Fourth Quarter and Full Year Earnings Call. February 14, 2019

Transcription

1 Fourth Quarter and Full Year Earnings Call February 4, 209

2 Safe Harbor and Non-GAAP Financial Measures 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 publicly-filed documents, including its 34 Act filings and the prospectuses prepared in connection with the Company s offerings. Today s call includes financial information which the Company s independent auditors have not completely reviewed. 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 accurate. This presentation and today's prepared remarks contain non-gaap financial measures. The Company believes adjusted pretax income, adjusted net 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, adjusted net 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 GAAP to non-gaap measures may be found within the financial tables of our earnings release. 2

3 Speakers Pat Bowe President and Chief Executive Officer Brian Valentine Senior Vice President and Chief Financial Officer John Kraus Director, Investor Relations 3

4 Q4 8 Highlights Stronger merchandising income and recovering corn and bean basis levels offset lower income from carrying wheat; Lansing acquisition closed January, 209 Year-over-year results down more than 20 percent; timely hedging and efficient production mitigate a weak margin environment Improved margins in primary nutrients and lower operating expenses lead profit growth in all product lines except specialty nutrients Increased utilization and more cars on lease offset by higher interest expense; sale of barges helps replace car sale income 4

5 Key Financial Data $M except per share data, long-term debt-to-equity Q4 8 Q4 7 VPY FY 8 FY 7 VPY Sales and merchandising revenues $82.7 $,004. ($9.4) $3,045.4 $3,686.3 ($640.9) Gross profit $94.0 $84.8 $9.2 $302.0 $38.8 ($6.8) Operating and general expenses $67.8 $ $257.9 $287.0 ($29.) Equity in earnings of affiliates $6.5 $8.6 ($2.) $27. $6.7 $0.4 Income (loss) before income taxes $29.9 ($0.9) $30.8 $53.2 ($20.5) $73.7 Adjusted income (loss) before income taxes $33.0 $27. $5.9 $59.7 $49.5 $0.2 Net income (loss) attributable to The Andersons, Inc. $23.8 $69.7 ($45.9) $4.5 $42.5 ($.0) Adjusted net income (loss) attributable to The Andersons, Inc. $26.0 $8.9 $7. $46.4 $33.7 $2.7 Diluted earnings (loss) per share (EPS) $0.84 $2.47 ($.63) $.46 $.50 ($0.04) Adjusted diluted earnings (loss) per share (EPS) $0.92 $0.67 $0.25 $.63 $.9 $0.44 Depreciation and amortization $22.3 $2.9 $0.4 $90.3 $86.4 $3.9 EBITDA $60.2 $25.0 $35.2 $7.6 $87.4 $84.2 Adjusted EBITDA $63.3 $53.0 $0.3 $78. $57.4 $20.7 Effective tax rate 20.9% N/A N/A 22.5% N/A N/A Long-term debt $496.2 $48.3 $77.9 Long-term debt-to-equity ratio Fourth quarter and full-year 207 tax rates were significantly skewed by the impact of 207 U.S. income tax reform 5

6 ($000) Pretax Income Q4 7 Adjusted Pretax Income to Q4 8 Adjusted Pretax Income Q4 8 Reconciliation $40,000 $4,757 $ $35,000 $30,000 $25,000 $27,075 $6,88 ($,30) ($3,64) $33,070 $30,06 $3,054 $33,070 $20,000 $5,000 $0,000 $5,000 $0 Q4 '7 Adjusted, 2 Grain Ethanol Plant Nutrient Rail Other Q4 '8 Adjusted Q4 '8 Reported Acquisition Costs Q4 '8 Adjusted Excludes net income attributable to the noncontrolling interests of $25 in Q4 7 and ($85) in Q4 8 2 Excludes Plant Nutrient Group goodwill impairment charge of $7,08 and Grain asset impairment charges of $0,93 6

7 ($000) Pretax Income FY 7 Adjusted Pretax Income to FY 8 Adjusted Pretax Income FY 8 Reconciliation $70,000 $60,000 $50,000 $40,000 $49,37 $2,99 $3,237 ($,930) ($7,49) $3,755 $59,933 $53,45 $6,58 $59,933 $30,000 $20,000 $0,000 $0 FY '7,2 Adjusted Grain Ethanol Plant Nutrient 2 Rail Other FY '8 FY '8 Acquisition FY '8 Adjusted Reported Costs Adjusted Excludes net income attributable to the noncontrolling interests of $98 in FY 7 and ($259) in FY 8. 2 Excludes Plant Nutrient Group goodwill impairment charge of $59,08 and Grain asset impairment charges of $0,93 7

