The Andersons, Inc. Reports Third Quarter Results
Record Earnings Of $0.70 Per Diluted Share
Nov 4, 2008
The Andersons, Inc.
The Grain & Ethanol Group's operating income was $9.4 million in the third quarter, which was below its year earlier result of $13.7 million. The grain business benefited from significantly improved basis income, with the company recovering most of the basis losses incurred earlier in the year. Income from the ethanol business declined $8.8 million during the most recent quarter to a loss of $2.0 million due primarily to the combined performance of the company's investments in three ethanol limited liability companies. Third quarter income from the group's investment in Lansing Trade Group was $2.6 million, which is $1.0 million lower than last year. Total third quarter revenues for the group were $651 million; this compares to total revenues of $383 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. During the quarter, the group purchased a grain storage facility, and leased two others. This increased the company's storage capacity by 7.6 million bushels. The Grain & Ethanol Group's operating income through the first nine months was $31.7 million in 2008. In 2007, operating income through September was $35.9 million. Total revenues through September 2008 and 2007 were $1.8 billion and $950 million, respectively.
The Rail Group's operating income was $5.2 million in the third quarter on revenues of $28 million. Last year, the group reported $5.8 million of income and $34 million of revenues for the same three month period. The group recognized $0.7 million in gross margin from the sale of railcars and related leases during the quarter, which is $2.1 million less than similar sales for the same period last year. Gross profit from the leasing business was higher due to wider relet spreads, a higher utilization rate, and growth in the size of the fleet. The fleet has increased 6 percent to 24,007 cars and locomotives. The average utilization rate (the percentage of the fleet in service) for the quarter was 93.2 percent in comparison to 92.5 percent for the same period last year. The gross profit of the railcar repair and manufacturing businesses also grew during the third quarter. The group's first nine months operating income this year was $16.5 million on $106 million of revenues. In 2007, operating income through September was $15.7 million and revenues were $102 million. Included in these results were gains on sales of railcars and related leases of $4.0 million and $7.9 million, for 2008 and 2007, respectively. A seventh railcar repair shop was opened in Ogden, Utah in September, and the group continues to explore additional railcar repair shop opportunities.
The Plant Nutrient Group had a record operating income of $7.2 million during the third quarter of 2008 on revenues of $162 million. The group reported an $0.8 million operating profit on $77 million of revenues in the third quarter of 2007. The current quarter earnings were impacted both positively and negatively by fluctuating fertilizer prices. During the quarter significant margin increases were recognized on sales made due to the inventory appreciation that occurred as a result of rising prices. Certain inventory values, however, declined sharply late in the third quarter and into the fourth quarter resulting in $13.1 million in adjustments due to adverse purchase commitments and lower of cost or market adjustments. Sales volume during the quarter was slightly above the prior year. The group's operating income through September this year was $62.1 million on $541 million of revenues. Last year, its operating income through the first nine months was $18.4 million on revenues of $326 million.
The Turf & Specialty Group had an operating loss of $0.5 million in the third quarter this year on $23 million of revenues. Last year, the group reported a loss of $1.6 million on $18 million of revenues. Turf products tonnage increased slightly from year to year, and gross profit per ton increased considerably, due to a larger percentage of sales coming from proprietary products such as Contec DG. The group continues to see proprietary products as a growth area. Through the first nine months of 2008, the group's operating income was $3.4 million on $99 million of revenues. Last year, its operating income was $0.9 million for the same period, and revenues were $85 million.
The Retail Group reported revenues of $41 million for the third quarter of 2008, which is slightly below the $42 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's operating loss was $0.2 million, which is an improvement over the $0.6 million operating loss in the prior year. Through nine months the group has lost $0.2 million on $127 million of revenues. Last year, the operating income through September was $0.8 million and total revenues were $131 million. Margins improved during the third quarter, which has led to year to date margins being consistent with the prior year.
Total company interest expense for the quarter and year to date are $3.3 million and $11.8 million higher than the prior year, respectively.
"Our third quarter and nine month results are both records, however, we were disappointed by the sudden turn of events in the fertilizer markets," said President and Chief Executive Officer Mike Anderson. "The Plant Nutrient Group contributed significantly to our income during the period, however, our expectations for the group were even higher before the recent sharp decline in global fertilizer prices that led to material inventory adjustment."
"Our current guidance is $3.50 - $4.00 per diluted share," Mr. Anderson continued. "As we noted in the second quarter press release our former guidance was heavily influenced by the reported and expected performance of our Plant Nutrient Group. This is again true of our current guidance, which is primarily attributed to the aforementioned decline in global fertilizer prices. The current guidance is also partially attributable to the economics in the ethanol industry. Numerous other factors will also have a bearing on the full year outcome, such as; grain prices, timing of railcar sales, and the performance of our equity investments, which include Lansing Trade Group and the ethanol production facilities."
