The Andersons, Inc. Reports Second Quarter Results
Record Earnings Of $ 2.48 Per Diluted Share
The Plant Nutrient Group Leads Earnings Result
Aug 6, 2008
The Andersons, Inc.
The Grain & Ethanol Group's record operating income of $20.0 million in the second quarter was significantly more than its year earlier result of $12.0 million. The grain business benefited from significantly improved margins on grain sales and the more than doubling of service fee income. The business, however, continues to be impacted by rising costs associated with higher grain prices. Specifically, interest expense increased more than $5.6 million in comparison to the prior period, and contract fair value adjustments were increased due to the increased risk of contract default associated with rising grain prices. Income from the ethanol joint ventures also grew during the most recent quarter. Second quarter income from the group's investment in Lansing Trade Group was $5.1 million higher this year. Total second quarter revenues for the group were $696 million; this compares to total revenues of $324 million for the same period last year. While revenues for the group are higher, such amounts do not serve as good predictors of income or economic performance in a commodity based business. The Grain & Ethanol Group's operating income through the first six months was $22.2 million in both 2008 and 2007. Total revenues through June 2008 and 2007 were $1.2 billion and $568 million, respectively.
The Rail Group's operating income was $4.9 million in the second quarter on revenues of $43 million. Last year, the group reported $6.9 million of income and $42 million of revenues for the same three-month period. The group recognized $1.1 million in gross margin from the sale of railcars and related leases during the quarter; however, in the second quarter last year it recognized gains of $4.1 million for similar sales. Gross profit from the leasing business was higher due to a higher utilization rate and growth in the size of the fleet. The group now has 23,840 cars and locomotives, which is 5 percent more than it had 12 months ago. The average utilization rate (the percentage of the fleet in service) for the quarter was 93.2 percent in comparison to 92.0 percent for the same period last year. The gross profit of the railcar repair business grew slightly during the second quarter due to the addition of a new repair shop in the second half of 2007. The group's first half operating income this year was $11.3 million on $78 million of revenues. In 2007, operating income through June was $9.9 million and revenues were $68 million. Included in these results were gains on sales of railcars and related leases of $3.3 million and $5.0 million, respectively.
The Plant Nutrient Group achieved record operating income of $47.4 million during the second quarter of 2008 on revenues of $274 million. With these results, the group has had quarter income records for six consecutive quarters. The group reported a $17.1 million operating profit on $183 million of revenues in the second quarter of 2007. These exceptional earnings resulted from significant margin increases primarily resulting from inventory value appreciation stemming from its significant storage space and unprecedented escalation in basic nutrient prices. This escalation of plant nutrient prices, lower corn acres, and pre-season buying at the end of 2007 have led to a reduced sales volume when compared to last year. The group's first half operating income this year was $54.9 million on $379 million of revenues. Last year, its operating income through the first six months was $17.5 million on revenues of $249 million. The purchase of Douglass Fertilizer & Chemical Inc. that was completed last quarter has proven to be accretive to earnings, as expected. Yesterday, the group announced the purchase of three pelleted lime facilities in Ohio, Illinois and Nebraska. The acquisition allows the group to expand its value added product offering and further broaden its geographic territory.
The Turf & Specialty Group had operating income of $1.9 million in the second quarter this year on $36 million of revenues. Last year, the group reported $0.7 million of income on $30 million of revenues for the period. Turf products tonnage increased slightly from year to year, and gross profit per ton increased considerably, in spite of record high raw material prices this year, due to a larger percentage of sales coming from proprietary products such as Contec DG. Through the first half of 2008, the group's operating income was $3.9 million on $76 million of revenues. Last year, its operating income was $2.5 million for the same period, and revenues were $67 million. The group, along with several partners, was recently awarded a $5.0 million grant by the state of Ohio for research and development expenses; this will be utilized to further develop technologically advanced and proprietary products.
The Retail Group reported revenues of $53 million for the second quarter of 2008, which is slightly below the $55 million in revenues reported for the same period in 2007. This sales decline is due to the overall decline in consumer spending. For the three-month period, the group earned operating income of $3.4 million. In the comparable period last year, the group's operating income was $3.6 million. Through six months the group has broken even on $86 million of revenues. Last year, operating income through June was $1.3 million and total revenues were $89 million. Margins have been reduced due to competitive sales pressure.
"Our second quarter and first half results are outstanding," said President and Chief Executive Officer Mike Anderson. "Both our Plant Nutrient and Grain & Ethanol Groups contributed significantly to our income during the period. I want to extend special thanks to our Plant Nutrient Group team. The team has worked tirelessly to serve customers and optimize their inventory position, while simultaneously exploring multiple growth opportunities and integrating Douglass Fertilizer into their business. It was truly a team effort and to see their results is rewarding. We are also excited by the addition of the three pelleted lime facilities yesterday, as this acquisition, like Douglass Fertilizer, is consistent with our strategic goal of growing our business to a national footprint.
"Last week we revised our full year guidance to $5.00 - $5.40 per diluted share," Mr. Anderson continued. "Our guidance was heavily influenced by the reported and expected performance of our Plant Nutrient Group. Numerous factors, however, will have a bearing on the full year outcome; basic nutrient prices, grain prices, timing of railcar sales, and the performance of our equity investments, which include the significant contributions of Lansing Trade Group and the ethanol production facilities."
