The Andersons, Inc. Reports First Quarter 2019 Results

May 6, 2019

MAUMEE, Ohio, May 6, 2019 /PRNewswire/ -- The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the first quarter ended March 31, 2019.

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

First Quarter Highlights:

  • Company reports a net loss of $14.0 million or $0.43 per diluted share and an adjusted net loss of $5.3 million, or $0.16 per diluted share. Adjustments include $8.7 million, or $0.27 per diluted share, of expenses related to the Lansing Trade Group acquisition, which closed in early January. Integration is progressing well. 
  • Adjusted EBITDA increases by 45 percent to $40.2 million.
  • Trade Group reports pretax loss of $17.5 million and adjusted pretax loss of $5.9 million in a continuing difficult grain margin environment.
  • Ethanol Group remains profitable in a weak margin environment, recording $2.6 million of pretax income on continued improved plant efficiency.
  • Plant Nutrient Group records pretax loss of $3.9 million on delayed primary and specialty nutrient sales and lower lawn and contract manufacturing results.
  • Rail Group earns $4.3 million of pretax income on better railcar leasing and repair income.

"We closed our acquisition of Lansing Trade Group successfully in early January, and our work to integrate it with our former Grain Group is on schedule," said President and CEO Pat Bowe. "I am very pleased with how well the new Trade Group team is functioning. However, our overall results were hampered by markets that continue to be negatively impacted by trade disruptions and poor weather that are affecting multiple business units significantly."

 $ in millions, except per share amounts     


Q1 2019

Q1 2018

Variance

Pretax Income (Loss) Attributable to the Company1 

($19.4)

($2.0)

($17.4)

Adjusted Pretax Income (Loss)

($7.9)

($2.0)

($5.9)

     Trade (Grain) Group

($5.9)

($1.2)

($4.7)

     Ethanol Group

$2.6

$3.1

($0.5)

     Plant Nutrient Group

($3.9)

$1.1

($5.0)

     Rail Group

$4.3

$4.0

$0.3

     Other

($4.9)

($8.9)

$4.0

Net Income (Loss)

($14.0)

($1.7)

($12.3)

Adjusted Net Income (Loss)

($5.3)

($1.7)

($3.6)

EPS

($0.43)

($0.06)

($0.37)

Adjusted EPS

($0.16)

($0.06)

($0.10)

EBITDA

$28.7

$27.7

$1.0

Adjusted EBITDA

$40.2

$27.7

$12.5


1 Excludes net income (loss) attributable to the noncontrolling interests of ($0.2) in Q1 2019 and ($0.3) in Q1 2018.

"The Trade Group's adjusted results were mixed, as weak markets and foreign trade uncertainty limited grain margin opportunities, and the group also incurred some insured property losses at one Nebraska facility due to heavy rains," Bowe continued. "The Ethanol Group's results were encouraging, as the group remained profitable by continuing its excellent plant efficiency and hedging its production well. The Plant Nutrient Group continues to struggle, as its results were hurt by lower volume, primarily in agriculture and lawn fertilizer, and higher operating expenses. Rail's results improved on better leasing and repair results, even while it reduced car sale income by electing to sell fewer cars."

Adjustments Related to the Lansing Acquisition

The company made significant purchase price accounting adjustments and incurred other expenses during the period due to the Lansing acquisition. The company adjusted the Trade Group's results for several one-time, largely noncash expenses totaling $8.2 million, or $0.19 per diluted share, and for noncash stock compensation expenses totaling $3.4 million, or $0.08 per diluted share, that were associated with the acquisition. 

While not included in the adjustments above, the group also incurred an incremental $4.4 million, or $0.10 per diluted share, of depreciation and amortization expenses due to the revaluation of Lansing and Thompsons Limited fixed assets and the valuation of its definite-lived intangibles. The group expects to incur similar amounts each quarter through 2021.

