Otter Tail Q3 2023 Earnings Call Transcript

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Provided by Quartr
October 31, 2023

Key Takeaways

  • Record Q3 results and raised full‐year guidance: EPS $2.19 in Q3 drove an increase in 2023 diluted EPS guidance to $6.76–$6.96 (previously $5.70–$6.00), primarily reflecting stronger‐than‐expected Plastics performance and lower corporate costs.
  • Electric segment solid with clean energy push: Q3 utility earnings were flat year-over-year and up 7% YTD, and the commissioning of the 49 MW Hoot Lake Solar plant brings renewables to nearly 40% of owned/contracted energy, supported by a $1.1 billion 5-year capex plan.
  • Manufacturing segment outperforms: BTD Manufacturing drove a 20% year-over-year earnings increase by successfully passing through labor and material cost inflation via price adjustments and capturing incremental volumes in construction, RV, and power generation markets.
  • Plastics margins expand: Improved PVC price-to-resin spreads lifted Plastics segment earnings by 6% in Q3 as PVC pricing declines more slowly than resin costs and distributor inventory destocking nears completion, undergirding higher guidance.
  • Regulatory and transmission investments: Otter Tail filed a North Dakota rate case seeking a $17 million (8.4%) revenue increase, and is advancing MISO Tranche 1 transmission projects plus repowering $230 million of legacy wind farms with refreshed production tax credits.
AI Generated. May Contain Errors.
Earnings Conference Call
Otter Tail Q3 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, and welcome to Otter Tail Corporation's Third Quarter 2023 Earnings Conference Call. Today's call is being recorded. We will hold a question and answer session after the prepared remarks. I will now turn the call over to the company for their opening comments.

Speaker 1

Good morning, everyone, and welcome to our 3rd quarter 2023 earnings conference call. My name is Beth Osmond, and I'm Otter Tail Corporation's Manager of Investor Relations. Last night, we announced our Q3 financial results. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A recording of this call will be available on our website later today.

Speaker 1

With me on the call today are Chuck MacFarlane, Otter Tail Corporation's President and CEO Kevin Mogg, Otter Tail Corporation's Senior Vice President and CFO and Todd Walland, Otter Tail Power Company's Vice President of Finance and CFO. Before we begin, I want to remind you that we will be making forward looking statements during the course of this call. As noted on Slide 2, these statements represent our current views and So please be advised about placing undue reliance on any of these statements. Our forward looking statements are described in more detail in our filings with the Securities and Exchange Commission, which we Otter Tail Corporation disclaims any duty to update or revise our forward looking statements due to new information, future events, developments or otherwise. Will now turn the call over to Otter Tail Corporation's President and CEO, Mr.

Speaker 1

Chuck MacFarlane.

Speaker 2

Thank you, Beth. Good morning and welcome to our Q3 2023 earnings call. Please refer to Slide 4 as I begin my comments on our Q3 results. Through the combined efforts of our employees and diversified business model, we delivered record setting quarterly earnings. We generated earnings per share of $2.19 driven by increased earnings from our Manufacturing and Plastics segments.

Speaker 2

Along with the reduction in corporate costs, our electric segment earnings in the quarter were largely flat to last year, but are up 7% on a year to date basis. Based on our strong quarterly and year to date results And revised expectations for the remainder of the year, we are increasing our 2023 diluted earnings per share guidance to a range of $6.76 to $6.96 from our previous range of $5.70 to $6 This increase is primarily driven by Plastics segment performance continuing to remain stronger than previously expected. In a moment, Kevin will provide a more detailed discussion of our Q3 financial results and our expectations for the remainder of the year. Slide 5 shows our expected 5 year compounded annual growth rate and earnings per share with and without the impact of our Plastics segment through the end of 2023 based on the midpoint of our updated earnings guidance. We expect to produce a compounded annual growth rate In earnings per share from 2018 through 2023 of 11% exclusive of our Plastics segment.

