The Andersons, Inc. Reports 2nd Quarter Results
First Half Results Set New Records
Jul 28, 2006
The Andersons, Inc.
The Grain & Ethanol Group's second-quarter operating income of $1.9 million was $3.3 million better than its year earlier result. Total revenues of $149 million for the period were $16 million higher than the second quarter of 2005. The number of bushels handled by the group's elevators was higher than the prior period, and average gross sales margins were also higher. Although space income was lower than last year in the second quarter, total gross profit increased. The group's investment in its commodity trading affiliate, Lansing Trade Group, LLC, also achieved earnings growth in the most recent three-month period. Through the first half of 2006, the Grain & Ethanol Group achieved operating income of $3.7 million. In the same period last year, operating income was $0.4 million. During the past year, the group has invested in three limited liability companies which are constructing ethanol production facilities in Michigan and Indiana. The Andersons is a significant investor in two of these projects and will provide general management, ethanol and DDGS marketing, and risk management services to them and offers these services to other ethanol producers as well. The plant located in Albion, Michigan, is scheduled to begin production in August. The Grain & Ethanol Group's second quarter results include the impact of employee recruiting, training and some other pre-opening expenses associated with the ethanol business. The group has also recently announced its intent to form a joint venture with Marathon Oil to build and operate additional ethanol facilities.
The Rail Group's operating income of $5.0 million in the second quarter of 2006 was $1.2 million higher than it earned in the same three-month period a year ago. Revenues of $28 million for the quarter were $10 million higher than the prior period. The group's railcar fleet utilization rate (the percentage of the fleet in service at the end of the period) has also increased over time. At the end of June 2006 it stood at 95 percent. The group realized some gains from the sale of railcars and related leases during the quarter, and income from the leasing business in total improved versus the prior year. Operating income from the group's railcar repair and manufacturing businesses was also higher in the second quarter. In the first half of 2006, the group achieved revenues of $62 million and $11.2 million of operating income. Last year, it reported revenues of $35 million and operating income of $7.4 million for the first half of 2005.
The Plant Nutrient Group had revenues of $113 million and operating income of $5.0 million in the second quarter this year. It earned $10.3 million on $120 million of revenues during the same three-month period of 2005. With much higher energy and nutrient input costs, the company believes that farmers have reduced the amount of nutrients applied to their fields this year, essentially keeping spending in line with last year. With volume and average gross margins both down, the group's second-quarter gross profit declined significantly from last year. Through the first half of 2006, the group's operating income was $3.8 million on $159 million of revenues. In the same period last year, operating income amounted to $9.5 million on $164 million of revenues.
The Turf and Specialty Group continued to achieve improved results during the most recent quarter. For the period, the group's operating income was $1.3 million on $33 million of revenues. In 2005, it earned $0.4 million of operating income in the second quarter on $40 million of revenues. The group's lawn and cob products businesses both contributed to this improvement. Through the first six months of this year, the group has reported operating income of $3.5 million and revenues of $73 million. In the first half of 2005, the group had revenues of $81 million and $1.5 million of income. During the past year, this group has restructured its businesses, reduced costs, improved operating efficiency, and focused on the products and markets where it can add the most value, which has allowed the group to increase profitability in spite of reduced revenue.
The Retail Group reported revenues of $55 million for the second quarter of 2006, an increase of 0.7 percent in same-store sales from the same period in 2005. With higher gross profit generated by the increase in sales, and a slight reduction in expenses, the group's operating income was $4.2 million for the quarter, about $0.3 million above the same period last year. For the first half of the year, the group generated revenues of $87 million and operating income of $1.7 million. In the first half of 2005, it also had operating income of $1.7 million but slightly higher revenues of $89 million.
President and Chief Executive Officer Mike Anderson reports that "for the following reasons, I believe the company's earnings prospects for the 2006 calendar year have strengthened versus earlier forecasts." Mr. Anderson explains: "We're about to begin production of ethanol at the new plant in Albion, Michigan ahead of schedule, and ethanol economics are stronger now than our earlier projections envisioned. In addition, the prospects for an excellent grain harvest in our region are even better now than we thought earlier, we continue to achieve growth in our rail business, our turf and specialty business is performing better than anticipated, and our investment in Lansing Trade Group is doing very well. Our estimate of the business interruption insurance settlement related to the accident at one of our elevators last year is also higher now that more specific data is available. The guidance we issued in early May, adjusted for the subsequent stock split, indicated that we expected to earn $1.70 to $1.90 per diluted share this year. While there is still a lot of time left in the growing season, and several other things such as the ethanol plant launch have to be executed well, it now appears that a range of $1.90 to $2.10 for our full-year earnings per share is a reasonable expectation. These per share estimates do not take into account the pending issuance of additional shares pursuant to our announced stock offering, which is not yet final. We will, of course, continue to evaluate our earnings projections as we progress through the year."
The company will host a webcast today at 2:00 P.M. ET, to discuss its second-quarter performance and full-year outlook. This can be accessed under the heading "Investor Relations" on its website at http://www.andersonsinc.com/.
The Andersons, Inc. is a diversified company with interests in the grain, ethanol and plant nutrient sectors of U.S. agriculture, as well as in railcar leasing and repair, turf products production and general merchandise retailing. Founded in Maumee, Ohio, in 1947, the company now has operations in seven U.S. states plus rail leasing interests in Canada and Mexico.