In addition, the company has recast first quarter 2018 pretax income for the Grain and Ethanol Groups to conform to segment reporting changes made in conjunction with the Lansing acquisition.  The changes, which related to service agreements for DDG marketing and a lease of grain storage assets in Denison, resulted in a shift of $1.2 million in pretax income from the Grain Group to the Ethanol Group. The Company expects similar shifts for each of the remaining three quarters of 2018.

First Quarter Segment Overview

Trade Group Results Muted by Difficult Margin Environment

With the closing of the Lansing acquisition effective January 1, 2019. Trade Group results now include the consolidated operating results of both Lansing and Thompsons. 

The Trade Group recorded a pretax loss of $17.5 million and an adjusted pretax loss of $5.9 million for the quarter. As noted above, the group also incurred $4.4 million of incremental depreciation and amortization expenses. The former Grain Group posted a loss of $1.2 million in the first quarter of 2018.

  • Income from merchandising activities was muted by limited market volatility.
  • Income derived from grain originations and the group's assets was down slightly on limited farmer selling and diminished income from storing wheat; those results also included a $2.2 million insured loss due to property damage caused by heavy rains in Nebraska.
  • Food ingredient and specialty grains business results were down.

Due in large part to the Lansing acquisition, the group's first quarter 2019 EBITDA and adjusted EBITDA were $7.0 million and $18.6 million, respectively, which compare favorably to the Grain Group's $5.7 million EBITDA in the first quarter of 2018.

Ethanol Group Performance Down Slightly on Weak Margins

The Ethanol Group earned pretax income of $2.6 million in the first quarter, somewhat less than the $3.1 million of pretax income it earned in the same period in 2018.  

  • Industry margins were weak, but improved late in the quarter.
  • The group continued to improve plant efficiency, which led to higher product yields.
  • E85 sales were well below those of the prior year, but began rebounding as gasoline prices rose.

Construction is nearly complete on the state-of-the-art bio-refinery in Kansas that the group is building in partnership with ICM, Inc. The company expects the facility to begin operating early in the third quarter. 

Plant Nutrient Group Records Pretax Loss of $3.9 Million as All Product Lines Struggle

The Plant Nutrient Group recorded a pretax loss of $3.9 million in the first quarter compared to pretax income of $1.1 million in the prior year period.

  • Both primary and specialty nutrient volumes significantly lagged the prior year due to extended cold and wet weather. 
  • Lawn and contract manufacturing got off to a decent start, but volumes were down even more than expected.

The group's current quarter EBITDA was $5.0 million, a $4.3 million decrease from 2018 first quarter results.

Rail Group Registers Improved Quarter on Stronger Leasing and Repair Results

The Rail Group earned first quarter pretax income of $4.3 million compared to $4.0 million in the same period of the prior year.

  • The group's income from railcar leasing increased by $1.2 million year over year on record utilization, more cars on lease and slightly higher average lease rates.
  • Income from car sales declined $1.7 million year over year.
  • Service and other pretax income improved by $0.9 million on higher volume and better margins in the repair business.

The group's first quarter 2019 EBITDA was $16.3 million, up 20 percent from the $13.5 million in the comparable 2018 period.

Adjusted Net Corporate Expenses Decline Year over Year

Unallocated net company-level expenses were $4.9 million, down considerably from the $8.9 million net expenses incurred in the comparable 2018 period. The year-over-year decrease was due in part due to the absence of severance expenses, which were $1.4 million in the prior period, and lower expenses associated with SAP implementation.         

Conference Call

The company will host a webcast on Tuesday, May 7, 2019, at 11 a.m. Eastern Daylight Time, to discuss its performance and provide its updated outlook for 2019. To access the call, please dial 866-439-8514 or 678-509-7568 (participant passcode is 9681589). It is recommended 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/aec8j4o7.  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. The company believes adjusted pretax income, adjusted net income, adjusted net income per share, EBITDA and adjusted EBITDA provide additional information to investors and others about its operations, allowing an evaluation of underlying operating performance and better period-to-period comparability. Adjusted pretax income, adjusted net income, adjusted net income per share, EBITDA and adjusted EBITDA do not and should not be considered as alternatives to pretax income, net income or net income per share as determined by generally accepted accounting principles. Reconciliations of the GAAP to non-GAAP measures may be found within the financial tables provided in the release.

