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, 1998
[ ] 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)
(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 7,962,065 Common shares outstanding, no par value, at May 1,
1998.
THE ANDERSONS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations -
Three months ended March 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE ANDERSONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(IN THOUSANDS)
December 31
March 31 1997
1998 (Audited)
Current assets
Cash and cash equivalents $ 3,391 $ 8,278
Accounts and notes receivable:
Trade accounts - net 79,363 68,643
Margin deposits 1,291 771
80,654 69,414
Inventories:
Grain 98,609 113,838
Agricultural fertilizer and supplies 33,759 18,908
Merchandise 33,613 27,674
Lawn and corn cob products 16,557 20,142
Other 15,330 10,905
197,868 191,467
Deferred income taxes 2,375 1,408
Prepaid expenses 4,009 4,521
Total current assets 288,297 275,088
Other assets:
Notes receivable (net) and other assets 6,609 6,333
Investments in and advances to affiliates 1,040 1,026
7,649 7,359
Property, plant and equipment:
Land 11,775 11,763
Land improvements and leasehold improvements 24,767 24,594
Buildings and storage facilities 85,835 85,377
Machinery and equipment 105,568 104,590
Construction in progress 3,869 2,109
231,814 228,433
Less allowances for depreciation and amortization 144,712 142,636
87,102 85,797
$383,048 $368,244
See notes to condensed consolidated financial statements.
THE ANDERSONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (continued)
(UNAUDITED)(IN THOUSANDS)
December 31
March 31 1997
1998 (Audited)
Current liabilities
Notes payable $ 75,300 $ 15,572
Accounts payable for grain 55,075 121,233
Other accounts payable 85,867 63,309
Accrued expenses 12,840 12,973
Current maturities of long-term debt 8,386 8,406
Total current liabilities 237,468 221,493
Pension and postretirement benefits 2,864 2,799
Long-term debt
Note payable, 7.84%, payable $398 thousand
quarterly, due 2004 12,906 13,304
Note payable under revolving credit line,
variable rate (6.13% at March 31, 1998) 20,000 20,000
Notes payable, variable rate (6.43% at March 31,
1998), payable $336 quarterly, due 2002 8,745 9,082
Other notes payable 1,121 1,120
Industrial development revenue bonds:
6.5%, sinking fund $1 million payable
annually, due 1999 2,000 2,000
Variable rate (5.70% at March 31, 1998), payable
$882 thousand annually through 2004 5,470 5,470
Variable rate (4.2% at March 31, 1998), due 2025 3,100 3,100
Debenture bonds, 6.5% to 8.7%, due 1998
through 2008 19,698 19,556
Other bonds, 4% to 10% 460 483
73,500 74,115
Less current maturities of long-term debt 8,386 8,406
65,114 65,709
Deferred income taxes 5,525 5,393
Minority interest 606 649
Shareholders' equity:
Common stock (25,000 shares authorized,
stated value $.01 per share, 7,986 and 7,939
outstanding at March 31, 1998 and
December 31, 1997, respectively) 84 84
Additional paid-in capital 66,663 66,660
Retained earnings 8,732 9,875
Treasury stock (444 and 491 shares at March 31,
1998 and December 31, 1997, respectively;
at cost) (4,008) (4,418)
71,471 72,201
$383,048 $368,244
See notes to condensed consolidated financial statements.
THE ANDERSONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31
1998 1997
Grain sales and revenues $ 127,829 $ 93,809
Fertilizer, retail and other sales 93,392 92,009
Other income 968 947
222,189 186,765
Cost of grain sales 120,233 91,200
Cost of fertilizer, retail and other sales 68,096 68,248
188,329 159,448
Gross profit 33,860 27,317
Operating, administrative and general expenses 32,729 31,902
Interest expense 2,458 2,140
35,187 34,042
Net loss before income tax credit (1,327) (6,725)
Income tax credit (503) (2,643)
Net loss $ (824) $ (4,082)
Per common share:
Basic and diluted $ (0.10) $ (0.49)
Dividends paid $ 0.04 $ 0.03
Weighted average common shares outstanding 7,986 8,346
See notes to condensed consolidated financial statements.
