The Andersons, Inc. Reports Strong Earnings Third Quarter & Nine Months Income Exceed Previous Records
Reaffirms Full-Year EPS Guidance of $1.90 - $2.10
Nov 1, 2006
The Andersons, Inc.
The Grain & Ethanol Group's third-quarter operating income of $12.0 million was $14.5 million better than its year-earlier result. Total revenues of $209 million for the period were $50 million higher than the third quarter of 2005. Total grain gross profit for the period was also significantly higher than it had been in the previous year. This included the sale of a large number of wheat bushels at excellent margins during the period and appreciation in corn basis values more usually seen in the fourth quarter. The group's third quarter operating income also included the settlement of the 2005 portion of the business interruption insurance claim related to an elevator in Toledo which had been damaged by an explosion and fire in the third quarter of 2005. Now that the elevator has re-opened and is receiving grain, the company is actively working on the 2006 portion of the business interruption claim. Because of the degree of volatility in recent wheat and ethanol markets, the group's investment in its commodity trading affiliate, Lansing Trade Group, LLC, incurred a loss during the most recent three-month period, although its income remains at a record level through nine months. Construction of an ethanol plant in Albion, Michigan, in which The Andersons, Inc. is a significant investor, was completed during the third quarter, and the plant began to produce and ship ethanol and distillers dried grain. Construction of another ethanol plant, located in Clymers, Indiana, is underway and scheduled to start production by the end of the first quarter of 2007. Through the first nine months of 2006, the Grain & Ethanol Group achieved operating income of $15.7 million. In the same period last year, the group incurred an operating loss of $2.1 million.
The Rail Group's operating income of $4.9 million in the third quarter of 2006 was $0.9 million below its third quarter 2005 results. Revenues of $27 million for the quarter were $4 million higher than the prior period. Railcar lease rates and the utilization rate of the group's railcar fleet remained strong during the third quarter of 2006, but fleet maintenance costs were higher. Operating income during the period from the group's railcar repair and manufacturing businesses was higher than the third quarter of 2005. Through the first nine months of 2006, the group achieved revenues of $90 million and $16.1 million of operating income. Last year, it reported revenues of $59 million and operating income of $13.3 million for the same nine month period.
The Plant Nutrient Group incurred an operating loss of $1.9 million on $39 million of revenues in the third quarter this year. It lost $0.8 million on $47 million of revenues during the same three-month period of 2005. Because energy and nutrient input costs through the third quarter have been significantly higher this year, the company believes that farmers reduced the amount of nutrients applied to their fields this season. This resulted in reduced wholesale and retail demand for plant nutrients and a deferral of pre- fall season purchasing. With volume down, the group's third-quarter gross profit declined from last year. Through the first nine months of 2006, the group's operating income was $1.9 million on $198 million of revenues. In the same period last year, operating income amounted to $8.7 million on $211 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 loss amounted to $0.4 million on $20 million of revenues. In 2005, it incurred an operating loss of $3.0 million in the third quarter on $19 million of revenues. The group's lawn and cob products businesses both contributed to this improvement. Also included in this year's third quarter income was the settlement of an insurance claim regarding a storage tank that was damaged last year. Through the first nine months of this year, the group has reported operating income of $3.1 million and revenues of $93 million. In the first nine months of 2005, the group had revenues of $101 million and an operating loss of $1.6 million. The improved third quarter and year-to-date results were primarily due to restructuring actions and other charges incurred in the third quarter of 2005.
The Retail Group reported revenues of $41 million for the third quarter of 2006, an increase of 1.3 percent in same-store sales from the same period in 2005. With higher gross margins and total gross profit, the group's operating loss was $0.4 million for the quarter, about $0.4 million better than the same period last year. For the first nine months of the year, the group generated revenues of $128 million and operating income of $1.3 million. In the first nine months of 2005, it reported operating income of $0.9 million and revenues of $130 million.
According to President and Chief Executive Officer Mike Anderson, "We've frequently noted that it's not unusual for some of our units to experience volatility in quarterly income over and above normal seasonal patterns. This has often been true in our commodity-based grain and plant nutrient businesses, and to some degree in our rail business, given the unpredictable timing of opportunistic railcar sales. With our strong third-quarter income this year, one might conclude that our prospects for the full year had noticeably improved. There are several variables which could still swing either way. Supply and demand dynamics in the grain markets, including rainfalls that have delayed the fall harvest, will impact fourth quarter income. Accordingly, I believe that our previously-announced guidance of $1.90 to $2.10 for our 2006 full-year earnings per diluted share is still a reasonable expectation. There are also some non-recurring items which, if they were to occur prior to year-end, could raise this guidance range. These include the 2006 portion of our elevator business interruption claim and additional ethanol development activities."
