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The Andersons, Inc. Reports Second Quarter Results

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The Andersons, Inc. Reports Second Quarter Results

PR Newswire

MAUMEE, Ohio, Aug. 7, 2018 /PRNewswire/ -- The Andersons, Inc. (NASDAQ:ANDE) announces financial results for the second quarter which ended June 30, 2018.

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

The Company reports net income of $21.5 million, or $0.76 per diluted share, up considerably from both the net loss of $26.7 million, or ($0.94) per diluted share, and adjusted net income of $15.3 million, or $0.54 per diluted share, reported in the prior year. Second quarter 2018 reported results include noncash pretax impairment charges totaling $6.3 million. The earnings per share impact of these charges is approximately $0.17 per diluted share.

  • Grain Group records much improved pretax income of $9.9 million, net of a $1.6 million impairment charge on a recently sold Tennessee facility, as market volatility provides better merchandising opportunities and affiliate results continue to improve.
  • Ethanol Group earns $6.1 million of pretax income on strong execution and improved DDG prices.
  • Plant Nutrient Group reports pretax income of $15.1 million on continued lower primary and specialty fertilizer margins, offset by strong performance by the lawn and contract manufacturing business.
  • Rail Group earns $0.9 million of pretax income despite a $4.7 million impairment charge on railcars intended to be scrapped, as the leasing market continues to improve and the railcar repair business rebounds.

The Company reported second quarter 2018 net income attributable to The Andersons of $21.5 million, or $0.76 per diluted share, on revenues of $911 million. This result is a significant improvement over the net loss attributable to the Company of $26.7 million, or $(0.94) per diluted share and adjusted net income attributable to the Company of $15.3 million, or $0.54 per diluted share, on revenues of $994 million recorded in the same period of 2017. The Company's earnings before interest, taxes, depreciation and amortization (EBITDA) was $59.7 million for the quarter, compared to $8.9 million of EBITDA and $50.9 million of adjusted EBITDA recorded in the second quarter of 2017.

Results for the quarter included pretax impairment charges of $4.7 million on idle railcars held for sale and $1.6 million on the Grain Group's Como, Tennessee, facility in anticipation of its recent sale. The decrease in revenues year over year was primarily the result of the Company's adoption of new revenue recognition rules at the beginning of 2018 that have changed the accounting treatment of a significant amount of Grain's sales transactions. This change has no impact on the amount of gross profit recognized on these transactions.

"As in the first quarter, our Grain and Ethanol businesses each posted significantly better year-over-year results, but our Plant Nutrient and Rail businesses posted lower results compared to last year," said CEO Pat Bowe.

"For the seventh consecutive quarter, our Grain Group recorded improved year-over-year results," Bowe continued. "The group's second quarter results improved by approximately $4.5 million when excluding the Tennessee asset impairment charge, and were highlighted by better results from merchandising and Lansing Trade Group. Ethanol Group results improved once again year over year due to higher volumes linked to plant optimization and improved DDG margins. The Plant Nutrient Group's lawn and contract manufacturing business continued to grow, but that was not enough to offset the continued squeeze in margins for both primary and specialty nutrients, which suffered from continued competitive pricing pressure. The Rail Group's results were comparable year over year notwithstanding its decision to scrap about 600 idle cars. Utilization and total cars on lease improved sequentially and year over year, signaling a continued modest market upturn."

For purposes of better understanding ongoing results, the expanded pretax income and EBITDA disclosures in the table below adjust for amounts that are not reflective of ongoing operations. Specifically, an adjustment was made for the goodwill impairment charged in the second quarter of 2017 associated with the Plant Nutrient Group.

 

$ in millions

Second Quarter

Year to Date


2018

2017

Vs

2018

2017

Vs

Reported Pretax Income (Loss)

$29.2

$(19.1)

$48.3

$26.9

$(24.6)

$51.5

Goodwill Impairment

-

42.0

(42.0)

-

42.0

(42.0)

Adjusted Pretax Income

$29.2

$22.9

$6.3

$26.9

$17.4

$9.5

EBITDA

$59.7

$8.9

$50.8

$87.3

$30.3

$57.0

Adjusted EBITDA

$59.7

$50.9

$8.8

$87.3

$72.3

$15.0















For the first six months of the year, the Company recorded net income of $19.8 million, or $0.70 per diluted share, compared to a net loss of $29.7 million, or ($1.05) per diluted share, and adjusted net income of $12.3 million, or $0.43 per diluted share, during the same period last year. Total EBITDA for the first half of 2018 was $87.3 million compared to first-half 2017 EBITDA of $30.3 million and adjusted EBITDA of $72.3 million.

