administrative Expenses

26,132

24,169

82,566

80,065

Depreciation and Amortization

29,731

27,541

118,107

107,121

Electric Property Taxes

4,236

3,971

17,023

15,662

Total Operating Expenses

240,480

236,287

958,376

950,298

Operating Income

67,619

66,824

345,682

380,250

Other Income and (Expense)

Interest Expense

(12,163

)

(10,591

)

(47,226

)

(41,815

)

Nonservice Components of Postretirement Benefits

894

2,412

3,334

9,609

Other Income (Expense), net

5,255

4,358

20,487

18,848

Income Before Income Taxes

61,605

63,003

322,277

366,892

Income Tax Expense

9,831

8,153

46,384

65,230

Net Income

51,774

54,850

275,893

301,662

Weighted-Average Common Shares Outstanding:

Basic

41,877

41,801

41,864

41,778

Diluted

42,149

42,088

42,117

42,072

Earnings Per Share:

Basic

1.24

1.31

6.59

7.22

Diluted

1.23

1.30

6.55

7.17

OTTER TAIL CORPORATION

CONSOLIDATED BALANCE SHEETS (unaudited)

December 31,

(in thousands)

2025

2024

Assets

Current Assets

Cash and Cash Equivalents

386,193

294,651

Receivables, net of allowance for credit losses

145,496

145,964

Inventories

158,598

148,885

Investments

54,311

753

Regulatory Assets

20,437

9,962

Other Current Assets

34,690

29,826

Total Current Assets

799,725

630,041

Noncurrent Assets

Investments

78,823

121,177

Property, Plant and Equipment, net of accumulated depreciation

2,876,685

2,692,460

Regulatory Assets

86,062

98,673

Intangible Assets, net of accumulated amortization

4,642

5,743

Goodwill

37,572

Other Noncurrent Assets

80,770

66,416

Total Noncurrent Assets

3,164,554

3,022,041

Total Assets

3,964,279

3,652,082

Liabilities and Shareholders' Equity

Current Liabilities

Short-Term Debt

60,242

69,615

Current Maturities of Long-Term Debt

79,951

—

Accounts Payable

93,606

113,574

Accrued Salaries and Wages

35,666

34,398

Accrued Taxes

18,460

17,314

Regulatory Liabilities

16,600

29,307

Other Current Liabilities

46,433

45,582

Total Current Liabilities

350,958

309,790

Noncurrent Liabilities and Deferred Credits

Pension Benefit Liability

32,376

32,614