2015 Third Quarter Earnings Call. November 5, 2015

Transcription

1 2015 Third Quarter Earnings Call November 5, 2015

2 20 5 The Andersons, Inc. Forward Looking Statements Certain information discussed today constitutes forward-looking statements. Actual results could differ materially from those presented in the forward looking statements as a result of many factors including general economic conditions, weather, competitive conditions in the Company s industries, both in the U.S. and internationally, and additional factors that are described in the Company s publicallyfiled documents, including its 34 act filings and the prospectuses prepared in connection with the Company s offerings. Today s call includes financial information of which the Company s independent auditors have not completed their review. 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 assurances that these assumptions will prove to be. 2

3 20 5 The Andersons, Inc. Speakers Mike Anderson Chairman of the Board Pat Bowe Chief Executive Officer Hal Reed Chief Operating Officer John Granato Chief Financial Officer Jim Burmeister Vice-President, Finance & Treasurer 3

4 20 5 The Andersons, Inc. Welcome our New CEO Pat Bowe Joins The Andersons 30 years with Cargill with numerous agriculture commercial roles and most recently as Corporate Vice President of Cargill s Food Ingredients Platform Extensive experience in leading large agriculture businesses, particularly in commodity trading and processing 4

5 20 5 The Andersons, Inc. Q3 Highlights Grain underperformed with significantly lower results from its investment in Lansing Trade Group Plant Nutrient lower primarily on added costs associated with recent acquisitions legacy business off slightly on soft volumes Ethanolmargins remained positive, however, well below record levels seen last year Railcontinued to deliver strong results with high utilization rates and strong lease rates Company raised its dividend by 11% 5

6 20 5 The Andersons, Inc. Company Results Q3 Highlights Income lower year-over-year due to ethanol margins and weakness in Grain and Plant Nutrient, partially offset by continued strength in Rail Operating expenses higher due to recent acquisitions, partially offset by cost management In millions, except EPS Q3 15 Q3 14 YTD 15 Revenue $935.8 $952.9 $3,094.4 Gross Profit $85.2 $84.9 $276.7 EBITDA $24.2 $47.2 $125.1 Net Income ($1.2) $16.8 $34.0 Earnings Per Share (EPS) ($0.04) $0.59 $1.19 Dividend and Earnings Per Share (EPS) Five Year EBITDA Dividends $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $ $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Diluted Earnings Per Share In millions $300 $250 $200 $150 $100 $50 $0 $255 $212 $195 $220 $ Actual Dividend Paid Diluted EPS Q1 Q2 Q3 Q4 6

7 20 5 The Andersons, Inc. Planned Pension Termination The Company is in the final stages of terminating its funded defined benefit pension plan through a combination of lump sum payments and purchased annuities being provided to employees. As the liabilities are settled, unamortized losses in accumulated other comprehensive income will be recognized based on the benefit obligations and assets measured as of the settlement date. At this time we anticipate the one-time non-cash charge to be approximately $54 million, or roughly $1.37 per diluted share. We also anticipate a contribution of approximately $7 million to fully fund the plan, as contributions were suspended as we worked up to this termination. The Company intends to report this charge as a one time item and to provide adjusted earnings results for the fourth quarter and full year 2015 financials as a more appropriate view of the Company s performance. 7

8 20 5 The Andersons, Inc. Pre-tax Income Q3 14 to Q3 15 In thousands $30,000 $27,076 $25,000 $20,000 $15,000 $10,000 ($12,318) $5,000 $0 ($8,100) $7,753 $199 -$5,000 ($1,977) ($2,732) -$10,000 ($15,365) -$15,000 Q3 '14 Grain Plant Nutrient Ethanol Rail Retail Other Q3 '15 8

9 The Andersons, Inc. Grain Group Q3 Highlights Disappointing quarter overall Affiliate (LTG) earnings hurt by declining China DDG demand and ongoing drop in US crude production Core business had poor market position during highly volatile July In millions, except margin Q3 15 Q3 14 YTD 15 Revenue $570.6 $575.4 $1,781.1 Gross Profit $29.9 $32.7 $84.7 Gross Profit Margin 5.2% 5.7% 4.8% Pre-tax Income $0.1 $12.4 $4.0 Grain Storage Capacity Five Year Revenue & Pre-tax Income/Loss Millions of Bushels Core Grain Storage Capacity Target Range Excessive wheat basis appreciation Income per Bushel Excess Wheat Basis $0.80 $0.60 $0.40 $0.20 Income per Bushel Pre-tax Income/Loss in millions $100 $80 $60 $40 $20 $0 -$ * $4,000 $3,000 $2,000 $1,000 $0 Revenue in millions $0.00 Q1 Q2 Q3 Q4 Revenue *Adjusted Q1 14 excludes $17.1 million pre-tax gain from the partial redemption of the Lansing Trade Group in

