The Andersons, Inc. Reports Third Quarter Results

Nov 3, 2020

MAUMEE, Ohio, Nov. 3, 2020 /PRNewswire/ -- The Andersons, Inc. (Nasdaq: ANDE) announces financial results for the third quarter ended September 30, 2020.

Third Quarter Highlights:

  • Company reported a net loss attributable to The Andersons of $1.1 million, or $0.03 per diluted share, and adjusted net loss of $2.4 million, or $0.07 per diluted share.
  • Adjusted EBITDA attributable to the company was $46.2 million for the quarter, up 21 percent year over year.
  • Trade reported pretax income of $5.9 million and adjusted pretax income of $6.9 million on improved merchandising results.
  • Ethanol reported pretax income attributable to the company of $1.1 million as margins improved

"We continued to make good progress during the quarter toward reaching our vision to be the most nimble and innovative ag supply chain company in North America," said President and CEO Pat Bowe. "The integration of Trade and Ethanol is going well and is being modeled after the successful integration of Lansing Trade Group last year. While we will always be vigilant about costs, we are looking forward to placing more emphasis on profitable growth and extraordinary customer service in 2021 and beyond."

"Our results for the third quarter were solid in light of the current economic environment," continued Bowe. "Trade, Ethanol and Plant Nutrient all recorded improved results year over year. Trade led the way with better merchandising income as the fall harvest got off to a good start. Ethanol's results were much improved, notwithstanding large non-cash mark-to-market charges. Plant Nutrient's results improved substantially year over year in a quarter in which that business is usually seasonally weak. Finally, Rail continued to feel the negative impacts of weak railcar demand."

$ in millions, except per share amounts     





Q3 2020

Q3 2019

Variance

YTD 2020

YTD 2019

Variance

Pretax Income (Loss) Attributable to the Company1

$

(5.8)


$

(11.4)


$

5.6


$

(26.7)


$

10.0


$

(36.7)


Adjusted Pretax Income (Loss) Attributable to the Company1

(1.6)


(8.9)


7.3


(17.8)


27.3


(45.1)


     Trade

6.9


0.4


6.5


(0.4)


20.0


(20.4)


     Ethanol1

1.1


1.1



(22.0)


7.8


(29.8)


     Plant Nutrient

(5.4)


(7.4)


2.0


12.8


4.5


8.3


     Rail

(0.1)


3.1


(3.2)


3.5


10.6


(7.1)


     Other

(4.1)


(6.1)


2.0


(11.8)


(15.6)


3.8


Net Income (Loss) Attributable to the Company1

(1.1)


(4.2)


3.1


(8.3)


11.7


(20.0)


Adjusted Net Income (Loss) Attributable to the Company1

(2.4)


(2.3)


(0.1)


(16.4)


24.7


(41.1)


Diluted EPS

(0.03)


(0.13)


0.10


(0.25)


0.35


(0.60)


Adjusted Diluted EPS

(0.07)


(0.07)



(0.50)


0.74


(1.24)


EBITDA

55.3


35.1


20.2


131.9


151.7


(19.8)


Adjusted EBITDA Attributable to the Company

$

46.2


$

38.2


$

8.0


$

131.6


$

170.2


$

(38.6)



1 Reflects amounts attributable to the company and excludes income attributable to the noncontrolling interests of $3.3 in Q3 2020 and losses attributable to the noncontrolling interests of $1.6 in Q3 2019, $20.6 for year-to-date 2020 and $2.3 for year-to-date 2019. See non-GAAP reconciliations in the accompanying tables.

Liquidity and Cash Management

"We continued to generate strong operating cash flows and manage capital expenditures during the third quarter," said Executive Vice President and CFO Brian Valentine. "We were able to reduce total long-term debt by more than $60 million. We remain very focused on overall liquidity, including expense and cash management."

In addition to the $30 million in 2020 expense reductions announced in May, about half of which it expects to be permanent, the company also anticipates that the business restructuring announced in August will result in further annual general and administrative cost reductions of approximately $10 million beginning in early 2021.

The company has spent $69 million net of proceeds from asset sales on capital projects through September and still expects to spend approximately $100 million in 2020 after averaging more than $200 million over the last three years. This reduction prudently preserves working capital and supports the company's continued strong financial position.

