U.S. Markets close in 16 mins

Edited Transcript of OTTR earnings conference call or presentation 7-May-19 3:00pm GMT

Q1 2019 Otter Tail Corp Earnings Call

FERGUS FALLS May 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Otter Tail Corp earnings conference call or presentation Tuesday, May 7, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Charles S. MacFarlane

Otter Tail Corporation - President, CEO & Director

* Kevin G. Moug

Otter Tail Corporation - Senior VP & CFO

* Loren Hanson

Otter Tail Corporation - Assistant Secretary

================================================================================

Conference Call Participants

================================================================================

* Christopher Ronald Ellinghaus

The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas

* Tate H. Sullivan

Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, and welcome to the Otter Tail Corporation's First Quarter 2019 Earnings Conference Call. Today's call is being recorded. (Operator Instructions)

I will now turn the call over to the company for their opening comments.

--------------------------------------------------------------------------------

Loren Hanson, Otter Tail Corporation - Assistant Secretary [2]

--------------------------------------------------------------------------------

Good morning, everyone, and welcome to our call. My name is Loren Hanson, and I manage Otter Tail's Investor Relations area.

Last night, we announced our first quarter 2019 earnings results. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A replay of the call will be available on our website later today.

With me on the call today are Chuck MacFarlane, Otter Tail Corporation's President and CEO; and Kevin Moug, Otter Tail Corporation's Senior Vice President and Chief Financial Officer.

Before we begin, I want to remind you that we will be making forward-looking statements during this call. As noted on Slide 2, these current statements represent our current judgment or opinion of what the future holds. They are subject to risks and uncertainties that may cause actual results to differ materially. 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 encourage you to review. Otter Tail Corporation disclaims any duty to update or revise our forward-looking statements due to new information, future events, developments or otherwise.

For opening remarks, I will now turn the call over to Otter Tail Corporation's President and CEO, Mr. Chuck MacFarlane.

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, Loren. Good morning, everyone. Last night, we released our first quarter results.

Please refer to Slide 8 as I begin my comments. Both operating revenues and net income increased slightly quarter-over-quarter and earnings per share remained consistent with first quarter 2018. Our financial performance continues to demonstrate the value of employee's actions to grow our business, achieve operational and commercial excellence and develop talent.

Turning to Slide 10. We'll look at some of Otter Tail Power's first quarter highlights. The Merricourt wind and Astoria station projects along with our South Dakota transmission reliability project and other investments outlined on Slide 12 will produce an approximate annual growth rate of 8% in our rate base between 2018 and 2023 in a constructive regulatory environment.

I'll touch briefly on several of these projects. The Merricourt generator interconnection agreement was filed with FERC on March 20, 2019, and received FERC approval on April 26. The Merricourt wind generation project will be Otter Tail's largest capital investment at $270 million. We anticipate closing on the purchase agreement and beginning construction in the last half of 2019.

Astoria station remains on schedule. Astoria will be a highly efficient simple cycle natural gas combustion turbine with 245 megawatts of capacity and will provide energy during periods of high demand. We will complement our wind generation by providing a reliable backstop when the wind isn't blowing and it will have flexible operating options and low CO2 emissions. We will invest $165 million in this project, which includes approximately 70 construction jobs during the peak of the 13-month construction period. We expect Astoria station will be online in 2021.

We're enhancing transmission infrastructure in our Southeastern/South Dakota service territory providing an approximate $39 million investment that will improve reliability and provide increased capacity for customers in the southern end of our service territory. Phase 1 of this project, a new 15-mile 115 kV transmission line from Hetland to Lake Norden, South Dakota, was put into service in March of 2019. We expect Phase 2, a 40-mile 115 kV transmission line from Lake Norden to Toronto, South Dakota to be in service in 2021.

Turning to Slide 18. On March 1, 2019, the South Dakota Public Utilities Commission approved a settlement on all issues in our rate review except return on equity. Our business outlook currently calls for a net revenue increase of approximately $2.3 million, a partial settlement includes a phase-in plan for recovering the costs of Merricourt wind and Astoria station projects. Otter Tail Power will submit a separate request for an amount to be recovered through the phase-in plan. The partial settlement also suspends another rate case until those projects are in service for a year. We expect a final determination on the rate review, including ROE, in the second quarter.