10 The Andersons, Inc. US Corn Production Change 2015 US Corn Production is forecast to be down 661 million bushels Increase from 2014 Decrease from 2014 Source: 10

11 The Andersons, Inc. US Soybean Production Change 2015 US Soybean Production is forecast to be down 38 million bushels Increase from 2014 Decrease from 2014 Source: 11

12 The Andersons, Inc. Plant Nutrient Group Q3 Highlights Added expense from recent acquisitions in seasonally slow quarter magnified loss Same Store volumes were lower but more than offset by Nutra-Flo volumes Q4 volume has started off strong Sales and Service Volume in Tons In millions, except margin Q3 15 Q3 14 YTD 15 Revenue $149.3 $133.4 $660.4 Gross Profit $22.3 $19.2 $91.0 Gross Profit Margin 14.9% 14.4% 13.8% Pre-tax Income (Loss) ($11.1) ($3.0) $8.2 Five Year Revenue& Pre-tax Income/Loss Includes fertilizer and cob $50 $950 In thousands 2,000 1,500 1, ,615 1,712 1, Pre-tax Income/Loss in millions $40 $30 $20 $10 $0 -$10 -$ $900 $850 $800 $750 $700 Revenue in millions Q3 YTD Q1 Q2 Q3 Q4 Revenue 12

13 The Andersons, Inc. Ethanol Group Q3 Highlights On-going investments supported record Q3 production volumes In millions Q3 15 Q3 14 YTD 15 Revenues $139.1 $179.4 $416.8 Equity Earnings of Affiliates $2.5 $13.7 $12.5 Margins remained moderate, off record levels seen in prior year Consolidated Operations and Service Fees $3.4 $7.6 $8.3 Pre-tax Income $5.9 $21.3 $20.8 Ethanol Price vs Corn Cost Five Year Revenue& Pre-tax Income/Loss $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 -$0.60 -$0.80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 9 Year Range Year Average 2014 $100 $80 $60 $40 $20 $0 -$20 Sources: NYMEX Chicago Ethanol (Platts) Futures Electronic (Front Month); CBOT Corn Futures Electronic (Front Month); Est industry 2.8 gal / bushel Pre-tax Income/Loss in millions $800 $600 $400 $200 $ Q1 Q2 Q3 Q4 Revenue $1,000 Revenue in millions 13

14 The Andersons, Inc. Rail Group Q3 Highlights Strong lease income as utilization and lease rates continue to be strong Service & repair, and other businesses had one of their most profitable quarters Group on track for record year, benefiting from the large Q2 gain on an early lease settlement majority of cars redeployed Average Utilization Rate In millions, except margin Q3 15 Q3 14 YTD 15 Revenue $44.8 $32.0 $134.5 Gross Profit $17.5 $10.8 $53.1 Gross Profit Margin 39.1% 33.9% 39.6% Lease Income $6.4 $1.8 $27.0* Railcar Sales Income $3.2 $1.4 $12.4 Service & Other $2.3 $1.0 $4.5 Pre-tax Income $11.9 $4.2 $43.9 * Includes $10.6 million gain on early return settlement Five Year Revenue& Pre-tax Income/Loss 86.2% 85.5% 89.9% 89.2% 91.6% 92.3% Pre-tax Income/Loss in millions $50 $40 $30 $20 $10 $200 $150 $100 $50 Revenue in millions Q3 YTD $ Q1 Q2 Q3 Q4 Revenue $- 14

15 The Andersons, Inc. Retail Group In millions Q3 15 Q3 14 YTD 15 Revenue $31.9 $32.7 $101.6 Pre-tax Income ($0.8) ($1.0) ($1.5) Five Year Revenue& Pre-tax Income/Loss Pre-tax Income/Loss in millions $4 $2 $0 -$2 -$4 -$6 -$8 $160 $155 $150 $145 $140 $135 Revenue in millions -$ $130 Q1 Q2 Q3 Q4 Revenue 15