Second Quarter Segment Overview

Grain Group Operating Income Increases Again Compared to Prior Year

The Grain Group generated pretax income of $9.9 million in the quarter.  Included in those results was a $1.6 million impairment charge related to some Tennessee assets that were sold recently. Notwithstanding that charge, the group's results were almost 40 percent better than the $6.9 million pretax income earned in the same period last year.

The table below separates the results of the base grain business from those of the group's affiliates, which include Lansing Trade Group (LTG) and Thompsons Limited. 

 

$ in millions     


Second Quarter



Year to Date


Pretax Income

2018

2017

Vs

2018

2017

Vs

  Base Grain

$4.5

$4.1

$0.4

$2.8

$0.6

$2.2

  Grain Affiliates

5.4

2.8

2.6

7.0

1.3

5.7

Total Grain Group

$9.9

$6.9

$3.0

$9.8

$1.9

$7.9

EBITDA

$17.9

$14.2

$3.7

$24.9

$16.3

$8.6












Excluding the impairment charge, the base grain business drove about 40 percent of the improvement, while affiliates accounted for the rest. Base grain pretax income after adjustment for the impairment charge improved by $1.8 million in the second quarter compared to 2017 results. The group was able to benefit from increased price volatility, which led to considerably better merchandising margins. Income from holding grain in inventory was comparable year over year.

LTG had an excellent quarter, accounting for all the year-over-year improvement by the affiliates.  The improvement spanned all its businesses.

Ethanol Group Results Improve on Higher Volume and Better DDG Values

The Ethanol Group produced $6.1 million of pretax income attributable to the Company in the second quarter. These results were $1.4 million or almost 30 percent higher than the $4.7 million pretax income attributable to the Company for the same period in 2017, primarily due to higher volume and better DDG values.

 

$ in millions     


                       Second Quarter

        Year to Date



2018

2017

Vs

2018

2017

Vs

Equity in Earnings of Affiliates

$4.3

$3.5

$0.8

$5.9

$2.9

$3.0

Consolidated Operations and Service Fees

1.7

1.1

0.6

1.7

3.5

(1.8)

Pretax Income

6.0

4.6

1.4

7.6

6.4

1.2

Attributable to Noncontrolling Interests

(0.1)

(0.1)

-

(0.4)

-

0.4

Ethanol Group Pretax Income Attributable to The Andersons

$6.1

$4.7

$1.4

$8.0

$6.4

$1.6












The four ethanol plants combined achieved second quarter and first half production records of more than 121 million and 238 million gallons, about 5 percent and 11 percent higher than the comparable periods, respectively. This is in part because the new Albion capacity came on line in March 2017. E85 sales continued to grow at a rapid pace.

While domestic and export demands have both been strong so far in 2018, the impact of current tariffs and the ultimate resolution of various trade disputes leave the future of margins and export business uncertain for the industry.

While Volume Was Up, Plant Nutrient Group Continued to Be Impacted by Lower Margins

The Plant Nutrient Group recorded pretax income of $15.1 million in the second quarter compared to a pretax loss of $25.8 million and adjusted pretax income of $16.2 million in the second quarter of 2017. The group's second quarter 2018 EBITDA was $23.5 million, a $1.2 million or 5 percent decrease from adjusted 2017 second quarter results.

For purposes of better understanding ongoing results, the Company has expanded the Plant Nutrient Group's pretax income and EBITDA disclosures in the table below to adjust for the second quarter 2017 goodwill impairment associated with the wholesale fertilizer business.

 

$ in millions 

Second Quarter

Year to Date


2018

2017

Vs

2018

2017

Vs

Reported Pretax Income

$15.1

$(25.8)

$40.9

$16.2

$(19.2)

$35.4

Goodwill Impairment

-

42.0

(42.0)

-

42.0

(42.0)

Adjusted Pretax Income

$15.1

$16.2

$(1.1)

$16.2

$22.8

$(6.6)

EBITDA

$23.5

$(17.3)

$40.8

$32.8

$(2.1)

$34.9

Adjusted EBITDA

$23.5

$24.7

($1.2)

$32.8

$39.9

$(7.1)












Sales volumes for both primary and specialty nutrients were strong for the quarter after a slow start due to adverse weather that delayed planting. However, both product segments struggled with continued margin erosion.

