NEWS RELEASEThe Andersons, Inc. Reports Second Quarter Results
Maumee, Ohio, August 3, 2016 -- The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the second-quarter ended June 30, 2016.
• | Company reports second quarter net income of $14.4 million, $0.51 per diluted share |
• | Grain Group pre-tax loss of $13 million, showing improvement over Q1 |
• | Ethanol Group returned to profitability driven by strong seasonal demand |
• | Plant Nutrient Group volumes grew year over year while margins remained soft |
• | Rail Group pre-tax income of $6.6 million, down from prior year primarily due to the large lease settlement recorded in second quarter of 2015 |
The Company reported net income attributable to The Andersons Inc. of $14.4 million, or $0.51 per diluted share on revenues of $1.1 billion for the second quarter of 2016 compared to net income of $31.1 million or $1.09 per diluted share on revenues of $1.2 billion in the second quarter of 2015.
For the first six months of the year, the Company had a net loss of $273,000, or $0.01 per diluted share compared to net income of $35.2 million or $1.23 per diluted share during the same period last year.
“The first half of the year was challenging, in line with our expectations, due to the poor crop last fall in the Eastern Corn Belt,” said CEO Pat Bowe. “While challenges in our Grain Group persisted, we did begin to see positive impacts from a good wheat harvest, and are starting to capture benefits from our productivity initiatives.
“We were encouraged to see good volumes of specialty products in our Plant Nutrient business,” he continued. “However, margins were disappointing in the face of oversupply of basic nutrients and low grain prices. The industry is starting to see production curtailments in certain products which should help bring supply and demand more into balance.”
Second Quarter Segment Overview
Grain Group challenges persisted into the second quarter
The Grain Group reported a pre-tax loss of $13.0 million compared to pre-tax income of $3.1 million in the second quarter of 2015.
Grain Group Results
$ in MM | Q2 ‘16 | Q2 ‘15 | V PY | 1H ‘16 | 1H ‘15 | V PY |
Base Grain | ($9.8) | $(4.3) | ($5.6) | $(23.1) | $(4.7) | $(18.4) |
Grain Affiliates | ($3.2) | $7.4 | ($10.6) | $(7.3) | $8.6 | $(15.9) |
Grain Group | ($13.0) | $3.1 | ($16.2) | $(30.4) | $3.9 | $(34.3) |
The Group’s Base Grain operations continued to feel the pressure from both low carry and basis appreciation primarily due to the poor crop in the Eastern Corn Belt in 2015.
Affiliate earnings were lower due to losses in the Lansing Trade Group (LTG) while performance at Thompsons Limited remained steady. DDGS markets returned towards normal conditions during the quarter for LTG, however they were adversely impacted by trading positions during the quarter.
As previously announced during the quarter, the Company completed the sale of eight grain and agronomy locations in Western Iowa to MaxYield Cooperative of West Bend, Iowa. This transaction closed on May 1, 2016, and resulted in a nominal gain.
Ethanol Group rebounded
The Group returned to profitability in the second quarter and for the full first half of the year. Ethanol margins grew in the second quarter on the seasonal increase in demand from the summer driving season and steady export volumes.
Ethanol pre-tax income for the second quarter came in at $6.2 million, compared to the $9.7 million earned in the same quarter of 2015. This brings the year to date results back to positive income with the first six months generating $3.5 million compared to $14.9 million in the same period last year.
Factors impacting second quarter performance included:
• | U.S. gasoline demand tracked above five year averages, strengthening as the driving season got into full gear. |
• | Margins were volatile during the quarter as corn prices moved lower and fuel prices continued to fluctuate. |
• | Industry production levels were at high levels throughout the quarter at times pressuring margins. |
The Group’s assets continue to perform well, achieving a new high for production versus comparable second quarters in prior years. The Albion, Michigan ethanol facility expansion remains on schedule for startup in the spring of 2017.
Plant Nutrient Group
Pre-tax income for the Group was $23.5 million, up from $18.9 million in same period last year. Nutrient volumes and margins continued to be negatively impacted by depressed grain prices and softening prices.
