The Andersons, Inc.
The nine-month net income increase was achieved despite a 13.7 percent decrease in revenues to $636 million from $737 million during the comparable period in 1998. In the third quarter, revenues of $175 million were 24.3 percent less than last year's $231 million. A significant portion of the company's revenues are generated by its grain business and are heavily influenced by grain prices. Because operating income in a commodity-based business does not correlate directly with grain prices or revenue, changes in The Andersons' total revenues are not necessarily indicative of net income trends.
The company's Agriculture Group operates grain elevators and wholesale fertilizer distribution facilities in four eastern corn belt states. Collectively these facilities handle about 150 million bushels of grain and one million tons of dry and liquid agricultural fertilizer products annually. The group also operates 14 farm centers in the region.
The group's operating performance in the third quarter was comparable to the 1998 period. Expense increases associated with additional fertilizer facilities and volume-related wholesale fertilizer gross-profit reductions this year were mostly offset by lower operating costs at the group's grain elevators. Despite weakness in parts of U.S. agriculture, the grain elevator segment was quite strong due to the need to store sizable carryover grain stocks. Fertilizer revenues declined because farmers reduced their fertilizer use as a result of lower grain prices. Also, the disruption in rail traffic since the Conrail divestiture is impacting the flow of grain between the group's farmers and end-users.
The Manufacturing Group repairs, sells and leases various types of railcars and operates a custom steel fabrication business. This business has achieved dramatic revenue and income growth in the past few years and now controls a fleet of about 3,800 railcars.
Railcar lease rates in several industries are somewhat weak at the present time, and railcar market values are experiencing a cyclical downturn. As a result, the group's 1999 third-quarter revenues and operating income, though strong, were lower than the year-earlier period.
The Processing Group produces granular lawn fertilizer products for major retailers throughout the country as well as professional lawn-care and golf course markets. It also produces ice-melt products, corncob-based chemical and feed-ingredient carriers and animal bedding and litter products.
The group's lawn-products segment continued to achieve volume and revenue growth in the 1999 third quarter versus the comparable period in 1998. Operating income declined somewhat, however, because of the significant investment being made to increase productivity at the company's Maumee, Ohio, plant, and start-up costs associated with the addition of manufacturing and distribution facilities in eastern Pennsylvania and Alabama.
This group operates six large retail stores in Ohio. The company characterizes its retail concept as "More For Your Home." A traditional home center with plumbing, electrical and building supplies, etc., it also features indoor and outdoor garden centers, extensive lines of housewares and domestics, pet supplies, automotive supplies, sporting goods, and a unique specialty food offering.
In the third quarter of 1999, the Retail Group's same-store sales and gross margins were virtually equivalent to year-earlier levels. Profitability was slightly impacted by increased wages resulting from the tight labor market.
According to President and Chief Executive Officer Mike Anderson, "The third quarter is always a soft period for us. While virtually all of our third-quarter decline from a year earlier occurred in our Manufacturing and Processing businesses, we continue to remain excited about both of these units. Although Manufacturing's results are down, we believe this is a growth sector, and we continue to add to our fleet of railcars. In our Processing Group, the drop in income was purposeful and represents an essential down payment on our ability to support the growth we are experiencing. We're still cautious about earnings expectations for the balance of the year since we will continue to experience these one-time costs and will be handling a slightly smaller and dryer than normal grain crop."
The Andersons, Inc. paid quarterly cash dividends of $0.05 per share in the first three quarters of this year. In 1998, the quarterly dividend was $0.04. The company continues to repurchase shares on the open market from time to time.
The Andersons, Inc. is a respected leader and dominant regional player in grain merchandising. Its strong position in this basic business has allowed the company to diversify into other agribusiness operations, processing and railcar leasing businesses, and general merchandise retailing. The company has been in operation since 1947.
This release contains forward-looking statements, including statements with respect to anticipated revenues, adequacy of cash flows and profitability. These statements involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, 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.
For further information regarding The Andersons free of charge via fax dial1-800-PRO-INFO and enter company code "ANDE."
The Andersons, Inc. Consolidated Statements of Operations (Unaudited) Three Months ended Nine Months ended September 30 September 30 (in thousands, except for per share amounts) 1999 1998 1999 1998 Sales and merchandising revenues $173,911 $229,216 $633,123 $733,236 Other income 763 1,576 2,631 3,584 Total 174,674 230,792 635,754 736,820 Cost of sales and merchandising revenues 139,984 193,875 510,417 617,281 Gross profit 34,690 36,917 125,337 119,539 Operating, administrative and general expenses 35,866 36,225 111,202 106,163 Interest expense 2,567 2,153 6,685 6,497 Total 38,433 38,378 117,887 112,660 Income (loss) before income taxes (3,743) (1,461) 7,450 6,879 Income taxes (1,231) (489) 2,458 2,305 Net income (loss) $(2,512) $(972) $4,992 $4,574 Per common share: Basic earnings (loss) $(0.32) $(0.12) $0.62 $0.57 Diluted earnings (loss) $(0.32) $(0.12) $0.61 $0.57 Dividends paid $0.05 $0.04 $0.15 $0.12 Weighted average shares outstanding-basic 7,968 8,145 8,066 8,033 Weighted average shares outstanding-diluted 7,968 8,145 8,205 8,078 The Andersons, Inc. Consolidated Balance Sheets (in thousands) September 30 December 31 1999 1998 (unaudited) (audited) Assets Current assets: Cash and cash equivalents $5,026 $3,253 Accounts receivable: Trade accounts and notes receivable (net) 44,409 62,647 Margin deposits 5,062 248 Total 49,471 62,895 Inventories 212,065 184,990 Deferred income taxes 2,629 4,634 Prepaid expenses 2,996 5,502 Total current assets 272,187 261,274 Other assets: Notes receivable (net) and other assets 6,652 8,435 Investments in and advances to affiliates 1,004 1,057 Total 7,656 9,492 Property, plant and equipment (net) 93,882 90,057 Total $373,725 $360,823 Liabilities and owners' equity Current liabilities: Notes payable $95,000 $7,700 Accounts payable for grain 33,308 88,978 Other accounts payable 62,846 75,301 Accrued expenses 12,012 17,079 Current maturities of long-term debt 5,407 6,318 Total current liabilities 208,573 195,376 Pension and postretirement benefits 2,705 3,113 Long-term debt 70,027 71,565 Deferred income taxes 7,333 7,330 Minority interest 1,205 705 Owners' equity 83,882 82,734 Total $373,725 $360,823
SOURCE: The Andersons, Inc.
Contact: Gary Smith of The Andersons, Inc., 419-891-6417; or Marilyn
Windsor, 312-640-6692, or Lisa Fortuna, 312-640-6779, both of the Financial