The company will host a webcast on Thursday, August 7, 2008 at 11:00 A.M. ET, to discuss its performance and full year outlook. This can be accessed under the heading "Investors" 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 11 U.S. states and Puerto Rico, 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 Six Months ended June 30 June 30 (in thousands, except for per share amounts) 2008 2007 2008 2007 Sales and merchandising revenues $1,100,700 $634,214 $1,813,701 $1,040,717 Cost of sales and merchandising revenues 980,363 562,378 1,641,123 924,496 Gross profit 120,337 71,836 172,578 116,221 Operating, administrative and general expenses 49,109 40,196 88,695 77,947 Allowance for doubtful accounts receivable 864 411 2,569 644 Interest expense 8,521 4,190 17,643 9,212 Other income / gains: Equity in earnings of affiliates 7,781 4,823 16,420 7,655 Other income, net 2,155 7,068 5,039 16,941 Minority interest in net (income) loss of subsidiary 682 433 (253) 516 Income before income taxes 72,461 39,363 84,877 53,530 Income taxes 26,835 13,875 31,428 18,803 Net income $45,626 $25,488 $53,449 $34,727 Per common share: Basic earnings $2.53 $1.43 $2.96 $1.96 Diluted earnings $2.48 $1.40 $2.91 $1.90 Dividends paid $0.0775 $0.0475 $0.1550 $0.0950 Weighted average shares outstanding-basic 18,065 17,792 18,046 17,761 Weighted average shares. outstanding-diluted 18,380 18,245 18,383 18,260 The Andersons, Inc. Consolidated Balance Sheets (Unaudited) June 30 December 31 June 30 (in thousands) 2008 2007 2007 Assets Current assets: Cash and cash equivalents 33,379 $22,300 $ 28,945 Restricted cash 3,664 3,726 3,756 Accounts receivable, net 194,243 106,257 138,451 Margin deposits, net 79,017 20,467 27,139 Inventories 406,839 502,904 215,925 Commodity derivative assets - current 493,571 205,956 47,634 Other current assets 40,430 43,281 26,307 Total current assets 1,251,143 904,891 488,157 Investments and other assets 156,005 137,518 106,477 Commodity derivative assets 84,297 29,458 27,169 Railcar assets leased to others (net) 152,879 153,235 146,567 Property, plant and equipment (net) 110,146 99,886 99,117 $1,754,470 $1,324,988 $867,487 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $432,500 $ 245,500 $ 77,000 Commodity derivative liabilities - current 160,611 122,488 39,481 Other current liabilities 350,796 359,224 215,196 Total current liabilities 943,907 727,212 331,677 Deferred items and other long-term liabilities 53,058 49,631 40,147 Commodity derivative liabilities 19,923 2,090 26,002 Long-term debt non-recourse 47,934 56,277 64,382 Long-term debt 281,496 133,195 87,150 Minority interest 12,471 12,219 13,120 Shareholders' equity 395,681 344,364 305,009 $1,754,470 $1,324,988 $867,487 Segment Data Grain & Plant Turf & Ethanol Rail Nutrient Specialty Quarter ended June 30, 2008 Revenues from external customers $695,787 $42,941 $273,501 $35,915 Gross Profit 29,195 9,100 58,396 7,266 Other income / Equity in earnings of affiliates 9,002 340 181 96 Operating income (loss) 19,994 4,874 47,369 1,882 Quarter ended June 30, 2007 Revenues from external customers $323,580 $42,445 $182,908 $30,394 Gross Profit 15,254 10,901 23,391 5,167 Other income / Equity in earnings of affiliates 8,361 431 300 133 Operating income (loss) 11,981 6,902 17,117 706 Grain & Plant Turf & Ethanol Rail Nutrient Specialty Six months ended June 30, 2008 Revenues from external customers $1,194,910 $77,952 $378,970 $75,576 Gross Profit 40,574 20,251 72,074 14,192 Other income / Equity in earnings of affiliates 20,175 518 327 189 Operating income (loss) 22,227 11,300 54,909 3,882 Six months ended June 30, 2007 Revenues from external customers $567,523 $68,361 $249,468 $66,698 Gross Profit 30,674 18,530 28,816 11,238 Other income / Equity in earnings of affiliates 17,175 522 456 195 Operating income (loss) 22,151 9,910 17,548 2,506 Segment Data Retail Other Total Quarter ended June 30, 2008 Revenues from external customers $52,556 $- $1,100,700 Gross Profit 16,380 - 120,337 Other income / Equity in earnings of affiliates 161 156 9,936 Operating income (loss) 3,360 (5,018) 72,461 Quarter ended June 30, 2007 Revenues from external customers $54,887 $- $634,214 Gross Profit 17,123 - 71,836 Other income / Equity in earnings of affiliates 158 2,508 11,891 Operating income (loss) 3,616 (959) 39,363 Retail Other Total Six months ended June 30, 2008 Revenues from external customers $86,293 $- $1,813,701 Gross Profit 25,487 - 172,578 Other income / Equity in earnings of affiliates 308 (58) 21,459 Operating income (loss) (17) (7,424) 84,877 Six months ended June 30, 2007 Revenues from external customers $88,667 $- $1,040,717 Gross Profit 26,963 - 116,221 Other income / Equity in earnings of affiliates 318 5,930 24,596 Operating income (loss) 1,329 86 53,530
First Call Analyst:
SOURCE: The Andersons, Inc.
CONTACT: Gary L. Smith, VP, Finance & Treasurer of The Andersons, Inc.,
Web site: http://www.andersonsinc.com/