Company Description

Founded in 1947 in Maumee, Ohio, The Andersons, Inc. (Nasdaq: ANDE) is a diversified company rooted in agriculture that conducts business in the commodity trading, ethanol, plant nutrient and rail sectors. Guided by its Statement of Principles, The Andersons strives to provide extraordinary service to its customers, help its employees improve, support its communities and increase the value of the company. For more information, please visit www.andersonsinc.com.

 

The Andersons, Inc.




Condensed Consolidated Statements of Operations




(Unaudited)









Three months ended March 31,

(in thousands, except per share data)

2019


2018

Sales and merchandising revenues 

$              2,079,391


$                    635,739

Cost of sales and merchandising revenues

1,969,727


572,034

Gross profit

109,664


63,705

Operating, administrative and general expenses

113,349


64,257

Asset impairment

-


-

Goodwill impairment

-


-

Interest expense

15,910


6,999

Other income:




  Equity in earnings (loss) of affiliates

1,519


3,573

  Other income, net

(1,514)


1,686

Income (loss) before income taxes

(19,590)


(2,292)

Income tax provision (benefit)

(5,442)


(310)

Net income (loss)

(14,148)


(1,982)

  Net income attributable to the noncontrolling interests

(155)


(282)

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

$                  (13,993)


$                      (1,700)





Per common share:




  Basic earnings (loss) attributable to The Andersons, Inc. common shareholders

$                       (0.43)


$                        (0.06)

  Diluted earnings (loss) attributable to The Andersons, Inc. common shareholders

$                       (0.43)


$                        (0.06)

  Dividends declared

$                      0.170


$                        0.165





 

 

The Andersons, Inc.




Reconciliation to Adjusted Net Income




(Unaudited)









Three months ended March 31,

(in thousands, except per share data)

2019


2018

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

$                 (13,993)


$                     (1,700)

Items impacting other income, net of tax:




One time acquisition costs

6,116


-

Transaction related stock compensation

2,562


-





Total adjusting items

8,678


-

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

$                   (5,316)


$                     (1,700)





Diluted earnings attributable to The Andersons, Inc. common shareholders

$                      (0.43)


$                       (0.06)





Impact on diluted earnings per share

0.27


-

Adjusted diluted earnings (loss) per share

$                      (0.16)


$                       (0.06)





 

 

The Andersons, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)







(in thousands)

March 31, 2019


December 31, 2018


March 31, 2018

Assets






Current assets:






  Cash and cash equivalents

$                    29,991


$                     22,593


$                      31,497

  Accounts receivable, net

611,290


207,285


216,021

  Inventories

1,026,465


690,804


731,629

  Commodity derivative assets – current

158,277


51,421


43,810

  Other current assets

60,222


50,703


57,147

  Assets held for sale

364


392


57,775

Total current assets

1,886,609


1,023,198


1,137,879

Other assets:






  Commodity derivative assets – noncurrent

3,757


480


1,739

  Other assets, net

352,905


127,503


143,445

  Right of use asset, net

85,766


-


-

  Equity method investments

121,781


242,326


224,449


564,209


370,309


369,633

Rail Group assets leased to others, net

537,629


521,785


462,253

Property, plant and equipment, net

671,805


476,711


393,763

Total assets

$              3,660,252


$                2,392,003


$                 2,363,528







Liabilities and equity






Current liabilities:






  Short-term debt

$                 434,304


$                   205,000


$                    489,000

  Trade and other payables

590,258


462,535


263,519

  Customer prepayments and deferred revenue

148,345


32,533


81,778

  Commodity derivative liabilities – current

66,623


32,647


15,424

  Accrued expenses and other current liabilities

151,648


79,046


60,095

  Current maturities of long-term debt

55,160


21,589


14,134

Total current liabilities

1,446,338


833,350


923,950







Right of use liability

57,451


-


-

Other long-term liabilities

12,262


32,184


31,536

Commodity derivative liabilities – noncurrent

3,821


889


1,414

Employee benefit plan obligations

21,471


22,542


26,310

Long-term debt, less current maturities

982,025


496,187


438,628

Deferred income taxes

138,598


130,087


118,933

Total liabilities

2,661,966


1,515,239


1,540,771

Total equity

998,286


876,764


822,757

Total liabilities and equity

$              3,660,252


$                2,392,003


$                 2,363,528







 

 

The Andersons, Inc.












