The Andersons, Inc. Reports Third Quarter Results

Nov 6, 2017

MAUMEE, Ohio, Nov. 6, 2017 /PRNewswire/ -- The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the third quarter ended September 30, 2017.

The Andersons, Inc. logo. (PRNewsFoto/The Andersons, Inc.)

The Company reports net income of $2.5 million, or $0.09 per diluted share compared to $1.7 million and $0.06 per share in third quarter 2016.

  • Grain Group records pretax income of $2.6 million on continued strong grain storage capacity utilization.
  • Ethanol Group earns $6.2 million of pretax income despite weaker year-over-year margins.
  • Plant Nutrient Group reports a pretax loss of $7.9 million due to persistent low prices and margins.
  • Rail Group earns $6.1 million of pretax income in a slowly improving but still soft market.

The Company reported third quarter 2017 net income attributable to The Andersons of $2.5 million, or $0.09 per diluted share, on revenues of $837 million. Those results compared to 2016 third quarter net income of $1.7 million, or $0.06 per diluted share, on revenues of $860 million.

"We performed reasonably well in the third quarter when considering that we continue to face some difficult market conditions, and we incurred some unusual expenses and sold two former retail properties," said President and CEO Pat Bowe. "The Grain Group again recorded better year-over-year results driven by good margins on corn and soybean sales and strong space margins for wheat. On a year-to-date basis, our Grain earnings have improved by more than $33 million."

Bowe continued, "Ethanol margins were lower year-over-year for the quarter in spite of strong U.S. exports. Current margins are disappointing. Forward curve margins into the first quarter of 2018 are below last year's levels as well."

"The Plant Nutrient Group's margins continued to be compressed by an oversupply of nutrients and low farm income, even as year-over-year volumes were somewhat improved. The Rail Group's base leasing income and utilization continued their improvement from the second quarter, and the group also recorded better income from selling and scrapping cars," added Bowe.

For the first nine months of the year, the Company recorded a net loss attributable to The Andersons of $27.2 million, or ($0.96) per diluted share, and adjusted net income attributable to The Andersons of $14.8 million, or $0.52 per diluted share, compared to net income of $1.4 million, or $0.05 per diluted share, during the same period last year.

For purposes of better understanding ongoing results, the Company has expanded its pretax income disclosure in the table below to adjust for amounts that are not reflective of ongoing operations. Specifically, an adjustment has been made for the goodwill impairment charged in the second quarter of 2017 associated with the Plant Nutrient Group.

$ in millions      


Third Quarter



        Year to Date




2017

2016

Vs

2017

2016

Vs

Reported Pretax Income (Loss)

$5.0

$4.4

$0.6

$(19.6)

$4.6

$(24.2)

Goodwill Impairment

-

-

-

42.0

-

42.0

Adjusted Pretax Income

$5.0

$4.4

$0.6

$22.4

$4.6

$17.8















Third Quarter Segment Overview

Grain Group Operating Income Increases Compared to Prior Year and Improves for Fourth Consecutive Quarter 

The Grain Group generated pretax income of $2.6 million in the quarter, up $0.7 million over its third quarter 2016 results.

The table below separates the earnings of the group's base grain business from those of its grain affiliates. Base grain business earnings originate from grain facilities that the Company operates. The grain affiliates' earnings originate from investments in the Company's grain affiliates, which include Lansing Trade Group and Thompsons Limited. 

$ in millions     


Third Quarter



Year to Date


Pretax Income

2017

2016

Vs

2017

2016

Vs

  Base Grain

$3.4

$1.7

$1.7

$4.0

$(21.5)

$25.5

  Grain Affiliates

(0.8)

0.2

(1.0)

0.5

(7.1)

7.6

Total Grain Group

$2.6

$1.9

$0.7

$4.5

$(28.6)

$33.1












Base grain pretax income improved by $1.7 million in the third quarter compared to 2016 results. Grain storage, risk management and trading income were all much improved. Low prices and very low volatility have farmers remaining reluctant to sell as we pass the midpoint of U.S. corn harvest. 

Ethanol Group Challenged by Decreasing Margins

The Ethanol Group generated pretax income of $6.1 million attributable to The Andersons in the third quarter, more than a third lower than the $9.5 million pretax income attributable to The Andersons for the same period in 2016. This result is primarily due to lower margins.