THE ANDERSONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(IN THOUSANDS)
Three Months Ended March 31
1998 1997
Operating activities
Net loss $ (824) $ (4,082)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,567 2,404
Provision for losses on accounts and notes
receivable (57) 234
Deferred income tax (835) (1,321)
Other (39) (49)
Changes in operating assets and liabilities:
Accounts receivable (11,183) (15,766)
Inventories (6,401) (24,660)
Prepaid expenses 512 581
Accounts payable for grain (66,158) (57,840)
Other accounts payable and accrued expenses 22,490 (1,096)
Notes receivable and other assets (438) (436)
Net cash used in operating activities (60,366) (102,031)
Investing activities
Purchases of property, plant and equipment (3,736) (2,645)
Proceeds from sale of property, plant and equipment 8 72
Net cash used in investing activities (3,728) (2,573)
Financing activities
Net increase in short-term borrowings 59,728 80,000
Proceeds from issuance of long-term debt 20,378 60,540
Payments of long-term debt (20,993) (57,420)
Purchase of common stock for the treasury - (1,361)
Proceeds from sale of treasury stock to employees
participating in Employee Share Purchase Plan 413 423
Dividends paid (319) (252)
Net cash provided by financing activities 59,207 81,930
Decrease in cash and cash equivalents (4,887) (22,674)
Cash and cash equivalents at beginning of period 8,278 27,524
Cash and cash equivalents at end of period $ 3,391 $ 4,850
See notes to condensed consolidated financial statements.
THE ANDERSONS, INC.
NOTES TO CONDENSED 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 condensed 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, 1997.
Note B - In June 1997, the Financial Accounting Standards Board issued
Statement No. 131, Disclosures about Segments of an Enterprise and
Related Information, which is required for years beginning after
December 15, 1997. The new rules change the manner in which operating
segments are defined and reported externally to be consistent with the
basis on which they are reported and evaluated internally. This
statement will not have a significant impact on the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Comparison of the three months ended March 31, 1998 with the three months ended
March 31, 1997:
Sales and revenues for the three months ended March 31, 1998 totaled $222.2
million, an increase of $35.4 million or 19% from the 1997 first quarter sales
and revenues of $186.8 million. The Agriculture Group had a total increase of
$36.8 million. This includes a $34.0 million increase in grain sales and
revenues due to a 54% increase in bushels shipped and a $3.8 million increase
in merchandising revenues (primarily storage and blending income), partially
offset by a 14% decrease in the average price of a bushel sold. The Company's
grain elevators have significantly more grain than at the same time last year.
Sales of agricultural fertilizer, supplies and services were also up from the
prior year with a total increase in sales of $2.8 million. Wholesale tons sold
were up 17% with an 8% decrease in the average selling price per ton.
Overall, the Processing & Manufacturing Group contributed increased sales and
revenues of $0.4 million or 1%. The processing business (lawn fertilizer, cob
and pet products) had a sales increase of $2.1 million or 9%. Sales of lawn
fertilizer to large retailers was the primary source of this increase. The
manufacturing business had decreased sales of $1.0 million or 13%. This
decrease resulted from railcar sales made in the first quarter of 1997 that
weren't repeated in 1998. Revenues from the railcar leasing business increased
56%.
The Retail Group experienced a 6% overall decrease in sales from the first
quarter of 1997 with the majority of the decrease in the Toledo area market.
Unusually warm weather in the first part of the quarter reduced the opportunity
for sales of winter products (clothing, snowblowers, etc.), however an early
spring selling season should provide an opportunity for increased sales of
nursery, lawn and garden and related products.
Gross profit for the three months ended March 31, 1998 totaled $33.9 million,
an increase of $6.5 million or 24% from the 1997 first quarter gross profit of
$27.3 million. The Agriculture Group had a $5.7 million or 103% increase with
$5.0 million related to margins on grain sales and merchandising activities.
Overall, the Processing and Manufacturing Group experienced an increase of 12%
or $1.4 million, with $1 million from the processing division. Gross profit on
sales in the Retail Group decreased 6% or $0.5 million.
