Maumee, OH - Nov. 3, 2020 - The Andersons, Inc. (Nasdaq: ANDE) announces financial results for the third quarter ended September 30, 2020.
Third Quarter Highlights:
"We continued to make good progress during the quarter toward reaching our vision to be the most nimble and innovative ag supply chain company in North America," said President and CEO Pat Bowe.
"The integration of Trade and Ethanol is going well and is being modeled after the successful integration of Lansing Trade Group last year. While we will always be vigilant about costs, we are looking forward to placing more emphasis on profitable growth and extraordinary customer service in 2021 and beyond."
"Our results for the third quarter were solid in light of the current economic environment," continued Bowe.
"Trade, Ethanol and Plant Nutrient all recorded improved results year over year.
"Trade led the way with better merchandising income as the fall harvest got off to a good start.
"Ethanol's results were much improved, notwithstanding large non-cash mark-to-market charges.
"Plant Nutrient's results improved substantially year over year in a quarter in which that business is usually seasonally weak.
"Finally, Rail continued to feel the negative impacts of weak railcar demand."
Liquidity and Cash Management
"We continued to generate strong operating cash flows and manage capital expenditures during the third quarter," said Executive Vice President and CFO Brian Valentine.
"We were able to reduce total long-term debt by more than $60 million. We remain very focused on overall liquidity, including expense and cash management."
In addition to the $30 million in 2020 expense reductions announced in May, about half of which it expects to be permanent, the company also anticipates that the business restructuring announced in August will result in further annual general and administrative cost reductions of approximately $10 million beginning in early 2021.
The company has spent $69 million net of proceeds from asset sales on capital projects through September and still expects to spend approximately $100 million in 2020 after averaging more than $200 million over the last three years.
This reduction prudently preserves working capital and supports the company's continued strong financial position.
Third Quarter Segment Overview
Trade Records Higher Results Driven by Improved Merchandising Income
The Trade segment recorded improved pretax income of $5.9 million and adjusted pretax income of $6.9 million for the quarter compared to a pretax loss of $2.1 million and adjusted pretax income of $0.4 million in the third quarter of 2019.
The difference in reported and adjusted income in both periods was attributable to stock compensation expense associated with the 2019 acquisition of Lansing Trade Group.
A large majority of the year-over-year improvement came from commodity merchandising, which earned pretax income that was more than 80 percent higher year over year.
The performance of the segment's assets improved due to strong corn and soybean sales despite earning less income from wheat.
The business also continued to benefit from the successful integration of Lansing and Thompsons Limited, portfolio optimization and other cost-cutting efforts.
Trade's third quarter adjusted EBITDA was $22.3 million, up approximately 8 percent over third quarter 2019 adjusted EBITDA of $20.7 million.
While merchandising opportunities continue to be good, the resulting income will not likely fully offset the lack of carry in the corn and soybean markets into 2021 due to the significant increase in futures prices and narrowing spreads since early August.
Ethanol Remains Profitable on Improved Margins Despite Mark-to-Market Charge
The Ethanol segment reported pretax income attributable to the company of $1.1 million in the third quarter compared to the similar amount it earned in the same period in 2019.
Improved crush margins were the primary driver of significantly improved performance by the group's five plants. However, the segment recorded a non-cash mark-to-market charge of $6.2 million due to increases in corn and DDG prices late in the quarter.
Production volumes in the quarter were higher year over year due to higher yields at The Andersons Marathon Holdings (TAMH) plants and ELEMENTTM operating for the entire quarter.
Board crush margins were roughly 12 cents higher than in the third quarter of 2019. The third-party ethanol trading business also posted comparatively better results due to improved margins and higher volumes.
Ethanol recorded EBITDA attributable to the company of $11.1 million in the third quarter of 2020, up from 2019 third quarter EBITDA attributable to the company of $3.9 million.
The results of three of the five ethanol plants were not consolidated in 2019.
Plant Nutrient Results Improve; Rail Breaks Even
The Plant Nutrient segment improved its results year over year, recording a pretax loss of $5.4 million in the third quarter compared to a pretax loss of $7.4 million in the same period of the prior year.
This was the sixth consecutive quarter that the segment posted improved year-over-year results.
Plant Nutrient's current quarter EBITDA was $2.2 million compared to 2019 third quarter EBITDA of $0.9 million.
While tons sold were unchanged, the improvement was driven by slightly better margin per ton and continued disciplined working capital and expense management.
Rail recorded a third quarter pretax loss of $0.1 million compared to $3.1 million of pretax income in the same period of the prior year.
Its third quarter 2020 EBITDA was $12.5 million compared to its third quarter 2019 EBITDA of $16.1 million.
The leasing business accounted for the majority of the shortfall due to lower lease rates and fleet utilization year over year; repair revenues and margins also fell.
Provision for Income Taxes Includes CARES Act Benefits
The company's income tax provision included additional CARES Act tax benefits of approximately $4.5 million, or $0.14 per diluted share in the current quarter and now totals benefits of approximately $14.8 million, or $0.45 per diluted share, year to date.
As with the impacts of the Tax Cuts and Jobs Act of 2017 and CARES Act benefits recognized in the first half of 2020, the company has excluded the current quarter benefits from its adjusted net income.
This quarter's additional benefits are expected to result in cash refunds of nearly $8 million, bringing the total expected CARES Act refunds to approximately $39 million.
In addition, the company's reported effective income tax rate is substantially impacted by the income or loss earned by the noncontrolling interests and may result in highly variable effective tax rates in future periods.
For more information, please contact John Kraus at 419-891-6544 or firstname.lastname@example.org