In April, Otter Tail Power celebrated its 110th anniversary. Since 1909, the company has touched the lives of customers by providing reliable electricity and energy services. The company served its first customer, Northern Light Electric Company of Wahpeton in North Dakota in April of 1909. It now provides electricity to more than 132 customers in 422 communities. We're proud of our 110 years serving our neighbors and we'll continue to provide a reliable, cost-effective and increasingly clean combination of resources to meet our customers' energy needs.

Now turning to our Manufacturing segment. BTD, our contract metal fabricator, improved return on sales on a consolidated basis and significantly improved financial results at our Georgia facility. Overall, demand increased year-over-year and exceeded first quarter 2019 expectations. Operations has done a great job balancing production output and costs to get the right levels of inventory built, keeping expedite levels low and still setting on-time delivery levels.

T.O. Plastics is improving factory output, despite staffing challenges in our Otsego and Clearwater facilities. And in a snow-related partial warehouse roof collapse in Clearwater, the warehouse and shipping team responded the Mother Nature with incredible effort and adaptability and we're able to lease another warehouse to minimize shipping delays. In March, the Clearwater facility had its highest volume of pounds produced within the last 12 months.

Our Plastics segment, Northern Pipe Products and Vinyltech, continued to demonstrate operational excellence. In the first quarter of 2019, the segment achieved financial results favorable to forecast. As anticipated, Q1 results were lower than the record levels of Q1 of 2018 driven by a more historic operating margins as pipe prices have decreased. Both companies continue to improve in the markets they serve by demonstrating flexibility and responsiveness to customer needs.

Now I'll turn it over to Kevin for the financial perspective.

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [4]

--------------------------------------------------------------------------------

Thanks, Chuck, and good morning, everyone. We are pleased with our first quarter financial results. Consolidated earnings per share for the quarter is ahead of our expectations driven by favorable results in our Electric and Manufacturing segments as well as our corporate cost center. Our PVC pipe company's first quarter earnings were in line with our earnings expectations.

Our 2019 financial plan for Plastics anticipated lower revenues and earnings based on current market conditions, which indicated our 2018 record year would not be repeated. Our current guidance for this segment would indicate 2019 will be our third best year from an earnings perspective.

Please refer to Slide 23 as I discuss our first quarter results.

Electric segment net earnings increased $2 million quarter-over-quarter. Key drivers for this increase were: increased revenues related to colder weather evidenced by an approximately 13% increase in heating degree days between the quarters. Weather favorably impacted earnings by $0.05 a share compared with the first quarter of 2018. Increased retail revenues in South Dakota due to the reversal of an expected refund related to reduced revenue requirements associated with the Tax Cuts and Jobs Act. The refund of this amount was not required under the terms of our South Dakota partial rate case settlement. Interim rates net of estimated refunds associated with our South Dakota rate case went into effect in October of 2018 increased renewable resource and transmission cost recovery rider revenues in Minnesota. These items were partially offset by lower kilowatt hour sales to industrial and other nonretail customers, lower ship revenues due to decreased ship expenditures in 2019; and other items impacting first quarter earnings were lower O&M expenses, increased depreciation expense and income tax expense due to higher earnings before taxes and the decrease in federal production tax credits, which had expired in November of 2018.

Net earnings for the Manufacturing segment increased $678,000 quarter-over-quarter. Key items driving this improvement are as follows: BTD's net revenues increased $10.3 million or approximately 18%. This was driven by an $11.4 million increase in product sales to all of its major end markets. $6.3 million of this increase relates to higher material costs pass through to customers with the balance due to increased sales and improved pricing.

The increase in parts revenue was partially offset by a $1.2 million decrease in tooling revenues mostly due to timing. In BTD, scrap metal revenues were flat quarter-over-quarter. Increased scrap volume was offset by decreased scrap metal prices. The overall increase in revenues in BTD were offset in part by higher cost of goods sold and higher operating and income tax expenses resulting in a $1.2 million increase in quarter-over-quarter earnings.

T.O. Plastics earnings decreased $500,000 between the quarters due to a decrease in revenues related to lower sales of horticultural containers and industrial and life science products. A partial collapse of a warehouse roof due to heavy snow also contributed to the slow start in horticultural sales. This also caused an increase in operating expenses related to the loss associated with the roof collapse.