Operating, administrative and general expenses for the first quarter of 1998
totaled $32.7 million, an increase of $0.8 million or 2.6% from the first
quarter of 1997.
Interest expense for the first quarter of 1998 was $2.5 million, a $0.3
million increase from the first quarter of 1997. Short-term borrowings at
March 31, 1998 were $75.3 million as compared to $80 million at March 31, 1997.
The pretax loss of $1.3 million represents an improvement of $5.4 million
from the first quarter of 1997. The net loss of $0.8 million represents an
improvement of $3.3 million from the 1997 first quarter net loss. The loss of
$0.10 per share is a $0.39 improvement from the first quarter of 1997 loss per
share of $0.49.
Liquidity and Capital Resources
The Company used $60 million in its operations in the first quarter of 1998
as compared to $102 million in the first quarter of 1997. The Company has
significant short-term lines of credit available to finance working capital,
primarily inventories and accounts receivable. Lines of credit available at
May 1, 1998 were $250 million, of which $75.3 million was borrowed at March 31,
1998. Typically the Company's highest borrowings occur in the spring due to
seasonal inventory requirements in the wholesale fertilizer and retail
businesses, credit sales in the wholesale and lawn fertilizer businesses and a
customary reduction in the liability for grain due to the cash needs of grain
producers and market strategies.
A quarterly cash dividend of $0.04 per common share was paid in the first
quarter of 1998. A cash dividend of $0.04 per common share was declared on
April 1, 1998 and was paid on April 21, 1998. Cash dividends of $0.03 per
common share were paid quarterly in 1997. The Company made income tax payments
of $0.3 million in the first quarter and expects to make payments totaling
approximately $2.6 million for the remainder of 1998. Also in the first
quarter, the Company issued 46,600 shares to its employees as part of the
Employee Share Purchase Plan.
Total cash capital expenditures for 1998 are expected to approximate $15
million and include additional production capacity in the processing division,
plant upgrades and improvements in the agriculture group and the acquisition of
additional railcars. Funding for these expenditures is expected to come from
cash generated from operations. Capital expenditures can be curtailed if cash
generated from operations is less than expected. The Company is also in the
process of finalizing a stock for stock acquisition of a corporation operating
three retail farm centers in Northwest Ohio.
Certain of the Company's long-term debt is secured by first mortgages on
various facilities. 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. In the opinion of management, the
Company's liquidity is adequate to meet short-term and long-term needs.
Forward Looking Statements
The preceding Management's Discussion and Analysis contain various "forward-
looking statements" which reflect the Company's current views with respect to
future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties, including but not limited to those
identified below, which could cause actual results to differ materially from
historical results or those anticipated. The words "believe," "expect,"
"anticipate" and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. The following
factors could cause actual results to differ materially from historical results
or those anticipated; weather, supply and demand of commodities including
grains, fertilizer and other basic raw materials, market prices for grains and
the potential for increased margin requirements, regulatory agency review of
grain contracts, competition, economic conditions, risks associated with
acquisitions, interest rates and income taxes.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Pursuant to subpoenas duces tecum served by the Commodities Futures Trading
Commission (the "CFTC"), the Company has produced certain records, including
names and phone numbers of certain customers, and the depositions of certain
employees and former employees have been taken in the matter of "Certain
Transactions and Practices Among Grain Elevators, et. al., Involving Futures
Contracts." There can be no assurance that other CFTC proceedings will not be
instituted. There currently is no reasonable basis to predict the amount of
future liability or loss, if any, that may arise from such CFTC proceedings.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. A report on Form 8-K was filed with the SEC
containing a March 25, 1998 press release announcing the signing of a letter of
intent to form a grain-handling and marketing agreement involving the Company's
facilities in Maumee and Toledo, Ohio and the grain facilities of Cargill, Inc.
in those same cities.
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 12, 1998 By /s/Richard P. Anderson
Richard P. Anderson
Chairman of the Board and Chief
Executive Officer
Date: May 12, 1998 By /s/Richard R. George
Richard R. George
Vice President and Controller
(Principal Accounting Officer)