Plant Nutrient Group Results
Second Quarter | First Half | ||||||||
$ in MM, Tons in 000’s | ‘16 | ‘15 | v PY | ‘16 | ‘15 | v PY | |||
Basic Nutrients (Tons) | 549 | 537 | 12 | 2% | 761 | 716 | 45 | 6% | |
Specialty Nutrients (Tons) | 208 | 129 | 79 | 62% | 327 | 216 | 110 | 51% | |
Other (Tons) | 185 | 237 | (52) | (22%) | 314 | 363 | (50) | (14%) | |
Total volume | 942 | 903 | 39 | 4% | 1,401 | 1,296 | 105 | 8% | |
Pre-Tax Income | $23.5 | $18.9 | $4.3 | 23% | $25.2 | $19.3 | $5.9 | 31% | |
Basic nutrient volumes were up modestly in the second quarter with the increase from acquired locations partially offset by intensified competitive pressures fueled by oversupply throughout the channel. Specialty nutrient volumes were up 62 percent year over year, driven by added sales of Nutra-Flo products. Volumes in the other category continued to track lower compared to prior year.
Rail Group
The Rail Group earned $6.6 million in the quarter, down from the prior year primarily due to an unusually large, $10.6 million pre-tax, gain on the settlement of an early lease termination in the prior year.
Rail Group Results
$ in MM | Q2 ‘16 | Q2 ‘15 | V PY | 1H ‘16 | 1H ‘15 | V PY |
Base Lease Income | $2.7 | $15.6 | $(12.9) | $7.0 | $20.6 | $(13.6) |
Fleet Utilization Rate | 88.6% | 93.5% | (4.9%) | 90.0% | 92.7% | (2.7%) |
Car Sale Income | $2.3 | $4.7 | $(2.4) | $4.7 | $9.2 | $(4.5) |
Rail Services & Other | $1.6 | $1.4 | $0.2 | $4.2 | $2.2 | $2.0 |
Rail Group Pre-Tax Income | $6.6 | $21.7 | $(15.1) | $15.9 | $32.0 | $(16.1) |
Equipment utilization rates averaged 88.6 percent in the second quarter compared to 93.5 percent in the second quarter of last year. Average lease rates were slightly down compared to the same period of 2015, while costs of sales were higher due to increased storage cost partially offset by lower maintenance expenses year over year.
Railcar sales generated $2.3 million of pre-tax income in the second quarter compared to $4.7 million in the second quarter of 2015. While part of the normal portfolio management process, the timing of these transactions normally vary quarter to quarter and year to year depending on rail market and financing conditions.
Rail Services and Other pre-tax income was $1.6 million in the second quarter, up from $1.4 million in the same quarter in 2015, driven by improved performance in the railcar repair business partially offset by the elimination of income from an investment in a short line railroad which was redeemed earlier this year.
Retail
The Retail Group had pre-tax income of $1.0 million for the second quarter compared to income of $1.5 million in the same period last year. Performance in the second quarter was lower compared to the same period of 2015 due to the timing of Easter which occurred in March rather than April, and lower same store sales through the quarter.
Corporate
Unallocated Corporate level expenses for the second quarter of 2016 were $2.2 million compared to expenses of $5.8 million in the second quarter of 2015. Corporate expense was lower primarily due to lower incentive compensation accruals and the impact of cost reduction measures.
Conference Call
The Company will host a webcast on Thursday, August 4, 2016 at 11:00 A.M. ET, to discuss its performance and provide outlook for 2016. To dial-in to the call, the number is 866-439-8514 or 678-509-7568 (participant passcode is 49515341). It is recommended that you call 10 minutes before the conference call begins.
