SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
Commission file number 000-20557
THE ANDERSONS, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-1562374
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
480 W. Dussel Drive, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
(419) 893-5050
(Telephone Number)
The Andersons Management Corp.
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The registrant had 8,430,286 Common Shares outstanding, no par value, at May
1, 1996.
THE ANDERSONS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income -
Three months ended March 31, 1996 and 1995 6
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE ANDERSONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (IN THOUSANDS)
March 31 December 31
1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 3,624 $ 5,052
Accounts Receivable:
Trade accounts - net 93,701 68,362
Margin deposits 8,838 20,753
102,539 89,115
Inventories:
Grain 174,624 186,989
Agricultural fertilizer and supplies 34,128 19,602
Merchandise 28,999 29,909
Lawn and corn cob products 18,089 21,729
Other 12,298 11,701
268,138 269,930
Deferred income taxes 4,016 -
Prepaid expenses 3,818 4,314
TOTAL CURRENT ASSETS 382,135 368,411
OTHER ASSETS
Investments in and advances to affiliates 695 670
Notes receivable (net) and other assets 4,610 4,575
TOTAL OTHER ASSETS 5,305 5,245
PROPERTY, PLANT AND EQUIPMENT
Land 11,214 11,179
Land improvements and leasehold
improvements 23,988 23,926
Buildings and storage facilities 78,419 78,210
Machinery and equipment 98,393 97,970
Construction in progress 1,781 972
213,795 212,257
Less allowances for depreciation and
amortization 131,794 130,395
NET PROPERTY, PLANT AND EQUIPMENT 82,001 81,862
$ 469,441 $ 455,518
NOTE: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
See notes to consolidated financial statements.
THE ANDERSONS, INC.
CONSOLIDATED BALANCE SHEETS - (continued)
(UNAUDITED) (IN THOUSANDS)
March 31 December 31
1996 1995
CURRENT LIABILITIES
Notes payable $ 182,600 $ 120,267
Accounts payable for grain 27,793 94,084
Other accounts payable 86,950 72,777
Accrued expenses 14,582 14,357
Current maturities of long-term debt 7,506 8,029
TOTAL CURRENT LIABILITIES 319,431 309,514
PENSION AND POSTRETIREMENT BENEFITS 3,181 2,929
LONG-TERM DEBT
Note payable, 7.84%, payable
quarterly, ($75 thousand through 7/97,
$398 thousand thereafter) due 2004 14,475 14,550
Note payable, variable rate (6.4375% at
3/31/96) payable $336 thousand
quarterly beginning 10/97, due 2004 9,418 9,418
Notes payable relating to revolving
credit facility, variable rate
(5.9125% at 3/31/96), due 1997 20,000 20,000
Other notes payable 1,104 1,101
Industrial development revenue bonds:
6.5%, sinking fund paid annually,
due 1999 3,700 3,700
Variable rate (5.5275% at 3/31/96),
due in annual installments of $881
thousand through 2004 7,233 7,233
Variable rate (3.8% at 3/31/96),
due 2025 3,100 3,100
Debenture bonds:
9.2% to 10%, due 1996 4,606 5,868
6.5% to 8%, due 1997 to 1999 5,815 5,815
10% due 1997 and 1998 2,117 2,117
10% due 2000 and 2001 2,699 2,704
7.5% to 8.7%, due 2002 to 2004 5,689 5,689
Other bonds, 4% to 9.6% 533 873
80,489 82,168
Less current maturities of long-term debt 7,506 8,029
TOTAL LONG-TERM DEBT 72,983 74,139
DEFERRED INCOME TAXES 4,221 675
MINORITY INTEREST 884 1,001
SHAREHOLDERS' EQUITY:
Common stock (25,000,000 shares authorized,
stated value $.01 per share, 8,430,286
outstanding) 84 84
Additional paid-in capital 66,659 66,448
Retained earnings 1,969 699
Unrealized gain on available-for-sale
securities (net of tax) 29 29
TOTAL SHAREHOLDERS' EQUITY 68,741 67,260
$ 469,441 $ 455,518
NOTE: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. Shareholders' equity at December
31, 1995 reflects the effects of the merger consummated on January 2, 1996 of
The Andersons, a limited partnership, into The Andersons Management Corp., the
corporate general partner.
See notes to consolidated financial statements.
THE ANDERSONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
Three Months
Ended March 31
1996 1995
Grain sales and revenues $ 153,363 $ 104,774
Fertilizer, retail and other sales 102,752 101,926
Other income 599 627
256,714 207,327
Cost of grain sales and revenues 140,063 93,773
Cost of fertilizer, retail and
other sales 76,918 77,210
216,981 170,983
GROSS PROFIT 39,733 36,344
Operating, administrative and
general expenses 31,589 31,210
Interest expense 4,698 3,142
36,287 34,352
NET INCOME BEFORE INCOME TAXES 3,446 1,992
Provision for income taxes (Note B) 2,177 53
NET INCOME $ 1,269 1,939
Pro forma income taxes (Note B) 741
Pro forma net income $ 1,198
Earnings per share $ 0.15
Pro forma earnings per share $ 0.14
Average shares outstanding 8,430 8,430
See notes to consolidated financial statements.