Third Quarter Segment Overview

Trade Records Higher Results Driven by Improved Merchandising Income

The Trade segment recorded improved pretax income of $5.9 million and adjusted pretax income of $6.9 million for the quarter compared to a pretax loss of $2.1 million and adjusted pretax income of $0.4 million in the third quarter of 2019. The difference in reported and adjusted income in both periods was attributable to stock compensation expense associated with the 2019 acquisition of Lansing Trade Group.

A large majority of the year-over-year improvement came from commodity merchandising, which earned pretax income that was more than 80 percent higher year over year. The performance of the segment's assets improved due to strong corn and soybean sales despite earning less income from wheat. The business also continued to benefit from the successful integration of Lansing and Thompsons Limited, portfolio optimization and other cost-cutting efforts.

Trade's third quarter adjusted EBITDA was $22.3 million, up approximately 8 percent over third quarter 2019 adjusted EBITDA of $20.7 million.

While merchandising opportunities continue to be good, the resulting income will not likely fully offset the lack of carry in the corn and soybean markets into 2021 due to the significant increase in futures prices and narrowing spreads since early August.

Ethanol Remains Profitable on Improved Margins Despite Mark-to-Market Charge

The Ethanol segment reported pretax income attributable to the company of $1.1 million in the third quarter compared to the similar amount it earned in the same period in 2019.

Improved crush margins were the primary driver of significantly improved performance by the group's five plants. However, the segment recorded a non-cash mark-to-market charge of $6.2 million due to increases in corn and DDG prices late in the quarter. 

Production volumes in the quarter were higher year over year due to higher yields at The Andersons Marathon Holdings (TAMH) plants and ELEMENTTM operating for the entire quarter. Board crush margins were roughly 12 cents higher than in the third quarter of 2019. The third-party ethanol trading business also posted comparatively better results due to improved margins and higher volumes.

Ethanol recorded EBITDA attributable to the company of $11.1 million in the third quarter of 2020, up from 2019 third quarter EBITDA attributable to the company of $3.9 million. The results of three of the five ethanol plants were not consolidated in 2019.

Plant Nutrient Results Improve; Rail Breaks Even

The Plant Nutrient segment improved its results year over year, recording a pretax loss of $5.4 million in the third quarter compared to a pretax loss of $7.4 million in the same period of the prior year. This was the sixth consecutive quarter that the segment posted improved year-over-year results. Plant Nutrient's current quarter EBITDA was $2.2 million compared to 2019 third quarter EBITDA of $0.9 million. While tons sold were unchanged, the improvement was driven by slightly better margin per ton and continued disciplined working capital and expense management.

Rail recorded a third quarter pretax loss of $0.1 million compared to $3.1 million of pretax income in the same period of the prior year. Its third quarter 2020 EBITDA was $12.5 million compared to its third quarter 2019 EBITDA of $16.1 million. The leasing business accounted for the majority of the shortfall due to lower lease rates and fleet utilization year over year; repair revenues and margins also fell.

Provision for Income Taxes Includes CARES Act Benefits

The company's income tax provision included additional CARES Act tax benefits of approximately $4.5 million, or $0.14 per diluted share in the current quarter and now totals benefits of approximately $14.8 million, or $0.45 per diluted share, year to date. As with the impacts of the Tax Cuts and Jobs Act of 2017 and CARES Act benefits recognized in the first half of 2020, the company has excluded the current quarter benefits from its adjusted net income. This quarter's additional benefits are expected to result in cash refunds of nearly $8 million, bringing the total expected CARES Act refunds to approximately $39 million. In addition, the company's reported effective income tax rate is substantially impacted by the income or loss earned by the noncontrolling interests and may result in highly variable effective tax rates in future periods.

Conference Call

The company will host a webcast on Wednesday, November 4, 2020, at 11 a.m. Eastern Standard Time, to discuss its performance and provide its updated outlook for 2020 and its preliminary views for 2021. To access the call, please dial 866-439-8514 or 678-509-7568 (participant passcode is 6386433). 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/yn8hngoo. 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 at www.andersonsinc.com.

Investor Day

The company will hold its investor day on the morning of Tuesday, December 8, 2020 and present it in a virtual format. 

Sustainability Review

The company has recently published a 2020 sustainability review. It can also be accessed under the heading "Investors" on the company's 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, the COVID-19 pandemic 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 that pretax income attributable to The Andersons, adjusted pretax income attributable to the company, net income attributable to the company, adjusted net income attributable to the company, adjusted diluted earnings per share, EBITDA and adjusted EBITDA attributable to the company provide additional information to investors and others about its operations, allowing an evaluation of underlying operating performance and better period-to-period comparability. The above measures are 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 this press release and the financial tables provided herein.