Speaker 2

The additional earnings and cash flows generated by our Plastics segment over this time period provides additional strength to our already strong credit metrics, liquidity and capital structure and allows for capital investment in our operating companies. Turning to Slide 7, We illustrate Otter Tail Power's efforts in working toward a cleaner energy future. With Hoot Lake Solar becoming operational in August of this year, We expect nearly 40% of Otter Tail Power's owned and contracted energy sources will come from renewable resources. This represents an exciting milestone as we continue to transition to a cleaner energy future, while still maintaining reliability and affordability Turning to Slide 11, in March, Automotive Power And filed reply comments yesterday. We anticipate a hearing with the Minnesota Public Utilities Commission in early 2024, And we expect to receive initial comments from the North Dakota Public Service Commission sometime next week and anticipate an informal hearing later this year.

Speaker 2

Slide 12 provides an overview and status update on our significant capital investment projects. Our team continues to effectively execute our project plans, working to secure projects that On Slide 13, an overview of Otter Tail Power's 49 Megawatt Hoot Lake The construction of the facility was completed on time and on budget and became fully operational in August. The facility was constructed on and near the retired Hoot Lake Coal Plant property in Fergus Falls, allowing us the Unique opportunity to utilize existing transmission rights, land and substation assets. Bootleg Solar is the least cost and 3rd largest operating solar site in the State of Minnesota and its completion marks another step Slide 14 summarizes Otter Tail Power's investments under Tranche 1 of MISO's long range transmission plant. Arto Power will co own 2 Tranche 1 projects, the Jamestown Allendale In the Big Stone South Alexandria to Big Oaks 345 kV transmission projects.

Speaker 2

Our team is focused on project development and coordinating these complex Projects with our co owners. Both projects have FERC approval for construction work in progress recovery, ensuring the timely recovery of our capital investment. In total, we estimate Otter Tail's capital These projects will be approximately $420,000,000 with 30% of the capital investment to occur before 2028. These investments have very limited impact on our retail customer rates as they are allocated across the MISO Midwest footprint. Our team continues to monitor developments at MISO regarding potential tranche 2 transmission projects.

Speaker 2

MISO is currently indicating tranche 2 projects While we expect some investment opportunity for Otter Tail Power rising from tranche 2 projects, Our 5 year capital plan does not include any estimates of future investments for these projects. In addition to the transmission investment opportunities available through MISO's long range transmission planning, MISO and the Southwest Power Pool or SPP recently partnered to develop the Joint Targeted Interconnection Queue or JTIQ Portfolio projects focus on improving the reliability of the grid where the 2 regional transmission organizations connect. The Minnesota Department of Commerce on behalf of MISO and SPP applied to the U. S. Department of Energy for funding to support the JTIQ projects.

Speaker 2

The DOE awarded $464,000,000 to 5 of these projects, one of which we are expecting to co develop with Xcel Energy. While these projects still need to go through the approval process with FERC, we are optimistic about the eventual outcome and the Potential investment opportunity. Similar to the MISO Tranche II projects, we have not yet included this Project in our 5 year capital forecast. Turning to Slide 15, we intend to repower 4 of our legacy wind farms In 2024 2025 with an investment of approximately $230,000,000 Each project qualifies for renewed production tax credits The passage of the Inflation Reduction Act and it is anticipated to lower customer bills demonstrating Otter Tail Power's continued focus And commitment to customer affordability. Slide 16 provides an overview of Otter Tail Power's capital spending plan.

Speaker 2

The plan includes $1,100,000,000 of capital investment over the next 5 year period and produces a 6.5% annual compound growth rate It is important to highlight that we have potential additional renewable investment opportunities after 2027 As outlined in our IRP, as well as incremental transmission investment opportunities relating to MISO Tranche 2 and JTIQ projects. We anticipate approximately 80% of our capital investments will be recovered through existing rates or riders. Slide 17 provides an overview of key regulatory matters for 2023. Based on the results of our cost of service studies, we determined it prudent to file a general rate case in North Dakota. We will be filing our case on November 2, 2023.