The lawn and contract manufacturing business continued to be a bright spot for the group, registering results that were more than 30 percent better year over year for the second consecutive quarter.

Rail Group Decides to Scrap Certain Idle Railcars; Leasing Market Conditions Continue to Improve

The Rail Group earned second quarter pretax income of $0.9 million compared to $5.9 million in the same period of the prior year. The difference was attributable to the decision to scrap nearly 600 idle railcars. About 500 of those railcars were not scrapped by the end of the quarter, which triggered an impairment charge of $4.7 million. A loss of $0.5 million was recognized on the remaining railcars. The decision will generate cash and improve future operating performance by approximately $1.4 million annually.

 





$ in millions


Second Quarter

Year to Date


Pretax Income


2018

2017

Vs

2018

2017

Vs


  Lease Income

$2.1

$2.9

$(0.8)

$4.2

$3.5

$0.7


  Car Sales

(3.0)

1.4

(4.4)

(0.7)

5.0

(5.7)


  Services and Other

1.8

1.6

0.2

1.4

3.4

(2.0)


Total Rail Group

$0.9

$5.9

$(5.0)

$4.9

$11.9

$(7.0)


EBITDA

$10.8

$13.6

$(2.8)

$24.3

$26.7

$(2.4)


   Utilization Rate

89.5%

84.4%

5.1%

88.7%

84.0%

4.7%














Base leasing operations earned $2.1 million, matching first quarter results but falling short of year-over-year results by $0.8 million due to higher maintenance expense, despite 5.1 percent higher year-over-year utilization. Utilization averaged 89.5 percent during the quarter compared to 87.9 percent sequentially and 84.4 percent during the same period last year. The average number of cars on lease rose about 3 percent year over year, while average lease rates fell slightly.

The group netted a pretax loss of $3.0 million on railcars sold, or to be sold, in the quarter compared to pretax income of $1.4 million in the second quarter of 2017. In addition to the idle railcar scrap program, the group took advantage of multi-year high scrap prices to scrap 515 additional railcars during the quarter. When the scrapping project is complete, the utilization rate should rise by approximately 2 percent excluding other factors. The group maintained the size of the fleet and reduced its average age during the quarter by buying 669 cars for $21 million.

Rail's service and other businesses earned pretax income of $1.8 million in the quarter, somewhat better than for the same period of 2017. Repair volumes were up after a first quarter 2018 lull. The group's repair facilities set a quarterly record for revenue and pretax income.

The group also recently announced that it has agreed to acquire a shuttered railcar facility in Danville, Illinois, with the intent to open it as a full-service railcar repair facility by year end.

Company Reduces Other Net Company-Level Expenses

Unallocated net Company-level expenses for the second quarter of 2018 fell by $1.1 million to $2.8 million. For the second quarter of 2017, the Company reported $10.6 million net expense, which included unallocated expenses of $3.9 million and a $6.7 million pretax loss from the former Retail business.

Conference Call

The Company will host a webcast on Wednesday, August 8, 2018 at 11 a.m. Eastern Daylight Time, to discuss its performance and provide its updated outlook for 2018. To dial-in to the call, please dial 866-439-8514 or 678-509-7568 (participant passcode is 5074829). 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/6wddy3qc. Log on.

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, 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, EBITDA and adjusted EBITDA do not and should not be considered as alternatives to net income or income before income taxes as determined by generally accepted accounting principles. Reconciliations of the non-GAAP to GAAP measures may be found within the financial tables provided in the release.