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
September 30,


Nine months ended
September 30,

(in thousands, except per share data)

2020


2019


2020


2019

Sales and merchandising revenues

$

1,922,233



$

1,982,755



$

5,665,519



$

6,284,588


Cost of sales and merchandising revenues

1,820,398



1,873,614



5,394,288



5,905,055


Gross profit

101,835



109,141



271,231



379,533


Operating, administrative and general expenses

98,219



107,118



293,415



327,385


Asset impairment







3,081


Interest expense, net

10,569



13,975



37,983



45,613


Other income, net:








Equity in earnings (loss) of affiliates, net

20



(3,728)



228



(2,367)


Other income, net

4,434



2,598



12,697



6,649


Income (loss) before income taxes

(2,499)



(13,082)



(47,242)



7,736


Income tax benefit

(4,714)



(7,212)



(18,378)



(1,657)


Net income (loss)

2,215



(5,870)



(28,864)



9,393


Net income (loss) attributable to the noncontrolling interests

3,273



(1,633)



(20,583)



(2,265)


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

$

(1,058)



$

(4,237)



$

(8,281)



$

11,658










Per common share:








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

$

(0.03)



$

(0.13)



$

(0.25)



$

0.36


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

$

(0.03)



$

(0.13)



$

(0.25)



$

0.35


 

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)

2020


2019


2020


2019

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

$

(1,058)



$

(4,237)



$

(8,281)



$

11,658


Items impacting other income, net of tax:








One time acquisition costs



(23)





5,849


Transaction related stock compensation

912



2,577



3,260



7,339


Asset impairment







3,081


Loss from remeasurement of equity method investments







1,073


Severance costs

3,222





5,563




Income tax impact of adjustments (a)

(5,511)



(638)



(16,962)



(4,335)


Total adjusting items, net of tax

(1,377)



1,916



(8,139)



13,007


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

$

(2,435)



$

(2,321)



$

(16,420)



$

24,665










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

$

(0.03)



$

(0.13)



$

(0.25)



$

0.35










Impact on diluted earnings (loss) per share

$

(0.04)



$

0.06



$

(0.25)



$

0.39


Adjusted diluted earnings (loss) per share

$

(0.07)



$

(0.07)



$

(0.50)



$

0.74



(a) Income tax adjustments include $(4.5) million and $(14.8) million due to CARES Act benefits and certain discrete items in the current quarter and year to date.

 

The Andersons, Inc.

Condensed Consolidated Balance Sheets (unaudited)


(in thousands)

September 30,
2020


December 31,
2019


September 30,
2019

Assets






Current assets:






  Cash, cash equivalents and restricted cash

$

13,693



$

54,895



$

21,299


  Accounts receivable, net

529,584



536,367



523,110


  Inventories

754,604



1,170,536



741,086


  Commodity derivative assets - current

140,066



107,863



120,510


  Other current assets

102,302



75,681



82,770


Total current assets

1,540,249



1,945,342



1,488,775


Other assets:






Goodwill

135,709



135,360



135,872


Other intangible assets, net

152,214



175,312



181,100


Right of use assets, net

58,108



76,401



70,773


Equity method investments

25,368



23,857



117,348


Other assets, net

23,601



21,753



21,442


Total other assets

395,000



432,683



526,535


Rail Group assets leased to others, net

587,851



584,298



565,746


Property, plant and equipment, net

888,511



938,418



703,396


Total assets

$

3,411,611



$

3,900,741



$

3,284,452








Liabilities and equity






Current liabilities:






  Short-term debt

100,405



147,031



138,249


  Trade and other payables

641,812



873,081



594,708


  Customer prepayments and deferred revenue

49,573



133,585



35,274


  Commodity derivative liabilities – current

79,159



46,942



67,606


  Current maturities of long-term debt

67,786



62,899



66,899


  Accrued expenses and other current liabilities

157,801



176,381



162,749


Total current liabilities

1,096,536



1,439,919



1,065,485


Long-term lease liabilities

38,232



51,091



47,299


Long-term debt, less current maturities

916,087



1,016,248



968,117


Deferred income taxes

163,454



146,155



128,003


Other long-term liabilities

60,075



51,673



64,198


Total liabilities

2,274,384



2,705,086



2,273,102


Total equity

1,137,227



1,195,655



1,011,350


Total liabilities and equity

$

3,411,611



$

3,900,741



$

3,284,452


 

The Andersons, Inc.