Speaker 2

Slide 18 provides a summary of our planned rate case filing with the North Dakota Public Service Commission in which we will be proposing a rate Net increase in revenues of approximately $17,000,000 or 8.4 percent based on a requested ROE of 10.6 percent on an equity layer of 53.5%. The rate case is driven by increases in our operating costs since our last Case filing in the State of North Dakota, which was over 6 years ago. Even with this increase, Otter Tail Power will continue to have some of the lowest rates in the country. Turning to our Manufacturing segment on Slide 22, end market demand is mixed, but our existing customers continue to look to us to add value resulting in incremental volumes from Winning additional work with existing customers. Within the recreational vehicle and lawn and garden end markets, Discretionary spending is being impacted by inflation and rising interest rates.

Speaker 2

However, within the recreational vehicle end market specifically, We have seen a shift to higher end models as buyers of these models seem to be better insulated from economic pressures. Construction remains a strong end market for us as distributors are still experiencing low levels of inventory The build up of fleet replacement needs over the last few years. The agricultural end market is stabilizing As inventory has started to build. And the power generation end market continues to be healthy $20,000,000 is currently underway. We expect to bring the additional capacity online in early 2025.

Speaker 2

At T. O. Plastics, sales volumes in the horticulture end market decreased in Q3 as lead times have normalized Customers continue to work through inventory purchased early due to scarcity concerns, resulting in lower operating revenues this quarter as compared to Slide 25 provides an overview of our Plastics segment. Sales volumes were relatively flat in Q3 compared to the same time last year and we believe distributor inventory destocking is generally complete. Slide 26 highlights historic resin costs and PVC pipe pricing.

Speaker 2

The Plastics segment produced stronger operating margins As our sales price to resin spreads have improved compared to the Q3 of 2022. The sales price of PVC pipe has receded from historic highs and continues to do so. This decline is at a pace slower And the reduction in cost of resin and other materials over the same timeframe. Our updated PVC pipe pricing expectations As well as related margins for the remainder of the year are the primary drivers for increased 2023 earnings guidance that Kevin will expand. The Vinaltec expansion and plant upgrade is underway and we anticipate the expansion will increase capacity by approximately 8% £26,000,000 for the segment.

Speaker 2

We currently expect to bring this new capacity online in the second half of twenty twenty four at a cost of $50,000,000 I'll now turn it over to Kevin to provide additional commentary on our Q3 results and our updated outlook for 2023.

Speaker 3

Well, thank you, Chuck. Good morning, everyone. We delivered record setting quarterly financial results with diluted earnings per share of $2.19 Our financial results for the trailing 12 months ended September 30, 2023 result in a 21.8% return on equity On an equity layer of approximately 62%. Please follow on Slide 30 as I provide an overview of our 3rd quarter segment earnings. Electric segment earnings decreased approximately $300,000 or 1% as compared to the Q3 of 2022.

Speaker 3

This was driven by increased operating and maintenance expenses primarily due to higher labor costs and strategic spending initiatives, Set by increased rider recovery revenues from our Hootleg Solar and Ashtabula 3 investments, increased commercial and industrial sales volumes And lower pension plan costs. Manufacturing segment earnings increased $1,200,000 or nearly 20% compared to the same time last year. Key elements driving this increase include the following. BTD Manufacturing has been Successful in adjusting sales prices in response to the labor and non steel material cost inflation, resulting in higher profit margins in the Q3 of 2023 as compared to the same time last year. Also sales volumes for BTD manufacturing increased in the Q3 driven by end market demand in the construction, Recreational vehicle and power generation end markets as well as incremental volumes from winning additional work with existing customers As they continue to look to us to add value.