Our Plastics segment earnings decreased $3.1 million quarter-over-quarter due to a 16.8% decrease in pounds of pipe sold along with a 3.1% decrease in pipe prices. While we expect the overall sales volumes to be down in the first quarter of 2019, adverse weather conditions across our sales territory also contributed to the lower sales. Lower pipe prices combined with an increase in the cost per pound sold resulted in a 19% decrease in gross margins.

Our corporate pretax expense and net of tax losses decreased $500,000 quarter-over-quarter primarily due to a $600,000 increase in nontaxable life insurance benefits.

Moving on to our business outlook on Slide 25. We are reaffirming our 2019 consolidated earnings per share guidance of $2.10 to $2.25. This equates to a return on equity range of 11.5% to 12.3% based on an estimated equity to total capitalization ratio of 54%. This guidance includes our strategies for improving future results of cyclical nature of our manufacturing businesses as well as current regulatory factors facing our Electric segment.

Our Electric segment's 2019 net income is expected to be higher than 2018 based on a favorable settlement on all issues except return on equity in our 2018 South Dakota rate case. The settlement allowed us to retain the impact of lower tax rates related to the Tax Cuts and Jobs Act from January through October of 2018. This outcome positively impacts 2019 earnings per share by approximately $0.02. Increased AFUDC for planned capital projects, including our Merricourt wind project and the Astoria station natural gas plant, along with increased revenues from the North Dakota generation cost recovery rider on the Astoria station. Increased revenues from the completion of the Big Stone's South Ellendale project and additional transmission investments related to our South Dakota transmission reliability project, decreased operating and maintenance expenses due to a decrease in pension medical workers' compensation and retiree medical benefits.

Our discount rate for pension plan is increasing in 2019 to 4.5% from 3.9% driven by higher interest rates. These items are offset by higher property tax and depreciation expense due to capital projects being put into service and an extension of the planned outage at Coyote Station due to a turbine rotator blade damage that was discovered in the early stages of the planned outage. We expect increased earnings from our Manufacturing segment in 2019 primarily driven by BTD manufacturing. However, we are lowering both ends of the 2019 guidance range for this segment due to volume softness experienced during the quarter and the expected impact from the warehouse roof collapse at T.O. Plastics.

The backlog for this segment is approximately $165 million for 2019 compared with $142 million a year ago, and we expect Plastics 2019 net income to be lower than 2018 from anticipated lower operating margins due to increasing resin prices on similar sales volumes compared to last year.

In corporate costs, net of tax, are expected to be lower in 2019. The first quarter results demonstrate our ongoing commitment to delivering shareholder value.

Otter Tail Power company is well positioned to grow its rate base and support the regulatory environments at an 8% compounded annual growth rate over the next 5 years. This is driven by investments in renewable and natural gas generation. Over time, the electric utility will provide approximately 75% of our overall earnings. The Manufacturing and Plastics segments also provide organic growth. This growth comes from new products and services, market expansion and increased efficiencies. These 2 segments are expected to provide around 25% of our earnings over time. We expect to be able to deliver total shareholder return of 8% to 10%. This consists of 2 components: first, our earnings per share are expected to increase at a 5% to 7% growth rate off of 2018 results; second, our current dividend yield is approximately 3%. Looking forward, we would expect to grow the dividend in line with our expected earnings per share growth rate, while maintaining a dividend payout ratio of 60% to 70%. And our company is on solid footings with a strong balance sheet and corporate credit ratings.

We're now ready to take your questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Chris Ellinghaus with Williams Capital.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [2]

--------------------------------------------------------------------------------

Kevin, the PVC guidance for the year, the first quarter was sort of maybe a little bit below that run rate. Does that suggest that you're expecting some improvements later in the year?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [3]

--------------------------------------------------------------------------------

Yes, Chris. Are you referring to the run rate for the year?

