The Andersons Inc. Reports 4Q 2018 Net Income of $23.8 Million; Down From $69.7 Million in 4Q 2017

MAUMEE, Ohio, Feb. 13, 2019

Fourth Quarter Highlights

• Company reports EPS of $0.84 and adjusted EPS of $0.92; adjusted EPS improves by 35% year over year.
• Lansing Trade Group acquisition closed effective January 1, 2019.
• Grain Group pretax income improves to $25.4 million on strong harvest margin environment and another strong quarter from Lansing.
• Ethanol Group earns $5.1 million of pretax income on optimal plant efficiency.
• Plant Nutrient Group reports pretax income of $3.8 million on improved primary nutrient margin and lower operating expenses.
• Rail Group earns $6.7 million of pretax income on steadily rising railcar demand.

The Andersons, Inc. (Nasdaq: ANDE) announces financial results for the fourth quarter and full year ended December 31, 2018.

"We improved our fourth quarter operating performance year over year," said

Pat Bowe, President and CEO. "The Grain Group recorded better results highlighted by improvement in its base grain business and a strong finish to the year by Lansing Trade Group.

"We are excited about the closing of our acquisition of Lansing at the beginning of 2019.

"Our integration efforts are going very well, and we are committed to a thoughtful, disciplined combination of our organizations.

"We are more confident than ever about the strong strategic fit of the transaction."

"In addition, our Ethanol Group performed well in a weak market environment by continuing to operate efficiently and market wisely even as margins for the quarter were lower again year over year," continued Bowe.

"The Plant Nutrient Group's performance improved across most of its product lines except for specialty nutrients.

"The Rail Group's performance was equal to last year's results, and the group purchased more than 1,000 railcars."

The company reported fourth quarter 2018 net income attributable to The Andersons of $23.8 million, or $0.84 per diluted share, on revenues of $813 million.

Adjusted net income attributable to the company for the period was $26.0 million, or $0.92 per diluted share, compared to 2017 fourth quarter net income of $69.7 million, or $2.47 per diluted share, and adjusted net income of $18.9 million, or $0.67 per diluted share, on revenues of $1.0 billion.

The company's EBITDA was $60.2 million for the fourth quarter of 2018 and $25.0 million for fourth quarter of 2017.

Adjusted EBITDA was $63.3 million for the quarter compared to $53.0 million in fourth quarter 2017.

For the full year, the company reported net income attributable to The Andersons of $41.5 million, or $1.46 per diluted share, and adjusted net income attributable to The Andersons of $46.4 million, or $1.63 per diluted share.

The adjusted results exclude $6.5 million in pretax charges related to the Lansing acquisition.

These amounts compared to net income attributable to The Andersons of $42.5 million, or $1.50 per diluted share, and adjusted net income attributable to The Andersons of $33.7 million, or $1.19 per diluted share, in 2017.

The company's EBITDA for 2018 and 2017 was $171.6 million and $87.4 million, respectively.

Adjusted EBITDA was $178.1 million for 2018 compared to $157.4 million in 2017.

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 changed the accounting treatment of a significant amount of the Grain Group's sales transactions.

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

For purposes of better understanding ongoing results, the company has expanded its pretax income disclosure in the table below to adjust for amounts that do not reflect ongoing operations.

Fourth quarter and full-year 2018 results include $3.1 million and $6.5 million of expenses related to the Lansing acquisition and integration, respectively.

These adjustments equate to $0.08 and $0.17 in EPS, respectively.

Fourth Quarter Segment Overview

Grain Group Rebounds from Tough Third Quarter

The Grain Group generated pretax income of $25.4 million in the fourth quarter, up $6.2 million or about 30 percent from its fourth quarter 2017 adjusted pretax income results.

The group's EBITDA in the 2018 and 2017 fourth quarters was $32.1 million and $14.3 million, respectively, and it generated adjusted EBITDA of $32.1 million and $25.2 million for the same two periods, respectively.

For purposes of better understanding ongoing results, the company has expanded the Grain Group's pretax income disclosure in the table below to adjust for amounts that are not reflective of ongoing operations.

The table below separates the earnings of the group's base grain business from those of its grain affiliates.

Base grain business earnings originate from grain facilities that the company operates.

The grain affiliates' earnings originate from equity method investments in Lansing Trade Group and Thompsons Limited.

Base grain pretax income was more than 40 percent higher in the fourth quarter compared to 2017 results.

Merchandising income improved significantly.

While income from corn and soybean ownership positions improved year over year from expected basis appreciation, those improvements were offset by significantly lower income from narrowing spreads on wheat positions.

Trading and risk management services income was lower as market uncertainty reduced trading opportunities.

The group's affiliates recorded lower income in the quarter due to some unusual expenses.

Lansing incurred expenses related to closing its sale to The Andersons and recorded an impairment charge on an investment in a small Canadian-based grain company.

The company's share of those two charges accounted for more than the small shortfall from fourth quarter 2017 pretax results.

For the full year, the group earned pretax income of $26.7 million compared to the pretax income of $12.8 million and adjusted pretax income of $23.7 million it earned in the same period last year.

Excluding a 2017 asset impairment expense, 2018 base grain income lagged 2017 results due to less wheat income opportunity and less income from trading and risk management.

Wheat margins have tightened significantly since the third quarter of 2018.

On a positive note, corn and soybean basis recovered and income from food ingredients increased substantially.

Income from affiliates more than offset the shortfall in base income, improving by about $7.8 million; Lansing's very strong year accounted for most of the improvement.