Speaker 3

Partially offsetting this increase, T. O. Plastics sales volumes within the horticulture end market declined in the Q3 of 2023 compared to the same time last year As customers continue their destocking efforts and return to more normal buying patterns. Plastics segment earnings increased $3,200,000 or approximately 6% compared to the Q3 of 2022. The increase in earnings is primarily due to increased profit margins for the segment as our sales price to resin spread improved in the Q3 of this year as compared to the same time a year ago.

Speaker 3

Both the sales price of PVC pipe And the cost of resin continue to decline, but the sales price has declined at a rate slower than resin costs. Sales volumes were largely flat as compared to the same time last year and we believe customers are generally through their destocking efforts. Corporate costs declined $3,600,000 in this quarter compared to the same time last year. This improvement resulted from lower employee health insurance claim costs and the investment income earned on our short term cash Equivalence in the Q3 of 2023 was higher due to improved yields and higher invested funds. Moving on to our updated earnings guidance, Slide 33 provides that updated outlook.

Speaker 3

We're increasing our earnings per share guidance to a range of $6.76 to $6.96 17% increase from the midpoint of our previous guidance range of $5.70 to $6 We are tightening the range of expected earnings for our electric segment and expect our utility to produce earnings growth of 6% over 2022. We are increasing the manufacturing segment earnings guidance due to the strength of 3rd quarter earnings Higher sales volumes, margin improvement and higher research and development credits drove earnings growth at BTD. We are increasing the earnings guidance for our plastics segment due to continued strength in sales prices and related operating margins of PVC pipe. While sales prices and margins have begun to recede from historic highs, the rate of decline continues to be slower than we anticipated. We expect sales prices to decline modestly over the Q4 resulting in a decline in operating margins.

Speaker 3

Additionally, we now expect stronger sales volumes in the 4th quarter as distributors are generally through their destocking efforts With demand rebounding in advance of a seasonal decline anticipated in the latter part of the 4th quarter. And finally, we are improving our guidance for corporate costs. This relates to our 3rd quarter results And an increase in expected earnings on our short term cash equivalents due to higher level of invested funds and increased yields on those investments. Additionally, we expect lower employee healthcare costs through the remainder of the year. We now expect our earnings mix for 2023 to be approximately 30% from our electric segment And 70% from our Manufacturing and Plastics segments, net of corporate costs.

Speaker 3

This anticipated mix Deviates from our long term expected earnings mix of approximately 65% electric and 35% non electric Our first question comes from the line of David. Please go ahead. Our first question comes from the line of David. Please go ahead. Our stakeholders and has put us in an enviable position.

Speaker 3

The higher level of earnings and cash flows generated over the last December 31, 2022 53.7 percent as of December 31, 2021. In September, Fitch upgraded the credit rating of both Otter Tail Corporation and Otter Tail Power Company in response to our strengthened financial S and P maintained its credit rating for Otter Tail Power Company. We believe it is prudent to retain our excess cash given all the regulated investment opportunities existing at Otter Tail Power Company, not only in the current 5 year period, but beyond. Additionally, our current cash position and balance sheet differentiates us from others in the utility sector as we have no equity needs over the next 5 years despite our sizable CapEx plans. With our strong financial position and track record of being able to deliver our capital investments on time and on budget,

Speaker 2

continues to be low risk.

Speaker 3

We don't have any outstanding borrowings on our parent company facility and the amounts drawn on the utility facility primarily relate to capital projects. The increased cost of these borrowings is fully considered in our updated 2023 guidance. As of September 30, 2023, our parent debt to total company debt is 9%. The $80,000,000 3.55 Percent Parent Company Note Matures in December of 2026 And this is our only outstanding debt at the parent level. Slide 39

Speaker 2

Before we open the call for questions, I want to take a moment to recognize Kevin, who recently announced his retirement effective at the end of the year. I'd like to thank Kevin for his years of service and contributions to Otter Tail Corporation, its employees and customers. Kevin has been a pillar of integrity for our company and has helped us shepherd through challenging times and enviable financial success. With the deepest gratitude, we congratulate Kevin and wish him all the best in his retirement.

