Otter Tail Corporation · NASDAQ:OTTR
Otter Tail — Investor Presentation (May 2004)
38 slides from Otter Tail's investor presentation, May 2004
Slide 1: Topics
Topics Who We Are Vision, Mission and Values Strategy and Business Model 2003 in Perspective How We Operate Financial and Stock Performance 1
Slide 2: Topics
Topics Who We Are Vision, Mission and Values Strategy and Business Model 2003 In Perspective How We Operate Financial and Stock Performance 2
Slide 3: Forward-Looking Information
Forward-Looking Information Except for historical information, all other information provided in this presentation consists of “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These “forward- looking statements” are subject to risks and uncerta
Slide 4: Otter Tail Corporation
OTTERTAIL CORPORATION OTHER MSEALTH’ ===> beret! Seen wee ee eee eee VINYLTECH Better Through Design EP o PVC PIPE SHORE MASTER: Se Mi SERVICES invowmariew Sratems
Slide 5: Otter Tail Corporation Vision
Otter Tail Corporation Vision Creating value and growth through acquisition, long-term ownership and decentralized operation of diverse businesses. 5
Slide 6: Mission
Mission To create value for: Customers Shareholders Employees 6
Slide 7: Values
Values z We will be fair, honest and ethical. z We will attract and retain talented people. z We will expect decentralized decision making. z We will be respectful of others. z We will be resourceful and entrepreneurial. z We will build relationships. z We will be fiscally responsible. z We will cel
Slide 8: Strategy and Business Model
Strategy and Business Model 8
Slide 9: Strategy
Strategy z Electric Segment – Solid Base z Other Segments – Growth z Financial Goals z Stock Positioning z Dividend Policy z Remain Independent 9
Slide 10: Otter Tail Corporation
OTTERTAIL CORPORATION OTHER MSEALTH’ ===> beret! Seen wee ee eee eee VINYLTECH Better Through Design EP o PVC PIPE SHORE MASTER: Se Mi SERVICES invowmariew Sratems
Slide 11: Revenue Growth (in millions)
Revenue Growth (in millions) $800 $700 $600 $500 485 403 $400 324 347 $300 194 206 231 122 172 $200 207 220 233 244 268 $100 192 193 198 203 $- 1995 1996 1997 1998 1999 2000 2001 2002 2003 Electric Non-electric 11
Slide 12: Earnings Per Share Growth
Earnings Per Share Growth $1.80 $1.60 0.34 0.43 0.56 $1.40 0.50 0.23 $1.20 0.30 0.43 0.18 0.27 0.32 $1.00 $0.80 $0.60 1.25 1.23 1.29 0.99 0.96 0.97 1.06 0.98 1.09 $0.40 $0.20 $- 1995 1996 1997 1998 1999 2000 2001 2002 2003 Electric Non-electric Radio station Gain 12
Slide 13: 2003 In Perspective
S OTTERTAIL W CORPORATION 2003 In Perspective
Slide 14: 2003 – In Review
2003 – In Review z Challenging Year z Recap – Revenues Up – Earnings Down – Dividends Up – Stock Price Flat 14
Slide 15: 2003 – In Perspective
2003 – In Perspective z Earnings Down z OTP – Record Year z Solid Balance Sheet z Strong Credit Ratings z Good Returns on Capital z Stock Performance – Mixed 15
Slide 16: Proxy Graph – 5-Year Stock Performance
Proxy Graph – 5-Year Stock Performance $250 OTC EEI $200 NASDAQ OTC $150 EEI $100 NAS DAQ $50 $0 1998 1999 2000 2001 2002 2003 As s ume s $100 inve s te d o n 12/31/98 16
Slide 17: Future Remains Bright
Future Remains Bright z Strategy Established z Business Model Proven z People – Key to Success 17
Slide 18: How We Operate
S OTTERTAIL W CORPORATION How We Operate
Slide 19: Business Model - Diversification
Business Model - Diversification z Diversification Benefits – Promotes More Predictable Growth – Reduces Effects of Segment Downturns and Individual Company Performance Issues – Increases Investment Opportunities z Managing Diversification – Decentralized with Discipline – Decentralized – z Operatin
Slide 20: Business Model - Diversification
Business Model - Diversification z Corporate Role in Diversification – Capital Allocation – Provide Value – the 4 C’s z Commodities (Finance) – Centralize and Use Consolidated Buying Power z Compliance (Legal, Regulatory, Safety) – Setting the Standards z Consulting – (HR, IT, Risk Management, Legal
Slide 21: Acquisition