The company will host a webcast on Thursday, November 2, 2006 at 11:00 A.M. ET, to discuss its third-quarter performance and full-year outlook. This can be accessed under the heading "Financial Information" on its website at 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 www.andersonsinc.com FINANCIAL TABLES FOLLOW . . . The Andersons, Inc. Consolidated Statements of Income Three Months ended Nine Months ended September 30 September 30 (in thousands, except for per share amounts) 2006 2005 2006 2005 Sales and merchandising revenues $335,871 $288,755 $994,638 $912,528 Cost of sales and merchandising revenues 284,327 252,162 848,056 782,958 Gross profit 51,544 36,593 146,582 129,570 Operating, administrative and general expenses 40,310 36,654 115,583 109,410 Interest expense 3,818 2,830 12,513 8,971 Other income, net 6,352 1,009 11,763 3,518 Equity in earnings of affiliates (483) 877 5,279 1,337 Income (loss) before income taxes 13,285 (1,005) 35,528 16,044 Income tax provision 4,898 (369) 12,959 5,293 Net income (loss) $8,387 $(636) $22,569 $10,751 Per common share: Basic earnings $0.52 $(0.04) $1.46 $0.73 Diluted earnings $0.51 $(0.04) $1.41 $0.70 Dividends paid $0.045 $0.0425 $0.1325 $0.1225 Weighted average shares outstanding-basic 16,080 14,890 15,467 14,812 Weighted average shares outstanding-diluted 16,591 14,890 16,021 15,382 The Andersons, Inc. Consolidated Balance Sheets (Unaudited) September 30 December 31 September 30 (in thousands) 2006 2005 2005 Assets Current assets: Cash and cash equivalents $47,773 $13,876 $9,592 Restricted cash 3,815 3,936 1,367 Accounts receivable (net) and margin deposits 92,867 83,291 78,845 Inventories 163,121 240,806 184,247 Other current assets 24,335 30,632 28,537 Total current assets 331,911 372,541 302,588 Investments and other assets 63,973 39,008 33,732 Railcar assets leased to others (net) 148,936 131,097 112,882 Property, plant and equipment (net) 93,065 91,498 92,098 $637,885 $634,144 $541,300 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $ - $12,400 $42,900 Other current liabilities 171,638 263,922 178,583 Total current liabilities 171,638 276,322 221,483 Deferred items and other long-term liabilities 37,832 30,896 29,869 Long-term debt non-recourse 77,222 88,714 59,164 Long-term debt 87,076 79,329 87,128 Shareholders' equity 264,117 158,883 143,656 $637,885 $634,144 $541,300 Segment Data Grain & Plant Turf & Ethanol Nutrient Rail Specialty Quarter ended September 30, 2006 Revenues from external customers $208,540 $38,580 $27,339 $20,396 Gross Profit 20,501 3,623 11,628 4,138 Other income / Equity in earnings of affiliates 4,064 348 127 569 Operating income (loss) 11,950 (1,868) 4,898 (420) Quarter ended September 30, 2005 Revenues from external customers 158,875 46,986 23,176 19,227 Gross Profit 6,263 4,443 11,232 3,398 Other income / Equity in earnings of affiliates 908 384 (5) 238 Operating income (loss) (2,504) (808) 5,841 (3,047) Nine months ended September 30, 2006 Revenues from external customers 485,928 197,921 89,558 93,329 Gross Profit 37,750 17,866 36,389 16,401 Other income / Equity in earnings of affiliates 12,068 781 442 1,087 Operating income (loss) 15,653 1,938 16,115 3,073 Nine months ended September 30, 2005 Revenues from external customers 412,460 210,971 58,554 100,582 Gross Profit 23,801 25,623 28,336 14,079 Other income / Equity in earnings of affiliates 1,733 896 536 545 Operating income (loss) (2,147) 8,700 13,280 (1,558) Segment Data Retail Other Total Quarter ended September 30, 2006 Revenues from external customers $41,016 $ - $335,871 Gross Profit 11,654 - 51,544 Other income / Equity in earnings of affiliates 265 496 5,869 Operating income (loss) (418) (857) 13,285 Quarter ended September 30, 2005 Revenues from external customers 40,491 - 288,755 Gross Profit 11,257 - 36,593 Other income / Equity in earnings of affiliates 140 221 1,886 Operating income (loss) (827) 340 (1,005) Nine months ended September 30, 2006 Revenues from external customers 127,902 - 994,638 Gross Profit 38,176 - 146,582 Other income / Equity in earnings of affiliates 697 1,967 17,042 Operating income (loss) 1,296 (2,547) 35,528 Nine months ended September 30, 2005 Revenues from external customers 129,961 - 912,528 Gross Profit 37,731 - 129,570 Other income / Equity in earnings of affiliates 517 628 4,855 Operating income (loss) 918 (3,149) 16,044
First Call Analyst:
SOURCE: The Andersons, Inc.
CONTACT: Gary Smith of The Andersons, Inc., +1-419-891-6417
Web site: http://www.andersonsinc.com/