Reconciliation to EBITDA and Adjusted EBITDA












(unaudited)




































(in thousands)

 Trade 


 Ethanol


 Plant Nutrient


 Rail


Other


 Total

Three months ended March 31, 2019












Income (loss) before income taxes

$          (17,464)


$              2,417


$             (3,929)


$              4,312


$             (4,926)


$          (19,590)

Income (loss) attributable to the noncontrolling interests

-


(155)


-


-


-


(155)

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

(17,464)


2,572


(3,929)


4,312


(4,926)


(19,435)

Interest expense

10,274


(824)


2,261


3,679


520


15,910

Depreciation and amortization

14,200


139


6,662


8,275


2,925


32,201

Earnings before interest, taxes, depreciation and amortization (EBITDA)

$               7,010


$              1,887


$              4,994


$            16,266


$             (1,481)


$            28,676

Adjusting items impacting EBITDA:












One time acquisition costs

8,154


-


-


-


-


8,154

Transaction related stock compensation

3,416


-


-


-


-


3,416

Total adjusting items

11,570


-


-


-


-


11,570

Adjusted EBITDA

$            18,580


$              1,887


$              4,994


$            16,266


$             (1,481)


$            40,246













Three months ended March 31, 2018












Income (loss) before income taxes

$              (1,244)


$                2,771


$                1,091


$                3,969


$              (8,879)


$              (2,292)

Income (loss) attributable to the noncontrolling interests

-


(282)


-


-


-


(282)

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

(1,244)


3,053


1,091


3,969


(8,879)


(2,010)

Interest expense

2,959


(41)


1,441


2,368


272


6,999

Depreciation and amortization

4,017


1,509


6,727


7,169


3,257


22,679

Earnings before interest, taxes, depreciation and amortization (EBITDA)

$                5,732


$                4,521


$                9,259


$              13,506


$              (5,350)


$              27,668













 

 

The Andersons, Inc.












Segment Data












(Unaudited)
























(in thousands)

Trade


Ethanol


Plant Nutrient


Rail


Other


Total

Three months ended March 31, 2019












Revenues from external customers

$             1,700,620


$          208,831


$          128,525


$            41,415


-


$           2,079,391

Gross profit

68,989


3,808


20,934


15,933


-


109,664

Equity in earnings of affiliates

(131)


1,650


-


-


-


1,519

Other income, net

(2,990)


84


567


209


616


(1,514)

Income (loss) before income taxes

(17,464)


2,417


(3,929)


4,312


(4,926)


(19,590)

Income (loss) attributable to the noncontrolling interests

-


(155)


-


-


-


(155)

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

(17,464)


2,572


(3,929)


4,312


(4,926)


$               (19,435)













Three months ended March 31, 2018












Revenues from external customers

$                   276,027


$            173,663


$            135,617


$              50,432


$                      -


$                 635,739

Gross profit

25,225


3,691


22,237


12,552


-


63,705

Equity in earnings of affiliates

1,987


1,586


-


-


-


3,573

Other income, net

325


614


652


16


79


1,686

Income (loss) before income taxes

(1,244)


2,771


1,091


3,969


(8,879)


(2,292)

Income (loss) attributable to the noncontrolling interests

-


(282)


-


-


-


(282)

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

$                     (1,244)


$                3,053


$                1,091


$                3,969


$              (8,879)


$                   (2,010)













(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


Trade
Plant Nutrient
Ethanol
Rail