Good morning, and welcome to Otter Tail Corporation's Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I will now turn this call over to the company for their opening comments.

Good morning, and welcome to our third quarter 2025 earnings conference call. My name is Beth Eiken, and I'm Otter Tail Corporation's Manager of Investor Relations. Last night, we announced our third quarter 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. With me on the call are Chuck MacFarlane, Otter Tail Corporation's President and CEO; and Todd Wahlund, Otter Tail Corporation's Vice President 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 expectations of future events. They are subject to risks and uncertainties, which may cause actual results to differ from those presented here. So please be advised against 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. I will now turn the call over to Otter Tail Corporation's President and CEO, Mr. Chuck MacFarlane.

Thank you, Beth. Good morning, and welcome to our third quarter earnings call. Please refer to Slide 4 as I begin my remarks with a summary of quarterly highlights. . We are pleased with our Q3 financial results as they outpaced our expectations. Our team members continue to execute well on our growth plan despite dynamic market conditions. Otter Tail Power continues to deliver on its regulatory priorities. Our South Dakota rate case, previously filed in June of this year, continues to progress; and in late October, we filed a rate case with the Minnesota Public Utilities Commission. The second phase of Vinyltech's expansion project is progressing well. We continue to target early next year for adding another 26 million pounds of capacity. Once complete, we will have increased our Plastics segment total production capacity by 15% through our multiyear investment plan. We are also introducing our updated 5-year capital spending plan today. Otter Tail Power's new capital investment plan totals $1.9 billion and is expected to produce a rate base compounded annual growth rate of 10%. With our updated capital investment plan, we are increasing our targeted long-term earnings per share growth rate to 9% to 7% from 6% to 8% of a 2028 base year. This results in a targeted total shareholder return of 10% to 12%. Slide 5 provides a summary of our quarter-to-date and year-to-date earnings. We generated $1.86 of diluted earnings per share in the third quarter, a decrease of 8% from the same time last year. This expected decline in earnings was driven by the continued decline in Plastics segment sales prices and earnings. Despite the year-over-year decrease, our results outpaced our expectations. We are increasing the midpoint of our 2025 earnings guidance to $6.47 from $6.26 per share. The increase in guidance is…

Thank you, Chuck, and good morning, everyone. Turning to Slide 19. Our quarterly financial results exceeded expectations. We generated $1.86 of diluted earnings per share compared to $2.03 during the same time last year. Please follow along on Slides 20 and 21 as I provide an overview of quarterly financial segment results by segment. Electric segment earnings decreased $0.03 per share in the third quarter. The decrease in earnings was primarily driven by unfavorable weather and the impact of seasonal rate differences between interim and final rates in North Dakota. This timing effect does not impact our revenue on an annual basis. These drivers were partially offset by higher quarterly sales volumes, excluding the impact of weather, as well as lower operating and maintenance expenses. Manufacturing segment earnings increased $0.04 per share. The increase in earnings was primarily driven by a lower cost structure following our efforts over the last year to align the costs in our business with the current demand environment. We also benefited from enhanced production efficiencies with a smaller but more skilled workforce. The timing of pass-through steel cost fluctuations and the selling of lower cost inventory also contributed to improved profit margins. These drivers were partially offset by the impact of lower sales volumes and higher SG&A expense. Turning to Slide 21. Plastics segment earnings decreased $0.26 per share compared to the same time last year. Plastics segment earnings exceeded our expectation for the third quarter, even as we continue to progress towards a more normalized earnings level. The decrease in earnings was driven by lower average sales prices, partially offset by lower input material costs and higher sales volumes. The average sales price of PVC pipe declined 17% compared to the third quarter of 2024. This continues the downward trend experienced in the sales…

[Operator Instructions] Our first call comes from Michael Pelletier from KeyBanc Capital Markets.

Congrats on the updates this morning.

Thanks, Michael.

Good morning, Michael.

Just curious on the updated EPS long-term growth rate there, just on the shaping of it and kind of expect that to grow linearly or any movement on a year-to-year basis?