Speaker 3

Thanks for the kind words, Chuck. My 27 years of working for Otter Tail is filled with wonderful memories, Challenges and accomplishments. It has been an honor to work for the company alongside the employees across our electric Manufacturing platforms. It has also been a privilege to have worked with all of you And I value the relationships we have developed. The support and confidence you have provided me during my tenure is most appreciated.

Speaker 3

The company is in wonderful hands. And so on January 1, I will hand the football to Todd Walland as my successor. He is well prepared to move into the role as he has served as VP of Financial Planning and Treasury. At the corporate level, VP of Finance and Planning for our manufacturing platform and most recently as Chief Financial Officer and VP of Finance for Otter Tail Power Company.

Speaker 2

Thank you, Kevin. I too extend my congratulations and best wishes Your leadership has been an outstanding model to follow and I appreciate all your guidance and coaching over the years. I'm grateful for the opportunity to continue your legacy of excellence and execution on a solid growth strategy. We are now ready to take your questions.

Operator

Thank you. After the Q and A, Chuck will return with a few closing remarks. One moment please. And our first question comes from the line of Chris Ellinghaus with Seberg, William, Shank and Company.

Speaker 2

Hey, everybody. How are you?

Speaker 3

Good. Good morning, Chris. Good morning.

Speaker 4

Chuck, could you talk about the IRP process? What are you hearing from interveners so far?

Speaker 2

On the Minnesota filing, which we filed comments, reply comments yesterday, We have comments from the Clean Energy Organization, Minnesota Office of Attorney General and the Minnesota Department of Commerce. The environmental interveners Brought up issues on the retirement timing of Coyote and Big Stone As related to the proposed CO2 regulations in front of the EPA, we've replied to that. There is also some comments in there about Otter Tail's use of Renewable energy credits to meet the Minnesota Clean Energy Standard by 2,040 and then some comments by OAG had very similar comments. The DOC reviewed Our modeling and inputs and did not have substantial comments on their own modeling at that

Speaker 4

Okay, great. Kevin, can you sort of talk about the plastics business? And Have you got any sort of update on your thoughts on the glide path to a more normal time?

Speaker 3

Yes, Chris, as we both said in our comments that this LivePath down is just taking longer than we would have expected. We as we I think we mentioned on The Q2 call, we are starting to see downward pressure in the residential commercial market, Particularly in the Northern Pipe territory as some competitors drop prices as they were looking to pick up some market The declines in the municipal water market, while they're softening, they aren't softening to the levels that we Expected when we updated our guidance at the end of the second quarter, as we look today into Clearly conditions are stronger than we expected middle of the year. We as evidenced by the John, Q3 and another uplift in the guidance for 2023. We aren't seeing anything today, Any kind of catalyst that says there should be any precipitous drop in pricing as we head into 2024 and we continue to monitor those conditions. We'll certainly provide An update on the when we give 2024 guidance in February, where those conditions are, but we think that The path to a more normal view of earnings is probably longer than what we had Previously expected, we said in the second quarter call that we expect that we'll see some type Normalization in the last half of twenty twenty four, I think that glide path is still there, Chris, but it could continue to be longer While it starts to come back in the last half of twenty twenty four and into twenty twenty five, I still think there's a As we see it today, a longer glide to get back to normal.

Speaker 2

Okay, great.

Speaker 3

And Chuck, can you just

Speaker 4

Remind us of the procedural sort of schedule in North Dakota. Is it still a 7 month Statutory review?

Speaker 2

Yes, Chris, it is. So in many cases in North Dakota, there are settlements that occur before that 7 months, but A fully litigated case has approximately a 7 month window. Okay. And

Speaker 4

in the rate case, Can we presume the test year is something in 2024? And is the $17,000,000 is that the base revenue request?

Speaker 2

The 17 is the net new we're in a process, we have a number of riders that would roll into base rates, but the net new Revenue request is a $17,000,000 and we do use 2024, North Dakota has forecast test year. Okay, great. Great.

