2015 Full Year and Fourth Quarter Earnings Call. February 11, 2016

Transcription

1 2015 Full Year and Fourth Quarter Earnings Call February 11, 2016

2 Forward Looking Statements & Non GAAP 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 publically-filed 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 accurate. This presentation and today's prepared remarks contain non-gaap financial measures. Reconciliations of the non-gaap to GAAP measures may be found within the financial tables of our earnings release. Adjusted Pre-Tax Income Attributable to The Andersons is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to compare our results from period to period. We have excluded nonrecurring items and items that we believe are not representative of our ongoing operations when calculating this Adjusted Pre-Tax Income. 2

3 Speakers Pat Bowe Chief Executive Officer John Granato Chief Financial Officer Jim Burmeister Vice-President, Finance & Treasurer 3

4 Q4 and FY 2015 Highlights Rail Delivered record earnings on strong utilization rates and a large second quarter gain Ethanol Earnings remained positive in face of severe energy market conditions Plant Nutrient Acquired Nutra Flo to support growth and margin improvements Grain Base Grain and Affiliates underperformed in the face of a challenging year for the Eastern Corn Belt Leadership Succession Pat Bowe joins the Company as CEO; Mike Anderson remains as Chairman of the Board Positioning Company to improve performance 4

5 Key Financial Data $ in millions, except per share data Q Q FY 2015 FY 2014 Net Sales $1,183 $1,272 $4,198 $4,540 Earnings Attributable to The Andersons ($47.0) $25.9 ($13.1) $109.7 Diluted earnings per share (EPS) ($1.68) $0.89 ($0.46) $3.84 Pre-Tax Income ($64.5) $39.6 ($11.6) $184.1 Adjusted Pre-Tax Income $20.1 $37.5 $76.1 $154.2 Adjusted Net Income $5.0 $25.9 $41.2 $99.1 Adjusted EPS (diluted) $0.18 $0.89 $1.45 $3.46 EBITDA ($39.9) $60.6 $85.2 $255.0 Corporate unallocated expenses $7.3 $10.9 $31.3 $34.5 Operating and general expenses $89.0 $94.9 $338.1 $318.9 Pension Termination $ $ Depreciation and amortization $21.1 $17.7 $78.5 $62.0 Long term debt $436.2 $298.6 $436.2 $298.6 Long term debt to equity

6 $ in thousands Non GAAP Measures Reconciliation of 2014 and 2015 Pre-Tax Income to Adjusted Pre-Tax Income FY 2014 Reconciliation FY 2015 Reconciliation $180,000 $160,000 $171,227 $140,000 ($17,055) $154,172 $120,000 $100,000 $56,165 $4,902 $80,000 $60,000 ( $23,109 ) $76,095 $40,000 $51,446 $20,000 $0 -$20,000 ($13,309) 6 -$40,000 FY 2014 Reported LTG Gain FY 2014 Adjusted FY 2015 Reported Defined Benefit Pension Termination Goodwill Impariments Nutra Flo Acquisition Expenses LTG Gain FY 2015 Adjusted

7 $ in thousands $ in thousands Adjusted Pre-Tax Income Adjusted Pre-Tax Income Q to Q Bridge Graph $40,000 $1,210 $30,000 $20,000 $10,000 $37,556 ($9,607) $1,505 ($14,182) ($18) $3,597 $20,061 $0 Q Rail Ethanol Grain Plant Nutrient Retail Other Q Adjusted Pre-Tax Income FY 2014 to FY 2015 Bridge Graph $190,000 $170,000 $19,236 $150,000 $130,000 $154,172 $110,000 $90,000 $70,000 $50,000 ($63,754) ($27,214) ($9,748) $165 $3,238 $76,095 $30,000 $10, $10, Rail Ethanol Grain Plant Nutrient Retail Corp Other 2015

8 Pre-tax Income/Loss in millions Rail Group Q4 Performance Five Year Performance Record year supported by second quarter gain and strong utilization rates Entering year with good utilization rates and highly diverse portfolio of customers $60 $50 $40 $30 $20 $10 $0 $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Q1 Q2 Q3 Q4 Revenue Revenue in millions $ in millions, except margin Q4 15 Q4 14 FY 15 FY 14 Revenue $36.4 $31.2 $170.8 $149.0 Gross Profit $14.6 $13.2 $67.7 $59.8 Gross Profit Margin 40.1% 42.3% 39.6% 40.1% Lease Income $4.5 $3.8 $31.5 $13.6 Railcar Sales Income $0.8 $1.2 $13.3 $15.8 Service & Other $1.5 $0.6 $5.9 $2.0 8 Pre-tax Income $6.8 $5.6 $50.7 $31.4

