The Andersons, Inc. Reports Second Quarter 2019 Results

Aug 6, 2019

MAUMEE, Ohio, Aug. 6, 2019 /PRNewswire/ -- The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the second quarter ended June 30, 2019.

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

Second Quarter Highlights:

  • Company reports net income of $29.9 million, or $0.91 per diluted share, and adjusted net income of $32.3 million, or $0.98 per diluted share.
  • Adjusted EBITDA increases year over year by almost 50 percent to $88.6 million.
  • Trade Group reports pretax income of $23.7 million and adjusted pretax income of $27.0 million on strong corn and wheat basis appreciation and cash trading.
  • Ethanol Group records pretax income of $2.6 million in a challenging margin environment.
  • Plant Nutrient Group records pretax income of $15.9 million despite significantly lower primary and specialty nutrient sales volumes.
  • Rail Group earns $3.2 million of pretax income on steady railcar leasing income.

"Extremely wet weather in many of our core grain origination markets benefited our Trade Group but hurt both our Ethanol and Plant Nutrient Groups during the quarter. The resulting market conditions illustrated perfectly the value of the more diversified, newly integrated portfolio we now operate in our Trade Group," said President and CEO Pat Bowe. "We were able to capitalize on merchandising opportunities caused by grain and feed ingredient price volatility. However, we're concerned about the implications of a smaller corn crop on the utilization of our eastern grain assets for the remainder of this year and into 2020."

 $ in millions, except per share amounts     


Q2 2019

Q2 2018

Variance

YTD 2019

YTD 2018

Variance

Pretax Income (Loss) Attributable to the Company1 

$40.9

$29.3

$11.6

$21.5

$27.3

($5.8)

Adjusted Pretax Income (Loss)1

$44.1

$29.3

$14.8

$36.3

$27.3

$9.0

     Trade (Grain) Group

$27.0

$8.7

$18.3

$21.1

$7.5

$13.6

     Ethanol Group

$2.6

$7.3

($4.7)

$5.2

$10.4

($5.2)

     Plant Nutrient Group

$15.9

$15.1

$0.8

$12.0

$16.2

($4.2)

     Rail Group

$3.2

$0.9

$2.3

$7.5

$4.9

$2.6

     Other

($4.6)

($2.8)

($1.8)

($9.5)

($11.7)

$2.2

Net Income (Loss)1

$29.9

$21.5

$8.4

$15.9

$19.8

($3.9)

Adjusted Net Income (Loss)1

$32.3

$21.5

$10.8

$27.0

$19.8

$7.2

Diluted EPS

$0.91

$0.76

$0.15

$0.48

$0.70

($0.22)

Adjusted Diluted EPS

$0.98

$0.76

$0.22

$0.82

$0.70

$0.12

EBITDA

$85.4

$59.7

$25.7

$114.0

$87.3

$26.7

Adjusted EBITDA

$88.6

$59.7

$28.9

$128.9

$87.3

$41.6

1 Excludes net income (loss) attributable to the noncontrolling interests of ($0.5) in Q2 2019, ($0.1) in Q2 2018, ($0.6) for year-to-date 2019 and ($0.4) for year-to-date 2018.

"The Trade Group's adjusted results were strong, as basis appreciation and good merchandising results helped offset weakness in the food and specialty ingredients units," Bowe continued. "The Ethanol Group remained profitable in a considerably compressed margin environment. As expected, the Plant Nutrient Group's results were hurt by substantially lower primary and specialty nutrient volumes due to the wet spring, but margins were stronger, resulting in improved year-over-year pretax income. The Rail Group performed well, primarily due to solid leasing results."  

Further Adjustments Related to the Lansing Acquisition

The company continues to refine its purchase price allocation. While the net adjustments recorded during the quarter were negligible, the group also incurred $0.4 million, or $0.01 per diluted share, of incremental depreciation and amortization expenses based on a revised revaluation of acquired fixed assets and definite-lived intangibles. The group now expects to incur incremental depreciation and amortization of $2.4 million each quarter through 2021.

As it did in the first quarter, the company has recast second quarter 2018 pretax income for the former Grain Group and the Ethanol Group to conform to segment reporting changes made in conjunction with the acquisition of Lansing Trade Group. The changes resulted in a reclassification of $1.2 million in pretax income from the Grain Group to the Ethanol Group. The company expects similar adjustments for each quarter of 2018.

Second Quarter Segment Overview

Trade Group Records Excellent Results on Increased Volatility and Strong Merchandising Results; Announces Pending Sale of Ontario Agronomy Business

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 Limited. 