This release contains forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially. Without limitation, these risks include economic, weather and regulatory conditions, competition, and the risk factors set forth from time to time in the company's filings with the Securities and Exchange Commission. Although the company believes that the assumptions upon which the financial information and its forward-looking statements have been based are reasonable, it can give no assurance that these assumptions and the forward-looking statements will prove to be correct.
The Andersons, Inc. is located on the Internet at http://www.andersonsinc.com/
The Andersons, Inc. Consolidated Statements of Income Three Months ended Six Months ended June 30 June 30 (in thousands, except for per share amounts) 2006 2005 2006 2005 Sales and merchandising revenues $378,109 $365,117 $658,767 $623,773 Cost of sales and merchandising revenues 323,342 312,099 563,729 530,796 Gross profit 54,767 53,018 95,038 92,977 Operating, administrative and general expenses 38,581 35,855 75,273 72,756 Interest expense 4,501 3,191 8,695 6,141 Other income, net 2,352 1,430 5,411 2,509 Equity in earnings of affiliates 2,209 14 5,762 460 Income before income taxes 16,246 15,416 22,243 17,049 Income tax provision 5,899 5,063 8,061 5,662 Net Income $10,347 $10,353 $14,182 $11,387 Per common share: Basic earnings $0.68 $0.70 $0.94 $0.77 Diluted earnings $0.66 $0.67 $0.90 $0.74 Dividends paid $0.045 $0.040 $0.0875 $0.080 Weighted average shares outstanding-basic 15,220 14,798 15,155 14,772 Weighted average shares outstanding-diluted 15,776 15,392 15,728 15,340 The Andersons, Inc. Consolidated Balance Sheets (Unaudited) June 30 December 31 June 30 (in thousands) 2006 2005 2005 Assets Current assets: Cash and cash equivalents $15,474 $13,876 $7,864 Restricted cash 3,836 3,936 1,435 Accounts receivable (net) and margin deposits 95,927 83,291 91,025 Inventories 168,918 240,806 182,405 Other current assets 24,623 30,632 16,177 Total current assets 308,778 372,541 298,906 Investments and other assets 64,344 39,008 18,928 Railcar assets leased to others (net) 136,271 131,097 134,450 Property, plant and equipment (net) 91,355 91,498 91,678 $600,748 $634,144 $543,962 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $51,600 $12,400 $69,900 Other current liabilities 169,723 263,922 151,884 Total current liabilities 221,323 276,322 221,784 Deferred items and other long-term liabilities 33,683 30,896 29,233 Long-term debt non-recourse 82,529 88,714 59,333 Long-term debt 88,862 79,329 89,105 Shareholders' equity 174,351 158,883 144,507 $600,748 $634,144 $543,962 Segment Data Grain & Plant Turf & Quarter ended June 30, 2006 Ethanol Nutrient Rail Specialty Revenues from external customers $148,763 $113,308 $27,836 $33,428 Gross Profit 10,304 10,110 11,883 5,628 Other income / Equity in earnings of affiliates 2,363 332 195 155 Operating income (loss) 1,923 5,041 4,999 1,344 Quarter ended June 30, 2005 Revenues from external customers 132,648 119,914 17,673 40,464 Gross Profit 7,339 15,598 8,589 4,823 Other income / Equity in earnings of affiliates 144 285 356 139 Operating income (loss) (1,381) 10,295 3,799 412 Six months ended June 30, 2006 Revenues from external customers 277,388 159,341 62,219 72,933 Gross Profit 17,249 14,243 24,761 12,263 Other income / Equity in earnings of affiliates 8,004 433 315 518 Operating income (loss) 3,703 3,806 11,217 3,493 Six months ended June 30, 2005 Revenues from external customers 253,585 163,985 35,378 81,355 Gross Profit 17,538 21,180 17,104 10,681 Other income / Equity in earnings of affiliates 825 512 541 307 Operating income (loss) 357 9,508 7,439 1,489 Segment Data Retail Other Total Quarter ended June 30, 2006 Revenues from external customers $54,774 $- $378,109 Gross Profit 16,842 - 54,767 Other income / Equity in earnings of affiliates 268 1,248 4,561 Operating income (loss) 4,155 (1,216) 16,246 Quarter ended June 30, 2005 Revenues from external customers 54,418 - 365,117 Gross Profit 16,669 - 53,018 Other income / Equity in earnings of affiliates 245 275 1,444 Operating income (loss) 3,843 (1,552) 15,416 Six months ended June 30, 2006 Revenues from external customers 86,886 - 658,767 Gross Profit 26,522 - 95,038 Other income / Equity in earnings of affiliates 432 1,471 11,173 Operating income (loss) 1,714 (1,690) 22,243 Six months ended June 30, 2005 Revenues from external customers 89,470 - 623,773 Gross Profit 26,474 - 92,977 Other income / Equity in earnings of affiliates 377 407 2,969 Operating income (loss) 1,745 (3,489) 17,049
SOURCE: The Andersons, Inc.
CONTACT: Gary Smith of The Andersons, Inc., +1-419-891-6417
Web site: http://www.andersonsinc.com/