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [4]

--------------------------------------------------------------------------------

Yes. I'm just looking at the earnings in Plastics for the quarter is slightly below the run rate in -- that the guidance would suggest or does that mean you're expecting a little bit better later in the year results?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [5]

--------------------------------------------------------------------------------

Yes, we are, Chris. I mean in part, we were -- we expected a lower first quarter. Of course, we had weather that affected the -- across the territory that impacted volumes, but as we look out the last -- the rest of the year, we expect that to move up.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [6]

--------------------------------------------------------------------------------

Okay. Yes, you mentioned weather came for, also the roof issue at T.O. you said impacted the quarter. Can you quantify either of those?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [7]

--------------------------------------------------------------------------------

The roof issue at T.O. from just an increase in operating expenses was $200,000 pretax charge as we had to write-off the net book value of the warehouse related to the damage. So that was the O&M expense. Shipping and nowhere -- I'm sorry, shipping in March for T.O. was slightly below our plan, but we are -- given the difficulties in the first quarter, particularly in February with production and the slowness in sales, that's what's causing us to bring that. It's T.O. that's bringing down the guidance range for manufacturing by that $0.02 on each side.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [8]

--------------------------------------------------------------------------------

Okay. So the weather impact on Plastics, were you able to quantify that or is that just sort of a qualitative issue?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [9]

--------------------------------------------------------------------------------

Well, in terms of the -- against our plan, we were down about 8 million pounds against our plan. And so the weather piece of that probably affected that by, I don't know, 33% to 40% of that.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [10]

--------------------------------------------------------------------------------

Okay. And you mentioned the Coyote rotator issue. Can you give us a little color on timing and cost of that?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [11]

--------------------------------------------------------------------------------

Sure. Chris, this is Chuck. This is -- its one-row blades, it was identified some cracking, it was very similar to we had the exact same turbine at Big Stone when the last time we did an overhaul there. We had a similar issue. We believe that it will delay the overall outage by approximately 3 weeks and the -- while the majority of the repair is capitalized, it will have an O&M impact of approximately $350,000.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [12]

--------------------------------------------------------------------------------

Okay, great. Chuck, can you describe the South Dakota phase-in plan? How that works with the cost recovery?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [13]

--------------------------------------------------------------------------------

Sure. In South Dakota, there's an ability on major capital projects. If you go into the commission before you start them so sort of giving them pre-approval, then they develop a phase-in plan so that you can begin recovery. It's not a writer, but it acts a lot like a writer once you have approval of it is you define the total costs and the time frame and during the period of construction, you are allowed to increase rates on an annual basis. You set up an annual number on each of those. And we will have maybe initial filing on both Merricourt and Astoria on for a phase-in rate, which should go into effect in '19 and '20.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [14]

--------------------------------------------------------------------------------

When during the year will they become effective?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [15]

--------------------------------------------------------------------------------

I don't -- it depends on when we file and when we close on the Merricourt project, but I think the filings should occur in the next month and we would hope to start those within 60 days after that.

--------------------------------------------------------------------------------

Christopher Ronald Ellinghaus, The Williams Capital Group, L.P., Research Division - Senior Equity Research Analyst of Power and Natural Gas [16]

--------------------------------------------------------------------------------

Okay. Lastly, Chuck, can you give us any color on the continuing improvement in Georgia?

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [17]

--------------------------------------------------------------------------------

Sure. We've just -- we've had probably a plant that would produce sales of approximately $2.5 million to $3 million a month and we were running into a significant amount of expedite issues, meaning within the factory, we needed to -- a number of orders that we were due. We weren't able to run as larger quantities of child parts and what not as we want to and we made operational changes and added warehouse facility that's allowed us to carry more inventory and then, therefore, meeting our customer's on-time delivery. As a benchmark on that, we sort of improved from the 65% to 70% on-time delivery in early 2018 to more of a 98-plus percent on-time delivery in the last half of '18 and first quarter of '19.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Tate Sullivan with Maxim Group.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [19]

--------------------------------------------------------------------------------

Kevin, you mentioned some -- potential market expansion in manufacturing and your PVC businesses organic and is it -- are you looking at more warehouse facilities or Otter facilities? Or what does that market expansion refer to?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [20]

--------------------------------------------------------------------------------

Tate, as it relates to the PVC business, we still have capacity that we can grow into in that business. So there's no need for any type of current warehouse expansion or anything for PVC. We have roughly 300 million pounds of total capacity between the 2 facilities. If you look back over the last few years, we've been selling out somewhere between 80% to 90% of that capacity. So we have room to grow through -- we have the capacity to take on additional volumes through probably mostly market share and those opportunities that present themselves.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [21]

--------------------------------------------------------------------------------

Okay. And in Manufacturing...