9 Pre-tax Income/Loss in millions Ethanol Group Q4 Performance Five Year Performance $100 $900 Delivered positive margins and cash flow in very challenging energy market $80 $800 $700 Record production volume for the quarter and year results of on-going improvements $60 $40 $20 $600 $500 $400 $300 Revenue in millions Higher corn basis in the Eastern Corn Belt will challenge margins in first half of 2016 $0 -$20 $ $100 $0 Q1 Q2 Q3 Q4 Revenue $ in millions Q4 15 Q4 14 FY 15 FY 14 Revenue $143.1 $171.3 $556.2 $766.0 Equity Earnings of Affiliates $4.7 $12.8 $17.2 $68.9 Consolidated Operations and Service Fees $3.0 $4.5 $11.3 $23.4 Pre-tax Income $7.7 $17.3 $28.5 $92.3 9

10 Pre-tax Income/Loss in millions Grain Group Q4 Performance Continued to bear difficult conditions from poor yields in Eastern Corn Belt Additional challenges with river freight dragged on fourth quarter performance Impact of poor crop likely to persist into the first half of 2016 Adjusted Five Year Performance $100 $80 $60 $40 $20 $0 -$20 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Revenue in millions Q1 Q2 Q3 Q4 Revenue $ in millions, except margin Q4 15 Q4 14 FY 15 FY 14 Base Grain Gross Profit $39.0 $53.5 $123.6 $131.1 Gross Profit Margin 5.0% 6.2% 5.0% 4.9% Adj. Pre Tax Income $6.2 $17.2 $0.6 $15.0 Affiliates Adj. Pre Tax Income $3.6 $6.8 $13.3 $26.1 Group Adj. Pre-tax Income $9.8 $24.0 $13.9 $ Group Reported Pre-Tax Income ($13.5) $24.0 ($9.4) $58.1

11 Pre-tax Income/Loss in millions Q4 Performance Fourth quarter volumes started off strong; tapered as growers reacted to declining prices Plant Nutrient Group $30 Twenty nutrient facilities and 13 farm $20 centers in Ohio, Michigan, $10 Indiana, Illinois, $0 Iowa, Florida, Minnesota, Wisconsin and -$10 Puerto Rico $10.3 million impact on 2014 results; $4.9 million one-time deal related, $5.2 million on-going Poised for growth as we enter new crop year with Nutra Flo product line Adjusted Five Year Performance Formulate, store and distribute 2.1 million $ in millions, except margin Q4 15 Q4 14 FY 15 FY 14 tons of dry and liquid agricultural nutrients Six liquid fertilizer operations are ISO certified $50 $40 Q1 Q2 Q3 Q4 Revenue Revenue $187.9 $162.7 $848.3 $802.3 Gross Profit $28.6 $26.6 $119.5 $116.9 Gross Profit Margin 15.2% 16.4% 14.1% 14.6% Legacy Business Adj Pre-Tax Inc $3.1 $0.5 $20.0 $24.5 Nutra Flo Adj Pre-Tax Income ($1.0) - ($5.2) - Group Adjusted Pre-tax Income $2.1 $0.6 $14.8 $24.5 $950 $900 $850 $800 $750 $700 Revenue in millions 11 Group Reported Pre-tax Income ($8.1) $0.6 $0.1 $24.5

12 Pre-tax Income/Loss in millions Retail Group Q4 Performance Five Year Performance Mixed impact of warm weather in the fourth quarter Same store sales were down 2.8% for the quarter; down 1% for the year $4 $2 $0 -$2 -$4 -$6 $160 $155 $150 $145 $140 Revenue in millions -$8 $135 -$ $130 Q1 Q2 Q3 Q4 Revenue $ in millions Q4 15 Q4 14 FY 15 FY 14 Revenue $37.9 $39.0 $139.5 $140.8 Pre-tax Income $1.0 $1.0 ($0.5) ($0.6) 12

13 2016 Outlook Rail Group Continued softening of rail traffic, especially in energy sector will put some pressure on utilization and renewal rates Ethanol Group Low margins expected to persist in Q1 with higher corn basis impacting our eastern plants as result of 2015 harvest Grain Group Effects of 2015 harvest will weigh on Grain earnings for first half Expectations for acres planted and normal weather can benefit the group in the second half Plant Nutrient Group Good weather and 90 million acres of corn should support return to historical earnings power Expect Nutra Flo to be accretive in its first consecutive 12 months and for the fiscal year 2016 ANDE Corporate Expect unallocated corporate expenses approximately flat to 2015

14 Q&A

15 Upcoming Events 20 Years on Nasdaq Shareholder Webcast At 1:00 PM EST Pat Bowe will speak and take Q&A on his Early Impressions and outlook February 24, 2016 The Andersons will ring the opening bell on Nasdaq to commemorate our 20 th year as a public company 15 See IR section of our website for details

