The Andersons, Inc. Reports Record Earnings
Third Quarter & Nine Months Income Both Set New Earnings Records
Grain & Ethanol and Plant Nutrient Businesses Lead Earnings Growth
Oct 31, 2007
The Andersons, Inc.
The Grain & Ethanol Group's third quarter operating income of $13.7 million was $1.8 million better than its year earlier result, which had included a 2006 gain of $4.2 million from a business interruption insurance claim. Total revenues were $383 million for the period. This included $85 million of ethanol sales made by the group in accordance with marketing agreements between the company and its ethanol joint ventures, for which it receives a fee. In the third quarter of 2006, the group's total revenues were $209 million and did not include any sales from the ethanol joint ventures. Income from ethanol joint ventures grew significantly during the most recent quarter. Both the Albion, Michigan and Clymers, Indiana ethanol plants were in operation during the entire third quarter, which was the first quarter both plants were in full operation. In addition, third quarter income from the group's investment in Lansing Trade Group LLC (LTG) was significantly higher this year. Through the first nine months of 2007, the Grain & Ethanol Group's operating income was $35.9 million, which is more than double the $15.7 million earned for the same period in 2006. Total revenues through September were $950 million, including $171 million in sales of ethanol. In comparison, the group's revenues for the first nine months of the prior year were $486 million and did not include any sales of ethanol from the ethanol joint ventures. Total revenues in the Grain & Ethanol Group have increased for both the quarter and nine months due to an increase in bushels sold, a considerable increase in the average price of the grains sold, and an increase in the gallons of ethanol sold.
The Rail Group's operating income of $5.8 million in the third quarter of 2007 was $0.9 million above the $4.9 million it earned in the same three month period in 2006. Revenues of $34 million for the quarter were up from $27 million in the same period of the prior year. The group now has approximately 22,600 cars and locomotives; this compares to about 20,400 cars and locomotives in the prior year. The group's average lease rates for new transactions and utilization rate (the percentage of the fleet's railcars in service at the end of the period) have decreased from a year ago due to softness in the overall rail leasing market. Including some gains from railcar sales and related leases entered into during the third quarter, operating income in the group's leasing business was higher than its year earlier results. Absent gains from sales, operating income from leasing was slightly lower. The railcar repair and manufacturing businesses also continued to experience lower operating income during the third quarter. Through the first nine months of the year the Rail Group had operating income of $15.7 million on $102 million of revenues. In 2006, operating income through the same period was $16.1 million and revenues amounted to $90 million.
The Plant Nutrient Group achieved operating income of $0.8 million during the third quarter of 2007; this is the first time in the history of the group that they have reported a profit in the third quarter. Total revenues were $77 million for the period. This represents a significant improvement from the same three month period in 2006 when the group reported a $1.9 million operating loss on $39 million of revenues. The net income record resulted from significant increases in both margin and volume. The third quarter volume increase is the result of customers buying earlier and more aggressively due to the escalation of nutrient prices and to replenish depleted fertilizer stockpiles left virtually empty at the end of the second quarter. The group's operating income for the first nine months was $18.4 million on $326 million of revenues. Last year, its operating income through the same period was $1.9 million and revenues were $198 million. The record quarter and year to date income and revenues for the group have been influenced by the significant increase in corn acreage, and nutrient inventory appreciation.
The Turf & Specialty Group incurred an operating loss of $1.6 million in the third quarter this year on $18 million of revenues. Last year, the group reported an operating loss of $0.4 million and revenues of $20 million for the period. Included in the 2006 earnings was a $0.4 million gain from the settlement of an insurance claim. Turf products tonnage continued to be lower in the third quarter due to relatively dry weather throughout much of the country which curtailed sales of some formulated products. Through the first nine months of 2007, the group's operating income was $0.9 million on $85 million of revenues. Last year, its operating income was $3.1 million for the same period, and revenues were $93 million.
The Retail Group reported an operating loss of $0.6 million for the third quarter of 2007; this compares to an operating loss of $0.4 million in the prior year. Revenues were $42 million for the quarter. Although total revenues were up from $41 million in the prior year due to the addition of the Sylvania, Ohio, Food Market, same store sales were down 1.6 percent for the period. The group's nine months to date operating income this year was $0.8 million on $131 million of revenues. Last year, operating income through September was $1.3 million, and total revenues were $128 million. The year to year income differential is caused primarily by competitive sales pressure in the Toledo area market and the performance of the new Sylvania Food Market.
"Our Grain and Ethanol and Plant Nutrient Groups are achieving excellent income growth this year, and the Rail Group is maintaining solid performance despite some tightening in that industry, which more than compensates for the softness being experienced in other segments," said President and Chief Executive Officer Mike Anderson. Mr. Anderson added, "A few weeks ago it became apparent that the results of our agriculture related businesses were stronger than we had expected. As a result, we announced on October 17th that our full-year earnings outlook had improved to be within a range of $3.15 to $3.35 per diluted share. While there are still various factors that could impact our full year results such as supply and demand dynamics in the grain and plant nutrient markets, timing of railcar sales, and investment results of LTG, we continue to believe this is the right guidance at this time."