The Trade Group recorded pretax income of $23.7 million and adjusted pretax income of $27.0 million for the quarter. Adjustments include $3.1 million for pretax impairment charges on the Trade Group's remaining Tennessee assets. As noted above, the group also incurred $0.4 million of incremental depreciation and amortization expenses. The former Grain Group recorded pretax income of $8.7 million in the second quarter of 2018.

  • Income from merchandising activities was strong due to significant market volatility.
  • Profit from grain originations and the group's assets was up on significant corn and soft red wheat basis appreciation.
  • The integration of Lansing and Thompsons continued to progress well.

Due in large part to the Lansing acquisition, the group's second quarter 2019 EBITDA and adjusted EBITDA were $44.8 million and $48.0 million, respectively, which reflect improvements in both the legacy and acquired businesses.

The group also announced that it has reached an agreement to sell the agronomy assets of Thompsons Limited, a wholly owned subsidiary in Ontario, Canada, to Sylvite Holdings Inc. of Burlington, Ontario. The sale is expected to close in September 2019. The Andersons will continue to own and operate Thompsons' grain storage and food processing facilities in Ontario.

Ethanol Group Remains Profitable Despite Weak Industry Margins

The Ethanol Group earned pretax income of $2.6 million in the second quarter compared to the $7.3 million of pretax income it earned in the same period in 2018.  

  • Margins were extremely weak, but ethanol and corn oil yields continued to improve.
  • The group selectively reduced production in response to the margin environment
  • Third party ethanol trading increased sales volumes and margins.

The group is in the process of commissioning its state-of-the-art bio-refinery in Kansas in partnership with ICM, Inc. The plant will produce low-carbon ethanol targeted for the higher-margin California market and several higher-value coproducts.

Plant Nutrient Group Income Grows Year Over Year

The Plant Nutrient Group recorded pretax income of $15.9 million in the second quarter compared to pretax income of $15.1 million in the prior year period.

  • For the second consecutive quarter, both primary and specialty nutrient volumes significantly lagged prior year amounts due to unprecedented wet weather across our selling region, reducing planted corn acres.
  • Improved margins per ton driven by cost containment, operational efficiency and product mix offset the impact of the volume shortfall.
  • Inventory carrying costs increased year over year due to delayed and reduced planting.

The group's current quarter EBITDA was $24.9 million, a slight increase over 2018 second quarter results.

Rail Group Results Highlighted by Steady Leasing Income

The Rail Group earned second quarter pretax income of $3.2 million compared to $0.9 million in the same period of the prior year. Prior year results included a $4.7 million impairment charge on railcars the group later scrapped.

  • Railcar leasing income rose year over year on stronger utilization and more cars on lease but was offset in part by increased allowances for doubtful accounts.
  • Income from car sales was negligible.
  • Service and other pretax income fell significantly, largely due to workers compensation and other expenses and lower sales volumes at certain repair facilities.

The group's second quarter 2019 EBITDA of $15.8 million was comparable to second quarter 2018 EBITDA before considering the 2018 impairment charge.

Conference Call

The company will host a webcast on Wednesday, August 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 9055829). It is recommended that you call 10 minutes before the conference call begins. 

To access the webcast, click on the link: https://edge.media-server.com/mmc/p/izr35eyr. 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's website: 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 June 30,


Six months ended June 30,

(in thousands, except per share data)

2019


2018


2019


2018

Sales and merchandising revenues 

$              2,325,041


$                    911,402


$              4,301,833


$                 1,547,141

Cost of sales and merchandising revenues

2,164,313


820,928


4,031,441


1,392,962

Gross profit

160,728


90,474


270,392


154,179

Operating, administrative and general expenses

106,918


59,853


220,267


124,110

Asset impairment

3,081


6,272


3,081


6,272

Interest expense

15,727


7,825


31,637


14,824

Other income:








Equity in earnings (loss) of affiliates

(157)


9,803


1,362


13,376

Other income, net

5,563


2,828


4,049


4,514

Income (loss) before income taxes

40,408


29,155


20,818


26,863

Income tax provision (benefit)

10,997


7,742


5,555


7,432

Net income (loss)

29,411


21,413


15,263


19,431

Net income attributable to the noncontrolling interests

(477)


(116)


(632)


(398)

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

$                    29,888


$                      21,529


$                    15,895


$                      19,829









Per common share:








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

$                        0.92


$                          0.76


$                        0.49


$                          0.70

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

$                        0.91


$                          0.76


$                        0.48


$                          0.70

 

The Andersons, Inc.