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. Through 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, visit The Andersons online at 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)

2018


2017


2018


2017

Sales and merchandising revenues 

$                 911,402


$                    993,662


$              1,547,141


$                 1,845,678

Cost of sales and merchandising revenues

820,928


905,828


1,392,962


1,681,386

Gross profit

90,474


87,834


154,179


164,292

Operating, administrative and general expenses

59,853


69,544


124,110


151,089

Asset impairment

6,272


-


6,272


-

Goodwill impairment

-


42,000


-


42,000

Interest expense

7,825


5,988


14,824


12,088

Other income:








Equity in earnings of affiliates

9,803


6,385


13,376


4,507

Other income, net

2,828


4,248


4,514


11,743

Income (loss) before income taxes

29,155


(19,065)


26,863


(24,635)

Income tax provision (benefit)

7,742


7,652


7,432


5,117

Net income (loss)

21,413


(26,717)


19,431


(29,752)

Net income attributable to the noncontrolling interests

(116)


(64)


(398)


(10)

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

$                    21,529


$                    (26,653)


$                    19,829


$                    (29,742)









Per common share:








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

common shareholders

$                        0.76


$                        (0.94)


$                        0.70


$                        (1.05)

Diluted earnings (loss)  attributable to The Andersons,

Inc. common shareholders

$                        0.76


$                        (0.94)


$                        0.70


$                        (1.05)

Dividends declared

$                      0.165


$                        0.160


$                      0.330


$                        0.320









 

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)

2018


2017


2018


2017

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

$                   21,529


$                   (26,653)


$                   19,829


$                   (29,742)

Items impacting other income, net of tax:








Goodwill impairment

-


42,000


-


42,000









Total adjusting items

-


42,000


-


42,000

Adjusted net income attributable to The Andersons, Inc.

$                   21,529


$                     15,347


$                   19,829


$                     12,258

















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

common shareholders

$                       0.76


$                       (0.94)


$                       0.70


$                       (1.05)









Impact on diluted earnings per share

-


1.48


-


1.48

Adjusted diluted earnings per share

$                       0.76


$                         0.54


$                       0.70


$                         0.43









 

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









(in thousands)

June 30, 2018


December 31, 2017


June 30, 2017


Assets







Current assets:







Cash and cash equivalents

$                    58,611


$                     34,919


$                      18,934


Restricted cash

-


-


1,033


Accounts receivable, net

218,476


183,238


186,331


Inventories

495,611


648,703


463,205


Commodity derivative assets – current

54,259


30,702


11,619


Other current assets

42,648


63,790


59,873


Assets held for sale

9,816


37,859


10,028


Total current assets

879,421


999,211


751,023


Other assets:







Commodity derivative assets – noncurrent

1,008


310


1,191


Other assets, net

138,201


131,474


145,283


Equity method investments

232,159


223,239


215,794



371,368


355,023


362,268


Rail Group assets leased to others, net

458,424


423,443


375,092


Property, plant and equipment, net

408,575


384,677


423,042


Total assets

$              2,117,788


$                2,162,354


$                 1,911,425









Liabilities and equity







Current liabilities:







Short-term debt

$                 185,000


$                     22,000


$                    124,000


Trade and other payables

282,221


503,571


267,194


Customer prepayments and deferred revenue

16,103


59,710


15,113


Commodity derivative liabilities – current

85,160


29,651


18,104


Accrued expenses and other current liabilities

74,512


69,579


69,256


Current maturities of long-term debt

13,700


54,205


62,482


Total current liabilities

656,696


738,716


556,149









Other long-term liabilities

30,325


33,129


34,441


Commodity derivative liabilities – noncurrent

3,202


825


334


Employee benefit plan obligations

26,131


26,716


36,837


Long-term debt, less current maturities

435,580


418,339


354,066


Deferred income taxes

118,864


121,730


181,806


Total liabilities

1,270,798


1,339,455


1,163,633


Total equity

846,990


822,899


747,792


Total liabilities and equity

$              2,117,788


$                2,162,354


$                 1,911,425


 

The Andersons, Inc.


Segment Data


(Unaudited)
























(in thousands)

Grain


Ethanol


Plant Nutrient


Rail


Other


Total

Three months ended June 30, 2018












Revenues from external customers

$                 365,920


$          200,938


$          303,106


$            41,438


$                     -


$               911,402

Gross profit

34,707


5,042


37,167


13,558


-


90,474

Equity in earnings of affiliates

5,510


4,293


-


-


-


9,803

Other income, net

727


45


622


675


759


2,828

Income (loss) before income taxes

9,877


6,009


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)

$                     9,877


$               6,125


$            15,124


$                  944


$             (2,799)


