The Andersons, Inc. Reports Third Quarter Results

Nov 7, 2016

MAUMEE, Ohio, Nov. 7, 2016 /PRNewswire/ -- The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the third quarter ended September 30, 2016.

  • Company reports third quarter net income of $1.7 million, or $0.06 per diluted share
  • Grain Group turns in $1.9 million of pre-tax income after shedding underperforming assets and positioning itself to take advantage of improved crop conditions at harvest
  • Ethanol Group reports pre-tax earnings of $9.5 million, up from $5.9 million in the third quarter of 2015 on record production and a good margin environment
  • Plant Nutrient Group reduces pre-tax loss to $7.2 million as the Group navigates a difficult environment in the industry
  • Rail Group earns $6.8 million of pre-tax income as utilization rates soften

The Company reported net income attributable to The Andersons of $1.7 million for the third quarter of 2016, or $0.06 per diluted share, on revenues of $860 million. This represents a $2.9 million improvement compared to the net loss of $1.2 million in the same period in 2015, or ($0.04) per diluted share, on revenues of $909 million.

The Andersons, Inc. logo.

 

Year to date, the Company has produced net income attributable to The Andersons of $1.4 million or $0.05 per diluted share compared to the prior year when it generated $34.0 million, or $1.19 per diluted share.

"Conditions are improving for our Grain Group and margins are strong for the Ethanol Group, but challenges persist with our Plant Nutrient Group facing weak margins and our Rail Group continuing to experience softening in utilization," said CEO Pat Bowe.  "In this mixed environment, the team is making good progress on our $10 million cost reduction initiative and continuing to take action on the items within our control to combat uncertainty in some of our markets."

Third Quarter Segment Overview

Start of the turnaround for the Grain Group

In the third quarter, the Grain Group benefited from having shed its underperforming Iowa assets earlier this year and positioned itself to take advantage of improving crop conditions in the Eastern Corn Belt. Overall, grain production in the Eastern Corn Belt has rebounded from last year.  Bean yields were strong and corn did well in most markets with some pockets of weaker yields.

The table below breaks out the pre-tax income of the Group's Base Grain operations from that of its non-consolidated affiliates (Lansing Trade Group and Thompsons Limited).

$ in MM

Third Quarter

Year to Date

Pre-Tax Income

2016

2015

Vs

2016

2015

Vs

   Base Grain

$1.6

($0.9)

$2.5

($21.5)

($5.6)

($15.9)

   Grain Affiliates

$0.3

$1.0

($0.7)

($7.1)

$9.6

($16.7)

Grain Group

$1.9

$0.1

$1.8

($28.6)

$4.0

($32.6)









 

Third quarter pre-tax income for the Grain Group was $1.9 million, a $1.8 million increase over the same period last year. Base Grain operations were up $2.5 million year over year, driven by the elimination of losses generated by the Group's assets in Iowa last year.  Grain's affiliates continued to lag year over year, but have improved from the losses incurred in the first half of the year.

Year to date results for the Group were a pre-tax loss of $28.6 million, a drop of $32.6 million from the $4.0 million in pre-tax income realized in the same period last year.  

Harvest is well underway in most of our markets and substantially done in some. Factors we are seeing that will impact the Group's results in the fourth quarter and first half of 2017 include:

  • Though there are some localized areas of weaker production in Michigan and Ohio, the majority of the Group's draw areas has enjoyed significantly better production than last year, allowing them to purchase grain at good levels.
  • Wheat storage rates should be stronger year over year as carries in the wheat market were supported by increased Variable Storage Rates (VSR) that went into effect in third quarter. The market is currently supporting a little over half of the full carry benefit of the VSR increases.
  • Performance of the added elevator capacity in Tennessee was muted during the third quarter by stronger than normal export demand and cheaper barge freight on the Mississippi River, which increased local competition during their harvest.
  • While results in Grain's affiliates have improved compared to the first two quarters of this year, Lansing Trade Group is behind expectations largely attributed to compressed margins at its grain facilities and lower DDG flows to China given recently imposed import duties.

Ethanol Group benefits from continued strong demand and improved margin conditions

The Ethanol Group delivered another quarterly production volume record, producing a third quarter best of 95.4 million gallons compared to the 93.5 million gallons in the same period of the prior year.

The Group generated pre-tax income of $9.5 million during the third quarter compared to the $5.9 million generated in the same quarter last year.

Ethanol margins rose throughout the quarter as corn prices remained modest and gasoline prices began to return to prior year levels after holding at five year lows for most of the year.  Renewable Identification Number (RIN) prices held at strong levels through the quarter, near the $0.90 level, which supports demand for higher blends such as E-85. A portion of the quarters margins were hedged early in the quarter to lock in at attractive levels.