Speaker 4

Good luck with the retirement. We're going to miss you. Thanks for the details everybody.

Operator

And our next question comes from the line of Sophie Karp with KeyBanc Capital Markets.

Speaker 2

Hey, good morning.

Speaker 5

This is actually Michael Seppin in for Sophie. Thanks for taking my question. I was just wondering, on the manufacturing segment, If you could remind us how much capacity the Georgia Expansion Project will add?

Speaker 3

In terms of dollar size, Mike?

Speaker 5

Just total capacity addition.

Speaker 3

Yes, I think it's adding collectively around $40,000,000 of capacity.

Speaker 2

Okay. Yes. And we would estimate that current capacity in sort of revenue for that site would be between $60,000,000 $65,000,000 So An upgrade of an additional 40.

Speaker 5

And then how much visibility do you have there with Those same customers and are you expecting a slowdown there in the near term?

Speaker 3

In terms of Georgia?

Speaker 5

Just in the manufacturing segment there, you talked about the Additional business from current customers?

Speaker 3

Yes. I mean, we've seen really continued healthy growth with John Deere, across our kind of footprint of plants, Mike, we continue to experience growth with Polaris as well. And then in the Southeast in Dawsonville, we continue to because of that Acquisition we did in 2015 and the growth there, we continue to see good growth with companies like Stanley Black and Decker, Caterpillar as

Speaker 5

well. Got it. Thanks. Then turning back to the North Dakota Rate case filing, is there anything specific that will stand out, any new mechanisms you'll be exploring?

Speaker 2

Michael, one thing we may look at is Implementing some form of a sales adjustment, I would not consider decoupling, but we have large Customers in North Dakota and an ability to adjust on a sales basis is something we'll bring forward. We don't have currently have decoupling in North Dakota.

Speaker 5

Great. Thanks for answering my questions. Best of luck Kevin. I look forward to seeing you guys in a couple of weeks. Thanks, Mike.

Operator

Thank you. One moment please for our next question. And our next question comes from the line of Brian Russo with Sidoti.

Speaker 6

Yes. Hi, good morning. Good

Speaker 2

morning, Brad. Good morning, Brad. Hey, I

Speaker 6

apologize if I missed this earlier, but where are you in the development of your tranche, MISO Tranche 1 transmission projects?

Speaker 2

Sure, Brian. It's Chuck. We have Two projects, 1 in North Dakota that goes from our existing Jamestown substation to a So, El Nill Substation owned by MDU and we are in the process of Routing, securing easements or options for easements and those types of things in that facility. And then one that goes from our Big Stone South, which is just outside of Minnesota in South Dakota To Alexandria, Minnesota and we have in Minnesota, there's a process where you file a Certificate of need that has been filed jointly with Xcel because this line ultimately emanates in the 2nd Circuit on existing line down to the northwest corner of the Twin Cities. And then once a certificate of need is reviewed by the commission, then we also would put in for a routing permit.

Speaker 2

We have Public meetings with landowners, one round we'll do another round of that as the potential Routing window narrows in those processes. So because of the kind of a 2 step Process, you get a certificate of need first, followed by a route permit in Minnesota. That process Generally takes a little longer than in North Dakota where it's sort of a single certificate of need and routing process.

Speaker 6

Okay, great. And then just also on the utility, what was the EPS impact of weather versus normal In the Q3?

Speaker 3

It was $0.02 I believe.

Speaker 6

Okay. And then just lastly on Medtfactual.

Speaker 2

It was a penny. Okay. All

Speaker 6

right. Got it.

Speaker 3

It was $0.02 Negative to Q3 of 2022.

Speaker 6

Okay, great. And then just on the manufacturing side, specifically BTD, How would you characterize the Q3 performance? I suspect it exceeded your expectations, which is why You raised the midpoint of that segment's guidance. And then also, if you could just talk about The backlog of $107,000,000 which is down year over year from $141,000,000 I know there are 2 components. 1 is just Price is Steel, right?