The table below separates the results of the Ethanol Group's unconsolidated entities, which include the Albion, Mich.; Clymers, Ind.; and Greenville, Ohio plants, from the earnings of the consolidated Denison, Iowa plant and the group's management services income.

$ in millions     


                       Third Quarter

        Year to Date


2017

2016

Vs

2017

2016

Vs

Equity in Earnings of Affiliates

$4.4

$9.5

$(5.1)

$7.3

$11.6

$(4.3)

Consolidated Operations and Service Fees

1.8

1.6

0.2

5.3

3.1

2.2

Pretax Income

6.2

11.1

(4.9)

12.6

14.7

(2.1)

Attributable to Noncontrolling Interests

0.1

1.6

(1.5)

0.1

1.7

(1.6)

Ethanol Group Pretax Income Attributable to The Andersons

$6.1

$9.5

$(3.4)

$12.5

$13.0

$(0.5)











Robust industry production was the main contributor to the softer margin environment even as the export market stayed strong. In addition, corn and natural gas costs were each up more than 4 percent year-over-year. The group's industry-leading E-85 sales increased by 10 percent.  

The group continued to incur discounts on distillers dried grains (DDGs) during the quarter due to problems with vomitoxin present in the 2016 corn crop primarily in the vicinity of the Albion plant. Lower international demand for DDGs also continued to pressure pricing and margins. Those two conditions combined to drive values 35 percent lower than in the comparable 2016 period.

The group also recorded $1.5 million in expense for preliminary engineering and design work. The work pertained to a potential capital project that did not meet the group's investment criteria, so the group cancelled it.

Plant Nutrient Group Results Hurt by Continued Lower Margins

For purposes of better understanding ongoing results, the Company has expanded the Plant Nutrient Group's pretax income disclosure in the table below to adjust for the second quarter goodwill impairment associated with the wholesale fertilizer business.

$ in millions     


    Third Quarter

Year to Date


2017

2016

Vs

2017

2016

Vs

Reported Pretax Income (Loss)

$(7.9)

$(7.2)

$(0.7)

$(27.1)

$18.0

$(45.1)

Goodwill Impairment

-

-

-

42.0

-

42.0

Adjusted Pretax Income (Loss)

$(7.9)

$(7.2)

$(0.7)

$14.9

$18.0

$(3.1)










The Plant Nutrient Group recorded a pretax loss of $7.9 million in the third quarter compared to a pretax loss of $7.2 million in the third quarter of 2016. The quarter was again characterized by low nutrient prices, an oversupply of product and unstable markets.

Base nutrient (NPK) volumes were up about 12 percent year-over-year, while higher-margin, value-added nutrient tons (low salt starter fertilizers and micro nutrients) were down 4 percent. Same-store volumes for products in the group's other businesses (Farm Centers, Lawn and Cob) were up about 5 percent.

Margins per ton were considerably lower in both base nutrients and value-added products, finishing down 41 percent and 5 percent year-over-year, respectively. Margins per ton improved considerably for the farm centers and the cob business, but were flat in the lawn fertilizer business year-over-year. Those volume and margin changes combined to reduce gross profit by about $2.1 million.

The group accrued a $2.2 million expense to settle a lawsuit that prevented an improvement over third quarter 2016 results. 

Rail Group Market Conditions Continue to Improve

The Rail Group earned third quarter pretax income of $6.1 million compared to $6.8 million in the same period of the prior year.

$ in millions

     Third Quarter

Year to Date

Pretax Income

2017

2016

Vs

2017

2016

Vs

  Lease Income

$3.5

$3.4

$0.1

$7.1

$10.4

$(3.3)

  Car Sales

2.6

1.6

1.0

7.6

6.4

1.2

  Services and Other

-

1.8

(1.8)

3.4

5.9

(2.5)

Total Rail Group

$6.1

$6.8

$(0.7)

$18.1

$22.7

$(4.6)

   Utilization Rate

85.8%

86.2%

(0.4)%

84.6%

88.8%

(4.2)%

Base leasing operations earned $3.5 million, up $0.6 million sequentially and $0.1 million year-over-year, on 0.4 percent lower utilization. Utilization averaged 85.8 percent during the quarter compared to 84.4 percent sequentially and 86.2 percent during the same period last year. Average lease rates were down almost 4 percent as shorter leases at lower rates began to have an impact. However, maintenance expense was more than 20 percent lower than in the period a year ago.