The group generated EBITDA of $54.6 million and $39.9 million in 2018 and 2017, respectively.

Adjusted EBITDA was $54.6 million and $50.8 million for the full years 2018 and 2017, respectively, increasing 7 percent year over year.

The integration of Lansing Trade Group to form the new Trade Group has gone very well in its first few weeks.

The new group has already identified several million dollars of run-rate synergies.

Some of these savings are being realized in early 2019 and the capture of synergies will accelerate throughout the year.

Ethanol Group Performs Well in Challenging Market Conditions

The Ethanol Group generated pretax income of $5.1 million attributable to The Andersons in the fourth quarter, compared to $6.4 million pretax income attributable to The Andersons for the same period in 2017.

The commercial and production teams performed extremely well, hedging forward margin and running the plants efficiently, effectively, and safely in the fourth quarter.

The table below separates the results of the Ethanol Group's unconsolidated entities of its plants in Albion, Mich.; Clymers, Ind.; and Greenville, Ohio, from the earnings of the Denison, Iowa, plant; the Colwich, Kansas, plant currently under construction; and the group's management services income.

Continued elevated ethanol stocks, lower oil prices and seasonally lower demand were the main contributors to the weaker margin environment.

The export market remained on its record pace despite China's continued absence.

The average sales price of ethanol continued to be lower year over year.

Year-over-year results for the group improved by $3.2 million, despite a much weaker margin environment.

For the year, the group earned pretax income of $22.1 million compared to $18.9 million last year.

Plant Nutrient Group Has Seasonally Strong Quarter

The Plant Nutrient Group recorded pretax income of $3.8 million in the fourth quarter compared to a pretax loss of $18.0 million and an adjusted pretax loss of $0.9 million in the fourth quarter of 2017.

The group's current quarter EBITDA and adjusted EBITDA were $12.5 million; the adjusted amount was a $5.6 million improvement over to 2017 fourth quarter results.

For purposes of better understanding ongoing results, the company has expanded the Plant Nutrient Group's pretax income disclosure in the table below to adjust for amounts that are not reflective of ongoing operations.

Except for the specialty nutrient product lines, the group's businesses recorded improved year-over-year operating results.

A significant increase in margin per ton on somewhat lower primary nutrient volume drove wholesale fertilizer gross profit more than 30 percent higher year over year.

In contrast, higher volumes only partially offset weaker margins in the specialty fertilizer product lines.

The lawn business completed a record year by improving results by almost $1 million year over year.

In addition to improving gross profit, the group reduced expenses by about 12 percent year over year.

For the full year, the group generated pretax income of $12.0 million.

This result compares favorably to a pretax loss of $45.1 million and adjusted pretax income of $14.0 million in 2017, which included a $4.7 million gain on the sale of the Florida farm centers.

Wholesale fertilizer volumes were up slightly, but margins were moderately lower, especially in the specialty nutrient product line.

Full-year 2018 adjusted EBITDA was $45.4 million compared to $47.0 million for 2017.

Excluding the $4.7 millionFlorida farm centers gain, full-year adjusted EBITDA increased by 7 percent.

Rail Group Pretax Income Reflects Lower Lease Income and Car Sale Income

The Rail Group earned fourth quarter pretax income of $6.7 million, on par with its results for the same period of the prior year.

The group's fourth quarter 2018 EBITDA was $17.9 million compared to $14.3 million in the comparable 2017 period.

Leasing operations earned $1.4 million in the fourth quarter, down $1.1 million sequentially and $0.5 million year over year.

Utilization averaged 94.3 percent during the quarter compared to 92.0 percent sequentially and 86.2 percent during the same period last year.

The average number of cars on lease rose about 7 percent year over year.

Average lease rates and maintenance expenses were flat year over year.

Depreciation and interest expenses were up, primarily due to a higher asset base.

The group earned $1.2 million of pretax income on railcar sales in the quarter compared to $3.3 million in the fourth quarter of 2017.

The group scrapped more than 300 cars and sold fewer cars outright than in the same 2017 period.

Rail's service and other pretax income was $4.1 million in the quarter compared to $1.5 million during the same period of 2017.

Current quarter results included $2.4 million in income from the sale of 50 barges.

Repair sales were higher year over year, and margins were flat.

For the full year, the Rail Group earned pretax income of $17.4 million compared to $24.8 million in 2017.

EBITDA was $57.9 million for full-year 2018 compared to $54.9 million for 2017, up 5 percent year over year.

The year-over-year decrease in pretax income primarily reflects the costs to scrap long-idled railcars in the second quarter and lower lease rates as leases expiring at peak rates were renewed at substantially lower lease rates.

The railcar market and demand for railcars continued its steady improvement and absolute lease rates improved for most car types.

Other Net Company-Level Expenses Include Lansing Acquisition Expenses

Fourth quarter 2018 unallocated net company-level expenses of $11.1 million were considerably higher than the $4.4 million of net expenses recorded during the fourth quarter of 2017.

Current quarter results included $3.1 million, or $0.08 per share, in expenses associated with acquiring and integrating Lansing Trade Group.

Fourth quarter 2017 results also included a $2.9 million gain from the sale of former retail store property.

Full year unallocated net company-level expenses were $24.8 million, down $7.2 million from 2017 levels.

The former amount included $6.5 million, or $0.17 per share, in Lansing acquisition expenses.

The 2017 amount included a $7.3 million pretax loss from the closing of the company's former retail business.

Read the full financial report here.

For more information, please contact John Kraus at 419-891-6544 or investorrelations@andersonsinc.com