The expansion of the ethanol production facility in Albion, Michigan continues to proceed safely, on schedule and on budget. The project will double the joint venture's annual capacity to about 130 million gallons.  The Group expects the added capacity to come on line in the first half of 2017.

Industry dynamics in the quarter were supportive, with record production levels and historically high levels of gasoline demand driven by low fuel prices. The Group continues to see softness in distiller's dried grain (DDG) prices. Chinese sanctions and higher vomitoxin levels near some of our facilities have had some negative impact on DDG. 

Oversupply and falling prices continue to challenge Plant Nutrient volumes and margins

The Plant Nutrient Group incurred a pre-tax loss of $7.2 million in the third quarter compared to the $11.1 million pre-tax loss in 2015's third quarter. The slightly better performance was derived from expense reductions resulting from integration of the Kay-Flo business and savings generated as part of the Company's productivity initiative. Prior year results also included one-time acquisition related costs. These year-over-year improvements were largely offset by a continuing weak margin environment for nutrients due to oversupply and falling prices in the market.

Year to date, the Group has generated $18.0 million of pre-tax income compared to $8.1 million in the first nine months of 2015.

tons in thousands; $ in MM

Third Quarter

Year to Date

Volumes

2016

2015

Vs

2016

2015

Vs

   Basic Nutrients NPK

219

240

(21)

980

957

23

   Specialty Nutrients

78

78

-

405

295

110

   Other

73

80

(7)

397

443

(46)

Total Group Tons

370

398

(28)

1,782

1,695

87

Pre-Tax Income

$(7.2)

$(11.1)

$3.9

$18.0

$8.1

$9.9

 

During the third quarter basic nutrient volumes fell in part due to producer and dealer reluctance to buy in a sustained falling price environment. The Group also saw lower advance purchase activity during the quarter. These market forces are expected to persist through the fourth quarter.

Industry margin pressures and lower crop prices have weakened near-term Group performance in both the legacy basic nutrients and the more recently acquired specialty products businesses.  The Group remains committed of the soundness of its long term strategy to grow its specialty nutrients products that support precision agriculture. However, performance and market conditions have been disappointing this year. At this point the Group expects that the Kay-Flo acquisition will be near breakeven this year.

Rail Group performance falls on softer market conditions and timing of car sales income

North American rail traffic volume continues to fall year over year and Class I railroad velocities remain high, placing pressure on lease renewal rates and railcar utilization levels.

$ in millions

Third Quarter

Year to Date

Pre-Tax Income

2016

2015

Vs

2016

2015

Vs

   Lease Income

$3.4

$6.5

$(3.1)

$10.4

$27.4

$(17.0)

   Car Sales

$1.6

$3.2

$(1.6)

$6.4

$12.4

$(6.0)

   Repair & Other

$1.8

$2.2

$(0.4)

$5.9

$4.1

$1.8

Total Rail Group

$6.8

$11.9

$(5.1)

$22.7

$43.9

$(21.2)









 

The Rail Group earned $6.8 million of pre-tax income in the quarter compared to $11.9 million in the same quarter last year. The reduced performance was primarily driven by lower utilization rates that averaged 86.2 percent in the quarter, down from 91.6 percent in the third quarter of 2015. 

Income from railcar sales transactions was lower during the quarter as these transaction tend to vary quarter to quarter. Railcar repair business continued to perform well, setting its third consecutive record earnings quarter on improved productivity and strong demand. Other pre-tax income was lower due to the exit of the Group's investment in a short line railroad late last year.

Year-to-date, the Group has earned $22.7 million of pre-tax income compared to $43.9 million of pre-tax income generated in the same period last year. Roughly half of this variance is due to the $10.6 million gain that the group recorded in the second quarter of 2015 due to a large lease termination settlement. Year to date utilization has averaged 88.8 percent, down from the 92.3 percent average in the first nine months of 2015.

Retail Group performance slips on lower same store sales; Group closes underperforming asset

The Retail Group had a pre-tax loss of $1.6 million for the third quarter compared to a pre-tax loss of $800,000 in the third quarter last year. Comparable store sales were down 6.1 percent year over year, driving gross margins down $900,000 from the prior year. The Group was able to partially mitigate the loss by instituting labor savings initiatives. 

On a year to date basis, the Group had a pre-tax loss of $2.6 million compared to a $1.5 million loss for the same period last year.

On October 10, the Company announced its intent to close the specialty foods store in Sylvania, Ohio. The site will close by mid-November. The Group continues to operate two stores in each of the Toledo, Ohio and Columbus, Ohio markets.