The group realized $2.6 million of pretax income on railcar sales in the quarter compared to $1.4 million sequentially and $1.6 million in the third quarter of 2016.

Rail's service and other pretax income was negligible in the quarter compared to $1.8 million during the same period of 2016. Repair sales that were 7 percent lower year-over-year and workers compensation and other expenses accrued by the group as a result of a third quarter fatality each accounted for about half of the decreased results.

North American rail traffic excluding coal carloads was down about 3 percent year-over-year, and is flat year-to-date compared to 2016 and remains historically weak. However, Class I railroad efficiency continued to be lower than year-ago levels.

Company Sells Two Retail Properties; Other Net Company-Level Expenses Somewhat Lower

The Company recorded pretax income of $4.4 million during the quarter from its closed retail business. This result was driven by the sale of two of four retail properties for a combined gain of $5.7 million.

Unallocated net Company-level expenses for the third quarter of 2017 were $6.4 million, slightly lower than the $6.5 million incurred in the third quarter of 2016.

Conference Call

The Company will host a webcast on Tuesday, November 7, 2017, at 11 a.m. Eastern Standard Time to discuss its performance and provide its outlook for the remainder of 2017 and some early thoughts about 2018. To access the call, please dial 866-439-8514 or 678-509-7568 (participant passcode is 9288638). We recommend that you call 10 minutes before the conference call begins.

To access the webcast, click on the link: http://edge.media-server.com/m6/p/8eac3s4i. Complete the four fields as directed and click submit. A replay of the call can also be accessed under the heading "Investors" 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.

Non-GAAP Measures

This release contains non-GAAP financial measures. "Adjusted Pretax Income" is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to compare our results from period to period. We have excluded the impairment charge related to our wholesale fertilizer group, as we believe it is not representative of our ongoing core operations when calculating Adjusted Pretax Income and Adjusted Net Income. Reconciliations of the non-GAAP to GAAP measures may be found within the financial tables provided in the release and a reconciliation of net income to adjusted net income is provided in a table below.

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. 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)

2017


2016


2017


2016

Sales and merchandising revenues 

$                 836,595


$                    859,612


$              2,682,273


$                 2,811,735

Cost of sales and merchandising revenues

766,924


782,597


2,448,310


2,569,923

Gross profit

69,671


77,015


233,963


241,812

Operating, administrative and general expenses

68,456


78,767


220,331


234,053

Goodwill impairment

-


-


42,000


-

Interest expense

5,384


4,441


17,472


18,046

Other income:








Equity in earnings of affiliates

3,586


8,422


8,093


3,789

Other income, net

5,588


2,216


18,117


11,144

Income (loss) before income taxes

5,005


4,445


(19,630)


4,646

Income tax provision

2,389


1,104


7,505


1,486

Net income (loss)

2,616


3,341


(27,135)


3,160

Net income attributable to the noncontrolling interests

83


1,619


73


1,711

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

$                      2,533


$                        1,722


$                  (27,208)


$                        1,449









Per common share:








Basic earnings attributable to The Andersons, Inc. common shareholders

$                        0.09


$                          0.06


$                       (0.96)


$                          0.05

Diluted earnings attributable to The Andersons, Inc. common shareholders

$                        0.09


$                          0.06


$                       (0.96)


$                          0.05

Dividends declared

$                      0.160


$                        0.155


$                      0.480


$                        0.465

 

 

The Andersons, Inc.








Reconciliation to Adjusted Net Income








(Unaudited)

















Three months ended September 30,


Nine months ended September 30,

(in thousands, except per share data)

2017


2016


2017


2016

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

$                     2,533


$                       1,722


$                 (27,208)


$                       1,449

Items impacting other income, net of tax:








Goodwill impairment

-


-


42,000


-

Total adjusting items

-


-


42,000


-

Adjusted net income (loss) attributable to The Andersons, Inc.

