The Andersons, Inc. Reports 2Q 2018 Net Income of $21.5 Million, Up From $26.7 Million Net Loss in 2Q 2017

Maumee, OH - Aug. 7, 2018 - The Andersons, Inc. (NASDAQ: ANDE) announces financial results for the second quarter which ended June 30, 2018.

The Company reports net income of $21.5 million, or $0.76 per diluted share, up considerably from both the net loss of $26.7 million, or ($0.94) per diluted share, and adjusted net income of $15.3 million, or $0.54 per diluted share, reported in the prior year.

Second quarter 2018 reported results include noncash pretax impairment charges totaling $6.3 million.

The earnings per share impact of these charges is approximately $0.17 per diluted share.

  • Grain Group records much improved pretax income of $9.9 million, net of a $1.6 million impairment charge on a recently sold Tennesseefacility, as market volatility provides better merchandising opportunities and affiliate results continue to improve.
  • Ethanol Group earns $6.1 million of pretax income on strong execution and improved DDG prices.
  • Plant Nutrient Group reports pretax income of $15.1 million on continued lower primary and specialty fertilizer margins, offset by strong performance by the lawn and contract manufacturing business.
  • Rail Group earns $0.9 million of pretax income despite a $4.7 million impairment charge on railcars intended to be scrapped, as the leasing market continues to improve and the railcar repair business rebounds.

The Company reported second quarter 2018 net income attributable to The Andersons of $21.5 million, or $0.76 per diluted share, on revenues of $911 million.

This result is a significant improvement over the net loss attributable to the Company of $26.7 million, or $(0.94) per diluted share and adjusted net income attributable to the Company of $15.3 million, or $0.54 per diluted share, on revenues of $994 million recorded in the same period of 2017.

The Company's earnings before interest, taxes, depreciation and amortization (EBITDA) was $59.7 million for the quarter, compared to $8.9 million of EBITDA and $50.9 million of adjusted EBITDA recorded in the second quarter of 2017.

Results for the quarter included pretax impairment charges of $4.7 million on idle railcars held for sale and $1.6 million on the Grain Group's Como, Tennessee, facility in anticipation of its recent sale.

The decrease in revenues year over year was primarily the result of the Company's adoption of new revenue recognition rules at the beginning of 2018 that have changed the accounting treatment of a significant amount of Grain's sales transactions.

This change has no impact on the amount of gross profit recognized on these transactions.

"As in the first quarter, our Grain and Ethanol businesses each posted significantly better year-over-year results, but our Plant Nutrient and Rail businesses posted lower results compared to last year," said CEO Pat Bowe.

"For the seventh consecutive quarter, our Grain Group recorded improved year-over-year results," Bowe continued.

"The group's second quarter results improved by approximately $4.5 million when excluding the Tennessee asset impairment charge, and were highlighted by better results from merchandising and Lansing Trade Group.

"Ethanol Group results improved once again year over year due to higher volumes linked to plant optimization and improved DDG margins.

"The Plant Nutrient Group's lawn and contract manufacturing business continued to grow, but that was not enough to offset the continued squeeze in margins for both primary and specialty nutrients, which suffered from continued competitive pricing pressure.

"The Rail Group's results were comparable year over year notwithstanding its decision to scrap about 600 idle cars.

"Utilization and total cars on lease improved sequentially and year over year, signaling a continued modest market upturn."

For purposes of better understanding ongoing results, the expanded pretax income and EBITDA disclosures in the table below adjust for amounts that are not reflective of ongoing operations.

Specifically, an adjustment was made for the goodwill impairment charged in the second quarter of 2017 associated with the Plant Nutrient Group.

For the first six months of the year, the Company recorded net income of $19.8 million, or $0.70 per diluted share, compared to a net loss of $29.7 million, or ($1.05) per diluted share, and adjusted net income of $12.3 million, or $0.43 per diluted share, during the same period last year.

Total EBITDA for the first half of 2018 was $87.3 million compared to first-half 2017 EBITDA of $30.3 million and adjusted EBITDA of $72.3 million.

Second Quarter Segment Overview

Grain Group Operating Income Increases Again Compared to Prior Year

The Grain Group generated pretax income of $9.9 million in the quarter.

Included in those results was a $1.6 million impairment charge related to some Tennessee assets that were sold recently.

Notwithstanding that charge, the group's results were almost 40 percent better than the $6.9 million pretax income earned in the same period last year.