16 20 5 The Andersons, Inc. Financial Highlights Q3 Highlights Inventories higher year-over-year due to acquired entities and a faster harvest than prior year Completed $50 million share repurchase program in early Q3, having bought back 1.2 million shares Leverage remains moderate with ample access to liquidity $ In millions Sept Sept Dec Working capital $183 $257 $227 Inventories $528 $396 $796 Current assets $904 $1,049 $1,254 Total assets $2,192 $2,083 $2,365 Short-term debt $83 $.5 $2 Current maturities (LT) $27 $77 $76 Long-term debt $414 $289 $299 Total debt $524 $367 $377 Total liabilities $1,392 $1,281 $1,541 Total equity $800 $802 $824 LT debt-to-capital

17 20 5 The Andersons, Inc. Company Outlook Finish year with continued high utilization rates and good operating performance Rail Group Expect moderate margins as domestic driving demand slows into year end Expect good Q4 results with good volumes being partially offset by margin pressures Ethanol Group Plant Nutrient Group Harvest off to a fast start, expect to finish earlier than last year mixed yield and basis opportunities Grain Group Q4 reported income will include an approximate $54 million impact of settling pension 17

18 20 5 The Andersons, Inc Organic Investments & Outlook Increasing Dividend Announced 11% increase for Q1 dividend payment Ethanol facility in Albion, MI EPA approved Efficient Producer Pathway Clears way for potential expansion of facility to double capacity Building $20 Million Grain Elevator in Humboldt, TN Began construction in Q3 Expect to be operational for 16 harvest Adds capacity in South East where grain production continues to rise 18

19 20 5 The Andersons, Inc. Mission Statement We firmly believe that our Company is a powerful vehicle through which we channel our time, talent, and energy in pursuit of the fundamental goal of serving God by serving others. Through our collective action we greatly magnify the impact of our individual efforts to: Provide extraordinary service to our customers Help each other improve Support our communities Increase the value of our Company 19

20 Thank you for joining us. Our next earnings call is scheduled for Thursday, February 5 th at 11:00 a.m.

21 Appendix

22 20 5 The Andersons, Inc. Definitions EBITDA:Earnings before interest, taxes, depreciation, and amortization, is a non-gaap measure. It is one of the measures the company uses to evaluate liquidity and leverage. Base Grain: Grain operations owned and operated by The Andersons (does not include affiliates). Ethanol Margin Hedging:From time-to-time we establish hedge positions with futures and derivative contracts that lock in prices for purchases of corn and sales of ethanol, as well as purchases of natural gas with the intent of securing portions our future sales margins. LT Debt to Capital:Ratio of long-term debt (including current maturities) to total capital defined as LT debt plus total equity. BushelsShipped:Includes shipments from our facilities, farm-to-market(f2m) and origination services for corn, soybeans, wheat, and oats. F2M:Bushels that The Andersons, Inc. purchases from the farm and are delivered directly to an Andersons customer. The bushels are never delivered to an Andersons facility. BushelsOwned:Bushels delivered to an Andersons elevator or storage facility rented by The Andersons, Inc. where title to the grain is transferred to The Andersons, Inc. Bushels Storedfor Others: The bushels are stored by The Andersons, Inc. for the owner of the grain for which a storage fee is charged the bushels owner. Railcar Fleet Utilization: Percentage of railcars and locomotives in leased service. CAGR: Compounded annual growth rate. 22

23 20 5 The Andersons, Inc. Pre-tax Income YTD 14 to YTD 15 In thousands $160,000 $140,000 $133,671 $120,000 $100,000 $80,000 $60,000 $40,000 ( ) $54,148 ( ) $30,087 *($17,100) $18,026 $183 ( ) $359 $51,517 $20,000 ( ) $15,769 $0 YTD '14 Ethanol Grain Plant Nutrient Rail Retail Other YTD '15 * $17.1 million one-time gain from the partial redemption of the Lansing Trade Group in

24 The Andersons, Inc. Grain Group Bushels Shipped Bushels Storage Capacity In millions In millions % Q3 YTD Sept. 30, Grain Inventory In millions Q3 13 Q3 14 Q3 15 Bushels owned Bushels stored for others Total bushel inventory