$                     2,533


$                       1,722


$                   14,792


$                       1,449

















Diluted earnings attributable to The Andersons, Inc. common
shareholders

$                       0.09


$                         0.06


$                      (0.96)


$                         0.05









Impact on diluted earnings per share

-


-


1.48


-

Adjusted diluted earnings per share

$                       0.09


$                         0.06


$                       0.52


$                         0.05

 

 

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













(in thousands)

September 30, 2017


December 31, 2016


September 30, 2016

Assets






Current assets:






Cash and cash equivalents

$                    24,478


$                     62,630


$                      78,158

Restricted cash

-


471


190

Accounts receivable, net

196,192


194,698


173,593

Inventories

475,602


682,747


427,754

Commodity derivative assets – current

45,202


45,447


59,837

Other current assets

53,958


72,133


43,761

Assets held for sale

8,383


-


-

Total current assets

803,815


1,058,126


783,293

Other assets:






Commodity derivative assets – noncurrent

245


100


1,346

Other assets, net

148,328


180,445


180,010

Equity method investments

215,031


216,931


225,114


363,604


397,476


406,470

Rail Group assets leased to others, net

377,393


327,195


334,401

Property, plant and equipment, net

419,348


450,052


460,247

Total assets

$              1,964,160


$                2,232,849


$                 1,984,411







Liabilities and equity






Current liabilities:






Short-term debt

$                    19,000


$                     29,000


$                              -

Trade and other payables

381,359


581,826


356,931

Customer prepayments and deferred revenue

29,520


48,590


15,725

Commodity derivative liabilities – current

38,578


23,167


59,770

Accrued expenses and other current liabilities

67,064


69,648


68,465

Current maturities of long-term debt

53,972


47,545


51,520

Total current liabilities

589,493


799,776


552,411







Other long-term liabilities

34,407


27,833


30,525

Commodity derivative liabilities – noncurrent

902


339


1,954

Employee benefit plan obligations

36,356


35,026


45,260

Long-term debt, less current maturities

371,315


397,065


395,559

Deferred income taxes

181,876


182,113


178,535

Total liabilities

1,214,349


1,442,152


1,204,244

Total equity

749,811


790,697


780,167

Total liabilities and equity

$              1,964,160


$                2,232,849


$                 1,984,411

 

 

The Andersons, Inc.














Segment Data














(Unaudited)




























(in thousands)

Grain


Ethanol


Plant Nutrient


Rail


Retail


Other


Total

Three months ended September 30, 2017














Revenues from external customers

$                 497,613


$           191,531


$          103,620


$            43,093


$                  738


$                     —


$               836,595

Gross profit

32,316


6,388


17,349


13,422


196



69,671

Equity in earnings of affiliates

(694)


4,280






3,586

Other income, net

539


12


(1,622)


693


5,869


97


5,588

Income (loss) before income taxes

2,641


6,181


(7,920)


6,127


4,424


(6,448)


5,005

Income (loss) attributable to the noncontrolling interests


83






83

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

$                      2,641


$               6,098


$              (7,920)


$                6,127


$               4,424


$              (6,448)


$                    4,922















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
















Grain


Ethanol


Plant Nutrient


Rail


Retail


Other


Total

Nine months ended September 30, 2017














Revenues from external customers

$              1,464,588


$           533,515


$          514,943


$           121,632


$             47,595


$                     —


$             2,682,273

Gross profit

86,412


15,248


83,091


38,429


10,783



233,963

Equity in earnings of affiliates

864


7,229






8,093

Other income, net

3,046


34


4,578


2,264


7,302


893


18,117

Income (loss) before income taxes

4,497


12,547


(27,074)


18,065


(9,140)


(18,525)


(19,630)

Income (loss) attributable to the noncontrolling interests

-


73






73

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

$                      4,497


$             12,474


$           (27,074)


$             18,065


$              (9,140)


$            (18,525)


$                (19,703)















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 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 interest

(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















(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).

 

SOURCE The Andersons, Inc.

For further information: Investor Relations Contact: John Kraus, Director, Investor Relations, Phone: 419-891-6544, E-mail: investorrelations@andersonsinc.com


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