To access the webcast:
a. | Click on the link: http://edge.media-server.com/m/p/by3ndtra |
b. | Log on. |
c. | Click on the phone icon at the bottom of the "webcast window" on the left side of the screen. Then, you will be provided with the conference call number and passcode. |
d. | Click the gear set icon (left of the telephone icon) and select 'Live Phone' to synchronize the presentation with the audio on your phone. |
A replay of the call can also be accessed under the heading "Investor" on the Company website at www.andersonsinc.com.
Forward Looking Statements
This release contains forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially. Without limitation, these risks include economic, weather and regulatory conditions, competition, and the risk factors set forth from time to time in the Company’s filings with the Securities and Exchange Commission. Although the Company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct.
Company Description
Founded in Maumee, Ohio, in 1947, The Andersons is a diversified Company rooted in agriculture conducting business across North America in the grain, ethanol, plant nutrient and rail sectors. The Company also has a consumer retailing presence. For more information, visit The Andersons online at www.andersonsinc.com.
Investor Relations Contact
Jim Burmeister
Phone: 419-891-5848
E-mail: Jim_Burmeister@andersonsinc.com
The Andersons, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data) | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Sales and merchandising revenues (a) | $ | 1,064,244 | $ | 1,187,704 | $ | 1,952,123 | $ | 2,105,929 | |||||||
Cost of sales and merchandising revenues (a) | 967,202 | 1,079,531 | 1,787,326 | 1,914,445 | |||||||||||
Gross profit | 97,042 | 108,173 | 164,797 | 191,484 | |||||||||||
Operating, administrative and general expenses | 75,405 | 83,743 | 155,286 | 162,346 | |||||||||||
Interest expense | 6,554 | 4,025 | 13,605 | 10,063 | |||||||||||
Other income: | |||||||||||||||
Equity in earnings of affiliates, net | 2,344 | 16,190 | (4,633 | ) | 19,450 | ||||||||||
Other income, net | 5,682 | 13,772 | 8,928 | 16,880 | |||||||||||
Income before income taxes | 23,109 | 50,367 | 201 | 55,405 | |||||||||||
Income tax provision | 7,668 | 17,969 | 382 | 19,061 | |||||||||||
Net income | 15,441 | 32,398 | (181 | ) | 36,344 | ||||||||||
Net income attributable to the noncontrolling interests | 1,018 | 1,306 | 92 | 1,155 | |||||||||||
Net income attributable to The Andersons, Inc. | $ | 14,423 | $ | 31,092 | $ | (273 | ) | $ | 35,189 | ||||||
Per common share: | |||||||||||||||
Basic earnings attributable to The Andersons, Inc. common shareholders | $ | 0.51 | $ | 1.09 | $ | (0.01 | ) | $ | 1.23 | ||||||
Diluted earnings attributable to The Andersons, Inc. common shareholders | $ | 0.51 | $ | 1.09 | $ | (0.01 | ) | $ | 1.23 | ||||||
Dividends declared | $ | 0.155 | $ | 0.14 | $ | 0.31 | $ | 0.28 | |||||||
(a) Revenue and cost of sales in the interim periods of 2015 have been recast to reflect a change in policy related to the classification of gains and losses on derivative contracts as disclosed in the 2015 10-K.