Segment Data (unaudited)


(in thousands)

Trade


Ethanol


Plant
Nutrient


Rail


Other


Total

Three months ended September 30, 2020












Sales and merchandising revenues

$

1,432,922



$

349,957



$

102,707



$

36,647



$



$

1,922,233


Gross profit

65,572



11,169



16,496



8,598





101,835


Equity in earnings (losses) of affiliates, net

20











20


Other income (loss), net

3,114



553



579



588



(400)



4,434


Income (loss) before income taxes

5,941



4,421



(5,387)



(139)



(7,335)



(2,499)


Income attributable to the noncontrolling interests



3,273









3,273


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

$

5,941



$

1,148



$

(5,387)



$

(139)



$

(7,335)



$

(5,772)


Adjustments to income (loss) before income taxes (b)

912









3,222



4,134


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

$

6,853



$

1,148



$

(5,387)



$

(139)



$

(4,113)



$

(1,638)














Three months ended September 30, 2019












Sales and merchandising revenues

$

1,515,107



$

319,105



$

109,446



$

39,097



$



$

1,982,755


Gross profit

73,379



8,083



15,851



11,828





109,141


Equity in earnings (losses) of affiliates, net

(98)



(3,630)









(3,728)


Other income (loss), net

876



417



510



854



(59)



2,598


Income (loss) before income taxes

(2,122)



(563)



(7,440)



3,137



(6,094)



(13,082)


Loss attributable to the noncontrolling interests



(1,633)









(1,633)


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

$

(2,122)



$

1,070



$

(7,440)



$

3,137



$

(6,094)



$

(11,449)


Adjustments to income (loss) before income taxes (b)

2,554











2,554


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

$

432



$

1,070



$

(7,440)



$

3,137



$

(6,094)



$

(8,895)



(a) Income (loss) before income taxes attributable to The Andersons, Inc. for each operating segment 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.

(b) Additional information on the individual adjustments that are included in the adjustments to income (loss) before income taxes can be found in the Reconciliation to EBITDA and Adjusted EBITDA table.

 

























(in thousands)

Trade


Ethanol


Plant
Nutrient


Rail


Other


Total

Nine months ended September 30, 2020












Sales and merchandising revenues

$

4,162,130



$

886,742



$

507,445



$

109,202



$



$

5,665,519


Gross profit

187,420



(20,829)



75,625



29,015





271,231


Equity in earnings (losses) of affiliates, net

228











228


Other income (loss), net

6,865



1,465



935



2,543



889



12,697


Income (loss) before income taxes

(3,650)



(42,543)



12,828



3,474



(17,351)



(47,242)


Loss attributable to the noncontrolling interests



(20,583)









(20,583)


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

$

(3,650)



$

(21,960)



$

12,828



$

3,474



$

(17,351)



$

(26,659)


Adjustments to income (loss) before income taxes (b)

3,260









5,563



8,823


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

$

(390)



$

(21,960)



$

12,828



$

3,474



$

(11,788)



$

(17,836)














Nine months ended September 30, 2019












Sales and merchandising revenues

$

4,753,375



$

899,137



$

508,548



$

123,528



$



$

6,284,588


Gross profit

241,444



19,973



75,583



42,533





379,533


Equity in earnings (losses) of affiliates, net

(1,843)



(524)









(2,367)


Other income (loss), net

1,705



696



1,647



1,392



1,209



6,649


Income (loss) before income taxes

2,610



5,562



4,534



10,629



(15,599)



7,736


Loss attributable to the noncontrolling interests



(2,265)









(2,265)


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

$

2,610



$

7,827



$

4,534



$

10,629



$

(15,599)



$

10,001


Adjustments to income (loss) before income taxes (b)

17,342











17,342


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

$

19,952



$

7,827



$

4,534



$

10,629



$

(15,599)



$

27,343



(a) Income (loss) before income taxes attributable to The Andersons, Inc. for each operating segment 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.

(b) Additional information on the individual adjustments that are included in the adjustments to income (loss) before income taxes can be found in the Reconciliation to EBITDA and Adjusted EBITDA table.

