Like the broad end of its furry namesake, Otter Tail covers a swath of businesses, from electric services and construction to manufacturing equipment and plastics. The electric utility (Otter Tail Power Corporation) is the company's core business; it keeps the lights on for about 129,260 residential, commercial, and industrial customers in Minnesota and the Dakotas. The company also makes PVC pipes (Northern Pipe Products, and Vinyltech Corporation), and metal parts (BTD Manufacturing), and provides construction services (Foley Company and Aevenia).
Otter Tail and its subsidiaries conduct business primarily in the US, Canada, and Mexico.
The conglomerate's businesses are divided into four major segments: Construction, Electric, Manufacturing, and Plastics. (Its Wind Energy, segment was sold in 2012).
Otter Tail's revenues grew by 21% in 2011 due to increased revenues from all segments except Electric, which decreased $1.6 million. Revenues from the Wind Energy segment increased $58.3 million due to a 28% growth in wind tower production. Revenues from its Manufacturing segment grew by $51.1 million as a result of higher sales volume due to improved customer demand for the products and services provided by manufacturing companies. Construction segment revenues increased by $50.4 million thanks to an increase in the volume of jobs in progress. Revenues increased by $26.7 million in the Plastics segment thanks to a combination of higher polyvinyl chloride (PVC) pipe prices and higher sales volume.
However, the company's net loss increased by 885% in 2011 due to increased Electric operating and maintenance expenses stemming from the increase in transmission tariff charges related to the growth in power purchased from other generators to serve retail customers, an increase in labor costs related to higher health benefit costs, and a growth in generation plant maintenance costs related to the Big Stone Plant overhaul in 2011. Other factors included increased maintenance costs at the Langdon wind farm and Coyote Station, and higher cost of goods sold in wind energy, manufacturing, construction, and plastic segments due to increased sales volume, labor costs, and higher material costs.
The company plans to spend $846 million for the years 2012 through 2016 to upgrade its power generation and transmission infrastructure.
Over the past 20 some years, Otter Tail has increased both its plant capacity, as well as its outside holdings by acquiring nearly a dozen businesses. To maximize its bottom line, Otter Tail invested in its electric utility business, which delivers the company's core revenue stream, in tandem with expanding its other businesses' products and services, and customer base to generate a diverse stream of top line growth. However, it has been selling a number of these businesses in recent years in order to reinvest in fewer segments and pay down debt.
Otter Tail's strategy is very much constrained by trends in the larger economy. For instance, Otter Tail's wind tower manufacturer, DMI Industries, was regarded as one of the largest wind tower manufacturers in the US. However, a sluggish economy, and cancellations and delays of major wind power projects forced DMI to slash its workforce by some 20%. In 2012, to raise cash, Otter Tail agreed to sell DMI to Trinity Industries for $20 million and exit the wind power business.
That year it also sold its DMS Health Technologies unit for about $24.1 million, and Aviva Sports, a wholly owned subsidiary of the company's waterfront equipment manufacturer, and used the proceeds to pay down debt.
In 2011 the company sold Idaho Pacific Holdings, its Food Ingredient Processing business, and E.W. Wylie Corporation (Wylie), its trucking company headquartered in West Fargo, North Dakota, which was included in its Wind Energy segment.
Otter Tail's outlook for investments in its Electric segment, however, are positive, and the company is looking for that segment to become an even larger part of its growth strategy.
Microsoft founder Bill Gates' Cascade Investment unit holds 10% of Otter Tail.
Otter Tail was founded in 1907.