-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EouKy9xC7YjSH8nuK4keHL9OCccrv2xqTmJ+gHyLM5kcBbgPE0NxJGU2Ef+822Lo D6fkwfBQ7iS5axcdfJJFIw== 0000821026-97-000005.txt : 19970520 0000821026-97-000005.hdr.sgml : 19970520 ACCESSION NUMBER: 0000821026-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDERSONS INC CENTRAL INDEX KEY: 0000821026 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-FARM PRODUCT RAW MATERIALS [5150] IRS NUMBER: 341562374 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20557 FILM NUMBER: 97606369 BUSINESS ADDRESS: STREET 1: 1200 DUSSEL DRIVE CITY: MAUMEE STATE: OH ZIP: 43537 BUSINESS PHONE: 4198935050 FORMER COMPANY: FORMER CONFORMED NAME: ANDERSONS MANAGEMENT CORP DATE OF NAME CHANGE: 19931119 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission file number 000-20557 THE ANDERSONS, INC. (Exact name of registrant as specified in its charter) OHIO 34-1562374 (State of incorporation (I.R.S. Employer or organization) Identification No.) 480 W. Dussel Drive, Maumee, Ohio 43537 (Address of principal executive offices) (Zip Code) (419) 893-5050 (Telephone Number) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The registrant had 8,261,992 Common shares outstanding, no par value, at May 1, 1997. THE ANDERSONS, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Operations - Three months ended March 31, 1997 and 1996 6 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 1997 and 1996 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 13 PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE ANDERSONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(IN THOUSANDS) March 31 December 31 1997 1996 Current assets Cash and cash equivalents $ 4,850 $ 27,524 Accounts receivable: Trade accounts - net 78,723 73,694 Margin deposits 10,829 327 89,552 74,021 Inventories: Grain 80,366 70,762 Agricultural fertilizer and supplies 34,592 21,897 Merchandise 34,020 29,527 Lawn and corn cob products 15,539 17,633 Other 10,440 10,478 174,957 150,297 Deferred income taxes 2,917 1,864 Prepaid expenses 3,348 3,929 Total current assets 275,624 257,635 Other assets: Notes receivable (net) and other assets 6,253 5,951 Investments in and advances to affiliates 1,332 1,340 7,585 7,291 Property, plant and equipment: Land 11,261 11,261 Land improvements and leasehold improvements 24,515 24,431 Buildings and storage facilities 80,793 80,669 Machinery and equipment 99,772 99,871 Construction in progress 3,232 1,795 219,573 218,027 Less allowances for depreciation and amortization 137,602 136,362 81,971 81,665 $365,180 $346,591 See notes to condensed consolidated financial statements. THE ANDERSONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS - (continued) (UNAUDITED)(IN THOUSANDS) March 31 December 31 1997 1996 Current liabilities Notes payable $ 80,000 $ - Accounts payable for grain 39,092 96,932 Other accounts payable 80,528 75,713 Accrued expenses 11,002 16,981 Current maturities of long-term debt 5,539 6,360 Total current liabilities 216,161 195,986 Pension and postretirement benefits 2,872 2,804 Long-term debt Note payable, 7.84%, payable $75 thousand quarterly through 7/97, and $398 thousand thereafter, due 2004 14,175 14,250 Note payable under revolving credit line, variable rate (6.635% at March 31, 1997) 20,000 16,300 Notes payable, variable rate (6.4375% at March 31, 1997), payable $336 quarterly beginning October 1997, due 2004 9,418 9,418 Other notes payable 1,041 1,036 Industrial development revenue bonds: 6.5%, sinking fund $900 thousand to $1 million payable annually, due 1999 2,900 2,900 Variable rate (5.695% at March 31, 1997), payable $882 thousand annually through 2004 6,351 6,351 Variable rate (3.95% at March 31, 1997), due 2025 3,100 3,100 Debenture bonds, 6.5% to 10%, due 1997 through 2007 20,554 21,030 Other bonds, 4% to 9.6% 509 543 78,048 74,928 Less current maturities of long-term debt 5,539 6,360 72,509 68,568 Deferred income taxes 5,103 5,371 Minority interest 559 613 Shareholders' equity: Common stock (25,000 shares authorized, stated value $.01 per share, 8,262 and 8,360 outstanding at 3/31/97 and 12/31/96, respectively) 84 84 Additional paid-in capital 66,659 66,659 Retained earnings 2,772 7,106 Treasury stock (168 and 70 shares at 3/31/97 and 12/31/96, respectively; at cost) (1,539) (600) 67,976 73,249 $365,180 $346,591 See notes to condensed consolidated financial statements. THE ANDERSONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended March 31 1997 1996 Grain sales and revenues $ 93,809 $ 153,363 Fertilizer, retail and other sales 92,009 102,752 Other income 947 599 186,765 256,714 Cost of grain sales 91,200 140,063 Cost of fertilizer, retail and other sales 68,248 76,918 159,448 216,981 Gross profit 27,317 39,733 Operating, administrative and general expenses 