The company will host a webcast on Thursday, November 1, 2007 at 11:00 A.M. ET, to discuss its performance and full year outlook. This can be accessed under the heading "Investor Relations" 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 eight U.S. states plus rail equipment 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 are based are reasonable, it can give no assurance that these assumptions will prove to be correct.
The Andersons, Inc. is located on the Internet at www.andersonsinc.com The Andersons, Inc. Consolidated Statements of Income (Unaudited) Three Months ended Nine Months ended September 30 September 30 (in thousands, except for per share amounts) 2007 2006 2007 2006 Sales and merchandising revenues $553,708 $335,871 $1,594,425 $994,638 Cost of sales and merchandising revenues 502,962 284,327 1,423,952 848,056 Gross profit 50,746 51,544 170,473 146,582 Operating, administrative and general expenses 41,430 40,310 123,527 115,583 Interest expense 4,174 3,818 13,386 12,513 Other income / gains: Equity in earnings of affiliates 9,574 (483) 17,229 5,279 Other income, net 2,144 6,352 19,085 11,763 Minority interest in net loss / (income) of subsidiary 549 - 1,065 - Income before income taxes 17,409 13,285 70,939 35,528 Income taxes 6,844 4,898 25,647 12,959 Net income $10,565 $8,387 $45,292 $22,569 Per common share: Basic earnings $0.59 $0.52 $2.54 $1.46 Diluted earnings $0.58 $0.51 $2.48 $1.41 Dividends paid $0.0475 $0.045 $0.1425 $0.1325 Weighted average shares outstanding-basic 17,878 16,080 17,800 15,467 Weighted average shares outstanding-diluted 18,311 16,591 18,282 16,021 The Andersons, Inc. Consolidated Balance Sheets (Unaudited) September 30 December 31 September 30 (in thousands) 2007 2006 2006 Assets Current assets: Cash and cash equivalents $22,357 $23,398 $47,773 Restricted cash 3,737 3,801 3,815 Accounts receivable (net) 127,382 87,698 79,552 Margin deposits (net) 28,970 15,273 10,540 Inventories 306,908 296,457 172,056 Commodity derivative assets - current 108,039 85,338 9,914 Other current assets 44,200 33,325 24,335 Total current assets 641,593 545,290 347,985 Investments and other assets 115,597 72,335 63,973 Commodity derivative assets 29,999 20,862 5,718 Railcar assets leased to others (net) 143,251 145,059 148,936 Property, plant and equipment (net) 100,829 95,502 93,065 $1,031,269 $879,048 $659,677 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $163,400 $75,000 $ - Commodity derivative liabilities - current 77,617 43,173 12,785 Other current liabilities 244,624 265,040 171,638 Total current liabilities 485,641 383,213 184,423 Deferred items and other long-term liabilities 45,315 41,267 37,832 Commodity derivative liability 26,285 26,531 9,007 Long-term debt non-recourse 60,107 71,624 77,222 Long-term debt 85,302 86,238 87,076 Minority interest 12,607 - - Shareholders' equity 316,012 270,175 264,117 $1,031,269 $879,048 $659,677 Segment Data Grain & Plant Turf & Ethanol Rail Nutrient Specialty Quarter ended September 30, 2007 Revenues from external customers $382,907 $33,890 $76,732 $17,911 Gross Profit 16,294 12,300 6,458 3,753 Other income / Equity in earnings of affiliates 10,226 243 350 185 Operating income (loss) 13,706 5,792 815 (1,626) Quarter ended September 30, 2006 Revenues from external customers $208,540 $27,339 $38,580 $20,396 Gross Profit 20,501 11,628 3,623 4,138 Other income / Equity in earnings of affiliates 4,064 127 348 569 Operating income (loss) 11,950 4,898 (1,868) (420) Nine months ended September 30, 2007 Revenues from external customers $950,430 $102,251 $326,200 $84,609 Gross Profit 46,968 34,336 35,274 14,991 Other income / Equity in earnings of affiliates 27,401 765 806 380 Operating income (loss) 35,857 15,702 18,363 880 Nine months ended September 30, 2006 Revenues from external customers $485,928 $89,558 $197,921 $93,329 Gross Profit 37,750 36,389 17,866 16,401 Other income / Equity in earnings of affiliates 12,068 442 781 1,087 Operating income (loss) 15,653 16,115 1,938 3,073 Segment Data Retail Other Total Quarter ended September 30, 2007 Revenues from external customers $42,268 $ - $553,708 Gross Profit 11,941 - 50,746 Other income / Equity in earnings of affiliates 149 565 11,718 Operating income (loss) (554) (724) 17,409 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 Nine months ended September 30, 2007 Revenues from external customers $130,935 $ - $1,594,425 Gross Profit 38,904 - 170,473 Other income / Equity in earnings of affiliates 467 6,495 36,314 Operating income (loss) 775 (638) 70,939 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
First Call Analyst:
SOURCE: The Andersons, Inc.
CONTACT: Gary Smith of The Andersons, Inc., +1-419-891-6417
Web site: http://www.andersonsinc.com/