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [22]

--------------------------------------------------------------------------------

The warehouse that Chuck was referring to was for BTD-Georgia.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [23]

--------------------------------------------------------------------------------

Okay. And do you have capacity addition plans in Manufacturing? Can you go into detail on that?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [24]

--------------------------------------------------------------------------------

We don't have any current capacity plans because we still have plenty of capacity organic growth to grow into across our footprint or plants at BTD and T.O. Plastics. So our capital investments in the manufacturing side of the business, as you look out over the next 5 years, are pretty much to fund depreciation and amortization. We have good capacity in place to grow into. So we -- through organic growth with existing customers and potential new customers, we're in good shape from a capital standpoint.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [25]

--------------------------------------------------------------------------------

Okay. And in Manufacturing as well, I see your net income margin in the quarter -- just the quarter was little above 6%. Have you had or do you continue to have a net income or return on sales target in Manufacturing?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [26]

--------------------------------------------------------------------------------

Our total return on sales target for Manufacturing is 6%, outlook for this segment, yes.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [27]

--------------------------------------------------------------------------------

And just for some review purposes. What are your tooling revenues in the business, for me, please?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [28]

--------------------------------------------------------------------------------

I'm going to have to look that up.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [29]

--------------------------------------------------------------------------------

No. I mean just background on what they are, are you selling -- are you making tools?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [30]

--------------------------------------------------------------------------------

We're making tooling for product for our customers. So they'll come to us with a design for a particular product and in a number of cases, we will design the tools for that product and then produce the product from those tooling.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [31]

--------------------------------------------------------------------------------

Okay. And one of the last ones for me, in PVC and as you have been consistent with your message what PVC can do this year relative to what look like a record year last year. Can you give any demand outlook or comments for the PVC in general?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [32]

--------------------------------------------------------------------------------

Demand continue -- it's not going to be obviously at the levels that we saw last year. We talked earlier in the call about our volume being down quarter-over-quarter. The demand has been softened from last year, particularly we're seeing that right now as we look out through the year, we expect our volumes to be similar to what they were last year. So nothing. And while they're certainly flat, I'm sure they're flat, they're down in the first quarter. Overall, we expect similar volumes based on the conditions in our sales territory in terms of housing starts, construction starts that we certainly follow.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [33]

--------------------------------------------------------------------------------

Okay. And the last on your total of corporate targets. Is it an 8% EPS CAGR target for the next 5 years versus the 5% to 7% EPS growth rate target for this year? Is that correct?

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [34]

--------------------------------------------------------------------------------

No. So our earnings per share growth target is 5% to 7% compounded growth rate using 2018 results.

--------------------------------------------------------------------------------

Tate H. Sullivan, Maxim Group LLC, Research Division - Senior VP & Senior Industrials Analyst [35]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Kevin G. Moug, Otter Tail Corporation - Senior VP & CFO [36]

--------------------------------------------------------------------------------

With the 8% -- the 8% we referred to is our rate-based growth in the utility, which is a CAGR over the same period using 2018 rate base. And I think that's laid out on slide -- if you look at Slide 11 of the presentation, Tate, we show our rate-based growth in that 8%.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

(Operator Instructions) Speakers, I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks.

--------------------------------------------------------------------------------

Charles S. MacFarlane, Otter Tail Corporation - President, CEO & Director [38]

--------------------------------------------------------------------------------

Well, thank you for your questions and support at Otter Tail Corporation. With continued execution on utility growth projects and strong operational performance in our manufacturing platform, we remain confident in our ability to deliver shareholder value. In 2019, we continued to improve BTD profitability, and we are further refining our organic long-term growth strategy for Northern Pipe, Vinyltech and T.O. Plastics. And we continue to execute on Otter Tail Power's major generation, transmission and technology projects. We believe this will allow us to deliver on our 2019 guidance of $2.10 to $2.25 a share. Thank you for joining our call. We appreciate your interest in Otter Tail Corporation and look forward to speaking with you next quarter.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for joining today's call. You may now disconnect, and have a wonderful day.