Acquisition z Criteria – Proven Management Team Remains After the Acquisition – Preference for 100% Ownership of Acquired Company – Small or Middle-market Sized Company ($20 - $200 Million in Revenues) – Immediate Earnings and Future Growth Potential – Products and Services Primarily Not Consumer/Re
Slide 22: Financial Performance
S OTTERTAIL W CORPORATION Financial Performance
Slide 23: Revenue by Segment
Revenue by Segment 2003 Revenues 2002 Revenues Other Other Electric 16% 13% Electric 36% 38% Manuf 22% Manuf 24% Plastics Health 11% Health Plastics 13% 14% 13% 23
Slide 24: Net Earnings by Segment
Net Earnings by Segment 2003 Earnings 2002 Earnings Manuf Other Health 10% (7)% Other Manuf 6% (1)% 10% Health 10% Plastics 5% Electric Electric Plastics 69% 86% 12% 24
Slide 25: Revenue by Segment
Revenue by Segment 2004 1st Qtr. 2003 1st Qtr. Other Other Electric 17% 14% Electric 35% Manuf 40% 20% Manuf Plastics Plastics 23% Health 13% Health 13% 12% 13% 25
Slide 26: Net Earnings by Segment
Net Earnings by Segment 2004 1st Qtr 2003 1st Qtr Electric 9,822 Electric 9,812 Plastics 639 Plastics 1,434 Health 101 (93) Health (142) Manuf Manuf 385 (2,325) Other (1,676) Other (5,000) 0 5,000 10,000 15,000 (5,000) 0 5,000 10,000 15,000 26
Slide 27: Electric Segment
Electric Segment z Do Business in Minnesota, North Dakota and South Dakota z Performance Based Regulation in North Dakota z Last Rate Case in 1986 z Record Financial Performance in 2003 Net Revenue ($ millions) Net Income ($ millions) $300 267.0 $60 233.0 244.0 $250 $45 $200 31.1 31.2 34.1 $150 $30
Slide 28: Plastics Segment
Plastics Segment z 2001: Departure from Historical Cycles z Extremely Sensitive to Economic Conditions z 2003: Lower Results after Record 2002 z Commenced Operations of New Plant in Hampton, Iowa – PE Corrugated Pipe Net Revenue ($ millions) Net Income ($ millions) $100 86 82.9 $12 $80 63.2 $10 $8 5
Slide 29: Health Services
Health Services z Two Parts – DMS Health Technologies and DMS Imaging z DMS Health Technologies – A Record Year z 2 acquisitions – Patient Monitoring Systems z DMS Imaging – Disappointing Results z Change in Leadership Net Revenue ($ millions) 100.9 Net Income ($ millions) 93.4 79.1 $7 $6 $75 4.2 4.
Slide 30: Manufacturing Operations
Manufacturing Operations z Tough Economic Environment z Record Results at TO Plastics z Waterfront Equipment Expansion z Leadership Change at DMI z No Production Tax Credits Net Revenue ($ millions) 142.4 123.4 177.8 Net Income ($ millions) $120 $13 $11 $90 $9 6.1 $60 46.9 $7 34.7 4.5 3.9 $5 $30 $3
Slide 31: Other Business Operations
Other Business Operations z Steady Performance from Midwest Information Systems z EW Wylie Named Top 10 Performer by ATA z Midwest Construction Services Continues Consolidation z Acquisition of Foley Company Net Revenue ($ millions) Net income ($ millions) 123.4 $10 $125 $8 $100 83.9 $6 80.1 $75 $4
Slide 32: Capital Expenditures (in millions)
Capital Expenditures (in millions) 80 75.5 70 60 53.6 50.7 50 40 30 20 13.6 8.2 10 0 2001 2002 2003 3 mnths 3 mnths 04 03 32
Slide 33: Long-Term Interest Bearing Debt To Total Capitalization
Long-Term Interest Bearing Debt To Total Capitalization 46.5% 50.00% 44.5% 44.7% 44.0% 43.5% 40.00% 30.00% 20.00% 10.00% 0.00% 2001 2002 2003 3 mnths 04 3 mnths 03 33
Slide 34: Stock Performance
S OTTERTAIL W CORPORATION Stock Performance
Slide 35: Stock Return and Performance
Stock Return and Performance Growth of $1,000 investment in OTTR Common Stock made Dec. 31, 1993 $3,000 $2,535 $2,500 $2,346 $2,000 $1,535 $1,500 $1,015 $1,000 $500 $- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 35
Slide 36: Dividend History
Dividend History Increased Dividends since 1975 Paid Dividends since 1938 1938 1950 1960 1970 1980 1990 2000 2003 36
Slide 37: Key Points
Key Points •Recent dividend increase to $1.10 = 4.1% yield Attractive Dividend & Total Return Potential •Dividend paid since 1938 with increases over last 29 years •Long term earnings growth in the 5-6% range Balanced Growth & •Strong and stable utility operations provide cash flow to support divide
Slide 38: Topics
Topics Who We Are Vision, Mission and Values Strategy and Business Model 2003 in Perspective How We Operate Financial and Stock Performance 38