Corporate

Undistributed corporate expenses were lower in the quarter by $2.2 million, primarily as a result of beginning to capitalize professional services related to the next wave of IT infrastructure deployments and favorable interest expenses as a result of mark to market gains on certain interest rate hedges contracts compared to mark to market losses recognized in the third quarter of 2015. These gains were partially offset by other slightly higher corporate costs.

Conference Call

The Company will host a webcast on Tuesday, November 8, 2016 at 11:00 A.M. ET, to discuss its performance and provide its outlook for the remainder of 2016.  To dial in to the call, please dial 866-439-8514 or 678-509-7568 (participant passcode is 97764895).  You are encouraged to call ten minutes before the conference call begins. 

To access the webcast: Click on the link: http://edge.media-server.com/m/p/46z3jodz/lan/en Log on. Click on the phone icon at the bottom of the "webcast window" on the left side of the screen.  You will be provided with the conference call number and passcode. Click the gear set icon (left of the telephone icon) and select 'Live Phone' to synchronize the presentation with the audio on your phone. 

A replay of the call can also be accessed under the heading "Investor" on the Company website at www.andersonsinc.com.  

Forward Looking Statements

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.

Company Description

Founded in Maumee, Ohio, in 1947, The Andersons is a diversified Company rooted in agriculture conducting business across North America in the grain, ethanol, plant nutrient, and rail sectors. The Company also has a consumer retailing presence. For more information, visit The Andersons online at www.andersonsinc.com.


The Andersons, Inc.





Condensed Consolidated Statements of Operations



(Unaudited)














Three months ended September 30,


Nine months ended September 30,

(in thousands, except per share data)

2016


2015


2016


2015

Sales and merchandising revenues (a)

$     859,612


$        909,093


$    2,811,735


$     3,015,022

Cost of sales and merchandising revenues

782,597


823,903


2,569,923


2,738,348

Gross profit

77,015


85,190


241,812


276,674

Operating, administrative and general expenses

78,767


88,698


234,053


251,044

Interest expense

4,441


6,147


18,046


16,210

Other income:








Equity in earnings of affiliates

8,422


3,845


3,789


23,295

Other income, net

2,216


3,355


11,144


20,235

Income (loss) before income taxes

4,445


(2,455)


4,646


52,950

Income tax provision (benefit)

1,104


(1,505)


1,486


17,556

Net income (loss)

3,341


(950)


3,160


35,394

Net income attributable to the noncontrolling interests

1,619


277


1,711


1,433

Net income (loss) attributable to The Andersons, Inc.

$          1,722


$          (1,227)


$            1,449


$          33,961









Per common share:








Basic earnings attributable to The Andersons, Inc. common shareholders

$            0.06


$            (0.04)


$              0.05


$              1.19

Diluted earnings attributable to The Andersons, Inc. common shareholders

$            0.06


$            (0.04)


$              0.05


$              1.19

Dividends declared

$          0.155


$              0.14


$            0.465


$              0.42









(a)  Revenue and cost of sales in the interim periods of 2015 have been recast to reflect a change in policy related to the classification of gains and losses on derivative contracts as disclosed in the 2015 10-K.

 

 


The Andersons, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)










(in thousands)

September 30, 2016


December 31, 2015


September 30, 2015


Assets







Current assets:







Cash and cash equivalents

$                  78,158


$                   63,750


$                    40,658


Restricted cash

190


451


181


Accounts receivable, net

173,593


170,912


201,664


Inventories

427,754


747,399


527,789


Commodity derivative assets – current

59,837


49,826


60,965


Deferred income taxes

-


6,772


6,735


Other current assets

43,761


90,412


66,411


Total current assets

783,293


1,129,522


904,403


Other assets:







Commodity derivative assets – noncurrent

1,346


412


1,584


Other assets, net (a)

180,010


193,689


273,078


Equity method investments

225,114


242,107


223,207



406,470


436,208


497,869


Rail Group assets leased to others, net

334,401


338,111


347,100


Property, plant and equipment, net (a)

460,247


455,260


442,322


Total assets

$            1,984,411


$              2,359,101


$               2,191,694









Liabilities and equity







Current liabilities:







Short-term debt

$                           -


$                   16,990


$                    82,801


Trade and other payables

356,931


668,788


466,428


Customer prepayments and deferred revenue

15,725


66,762


23,581


Commodity derivative liabilities – current

59,770


37,387


49,911


Accrued expenses and other current liabilities

68,465


70,324


71,593


Current maturities of long-term debt

51,520


27,786


26,989


Total current liabilities

552,411


888,037


721,303









Other long-term liabilities

30,525


18,176


16,510


Commodity derivative liabilities – noncurrent

1,954


1,063


2,912


Employee benefit plan obligations

45,260


45,805


58,123


Long-term debt, less current maturities

395,559


436,208


413,561


Deferred income taxes

178,535


186,073


179,591


Total liabilities

1,204,244


1,575,362


1,392,000


Total equity

780,167


783,739


799,694


Total liabilities and equity

$            1,984,411


$              2,359,101


$               2,191,694









(a) For the period ended September 30, 2015 Other assets, net and Property, plant and equipment, net have been recast to reflect the change in accounting policy which reclassified software and accumulated amortization.  Additional detail is available in the 2015 10-K.