The company will host a webcast on Wednesday, November 5, 2008 at 11:00 A.M. ET, to discuss its performance and full year outlook. This can be accessed under the heading "Investor" 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 12 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 FINANCIAL TABLES FOLLOW . . . 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) 2008 2007 2008 2007 Sales and merchandising revenues $905,712 $553,708 $2,719,413 $1,594,425 Cost of sales and merchandising revenues 832,687 504,894 2,473,810 1,429,390 Gross profit 73,025 48,814 245,603 165,035 Operating, administrative and general expenses 48,239 39,040 136,934 116,987 Allowance for doubtful accounts receivable 333 458 2,902 1,102 Interest expense 7,497 4,174 25,140 13,386 Other income / gains: Equity in earnings of affiliates (619) 9,518 15,801 17,173 Other income, net 1,279 2,200 6,318 19,141 Minority interest in net (income) loss of subsidiary 1,841 549 1,588 1,065 Income before income taxes 19,457 17,409 104,334 70,939 Income taxes 6,617 6,844 38,045 25,647 Net income $12,840 $10,565 $66,289 $45,292 Per common share: Basic earnings $0.71 $0.59 $3.67 $2.54 Diluted earnings $0.70 $0.58 $3.60 $2.48 Dividends paid $0.0850 $0.0475 $0.2400 $0.1425 Weighted average shares outstanding-basic 18,085 17,878 18,059 17,800 Weighted average shares outstanding-diluted 18,380 18,311 18,409 18,282 The Andersons, Inc. Consolidated Balance Sheets (Unaudited) September 30 December 31 September 30 (in thousands) 2008 2007 2007 Assets Current assets: Cash and cash equivalents $28,541 $22,300 $22,357 Restricted cash 3,630 3,726 3,737 Accounts receivable, net 184,566 106,257 127,382 Margin deposits, net 58,077 20,467 28,970 Inventories 382,268 502,904 306,908 Commodity derivative assets - current 113,427 205,956 108,039 Other current assets 71,769 43,281 44,200 Total current assets 842,278 904,891 641,593 Investments and other assets 169,800 137,518 115,597 Commodity derivative assets 19,010 29,458 29,999 Railcar assets leased to others (net) 175,947 153,235 143,251 Property, plant and equipment (net) 118,288 99,886 100,829 $1,325,323 $1,324,988 $1,031,269 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $43,600 $245,500 $163,400 Commodity derivative liabilities - current 80,874 122,488 77,617 Other current liabilities 370,430 359,224 244,624 Total current liabilities 494,904 727,212 485,641 Deferred items and other long-term liabilities 65,007 49,631 45,315 Commodity derivative liabilities 6,825 2,090 26,285 Long-term debt non-recourse 43,964 56,277 60,107 Long-term debt 295,207 133,195 85,302 Minority interest 10,936 12,219 12,607 Shareholders' equity 408,480 344,364 316,012 $1,325,323 $1,324,988 $1,031,269 Segment Data Grain & Plant Turf & Ethanol Rail Nutrient Specialty Quarter ended September 30, 2008 Revenues from external customers $651,045 $28,394 $162,018 $23,164 Gross Profit 25,021 9,009 21,731 5,176 Other income / Equity in earnings of affiliates 392 84 405 76 Operating income (loss) 9,443 5,164 7,223 (497) Quarter ended September 30, 2007 Revenues from external customers $382,907 $33,890 $76,732 $17,911 Gross Profit 16,294 10,367 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) Grain & Plant Turf & Ethanol Rail Nutrient Specialty Nine months ended September 30, 2008 Revenues from external customers $1,845,955 $106,346 $540,988 $98,740 Gross Profit 65,595 29,260 93,805 19,368 Other income / Equity in earnings of affiliates 20,567 602 732 265 Operating income (loss) 31,670 16,464 62,132 3,385 Nine months ended September 30, 2007 Revenues from external customers $950,430 $102,251 $326,200 $84,609 Gross Profit 46,968 28,897 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 Segment Data Retail Other Total Quarter ended September 30, 2008 Revenues from external customers $41,091 $- $905,712 Gross Profit 12,088 - 73,025 Other income / Equity in earnings of affiliates 125 (422) 660 Operating income (loss) (155) (1,721) 19,457 Quarter ended September 30, 2007 Revenues from external customers $42,268 $- $553,708 Gross Profit 11,942 - 48,814 Other income / Equity in earnings of affiliates 149 565 11,718 Operating income (loss) (554) (724) 17,409 Retail Other Total Nine months ended September 30, 2008 Revenues from external customers $127,384 $- $2,719,413 Gross Profit 37,575 - 245,603 Other income / Equity in earnings of affiliates 433 (480) 22,119 Operating income (loss) (172) (9,145) 104,334 Nine months ended September 30, 2007 Revenues from external customers $130,935 $- $1,594,425 Gross Profit 38,905 - 165,035 Other income / Equity in earnings of affiliates 467 6,495 36,314 Operating income (loss) 775 (638) 70,939
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