The table below separates the results of the base grain business from those of the group's affiliates, which include Lansing Trade Group (LTG) and Thompsons Limited.

Excluding the impairment charge, the base grain business drove about 40 percent of the improvement, while affiliates accounted for the rest.

Base grain pretax income after adjustment for the impairment charge improved by $1.8 million in the second quarter compared to 2017 results.

The group was able to benefit from increased price volatility, which led to considerably better merchandising margins.

Income from holding grain in inventory was comparable year over year.

LTG had an excellent quarter, accounting for all the year-over-year improvement by the affiliates.

The improvement spanned all its businesses.

Ethanol Group Results Improve on Higher Volume and Better DDG Values

The Ethanol Group produced $6.1 million of pretax income attributable to the Company in the second quarter.

These results were $1.4 million or almost 30 percent higher than the $4.7 million pretax income attributable to the Company for the same period in 2017, primarily due to higher volume and better DDG values.

The four ethanol plants combined achieved second quarter and first half production records of more than 121 million and 238 million gallons, about 5 percent and 11 percent higher than the comparable periods, respectively.

This is in part because the new Albion capacity came on line in March 2017. E85 sales continued to grow at a rapid pace.

While domestic and export demands have both been strong so far in 2018, the impact of current tariffs and the ultimate resolution of various trade disputes leave the future of margins and export business uncertain for the industry.

While Volume Was Up, Plant Nutrient Group Continued to Be Impacted by Lower Margins

The Plant Nutrient Group recorded pretax income of $15.1 million in the second quarter compared to a pretax loss of $25.8 million and adjusted pretax income of $16.2 million in the second quarter of 2017.

The group's second quarter 2018 EBITDA was $23.5 million, a $1.2 million or 5 percent decrease from adjusted 2017 second quarter results.

For purposes of better understanding ongoing results, the Company has expanded the Plant Nutrient Group's pretax income and EBITDA disclosures in the table below to adjust for the second quarter 2017 goodwill impairment associated with the wholesale fertilizer business.

Sales volumes for both primary and specialty nutrients were strong for the quarter after a slow start due to adverse weather that delayed planting.

However, both product segments struggled with continued margin erosion.

The lawn and contract manufacturing business continued to be a bright spot for the group, registering results that were more than 30 percent better year over year for the second consecutive quarter.

Rail Group Decides to Scrap Certain Idle Railcars; Leasing Market Conditions Continue to Improve

The Rail Group earned second quarter pretax income of $0.9 million compared to $5.9 million in the same period of the prior year.

The difference was attributable to the decision to scrap nearly 600 idle railcars.

About 500 of those railcars were not scrapped by the end of the quarter, which triggered an impairment charge of $4.7 million.

A loss of $0.5 million was recognized on the remaining railcars.

The decision will generate cash and improve future operating performance by approximately $1.4 million annually.

Base leasing operations earned $2.1 million, matching first quarter results but falling short of year-over-year results by $0.8 million due to higher maintenance expense, despite 5.1 percent higher year-over-year utilization.

Utilization averaged 89.5 percent during the quarter compared to 87.9 percent sequentially and 84.4 percent during the same period last year.

The average number of cars on lease rose about 3 percent year over year, while average lease rates fell slightly.

The group netted a pretax loss of $3.0 million on railcars sold, or to be sold, in the quarter compared to pretax income of $1.4 million in the second quarter of 2017.

In addition to the idle railcar scrap program, the group took advantage of multi-year high scrap prices to scrap 515 additional railcars during the quarter.

When the scrapping project is complete, the utilization rate should rise by approximately 2 percent excluding other factors.

The group maintained the size of the fleet and reduced its average age during the quarter by buying 669 cars for $21 million.

Rail's service and other businesses earned pretax income of $1.8 million in the quarter, somewhat better than for the same period of 2017.

Repair volumes were up after a first quarter 2018 lull.

The group's repair facilities set a quarterly record for revenue and pretax income.

The group also recently announced that it has agreed to acquire a shuttered railcar facility in Danville, Illinois, with the intent to open it as a full-service railcar repair facility by year end.

Company Reduces Other Net Company-Level Expenses

Unallocated net Company-level expenses for the second quarter of 2018 fell by $1.1 million to $2.8 million.

For the second quarter of 2017, the Company reported $10.6 million net expense, which included unallocated expenses of $3.9 million and a $6.7 million pretax loss from the former Retail business.

Read the full financial report here.

For more information, please contact John P. Karus at 419-891-6544 or investor_relations@andersonsinc.com