Speaker 6

So it doesn't necessarily indicate slowdown of business, but I just Thought you could elaborate on that trend? Sure.

Speaker 3

As it relates to the Q3, we talked about both the Ability to continue to get price increases to help offset Increasing labor and other non material related costs. So the company has continued to excel Very well in being able to do that. We saw stronger volumes as well as we mentioned that helped drive the Increased profitability quarter over quarter. And the other item that happened in the quarter, Brian, it's Referenced in the press release and I indicated it in my guidance comments is the R and D amount of R and D credits That were recorded in the Q3 at BTD. So we do a Fair amount of R and D work for our customers.

Speaker 3

That's one of our, I would call it our core competencies that BTD has that helps Keep customers engaged with us and we do we estimate what we expect our R and D credits And then when we once we finish up, for example, we finished up 2022, We then engage an outside firm to do an R and D credit study for us in 20 in this case, 23 and they come in and they look at the nature of the products, the nature of I should say Well, products, projects that we did during the year and what was the nature, were they more complex, was it more materials, Those types of things and we saw about $1,000,000 uplift in R and D credits in the 3rd quarter That we hadn't fully anticipated, it was driven primarily by increased work That we did for one of our customers that was, I'll call it heavier type steel And more complex projects they were working on. So we were able to recognize an additional amount of R and D credit Over and above what we had been estimating for that. And then as the Inflation Reduction Act allowed for Another method to recognize R and D credits and we that new method that was under the Inflation Reduction Act That allowed us to get additional R and D credits as well as a result of that law that's And then so there was a pickup there in our estimate of where we thought it was going to be.

Speaker 3

And then as we Revised our estimate in 2023 based on that new method that also provided was part of that $1,000,000 uplift and I think we've got it listed as $0.02 impact on slide on the earnings walk slide in the earnings call materials. And so those were the drivers of Q3 results that largely contributed to our uplift in the earnings guidance.

Speaker 2

Okay. Thank you, Brian. On the productivity side, when we At the Q2 call, we had indicated we had in the process of 3 prior quarters BTD was trying to Increased employee levels of 20% to 25% amount. And during the Q3, while we continue to recruit, We have more stabilized our employee level. So we saw improving productivity of the overall workforce there.

Speaker 6

Okay, great. And then just on the backlog, the trends you're seeing there year over year and is there any read throughs?

Speaker 3

Yes. In terms of backlog, the primary difference there in the backlogs is just because of the Steel pricing between the years, Brian, is what's driving that. But in terms of what the work we're Seeing from our customers, they continue to look to us for provide services that their other supplier base Either is not providing timely or not providing quality type works. They continue to look to BTD Not only currently, but on a go forward basis to deliver the product that they need to for their End use product, whether it be in recreational vehicle or ag or construction, but that big the biggest difference would be in the steel price between the years. Also included in that backlog, part of the reduction would certainly be not a big piece, but it would be in there as just we've seen a decline in the Horticultural end market backlog between this year and at the same time a year ago.

Speaker 6

Okay, great. Appreciate it. Well, thank you very much. And Kevin, all the best and good luck in the future.

Speaker 3

Thank you, Brian. Appreciate it.

Operator

Thank you. With no other questions, I will now turn the call back over to Chuck for his closing remarks.

Speaker 2

Thank you for joining our call and your interest in Otter Tail Corporation. Based on our Q3 year to date results as well as our continued strength Within our Plastics segment, we are raising our 23 earnings per share guidance to the range of $6.76 to $6.96 An increase of approximately 17% from our previous guidance range of $5.70 to $6 Over the long term, I believe we are well positioned with our utility growth strategy and predictable earnings stream, complemented by our strategic manufacturing and plastic for 5% to 7% and to increase our dividend in the range of 5% to 7% annually. Thank you again for joining our call and We look forward to speaking with you next quarter.

Operator

Thank you for participating. This concludes today's program and you may now disconnect.

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