THE ANDERSONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
Three Months
Ended March 31
1996 1995
OPERATING ACTIVITIES
Net income $ 1,269 $ 1,939
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 2,461 2,180
Minority interest in net loss of
subsidiaries (42) (43)
Payments to minority interests (75) (48)
Provision for losses on receivables,
investments and other assets 237 200
Gain on sale of property, plant and
equipment (22) (38)
Deferred income taxes (470) -
Changes in operating assets and
liabilities:
Accounts receivable (13,660) (3,958)
Inventories 1,792 (13,501)
Prepaid expenses and other assets 330 594
Accounts payable for grain (66,291) (53,957)
Other accounts payable and
accrued expenses 14,650 (8,090)
NET CASH USED IN OPERATING ACTIVITIES (59,821) (74,722)
INVESTING ACTIVITIES
Purchases of property, plant, equipment (2,554) (2,465)
Proceeds from sale of property, plant and
equipment 81 74
Payments from affiliates - 250
NET CASH USED IN INVESTING ACTIVITIES (2,473) (2,141)
FINANCING ACTIVITIES
Net increase in short-term borrowings 62,333 71,400
Proceeds from issuance of long-term debt 9 10,293
Payments of long-term debt (1,412) (10,223)
Payments to partners and other deductions
from capital accounts (64) (1,261)
Capital invested by partners and shareholders - 1,091
NET CASH PROVIDED BY FINANCING ACTIVITIES 60,866 71,300
DECREASE IN CASH AND CASH EQUIVALENTS (1,428) (5,563)
Cash and cash equivalents at beginning of
year 5,052 6,924
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,624 $ 1,361
Noncash financing activity
Exchange of employee bonds for common shares $ 276
See notes to consolidated financial statements.
THE ANDERSONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of
the results of operations for the periods indicated have been made.
The accompanying unaudited consolidated financial statements should
be read in conjunction with the consolidated financial statements
and notes thereto included in The Andersons, Inc. annual report on
Form 10-K for the year ended December 31, 1995.
Note B - Prior to 1996, the majority of the Company's operations were
conducted as a partnership and the income from those operations was
included in the individual tax returns of its partners. Since
January 2, 1996, the date that The Andersons (the "Partnership")
merged into its corporate general partner, income from operations
is taxed at the corporate level. Prior year financial statements
were restated to reflect the effects of the merger and the pro
forma provision for income taxes at a corporate level is included
in the income statement for comparison.
In conjunction with the merger, the Company recorded the deferred
tax assets and liabilities of the partnership that had not
previously been recognized. The net excess of deferred tax
liabilities over deferred tax assets ($812,000) was recorded in the
first quarter and included as a component of the provision for
income taxes.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Agribusiness
The Company's largest segment, the Agriculture Group, includes grain
merchandising, the operation of grain elevator facilities, and distribution
and custom application of agricultural products such as fertilizers, seeds and
farm supplies. All of these businesses may be adversely affected by
unfavorable weather conditions, disease and insect damage, government
regulation and policies and worldwide supply and demand.
The industry experienced unusual market conditions during the first
quarter of 1996, some of which are a result of conditions first appearing in
1995. The 1995 spring planting season was unusually cold and wet, resulting
in fewer acres plant ed and a reduction in average yields. At the same time,
export demand increased, and as a result, U.S. grain stocks at the end of the
current crop year are projected to be at their lowest levels in twenty years.
The United States government removed its acreage set-aside program for 1996
and will be eliminating price supports for farmers over the next seven years.
These factors, along with poor expectations for the 1996 U. S. wheat crop,
have contributed to continued volatility in the grain commodity markets.
The Company believes that its position as a merchandiser of grain and
a supplier of inputs and services could be favorably impacted by expected
volume increases due to the removal of the current and future acreage set-
aside. Increases in demand from the export market can be met through the
Company's river elevator located at the Port of Toledo. In addition, the
removal of governmental price supports may make forward contracts more
attractive to producers needing to lock in prices which would allow them a
profit margin. The Company forward contracts with producers for future
delivery of grain to its elevators. These contracts provide producers the
ability to establish selling prices at appropriate levels and provide the
Company with future commitments of grain bushels to be handled.
The Company's hedging program is managed through daily position
limits, weekly reviews of positions by key management outside of the hedging
function and margin risk modeling. In addition, the Company continues to
review the contracts it holds with grain producers and dealers for nondelivery
risk in this volatile environment and believes it has adequately reserved for
potential defaults.