Yes. Over the long term, we do expect our utility earnings to grow in line with our rate base. There will be year-to-year fluctuations depending upon timing of recovery. But over the long term, we do expect our earnings for the utility to be in line with the rate base growth plan, and we do provide the rate base projections by year. And certainly, as we're going through the manufacturing and on the Plastics side, we're seeing that normalize and on then the Manufacturing segment, we're in a down cycle right now. So we will have some fluctuations year-to-year, but beyond 2028 when we reach that normal level of Plastics earnings and are through the Manufacturing down cycle, we expect to achieve the 7% to 9% long term.

And then just a quick modeling question, but what are you currently assuming for your 2025 tax rate? And how are you tracking towards that? And has there been any change in your assumption since your initial guidance this year?

Just to make sure I understood that, Michael, our tax rate, is that what you're asking about?

Yes.

I don't know that I have that specific information in front of me.

Okay. And then just on the antitrust case, and just curious if you could provide any update there? And then how does the Department of Justice's involvement affect the proceedings or time line?

Michael, this is Chuck. During the quarter, the -- there were amended complaints filed in the class action lawsuits in the U.S. in. As you mentioned, in October, the DOJ intervened to stay the discovery in the civil litigation, which is not uncommon when there's a parallel investigation going on. There is also a class action complaint filed in British Columbia, Canada, with similar allegations to the civil complaint in the United States. And then finally, last week, defendants filed a motion to dismiss in the civil litigation case. We argue that the complaint should be dismissed in their entirety. There's no deadline for the court to make a decision, but we anticipate that in calendar year '26.

Got it. And look forward to seeing you in Florida in a few days.

Thank you.

Our next call comes from Tim Winter of Gabelli Funds.

Congrats on the quarter. I know you guys talked a little bit about the 64% equity ratio and the [ $8 ] of cash on the balance sheet with some near-term need to take out that $80 million in debt. But I was just wondering if you could talk a little more how you're thinking about using that cash long term? I know you have plenty to use utility over the long term, but over the near term, just wondering if there's -- if that's the best way to maximize the cash or what your thinking is regarding that?

Yes. So in terms of our capital allocation priorities. Certainly, our priority is investing in our businesses and with the significant rate base growth we have with Otter Tail Power, we do expect that cash balance will decline over the 5-year period as we invest and provide equity for that. We don't have any external equity needs. We'll be able to fund that with our cash that we have on hand. Beyond that, certainly looking at the dividend payout ratio, we did increase our dividend payout ratio or our dividend by 12% earlier this year. Beyond that, we would look at are there opportunistic M&A opportunities or opportunistic returns to shareholders. But our primary focus is on the first 2 with funding the utility growth plan as well as providing capital back to our shareholders through the dividend.

Okay. Great. And on the M&A opportunities, what sorts of things are priorities of yours as you look at the environment out there?

We would -- look, on the utility side, some potential assets. From M&A, we've not put a specific -- a lot of focus on that right now due to our internal growth opportunities available at the utility. In the Manufacturing or Plastics segments, we would review bolt-on opportunities, but we are not currently looking to add in any additional platforms or new companies that way. They would be smaller add-ons like we have done with BTD over time.

And I'd just add, Tim, that we're positioned very well to execute on our growth plan without M&A for scale. We're positioned well to attract large loads. We've got the cash to fund our growth plan that's very significant.

Okay. And if I could just ask one more. Can you talk just a little bit about the large load customer and maybe how the electric service agreement is structured, that 155-megawatt customer?

Yes. Tim, this is Chuck. It's a customer that is an interruptible type load. And so we have very minimal capacity needs. In the site location, the customer had limited interconnection costs, primarily distribution at that point. So it's a customer that will use low-cost energy in a storage function. And we don't see a large capacity need or a large investment need right at this point, so it's not driving significant earnings in the 2026 time frame, but it is reducing fixed costs across a big amount with that type of load.

Okay. All right, and we'll see you in sunny Florida.

Thanks, Tim. Good to talk to you.

As there are no remaining questions in the queue, I will turn the call back over to Chuck for his closing remarks.

Thank you for joining our call and your interest in Otter Tail Corporation. If you have any questions, please reach out to our Investor Relations team, and we look forward to speaking with you next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.