8 Grain Group Q4 8 Highlights Base Grain results rose on improved merchandising income even as wheat spreads narrowed Affiliates income lower due to Lansing one-time expenses and asset impairment charge Unaudited in $M Q4 8 Q4 7 VPY FY 8 FY 7 VPY Adj. Pretax Income ($M) $4 Revenues $450.8 $64.9 ($9.) $,437.0 $2,06.5 ($669.5) $24 $27 Gross Profit $52.5 $45.0 $7.5 $29.9 $3.4 ($.5) $4 ($6) Base Grain Pretax Income $22.4 $4.8 $7.6 $4.3 $8.9 $5.4 Affiliates Pretax Income $3.0 $3.5 ($0.5) $2.4 $3.9 $8.5 Total Pretax Income $25.4 $8.3 $7. $26.7 $2.8 $3.9 Adjusted Pretax Income $25.4 $9.2 $6.2 $26.7 $23.7 $3.0 Adjusted EBITDA $32. $25.2 $6.9 $54.6 $50.8 $ revenues are $72.9 lower for the quarter and $688.3 lower full-year as the result of new accounting rules effective January, 208, Q Q2 Q3 Q4 Excludes gains of $7. in 204 and $23. in 205 from partial redemptions of our investment in Lansing Trade Group. 2 Excludes goodwill impairment charges of $ Excludes asset impairment charges of $0.9. 8

9 Ethanol Group Q4 8 Highlights Pretax income down for the quarter more than 20 percent on weaker margins Full-year results improved by good marketing decisions and highly efficient production Unaudited in $M Q4 8 Q4 7 VPY FY 8 FY 7 VPY Revenues $75. $74.5 $0.6 $743.7 $708. $35.6 Pretax Income Attributable to The Andersons, Inc. ($M) $92 Equity in Earnings of Affiliates $3.5 $5.0 ($.5) $4.2 $2.2 $2.0 Consolidated Operations and Services Fees $.5 $.4 $0. $7.7 $6.8 $0.9 Pretax Income $5.0 $6.4 ($.4) $2.9 $9.0 $2.9 Attributable to Noncontrolling Interest ($0.) $ - ($0.) ($0.2) $ 0. ($0.3) $29 $25 $9 $22 Pretax Income Attributable to The Andersons, Inc. $5. $6.4 ($.3) $22. $8.9 $ Q Q2 Q3 Q4 9

10 Plant Nutrient Group Q4 8 Highlights All product lines except specialty nutrients recorded better year-over-year results Improved primary nutrient margin drove increased gross profit; group also reduced operating expenses Unaudited Tons in 000 s, $M Q4 8 Q4 7 VPY FY 8 FY 7 VPY Adj. Pretax Income ($M) Primary Nutrient Tons (9),424,477 (53) Specialty Nutrient Tons $25 $5 $4 $4 $2 Other Tons 4 5 () () Revenues $47.6 $36.9 $0.7 $690.5 $65.8 $38.7 Gross Profit $24.0 $2.6 $2.4 $98.9 $04.6 ($5.7) Gross Profit Margin 6.3% 5.8% 0.5% 4.3% 6.0% (.7%) Pretax Income (loss) $3.8 ($8.0) $2.8 $2.0 ($45.) $57. Adjusted Pretax Income (loss) $3.8 ($0.9) $4.7 $2.0 $4.0 ($2.0) Adjusted EBITDA $2.5 $6.9 $5.6 $45.4 $47.0 ($.6) Q Q2 Q3 Q4 Excludes goodwill impairment charges of $9.7 and one-time acquisition costs of $ Excludes goodwill impairment charges of $59.. 0

11 Rail Group Q4 8 Highlights Lease income lower on higher interest expense despite better utilization and more cars on lease Income from car sales lower, primarily as a result of 208 accounting rule change and scrapping of idle cars Other income included $2.4 million gain on sale of 50 barges Unaudited in $M Q4 8 Q4 7 VPY FY 8 FY 7 VPY Pretax Income ($M) Revenues $39.2 $50.5 ($.3) $74.2 $72. $2. $5 Gross Profit $4.0 $4.0 $ - $54.8 $52.5 $2.3 Gross Profit Margin 35.7% 27.7% 8.0% 3.5% 30.5%.0% $3 $32 Lease Income $.4 $.9 ($0.5) $8. $8.9 ($0.8) $25 Railcar Sales Income $.2 $3.3 ($2.) $2.4 $.0 ($8.6) $7 Service and Other Income $4. $.5 $2.6 $6.9 $4.9 $2.0 Pretax Income $6.7 $6.7 $ - $7.4 $24.8 ($7.4) EBITDA $7.9 $4.3 $3.6 $57.9 $54.9 $ Q Q2 Q3 Q4 Includes asset impairment charge of $4.7.