The Andersons, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands) | June 30, 2016 | December 31, 2015 | June 30, 2015 | ||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 31,383 | $ | 63,750 | $ | 40,773 | |||||
Restricted cash | 987 | 451 | 941 | ||||||||
Accounts receivable, net | 212,588 | 170,912 | 238,601 | ||||||||
Inventories | 486,236 | 747,399 | 508,408 | ||||||||
Commodity derivative assets - current | 115,924 | 49,826 | 39,860 | ||||||||
Deferred income taxes | — | 6,772 | 6,069 | ||||||||
Other current assets | 48,754 | 90,412 | 44,765 | ||||||||
Total current assets | $ | 895,872 | $ | 1,129,522 | $ | 879,417 | |||||
Other assets: | |||||||||||
Commodity derivative assets - noncurrent | $ | 1,934 | $ | 412 | $ | 2,990 | |||||
Other assets, net (b) | $ | 183,728 | $ | 193,689 | $ | 277,672 | |||||
Equity method investments | 238,478 | 242,107 | 224,380 | ||||||||
424,140 | 436,208 | 505,042 | |||||||||
Railcar assets leased to others, net | 340,136 | 338,111 | 330,832 | ||||||||
Property, plant and equipment, net | 447,267 | 455,260 | 437,074 | ||||||||
Total assets | $ | 2,107,415 | $ | 2,359,101 | $ | 2,152,365 | |||||
Liabilities and equity | |||||||||||
Current liabilities: | |||||||||||
Short-term debt | $ | 179,404 | $ | 16,990 | $ | 141,250 | |||||
Trade and other payables | 302,413 | 668,788 | 358,190 | ||||||||
Customer prepayments and deferred revenue | 18,252 | 66,762 | 25,927 | ||||||||
Commodity derivative liabilities – current | 43,183 | 37,387 | 42,622 | ||||||||
Accrued expenses and other current liabilities | 71,169 | 70,324 | 72,034 | ||||||||
Current maturities of long-term debt | 53,720 | 27,786 | 27,188 | ||||||||
Total current liabilities | $ | 668,141 | $ | 888,037 | $ | 667,211 | |||||
Other long-term liabilities | $ | 30,430 | $ | 18,176 | $ | 14,934 | |||||
Commodity derivative liabilities – noncurrent | 2,182 | 1,063 | 2,177 | ||||||||
Employee benefit plan obligations | 44,902 | 45,805 | 57,686 | ||||||||
Long-term debt, less current maturities | 398,746 | 436,208 | 417,279 | ||||||||
Deferred income taxes | 179,911 | 186,073 | 171,163 | ||||||||
Total liabilities | 1,324,312 | 1,575,362 | 1,330,450 | ||||||||
Total equity | 783,103 | 783,739 | 821,915 | ||||||||
Total liabilities and equity | $ | 2,107,415 | $ | 2,359,101 | $ | 2,152,365 | |||||
(b) For the period ended June 30, 2015 Other assets, net and Property, plant and equipment, net have been recast to reflect the change in accounting policy which reclassified software and accumulated amortization. Additional detail is available in the 2015 10-K.
The Andersons, Inc.
Segment Data
(Unaudited)
(in thousands) | Grain | Ethanol | Plant Nutrient | Rail | Retail | Other | Total | ||||||||||||||||||||
Three months ended June 30, 2016 | |||||||||||||||||||||||||||
Revenues from external customers | $ | 522,989 | $ | 142,520 | $ | 320,036 | $ | 40,342 | $ | 38,357 | $ | — | $ | 1,064,244 | |||||||||||||
Gross profit | 17,551 | 4,570 | 49,577 | 13,602 | 11,742 | — | 97,042 | ||||||||||||||||||||
Equity in earnings of affiliates | (2,907 | ) | 5,251 | — | — | — | — | 2,344 | |||||||||||||||||||
Other income, net | 2,642 | 3 | 1,222 | 185 | 91 | 1,539 | 5,682 | ||||||||||||||||||||
Income (loss) before income taxes | (13,037 | ) | 7,205 | 23,535 | 6,569 | 1,010 | (2,173 | ) | 23,109 | ||||||||||||||||||
Income (loss) attributable to the noncontrolling interests | — | 1,018 | — | — | — | — | 1,018 | ||||||||||||||||||||