Reconciliation to Adjusted Net Income








(Unaudited)

















Three months ended June 30,


Six months ended June 30,

(in thousands, except per share data)

2019


2018


2019


2018

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

$                   29,888


$                     21,529


$                   15,895


$                     19,829

Items impacting other income, net of tax:








One time acquisition costs

(907)


-


5,209


-

Transaction related stock compensation

1,010


-


3,572


-

Asset impairment

2,311


-


2,311


-









Total adjusting items

2,414


-


11,092


-

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

$                   32,302


$                     21,529


$                   26,987


$                     19,829









Diluted earnings attributable to The Andersons, Inc.
common shareholders

$                       0.91


$                         0.76


$                       0.48


$                         0.70









Impact on diluted earnings per share

0.07


-


0.34


-

Adjusted diluted earnings (loss) per share

$                       0.98


$                         0.76


$                       0.82


$                         0.70









 

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


(in thousands)

June 30, 2019


December 31, 2018


June 30, 2018

Assets






Current assets:






Cash and cash equivalents

$                    11,087


$                         22,593


$                      58,611

Accounts receivable, net

712,294


207,285


218,476

Inventories

753,641


690,804


495,611

Commodity derivative assets – current

233,015


51,421


54,259

Other current assets

58,439


50,703


42,648

Assets held for sale

151


392


9,816

Total current assets

1,768,627


1,023,198


879,421

Other assets:






Commodity derivative assets – noncurrent

6,161


480


1,008

Other assets, net

346,531


127,503


138,201

Right of use asset, net

74,073


-


-

Equity method investments

120,929


242,326


232,159


547,694


370,309


371,368

Rail Group assets leased to others, net

559,711


521,785


458,424

Property, plant and equipment, net

695,827


476,711


408,575

Total assets

$              3,571,859


$                    2,392,003


$                 2,117,788







Liabilities and equity






Current liabilities:






Short-term debt

$                 426,125


$                       205,000


$                    185,000

Trade and other payables

527,250


462,535


282,221

Customer prepayments and deferred revenue

49,761


32,533


16,103

Commodity derivative liabilities – current

69,369


32,647


85,160

Accrued expenses and other current liabilities

165,383


79,046


74,512

Current maturities of long-term debt

66,678


21,589


13,700

Total current liabilities

1,304,566


833,350


656,696







Right of use liability

48,401


-


-

Other long-term liabilities

18,398


32,184


30,325

Commodity derivative liabilities – noncurrent

3,985


889


3,202

Employee benefit plan obligations

22,019


22,542


26,131

Long-term debt, less current maturities

1,007,012


496,187


435,580

Deferred income taxes

146,839


130,087


118,864

Total liabilities

2,551,220


1,515,239


1,270,798

Total equity

1,020,639


876,764


846,990

Total liabilities and equity

$              3,571,859


$                    2,392,003


$                 2,117,788

 

The Andersons, Inc.










Segment Data











(Unaudited)
























(in thousands)

Trade


Ethanol


Plant Nutrient


Rail


Other


Total

Three months ended June 30, 2019












Revenues from external customers

$             1,766,305


$          245,143


$          270,577


$            43,016


$                     -


$           2,325,041

Gross profit

102,846


4,312


38,798


14,772


-


160,728

Equity in earnings of affiliates

(1,614)


1,457


-


-


-


(157)

Other income, net

3,818


194


570


329


652


5,563

Income (loss) before income taxes

23,731


2,172


15,903


3,180


(4,578)


40,408

Income (loss) attributable to the noncontrolling interests

-


(477)


-


-


-


(477)

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

$                   23,731


$               2,649


$            15,903


$              3,180


$             (4,578)


$                 40,885













Three months ended June 30, 2018












Revenues from external customers

$                   365,100


$            201,758


$            303,106


$              41,438


$                      -


$                 911,402

Gross profit

33,887


5,862


37,167


13,558


-


90,474

Equity in earnings of affiliates

5,510


4,293


-


-


-


9,803

Other income, net

1,248


(476)


622


675


759


2,828

Income (loss) before income taxes

8,707


7,179


15,124


944


(2,799)


29,155

Income (loss) attributable to the noncontrolling interests

-


(116)


-


-


-


(116)

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

$                       8,707


$                7,295


$              15,124


$                   944


$              (2,799)


$                   29,271

























Six months ended June 30, 2019












Revenues from external customers

$             3,364,326


$          453,974


$          399,102


$            84,431


$                     -


$              4,301,833

Gross profit

171,835


8,120


59,732


30,705


-


270,392

Equity in earnings of affiliates

(1,745)