12 Early 209 Outlook New Trade Group focusing on integration, synergies and business growth; believe Lansing acquisition will be accretive this year on an operating basis Ethanol margins to remain under pressure absent trade war resolution; Kansas plant on track to begin production mid-year Expect modest improvement in primary and specialty nutrient product lines; likely will not repeat record 208 year in lawn and contract manufacturing business Anticipate steady improvement in lease income on continued high utilization rates and railcar fleet growth; repair business will continue to expand 2

13 Q&A Session 3

14 Thank you for joining us. Our next earnings call is scheduled for May 7, 209 at :00 a.m. 4

15 Appendix 5

16 Definitions EBITDA: Earnings before interest, taxes, depreciation and amortization; a non-gaap measure. A primary measure of period-over-period comparisons, and we believe it is meaningful measures for investors to compare our results from period to period 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 sales of ethanol and purchases of corn and natural gas with the intent of securing portions of our future sales margins Grain Bushels Shipped: Includes shipments from our facilities, farm-to-market (F2M) and origination services for corn, soybeans, wheat and oats Bushels Stored for Others: Bushels stored by The Andersons for the owner of the grain for which the company charges a storage fee Railcar Fleet Utilization: Percentage of railcars in leased service divided by total railcars controlled by the Company Primary Nutrients: Nitrogen, phosphorous, potassium (including those sold by farm centers) Specialty Nutrients: Low-salt liquid starter fertilizers, micronutrients, lawn fertilizers (including those sold by farm centers) Other Tons: Corn-cob products 6

17 Millions of acres Millions of bushels Pretax Income per bushel Grain Group Grain Storage Capacity/Adjusted Pretax Income Per Bushel Base Grain Average Storage Capacity Target Range Excess wheat basis appreciation Adj. Pre-tax Income per Bushel Excess Wheat Basis $ Excludes the impact of goodwill impairment charges of $ Excludes the impact of asset impairment charges of $0.9. $0.60 $0.50 $0.40 $0.30 $0.20 $0.0 $0.00 ($0.0) Grain Inventory In million Q4 6 Q4 7 Q4 8 Bushels owned U.S. Planted Acres Bushels stored for others Total bushels inventory Corn Soybeans Wheat estimate Pro Exporter Network 2/9/9 7

18 Ethanol Group Production Ethanol Gallons Produced E-85 Gallons Shipped DDG Tons Shipped Corn Oil Pounds Shipped in millions in millions in thousands in millions ,057,238, Q4 FY Q4 FY Q4 FY Q4 FY Charts include activity at nonconsolidated ethanol plants 8

19 Growing U.S. Ethanol Exports Continue to Support Market Price U.S. Ethanol Exports (MGY) October 208 Other, YTD,422M 207 YTD,09M,75 Philippines, 62 UAE, 52 China, 53 Mexico, 20 Colombia, 40 Peru, 47 Brazil, 425 Canada, , ,046,367 India, 9 S. Korea, 67 Nigeria, 8 Source: EIA E Source: Pro Exporter Network /23/9 Export Growth Expected to Continue in Spite of China s Absence from Market 9

20 Plant Nutrient Tons Sold Historical Seasonality in Volume (000 s) Q' 6 Q2 '6 Q3 '6 Q4 '6 Q '7 Q2 '7 Q3 '7 Q4 '7 Q '8 Q2 '8 Q3 '8 Q4 '8 Primary Nutrients Specialty Nutrients Other Tons Committed to Growth of Specialty Nutrients Note: Primary nutrients = nitrogen, phosphorous, potassium (including those sold by farm centers); specialty nutrients = low-salt liquid starter fertilizers, and micro-nutrient (including those sold by farm centers) and lawn fertilizers; other tons = cob products. 20

21 Rail Group Fleet Key Metrics Railcar Fleet by Commodity 2 ~23,400 Railcars 94.3% Average Utilization Rate ~22,300 Cars on Lease 2 24 Railcar Repair Facilities 2 ~60 Commodities Handled Grain/Grain Products Fertilizer/Minerals Sand/Sand Products Plastics Wood & Forestry/Paper Ethanol & Gasoline Metals & Products Chemicals Aggregates & Limestone Other % 9% 9% 8% 6% 6% 5% 4% 8% 24% Average of Q As of 2/3/8. 2

22 Rail Group Earning Power $ in millions YE 204 YE 205 YE 206 YE 207 YE 208 Average # of Assets 22,99 23,07 23,057 23,34 22,693 Sources of Income Generates lease income from long-lived assets Maximizes value by remarketing assets opportunistically Provides repair services embedded in leases and to third parties Beg. $ on Bal. Sheet $240.6 $297.7 $338. $327.2 $52.8 Average % Utilization 89.5% 92.4% 87.8% 85.0% 90.3% Lease Income $ in millions FY 204 FY 205 FY 206 FY 207 FY 208 Lease Income $3.6 $3.5 $3.2 $8.9 $8. Railcar Sales Income $ in millions FY 204 FY 205 FY 206 FY 207 FY 208 Railcar Sale Income $5.8 $3.3 $.0 $.0 $2.4 Service & Other Income $ in millions FY 204 FY 205 FY 206 FY 207 FY 208 Services & Other Income $2.0 $5.9 $8.2 $4.9 $6.9 Total Rail $ in millions FY 204 FY 205 FY 206 FY 207 FY 208 Revenue $49.0 $70.8 $63.7 $72. $74.2 Gross Profit $59.8 $67.7 $55.9 $52.5 $54.8 Gross Profit % 40.% 39.6% 34.% 30.5% 3.5% Pretax Income $3.4 $50.7 $32.4 $24.8 $7.4 22