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

17 Appendix

18 Significant Financial Items Pension Termination Charge Completed termination of defined benefit pension plan triggering a non-cash charge of $51.4 million Approximately $4 million of cash contributed to settle liability Lansing Trade Group Gain LTG sold a 20% stake to New Hope Liuhe for approximately $127 million Majority of cash used to pay down debt; small portion redeemed portion of existing partners stakes As a result The Andersons ownership was diluted from 38% to 31%; the company received $8 million in cash and recognized a $23.1 million gain primarily related to the increased value of its portion of LTG 18

19 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. Bushels Shipped: 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. Bushels Owned: 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 Stored for 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. 19

20 In millions Millions of Bushels In millions Grain Group Grain Storage Capacity Bushels Shipped Excessive wheat basis appreciation Core Grain Storage Capacity Income per Bushel 0.35 $0.80 $0.60 $0.40 Income per Bushel $ $ Q4 YTD Grain Inventory 250 U.S. Planted Acres In millions Q4 13 Q4 14 Q Bushels owned Bushels stored for others Total bushel inventory Corn Soybeans Wheat

21 In thousands In millions In millions In millions Ethanol Group Ethanol Gallons Produced Not all Ethanol gallons produced are sold thru The Andersons, Inc E-85 Gallons Shipped Q4 YTD Q4 YTD DDG Tons Shipped Corn Oil Pounds Shipped 21 1,400 1,200 1, ,059 1,036 1, Not all DDGS tons shipped are sold thru The Andersons, Inc. Q4 YTD Not all Corn Oil pounds shipped are sold thru The Andersons, Inc. Q4 YTD

22 Ethanol Group 8 Year Corn vs Ethanol Margins 22 Sources: NYMEX Chicago Ethanol (Platts) Futures Electronic (Front Month); CBOT Corn Futures Electronic (Front Month); Est industry 2.8 gal / bushel

23 Plant Nutrient and Rail Group Sales and Service Volume in Tons 2,500 2,000 1,500 2,177 2,193 2,236 1, Q4 FY Rail Average Utilization Rate 23 96% 94% 92% 90% 88% 86% 84% 82% 80% 92.7% 92.4% 90.3% 89.5% 88.2% 86.1% Q4 FY

24 Rail Group Earnings Power Lease Income $ in millions Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Q4 FY 15 Average # of Assets 22,295 22,148 22,066 22,285 22,199 22,879 22,972 23,301 22,916 23,017 Beginning $ on BS $240.6 $237.5 $242.1 $245.8 $240.6 $297.7 $313.1 $330.8 $347.1 $297.7 Average % Utilization 88.4% 89.3% 89.9% 90.3% 89.5% 91.8% 93.5% 91.6% 92.7% 92.4% Lease Income $4.2 $3.7 $1.8 $3.9 $13.6 $5.0 $15.6 $6.4 $4.5 $31.5 Remarketing Income $ in millions Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Q4 FY 15 Asset Sale Income $10.8 $2.5 $1.4 $1.2 $15.8 $4.5 $4.7 $3.2 $0.8 $13.3 Service & Other Income $ in millions Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Q4 FY 15 Rail Services & Other $0.0 $0.5 $1.0 $0.5 $2.0 $0.8 $1.4 $2.3 $1.5 $5.9 Total Rail Income $ in millions Q1 Q2 Q3 Q4 FY 14 Q1 Q2 Q3 Q4 FY 15 Revenue $52.3 $33.4 $32.0 $31.2 $149.0 $44.2 $45.5 $44.8 $36.4 $170.8 Gross Profit $21.9 $13.9 $10.8 $13.2 $59.8 $17.3 $18.2 $17.5 $14.6 $67.7 Gross Profit Margin 41.9% 41.6% 33.8% 42.2% 40.1% 39.2% 40.1% 39.1% 40.1% 39.6% Pre-tax Income $15.0 $6.7 $4.2 $5.6 $31.4 $10.3 $21.7 $23.2 $6.8 $

25 Rail Group Earnings Power Five Year Lease Income $ in millions 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 Average # of Assets 22,265 23,019 22,990 22,199 23,017 Beginning $ on BS $168.5 $197.1 $228.3 $240.6 $297.7 Average % Utilization 84.6% 84.6% 86.1% 89.5% 92.4% Lease Income ($1.8) $13.4 $18.9 $13.6 $31.5 Remarketing Income $ in millions Asset Sale Income $8.4 $23.7 $19.4 $15.8 $13.3 Service & Other Income $ in millions Rail Services & Other Total Rail Income $3.2 $5.7 $4.5 $2.0 $5.9 $ in millions Revenue $107.4 $156.4 $164.8 $149.0 $170.8 Gross Profit $24.8 $56.7 $58.9 $59.8 $67.7 Gross Profit % 23.1% 36.3% 35.7% 40.1% 39.6% 25 Pre-tax Income $9.8 $42.8 $42.8 $31.4 $50.7