Results of Operations
Comparison of the three months ended March 31, 1996 with the three months
ended March 31, 1995:
Sales and revenue for the three months ended March 31, 1996 totaled
$256.7 million, an increase of $49.4 million or 24% from the 1995 first
quarter sales and revenue of $207.3 million. The Agriculture Group
contributed $45.9 million of the $ 49.4 million increase. While grain
shipment volume increased only 3.7%, an increase in the average bushel price
of approximately 42% contributed significantly to this increase. Commodity
market prices continued to rise during the quarter on the expectation of low
carryover stocks. The Retail Group experienced a 1% decrease in sales, with
mixed results. The Toledo and Maumee stores posted increases while the
Columbus stores continue to feel the impact of new competition in that market.
The Business Development Group contributed increased sales and revenue of $3.9
million with all major businesses showing increases. The lawn products
business had the majority of the Group's increase with a 13% or $2.5 million
increase in sales on higher volume and increased prices.
Gross profit for the three months ended March 31, 1996 totaled $39.7
million, an increase of $3.4 million or 9% from the 1995 first quarter gross
profit of $36.3 million. The Agriculture Group contributed $2.5 million of
the increase with $2 .3 million of this increase resulting from margins on
grain sales and merchandising activities. Gross profit on sales in the Retail
Group was down slightly. The Business Development Group had mixed results
with the lawn business posting a 23% or $1 .3 million increase, the railcar
business gross profit unchanged and the industrial products business down
slightly. In total, the Business Development Group had a gross profit
increase of $1.2 million or 11%.
Operating, administrative and general expense for the three months
ended March 31, 1996 totaled $31.6 million, an increase of $0.4 million or 1%
from the 1995 first quarter expense of $31.2 million.
Interest expense for the three months ended March 31, 1996 totaled
$4.7 million, an increase of $1.5 million or 50% from the 1995 first quarter
expense of $3.1 million. Increased inventory values in the grain business,
because of the high market prices, required additional short-term borrowings
for the quarter. Short-term borrowing at the end of the first quarter of 1996
was $183 million as compared to short-term borrowings of $121 million at March
31, 1995.
Income before income taxes for the three months ended March 31, 1996
totaled $3.4 million, an increase of $1.4 million or 73% from the 1995 first
quarter income of $2 million. Net income increased from $1.2 million in the
three months ended March 31, 1995 to $1.3 million for the same period in 1996
after a one time charge of $812 thousand, included in the provision for income
taxes, to record the net excess of deferred tax liabilities over deferred tax
assets of the Partnership.
Liquidity and Capital Resources
The Company used $60 million in its operations in the first quarter of
1996 as compared to 1995 first quarter operations using $75 million. The
Company has significant short-term lines of credit available to finance
working capital, primarily inventories and accounts receivable. Lines of
credit available at the time of this writing were $337 million, of which $183
million was used at March 31, 1996. Typically, the Company's highest
borrowing occurs in the spring due to seasonal inventory requirements in
several of the Company's businesses, credit sales in the lawn products and
agricultural fertilizer and supply business and a customary reduction in grain
payables due to customer cash needs and market strategies. The available
lines were recently increased in response to anticipated cash demands
including increased grain prices and the potential for additional margin
requirements in the event of rising prices.
The final payments to former partners electing not to participate in
the merger was made in the first quarter of 1996. No cash dividends have been
declared or are anticipated at this time. The Company will be required to pay
income taxes at the corporate level beginning with 1996 income from
operations. As the majority of the income was previously earned in a
partnership, corporate taxes prior to 1996 were minimal and as such, the
Company must only make tax deposits at that level for 1996.
Total capital expenditures for 1996 are expected to approximate $13
million, including $2.5 million for renovations to the Maumee and Toledo
General Stores and $1 million for plant upgrades and improvements. Funding
for these expenditures is expected to come from cash generated from operations
and additional long-term debt. Capital expenditures can be, and in the past
have been, curtailed if cash generated from operations is less than expected.
Certain of the Company's long-term debt is secured by first mortgages
on various facilities. In addition, some of the long-term borrowings include
provisions that impose minimum levels of working capital and equity,
limitations on additional debt and require the Company to be substantially
hedged in its grain transactions. The Company's liquidity is enhanced by the
fact that grain inventories are readily marketable and the Maumee and Toledo,
Ohio elevators serve as delivery points for Chicago Board of Trade contracts.
In the opinion of management, the Company's liquidity is adequate to meet
short-term and long-term needs.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. There were no reports on Form 8-K for the
three months ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ANDERSONS, INC.
(Registrant)
Date: May 14, 1996 By /s/Richard P. Anderson
Richard P. Anderson
President and Chief Executive
Officer
Date: May 14, 1996 By /s/Richard R. George
Richard R. George
Corporate Controller (Principal
Accounting Officer)