 

The Andersons, Inc.

Reconciliation to EBITDA and Adjusted EBITDA

(unaudited)


(in thousands)

Trade


 Ethanol


 Plant
Nutrient


 Rail


 Other


 Total

Three months ended September 30, 2020












Net income (loss)

$

5,941



$

4,421



$

(5,387)



$

(139)



$

(2,621)



$

2,215


Interest expense (income)

4,380



1,651



1,287



3,716



(465)



10,569


Tax provision (benefit)









(4,714)



(4,714)


Depreciation and amortization

11,079



18,282



6,316



8,882



2,710



47,269


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

21,400



24,354



2,216



12,459



(5,090)



55,339


EBITDA attributable to non-controlling interests



13,250









13,250


EBITDA attributable to The Andersons, Inc.

21,400



11,104



2,216



12,459



(5,090)



42,089


Adjusting items impacting EBITDA:












Transaction related stock compensation

912











912


Severance Costs









3,222



3,222


Total adjusting items

912









3,222



4,134


Adjusted EBITDA attributable to The Andersons, Inc.

$

22,312



$

11,104



$

2,216



$

12,459



$

(1,868)



$

46,223














Three months ended September 30, 2019












Net income (loss)

$

(2,122)



$

(563)



$

(7,440)



$

3,137



$

1,118



$

(5,870)


Interest expense (income)

7,788



291



1,831



4,211



(146)



13,975


Tax provision (benefit)









(7,212)



(7,212)


Depreciation and amortization

12,487



3,716



6,485



8,713



2,849



34,250


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

18,153



3,444



876



16,061



(3,391)



35,143


EBITDA attributable to non-controlling interests



(483)









(483)


EBITDA attributable to The Andersons, Inc.

18,153



3,927



876



16,061



(3,391)



35,626


Adjusting items impacting EBITDA:












Acquisition costs

(23)











(23)


Transaction related stock compensation

2,577











2,577


Total adjusting items

2,554











2,554


Adjusted EBITDA attributable to The Andersons, Inc.

$

20,707



$

3,927



$

876



$

16,061



$

(3,391)



$

38,180


 

























(in thousands)

Trade


 Ethanol


 Plant
Nutrient


 Rail


 Other


 Total

Nine months ended September 30, 2020












Net income (loss)

$

(3,650)



$

(42,543)



$

12,828



$

3,474



$

1,027



$

(28,864)


Interest expense (income)

16,624



5,908



4,535



12,032



(1,116)



37,983


Tax provision (benefit)









(18,378)



(18,378)


Depreciation and amortization

33,478



53,786



19,021



26,670



8,212



141,167


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

46,452



17,151



36,384



42,176



(10,255)



131,908


EBITDA attributable to non-controlling interests



9,130









9,130


EBITDA attributable to The Andersons, Inc.

46,452



8,021



36,384



42,176



(10,255)



122,778


Adjusting items impacting EBITDA:












Transaction related stock compensation

3,260











3,260


Severance Costs









5,563



5,563


Total adjusting items

3,260









5,563



8,823


Adjusted EBITDA attributable to The Andersons, Inc.

$

49,712



$

8,021



$

36,384



$

42,176



$

(4,692)



$

131,601














Nine months ended September 30, 2019












Net income (loss)

$

2,610



$

5,562



$

4,534



$

10,629



$

(13,942)



$

9,393


Interest expense (income)

28,740



(1,232)



6,478



12,071



(444)



45,613


Tax provision (benefit)









(1,657)



(1,657)


Depreciation and amortization

37,523



7,094



19,778



25,377



8,624



98,396


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

68,873



11,424



30,790



48,077



(7,419)



151,745


EBITDA attributable to non-controlling interests



(1,073)









(1,073)


EBITDA attributable to The Andersons, Inc.

68,873



12,497



30,790



48,077



(7,419)



152,818


Adjusting items impacting EBITDA:












Acquisition costs

5,849











5,849


Transaction related stock compensation

7,339











7,339


Asset impairment

3,081











3,081


Loss from remeasurement of equity method investment

1,073











1,073


Total adjusting items

17,342











17,342


Adjusted EBITDA attributable to The Andersons, Inc.

$

86,215



$

12,497



$

30,790



$

48,077



$

(7,419)



$

170,160


 

SOURCE The Andersons, Inc.

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


Trade
Plant Nutrient
Ethanol
Rail