$                 29,271













Three months ended June 30, 2017












Revenues from external customers

$                   488,447


$            187,831


$            264,736


$              38,149


$              14,499


$                 993,662

Gross profit

30,447


3,320


39,934


12,699


1,434


87,834

Equity in earnings of affiliates

2,903


3,482


-


-


-


6,385

Other income, net

1,861


15


636


492


1,628


4,632

Income (loss) before income taxes

6,929


4,596


(25,825)


5,860


(10,625)


(19,065)

Income (loss) attributable to the noncontrolling

interests

-


(64)


-


-


-


(64)

Income (loss) before income taxes attributable to

The Andersons, Inc. (a)

$                       6,929


$                4,660


$             (25,825)


$                5,860


$            (10,625)


$                 (19,001)














Grain


Ethanol


Plant Nutrient


Rail


Other


Total

Six months ended June 30, 2018












Revenues from external customers

$                 642,772


$          373,776


$          438,723


$            91,870


$                     -


$           1,547,141

Gross profit

60,757


7,908


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

9,847


7,566


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. (a)

$                     9,847


$               7,964


$            16,215


$              4,913


$          (11,678)


$                 27,261













Six months ended June 30, 2017












Revenues from external customers

$                   966,975


$            341,984


$            411,323


$              78,539


$              46,857


$              1,845,678

Gross profit

54,096


8,860


65,742


25,007


10,587


164,292

Equity in earnings of affiliates

1,558


2,949


-


-


-


4,507

Other income, net

2,507


22


6,200


1,571


2,229


12,529

Income (loss) before income taxes

1,856


6,366


(19,154)


11,938


(25,641)


(24,635)

Income (loss) attributable to the noncontrolling

interest

-


(10)


-


-


-


(10)

Income (loss) before income taxes attributable to

The Andersons, Inc. (a)

$                       1,856


$                6,376


$             (19,154)


$              11,938


$            (25,641)


$                 (24,625)













(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)

  Grain 


 Ethanol


 Plant Nutrient


 Rail


Other


 Total

Three months ended June 30, 2018












Income (loss) before income taxes

$              9,877


$              6,009


$            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.

9,877


6,125


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)

$            17,933


$              7,371


$            23,535


$            10,781


$                    29


$            59,649













Three months ended June 30, 2017












Income (loss) before income taxes

$                6,929


$                4,596


$            (25,825)


$                5,860


$            (10,625)


$            (19,065)

Income (loss) attributable to the noncontrolling interests

-


(64)


-


-


-


(64)

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

6,929


4,660


(25,825)


5,860


(10,625)


(19,001)

Interest expense

2,328


(22)


1,815


1,936


(69)


5,988

Depreciation and amortization

4,948


1,484


6,758


5,808


2,877


21,875

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

$              14,205


$                6,122


$            (17,252)


$              13,604


$              (7,817)


$                8,862

Adjusting items impacting EBITDA:












   Goodwill impairment

-


-


42,000


-


-


42,000

Total adjusting items

-


-


42,000


-


-


42,000

Adjusted EBITDA

$              14,205


$                6,122


$              24,748


$              13,604


$              (7,817)


$              50,862













Six months ended June 30, 2018












Income (loss) before income taxes

$              9,847


$              7,566


$            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.

9,847


7,964


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)

$            24,879


$            10,679


$            32,794


$            24,287


$             (5,322)


$            87,317













Six months ended June 30, 2017












Income (loss) before income taxes

$                1,856


$                6,366


$            (19,154)


$              11,938


$            (25,641)


$            (24,635)

Income (loss) attributable to the noncontrolling interests

-


(10)


-


-


-


(10)

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

1,856


6,376


(19,154)


11,938


(25,641)


(24,625)

Interest expense

5,023


(25)


3,455


3,745


(110)


12,088

Depreciation and amortization

9,402


2,985


13,623


10,989


5,879


42,878

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

$              16,281


$                9,336


$              (2,076)


$              26,672


$            (19,872)


$              30,341

Adjusting items impacting EBITDA:












   Goodwill impairment

-


-


42,000


-


-


42,000

Total adjusting items

-


-


42,000


-


-


42,000

Adjusted EBITDA

$              16,281


$                9,336


$              39,924


$              26,672


$            (19,872)


$              72,341













 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/the-andersons-inc-reports-second-quarter-results-300693455.html

SOURCE The Andersons, Inc.

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