3,107


-


-


-


1,362

Other income, net

828


278


1,137


538


1,268


4,049

Income (loss) before income taxes

6,268


4,589


11,974


7,492


(9,505)


20,818

Income (loss) attributable to the noncontrolling interests

-


(632)


-


-


-


(632)

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

$                     6,268


$               5,221


$            11,974


$              7,492


$             (9,505)


$                 21,450













Six months ended June 30, 2018












Revenues from external customers

$                   641,126


$            375,422


$            438,723


$              91,870


$                      -


$              1,547,141

Gross profit

59,111


9,554


59,404


26,110


-


154,179

Equity in earnings of affiliates

7,497


5,879


-


-


-


13,376

Other income, net

1,573


138


1,274


691


838


4,514

Income (loss) before income taxes

7,460


9,953


16,215


4,913


(11,678)


26,863

Income (loss) attributable to the noncontrolling interest

-


(398)


-


-


-


(398)

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

$                       7,460


$              10,351


$              16,215


$                4,913


$            (11,678)


$                   27,261













(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).

 

The Andersons, Inc.











Reconciliation to EBITDA and Adjusted EBITDA








(unaudited)




































(in thousands)

 Trade 


 Ethanol


 Plant Nutrient


 Rail


Other


 Total

Three months ended June 30, 2019












Income (loss) before income taxes

$            23,731


$              2,172


$            15,903


$              3,180


$             (4,578)


$            40,408

Income (loss) attributable to the noncontrolling interests

-


(477)


-


-


-


(477)

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

23,731


2,649


15,903


3,180


(4,578)


40,885

Interest expense

10,243


(906)


2,386


4,181


(177)


15,727

Depreciation and amortization

10,837


48


6,631


8,389


2,850


28,755

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

$            44,811


$              1,791


$            24,920


$            15,750


$             (1,905)


$            85,367

Adjusting items impacting EBITDA:












One time acquisition costs

(1,209)


-


-


-


-


(1,209)

Transaction related stock compensation

1,346


-


-


-


-


1,346

Asset impairment

3,081


-


-


-


-


3,081

Total adjusting items

3,218


-


-


-


-


3,218

Adjusted EBITDA

$            48,029


$              1,791


$            24,920


$            15,750


$             (1,905)


$            88,585













Three months ended June 30, 2018












Income (loss) before income taxes

$                8,707


$                7,179


$              15,124


$                   944


$              (2,799)


$              29,155

Income (loss) attributable to the noncontrolling interests

-


(116)


-


-


-


(116)

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

8,707


7,295


15,124


944


(2,799)


29,271

Interest expense

3,930


(271)


1,642


2,718


(194)


7,825

Depreciation and amortization

4,126


1,517


6,769


7,119


3,022


22,553

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

$              16,763


$                8,541


$              23,535


$              10,781


$                     29


$              59,649













Six months ended June 30, 2019












Income (loss) before income taxes

$              6,268


$              4,589


$            11,974


$              7,492


$             (9,505)


$            20,818

Income (loss) attributable to the noncontrolling interests

-


(632)


-


-


-


(632)

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

6,268


5,221


11,974


7,492


(9,505)


21,450

Interest expense

21,158


(1,730)


4,647


7,860


(298)


31,637

Depreciation and amortization

25,036


187


13,294


16,664


5,775


60,956

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

$            52,462


$              3,678


$            29,915


$            32,016


$             (4,028)


$          114,043

Adjusting items impacting EBITDA:












One time acquisition costs

6,945


-


-


-


-


6,945

Transaction related stock compensation

4,762


-


-


-


-


4,762

Asset impairment

3,081


-


-


-


-


3,081

Total adjusting items

14,788


-


-


-


-


14,788

Adjusted EBITDA

$              67,250


$              3,678


$            29,915


$            32,016


$             (4,028)


$          128,831













Six months ended June 30, 2018












Income (loss) before income taxes

$                7,460


$                9,953


$              16,215


$                4,913


$            (11,678)


$              26,863

Income (loss) attributable to the noncontrolling interests

-


(398)


-


-


-


(398)

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

7,460


10,351


16,215


4,913


(11,678)


27,261

Interest expense

6,889


(311)


3,082


5,086


78


14,824

Depreciation and amortization

8,143


3,026


13,497


14,288


6,278


45,232

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

$              22,492


$              13,066


$              32,794


$              24,287


$              (5,322)


$              87,317













 

 

SOURCE The Andersons, Inc.

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


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