 

 


The Andersons, Inc.











Segment Data











(Unaudited)

























(in thousands)

Grain


Ethanol


Plant
Nutrient


Rail


Retail


Other


Total

Three months ended September 30, 2016














Revenues from external customers

$     550,189


$  139,413


$ 101,770


$    38,201


$  30,039


$        —


$     859,612

Gross profit

30,465


6,301


19,387


12,527


8,335



77,015

Equity in earnings of affiliates

533


7,889






8,422

Other income, net

361


6


711


451


83


604


2,216

Income (loss) before income taxes

1,879


11,160


(7,231)


6,754


(1,578)


(6,539)


4,445

Income (loss) attributable to the noncontrolling interests


1,619






1,619

Income (loss) before income taxes attributable to The Andersons, Inc. (a)

$         1,879


$      9,541


$    (7,231)


$      6,754


$  (1,578)


$  (6,539)


$         2,826














-

Three months ended September 30, 2015













-

Revenues from external customers (b)

$     545,320


$  137,765


$  149,303


$    44,758


$  31,947


$        —


$     909,093

Gross profit

29,926


6,265


22,320


17,491


9,188



85,190

Equity in earnings of affiliates

1,340


2,505






3,845

Other income (loss), net

618


36


947


2,093


92


(431)


3,355

Income (loss) before income taxes

129


6,167


(11,114)


11,913


(769)


(8,781)


(2,455)

Income (loss) attributable to the noncontrolling interest

(2)


279






277

Income (loss) before income taxes attributable to The Andersons, Inc. (a)

$            131


$      5,888


$  (11,114)


$    11,913


$    (769)


$  (8,781)


$       (2,732)
















Grain


Ethanol


Plant
Nutrient


Rail


Retail


Other


Total

Nine months ended September 30, 2016














Revenues from external customers

$ 1,611,992


$  396,626


$  588,797


$  118,152


$  96,168


$        —


$  2,811,735

Gross profit

64,216


13,207


95,653


40,689


28,047



241,812

Equity in earnings (loss) of affiliates

(6,141)


9,930






3,789

Other income, net

3,671


39


2,728


2,013


263


2,430


11,144

Income (loss) before income taxes

(28,566)


14,762


18,008


22,698


(2,644)


(19,612)


4,646

Income (loss) attributable to the noncontrolling interests

(3)


1,714






1,711

Income (loss) before income taxes attributable to The Andersons, Inc. (a)

$     (28,563)


$    13,048


$    18,008


$    22,698


$  (2,644)


$ (19,612)


$         2,935














-

Nine months ended September 30, 2015













-

Revenues from external customers

$  1,705,393


$  413,130


$  660,440


$  134,497


$ 101,562


$          —


$  3,015,022

Gross profit

84,656


18,394


90,984


53,062


29,578



276,674

Equity in earnings of affiliates

10,764


12,531






23,295

Other income (loss), net

2,682


83


2,441


14,766


284


(21)


20,235

Income (loss) before income taxes

4,016


22,274


8,183


43,915


(1,483)


(23,955)


52,950

Income (loss) attributable to the noncontrolling interest

(8)


1,441






1,433

Income (loss) before income taxes attributable to The Andersons, Inc. (a)

4,024


20,833


8,183


43,915


(1,483)


(23,955)


51,517















(a) Income (loss) before income taxes attributable to The Andersons, Inc. for each Group is defined as net sales and merchandising revenues plus identifiable other income less all identifiable operating expenses, including interest expense for carrying working capital and long-term assets and is reported net of the noncontrolling interest share of income (loss).

(b) Revenue in the interim periods of 2015 has been recast to reflect a change in policy related to the classification of gains and losses on derivative contracts as disclosed in the 2015 10-K.

 

Logo - http://photos.prnewswire.com/prnh/20081104/CLTU081LOGO

SOURCE The Andersons, Inc.

For further information: Investor Relations - Jim Burmeister, Phone: 419-891-5848, E-mail: Jim_Burmeister@andersonsinc.com


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