Good morning, and welcome to the Otter Tail Corporation's 2017 Year End Earnings Conference Call. Today's call is being recorded and we will hold a question-and-answer session after the prepared remarks. I will now turn the call over to the Company for the opening comments.

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 2017 results and issued 2018 guidance. Our complete earnings release and slides accompanying this call are available on our website at www.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 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.

Thank you, Loren, good morning, everyone. Last night we released our 2017 results. Please refer to Slide 5 as I begin my comments. Earnings per share from continuing operations were $1.81, this includes reduction of $0.05 per diluted share related to tax reform. Our adjusted earnings per share from continuing operations excluding the impact of tax reform is at $1.86, this succeeds our updated 2017 earnings guidance with $1.75 to $1.85. Our PVC pipe companies, Northern Pipe Products and Vinyltech, had an outstanding year producing and selling record amounts of pipe. They were also positively impacted by market dynamics associated with last year's historic hurricanes. We believe this resulted in an estimate positive impact at $0.09 which we don't expect to occur again this year. We appreciate employee efforts across our organization as all were key contributors to our success in 2017. Diluted earnings per share from continuing operations grew 13% and adjusted diluted earnings per share were 16.25% when compared to the $1.60 per share from 2016. Our stock performed well; total return which includes the dividend was 12.1%. Our dividend yield was 2.9% at year end, and overall return-on-equity was 10.6%. Our Board of Directors increased the dividend by 4.7% for an indicated annual rate of $1.34 per share. With continued execution on utility growth projects and improving markets conditions in our manufacturing segment, we remain confident in our ability to deliver shareholder value. We have set our 2018 earnings guidance at $1.80 to $1.95 a share. This includes an uplift of an estimated $0.05 a share related to the impact of lower tax rates for our manufacturing platform and corporate cost center. Any amount related to our electric utility will ultimately benefit customers either through lower rates or in system investments to serve them. Otter Tail power…

Thanks, Chuck and hello, everyone. This morning I will cover the following topics; our 2017 financial results, our liquidity position, strength of our balance sheet and corporate credit ratings, the increase in our 2018 indicated annual dividend, our updated 5-year capital expenditure budget and our 2018 business outlook. We are pleased with our 2017 financial performance. Our revenues grew approximately 6% with all of our reportable segments showing year-over-year revenue increases. We earned $1.81 a share which includes the $0.05 share reduction in earnings from tax reform, a non-cash write-off of deferred taxes. The $1.81 a share represents a 13% year-over-year growth when compared with our $1.60 a share in 2016. And we'll now provide a more detailed review of 2017 earnings as shown on Slides 13 through 16. The electric segment net earnings decreased $383,000 year-over-year. This change is a result of a number of items. We experienced increases in revenues due to better year-over-year weather which improved earnings by $0.03 a share. Our North Dakota transmission riders increased due to more investments. Our revenues also declined due to a net $2.9 million decrease from declining rate base due to higher accumulated depreciation and lower return-on-equity on transmission related to the Minnesota rate case decision to share the higher return-on-equity with Minnesota customers. The change in estimate reducing our unbilled revenues lowered Minnesota conservation improvement program incentives and lowered North Dakota and South Dakota environmental cost recovery riders due to lower rate base from higher accumulated depreciation. Our O&M cost were basically flat between the years, property tax has increased due to more capital investments and income tax expense increased related to tax reform and a proportion of supplemental return and program costs that are not allowed for recovery. The net earnings for our manufacturing segment increased $2.7 million…

[Operator Instructions] Our first question comes from the line of Chris [ph] from William's Capital. Your line is now open.

Chuck, I think you mentioned sort of improving outlook at BTD; can you give us any color on that? Is that really what is reflected in the backlog increase?

We're clearing seeing an uptick in activity in backlog compared year-over-year at BTD, that's a large portion of that difference in backlog. So we're just seeing more activity in the oil and gas space, in the recreational vehicle and slight improvement in Ag.

What also has happened -- you've heard us talk about over the last few years as how these customers went out and asked for price reductions from their supplier base and we've been through that and now what's happened is there is a lot of the smaller contract metal manufacturers that took that business on the lower prices or either at capacity or they have had difficulty delivering to the customers at the prices that they had agreed to and I think the customers have recognized that there is an important factor that you want your supplier base to be strong financially and be there to deliver products on-time with the quality specs that they expect and so we've -- the backlog as Chuck referred to is increasing but it's also due because there has been a recognition by customers that -- of our capabilities and those capabilities come at higher price and so we're seeing that to occur in the marketplace.

Are you seeing some of the customers come back a little because some of those competitors weren't able to produce the quality that you can?

Yes, and delivery times.

Kevin, about tax reform; the $0.05 that you described to tax reform -- is that sort of your thinking about what the sort of durable portion of tax reform benefits will look like as you sort of see the businesses start to reflect them in pricing?

Yes, that's our view. We have not had so far any pushback from customers, particularly on the manufacturing side where they are thinking that they should get some kind of piece of this. Basically we've had a few questions asked about what we intend to do with it in terms of more investments in those types of things in the business but we're not getting any pressure in terms of having to share that with customers, we don't expect that. So the short answer to your question is yes, that's kind of the durable portion we expect to have.