Income (loss) before income taxes attributable to The Andersons, Inc. (a) | $ | (13,037 | ) | $ | 6,187 | $ | 23,535 | $ | 6,569 | $ | 1,010 | $ | (2,173 | ) | $ | 22,091 | |||||||||||
Three months ended June 30, 2015 | |||||||||||||||||||||||||||
Revenues from external customers | $ | 601,397 | $ | 142,564 | $ | 357,186 | $ | 45,523 | $ | 41,034 | $ | — | $ | 1,187,704 | |||||||||||||
Gross profit | 25,005 | 5,843 | 46,698 | 18,249 | 12,378 | — | 108,173 | ||||||||||||||||||||
Equity in earnings of affiliates | 7,875 | 8,315 | — | — | — | — | 16,190 | ||||||||||||||||||||
Other income, net | 1,230 | 6 | 459 | 11,834 | 94 | 149 | 13,772 | ||||||||||||||||||||
Income (loss) before income taxes | 3,147 | 10,975 | 18,873 | 21,689 | 1,469 | (5,786 | ) | 50,367 | |||||||||||||||||||
Income (loss) attributable to the noncontrolling interest | (2 | ) | 1,308 | — | — | — | — | 1,306 | |||||||||||||||||||
Income (loss) before income taxes attributable to The Andersons, Inc. (a) | $ | 3,149 | $ | 9,667 | $ | 18,873 | $ | 21,689 | $ | 1,469 | $ | (5,786 | ) | $ | 49,061 | ||||||||||||
Grain | Ethanol | Plant Nutrient | Rail | Retail | Other | Total | |||||||||||||||||||||
Six months ended June 30, 2016 | |||||||||||||||||||||||||||
Revenues from external customers | $ | 1,061,803 | $ | 257,213 | $ | 487,027 | $ | 79,951 | $ | 66,129 | $ | 1,952,123 | |||||||||||||||
Gross profit | 33,751 | 6,906 | 76,266 | 28,162 | 19,712 | — | 164,797 | ||||||||||||||||||||
Equity in earnings of affiliates | (6,674 | ) | 2,041 | — | — | — | — | (4,633 | ) | ||||||||||||||||||
Other income, net | 3,310 | 33 | 2,017 | 1,562 | 180 | 1,826 | 8,928 | ||||||||||||||||||||
Income (loss) before income taxes | (30,445 | ) | 3,602 | 25,239 | 15,944 | (1,066 | ) | (13,073 | ) | 201 | |||||||||||||||||
Income (loss) attributable to the noncontrolling interests | (3 | ) | 95 | — | — | — | — | 92 | |||||||||||||||||||
Income (loss) before income taxes attributable to The Andersons, Inc. (a) | $ | (30,442 | ) | $ | 3,507 | $ | 25,239 | $ | 15,944 | $ | (1,066 | ) | $ | (13,073 | ) | $ | 109 | ||||||||||
Six months ended June 30, 2015 | |||||||||||||||||||||||||||
Revenues from external customers | $ | 1,160,073 | $ | 275,365 | $ | 511,137 | $ | 89,739 | $ | 69,615 | $ | — | $ | 2,105,929 | |||||||||||||
Gross profit | 54,730 | 12,129 | 68,664 | 35,571 | 20,390 | — | 191,484 | ||||||||||||||||||||
Equity in earnings of affiliates | 9,423 | 10,027 | — | — | — | — | 19,450 | ||||||||||||||||||||
Other income, net | 2,064 | 48 | 1,494 | 12,673 | 191 | 410 | 16,880 | ||||||||||||||||||||
Income (loss) before income taxes | 3,887 | 16,106 | 19,297 | 32,002 | (714 | ) | (15,173 | ) | 55,405 | ||||||||||||||||||
Income attributable to the noncontrolling interest | (5 | ) | 1,160 | — | — | — | — | 1,155 | |||||||||||||||||||
Income (loss) before income taxes attributable to The Andersons, Inc. (a) | $ | 3,892 | $ | 14,946 | $ | 19,297 | $ | 32,002 | $ | (714 | ) | $ | (15,173 | ) | $ | 54,250 | |||||||||||
(a) Income (loss) before income taxes attributable to The Andersons, Inc. for each Group is defined as net sales and merchandising revenues plus identifiable other income less all identifiable operating expenses, including interest expense for carrying working capital and long-term assets and is reported net of the noncontrolling interest share of income (loss).
(b) Revenue in the interim periods of 2015 has been recast to reflect a change in policy related to the classification of gains and losses on derivative contracts as disclosed in the 2015 10-K.