25 The Andersons, Inc. Ethanol Group Ethanol Gallons Produced E-85 Gallons Shipped In millions In millions Q3 YTD Not all Ethanol gallons produced are sold thru The Andersons, Inc Q3 YTD In thousands 1, DDG Tons Shipped In millions Corn Oil Pounds Shipped Q3 YTD Not all DDGS tons shipped are sold thru The Andersons, Inc Q3 YTD Not all Corn Oil pounds shipped are sold thru The Andersons, Inc. 25

26 The Andersons, Inc. Ethanol Group $1.20 $ Year Corn vs Ethanol Margins $0.80 $0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -$0.60 -$ Year Range Year Average 2014 Margins Strong Early in Q2 Fell Below Averages in June and into Q3 Sources: NYMEX Chicago Ethanol (Platts) Futures Electronic (Front Month); CBOT Corn Futures Electronic (Front Month); Est industry 2.8 gal / bushel 26

27 The Andersons, Inc. Rail Group Earnings Power Quarterly Lease Income $ In millions Q1 Q2 Q3 Q4 FY 13 Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Average # of Assets 23,283 23,238 22,904 22,534 22,900 22,295 22,148 22,066 22,285 22,199 22,879 22,972 23,301 Beginning $ on BS $228.3 $244.7 $242.9 $233.0 $240.6 $240.6 $237.5 $242.1 $245.8 $240.6 $297.7 $313.1 $330.8 Average % Utilization 84.6% 85.7% 86.2% 88.2% 86.1% 88.4% 89.3% 89.9% 90.3% 89.5% 91.8% 93.5% 91.6% Lease Income $3.5 $4.2 $8.5 $3.6 $18.9 $4.2 $3.7 $1.8 $3.9 $13.6 $5.0 $15.6 $6.4 Remarketing Income In millions Q1 Q2 Q3 Q4 FY 13 Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Asset Sale Income $9.3 $4.4 $2.8 $2.0 $19.4 $10.8 $2.5 $1.4 $1.2 $15.8 $4.5 $4.7 $3.2 Services & Other Income In millions Q1 Q2 Q3 Q4 FY 13 Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Rail Services & Other $1.8 $1.1 $1.1 $0.5 $4.5 $0.0 $0.5 $1.0 $0.5 $2.0 $0.8 $1.4 $2.3 Total Rail Income $ In millions Q1 Q2 Q3 Q4 FY 13 Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Revenue $46.4 $38.6 $47.5 $32.3 $164.8 $52.3 $33.4 $32.0 $31.2 $149.0 $44.2 $45.5 $44.8 Gross Profit $19.0 $14.6 $13.0 $12.3 $58.9 $21.9 $13.9 $10.8 $13.2 $59.8 $17.3 $18.2 $17.5 Gross Profit Margin 41.0% 37.8% 27.4% 38.0% 35.7% 41.9% 41.6% 33.8% 42.2% 40.1% 39.2% 40.1% 39.1% Pre-tax Income $14.6 $9.7 $12.4 $6.2 $42.8 $15.0 $6.7 $4.2 $5.6 $31.4 $10.3 $21.7 $

28 The Andersons, Inc. Rail Group Earnings Power Five Year Sources of Income Generate lease income from long lived assets Maximize value by remarketing assets opportunistically Provide repair services embedded in leases and to third parties Lease Income $ In millions Average # of Assets 22,848 22,265 23,019 22,990 22,199 Beginning $ on BS $179.2 $168.5 $197.1 $228.3 $240.6 Average % Utilization 73.6% 84.6% 84.6% 86.1% 89.5% Lease Income ($7.0) ($1.8) $13.4 $18.9 $13.6 Remarketing Income In millions Asset Sale Income $5.5 $8.4 $23.7 $19.4 $15.8 Services & Other Income $ In millions Rail Services & Other $1.6 $3.2 $5.7 $4.5 $2.0 Total Rail Income $ In millions Revenue $94.8 $107.4 $156.4 $164.8 $149.0 Gross Profit $13.4 $24.8 $56.7 $58.9 $59.8 Gross Profit% 14.1% 23.1% 36.3% 35.7% 40.1% Pre-tax Income $0.1 $9.8 $42.8 $42.8 $