As far as the North Dakota case goes and your range that you gave in the earnings guidance, are you reserving any portion of the current interim rates?

We will start to be as we head into 2018 once we get interim rates just went into effect here on January 1, we're looking at now the impact of tax reform and as we get more color in response from the commission as we head through the case we will continue to establish allowances for estimated refunds where we think it's appropriate and that's kind of included in our forward-looking.

The North Dakota Commission has not filed any rebuttal testimony or anything at this point also.

So you will do that on an issue by issue basis as the case proceeds?

Yes.

Can you remind me, I don't remember if there was any third quarter weather benefit or drag versus normal? Was there anything in the third quarter?

Third quarter was slightly positive if I remember right.

And as far as your guidance on the pipe business, are some of those sort of negatives other than the hurricane sort of normalization; are those things that may change throughout the year, is that just your sort of expectations on where resin maybe throughout the year? Is that something that maybe a little variable throughout the year?

The guidance as we came out here is based on kind of the current conditions as we see them and we will typically or we will update that every quarter as we do our normal forecasting process but as we head into '18, we -- there is at least a norm straight now, there is a $0.03 resin increase announced for February and another $0.04 that sometime in the March-April timeframe. Now whether that fully sticks or not time will tell but the resin manufacturers did not get the resin increase that they were hoping to get back in the fourth quarter of '17. So we're contemplating at least as we come out here with our initial guidance that there is additional resin cost increases here as we head into the year that impacts that guidance. The other thing is we are right now seeing kind of flat to potentially declining sales prices. And so if you kind of think about our guidance, before the tax reform plastics made $18.4 million in 2017. If you back out the hurricane that's $3.4 million, so that gets you to a $15 million net income number. And then when you look at our guidance of $0.36 to $0.40 it really puts you in $14.4 million to $16 million kind of guidance range. So that's based on as I said kind of the current conditions as we see them for '18 and we will continue to update that every quarter when we come up with our -- when we look at where our guidance should be for the year.

On PVC, Trump administration is supposed to come out with some infrastructure plan today; how do you foresee PVC having any benefits from whatever he may come up with on infrastructure?

I think that there is potential for uplift. I mean I saw some initial releases yesterday where the infrastructure has the potential impact for water and wastewater projects and so I think that as we look out, there is potential opportunity that the plastics business would be able to take advantage of and I guess we'll continue to watch all that unfolds and where we think it's going to be but at least that first blush, it certainly looks like there could be a uplift or potential positive impact for us.

And our next question comes from the line of Paul Ridzon from KeyBanc. Your line is now open.

Did plastics benefit at all from any kind of bleeding of the hurricane impact into the fourth quarter?

When we came out in the third quarter, September -- third quarter had about a $0.04 uplift in earnings from the hurricane which all occurred in September. And then in the fourth quarter, I mean for the year we said there is about a $0.09 uplift and so there was an additional kind of $0.05 that occurred in October-November timeframe from the hurricane and we had estimated when we came out in the third quarter that we thought the total year impact would be about $0.08 and that we were closer ended up being $0.09. I think that answers your question.

So you think that's washed through the system by now?

Yes.

And then how much of your backlogs were booked before tax reform was signed on a percentage basis?

The $163 million for manufacturing would have all been booked before the tax reform.

Any contracts you're signing now or you're not seeing any margin hit?

No.

You had some comments on resin price increases; I kind of missed a large part of that commentary. Could you just hit that at high level again?

Sure. What's been announced is a potential $0.03 increase in resin in February and then there is another $0.04 that's been announced for the March-April timeframe.

And how do your customers respond to those announcements? Are they stockpiling?

We haven't seen any stockpiling yet but if you look back in our -- what typically would happen where there is announced increases like that, if customers inventories are down they will typically buy in advance of potential increases.

And do you have a sense of where your customers inventory stand?

The ultimate inventory is sitting out in contractors yards, kind of across our region and so we don't have a real good flavor in terms of initially as we head into the year, our volumes so far have been relatively in line with what we expected.

And then lastly, there was something in your press release last night; 2018 CapEx of $110 million with CapEx cash spending at 137 [ph], that kind of drove me for a little -- could you kind of clarify that?

Which part of the release are you referring to Paul? I mean, in 2018 the $110 million.

2018 business outlook, we expect CapEx of 2018 with $110 million compared -- I misread, I'm sorry.

[Operator Instructions]

Otter Tail Corporation continues its two platform company delivering shareholder value through our core electric utility and disciplined manufacturing companies. However, our operating companies focus on the long-term compound and annual earnings per share growth goal that Kevin just described. All of them contributed to our excellent 2017 financial results and all of them have promising futures. We expect 2018 earnings to be in the range of $1.80 to $1.95 a share as we execute our objectives to grow our businesses, achieve operational and commercial excellence and develop our employees. I want to extend our appreciation to employees across our organization for their hard work and results this year. We appreciate their diligence and initiative. Thank you for joining our call, we appreciate your interest in Otter Tail Corporation and look forward to speaking with you next quarter.

Ladies and gentlemen, thank you for participating in this conference. This does conclude the program and you may all disconnect. Everyone have a great day.