31,902 31,589 Interest expense 2,140 4,698 34,042 36,287 Net (loss) income before income taxes (6,725) 3,446 Income tax (credit) expense (includes deferred taxes established in connection with the merger of $812 in 1996 (2,643) 2,177 Net (loss) income $ (4,082) $ 1,269 Earnings (loss) per share $ (0.49) $ 0.15 Weighted average common shares outstanding 8,346 8,430 See notes to condensed consolidated financial statements. THE ANDERSONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(IN THOUSANDS) Three Months Ended March 31 1997 1996 Operating activities Net (loss) income $ (4,082) $ 1,269 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 2,404 2,461 Provision for losses on accounts and notes receivable 234 237 Deferred income tax (1,321) (470) Other (49) (139) Changes in operating assets and liabilities: Accounts receivable (15,766) (13,660) Inventories (24,660) 1,792 Prepaid expenses 581 496 Accounts payable for grain (57,840) (66,291) Other accounts payable and accrued expenses (1,096) 14,650 Notes receivable and other assets (436) (166) Net cash used in operating activities (102,031) (59,821) Investing activities Purchases of property, plant and equipment (2,645) (2,554) Proceeds from sale of property, plant and equipment 72 81 Net cash used in investing activities (2,573) (2,473) Financing activities Net increase in short-term borrowings 80,000 62,333 Proceeds from issuance of long-term debt 60,540 9 Payments of long-term debt (57,420) (1,412) Payments to dissenting partners and for fractional shares in merger transaction - (64) Purchase of common stock for the treasury (1,361) - Proceeds from sale of treasury stock to employees participating in Employee Share Purchase Plan 423 - Dividends paid (252) - Net cash provided by financing activities 81,930 60,866 Decrease in cash and cash equivalents (22,674) (1,428) Cash and cash equivalents at beginning of period 27,524 5,052 Cash and cash equivalents at end of period $ 4,850 $ 3,624 Noncash financing activity Exchange of employee bonds for common shares $ (275) See notes to condensed consolidated financial statements. THE ANDERSONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note A - In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods indicated have been made. The accompanying unaudited Condensed Consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Andersons, Inc. annual report on Form 10-K for the year ended December 31, 1996. Note B - Prior to 1996, the majority of the Company's operations were conducted as a partnership and the income from those operations was included in the individual tax returns of its partners. Since January 2, 1996, the date that The Andersons (the "Partnership") merged into its corporate general partner, income from operations is taxed at the corporate level. In conjunction with the merger, the Company recorded the deferred tax assets and liabilities of the partnership that had not previously been recognized. The net excess of deferred tax liabilities over deferred tax assets ($812,000) was recorded in the first quarter of 1996 and included as a component of the provision for income taxes. Note C - In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. This standard will have no impact on the Company's presentation of earnings per share. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of the three months ended March 31, 1997 with the three months ended March 31, 1996: Sales and revenues for the three months ended March 31, 1997 totaled $186.8 million, a decrease of $69.9 million or 27% from the 1996 first quarter sales and revenues of $256.7 million. The Agriculture Group had a total decrease of $73.8 million. This includes a $59.5 million decrease in grain sales and revenues due to a 25% decrease in bushels shipped, a 14% decrease in the average price of bushels sold and decreased merchandising revenues. The grain business began the year with less grain available for sale than in prior years (due to a poor fall harvest in certain of the primary growing areas served by the Company) and could continue to experience decreased revenues until the 1997 fall harvest. Sales of agricultural fertilizer were also off with a total decrease in sales of $14.3 million. Wholesale tons sold were down 41% with a 2% increase in the average selling price per ton. The Company expects that a significant portion of the wholesale fertilizer volume lost in the first quarter will be recovered in the second quarter of 1997. The Retail Group experienced a 7% overall increase in sales from the first quarter of 1996 with the three Toledo area stores contributing to the increase. Overall, the Processing & Manufacturing Group contributed increased sales and revenues of $1.6 million or 5%. The manufacturing business had the largest increase with a $4 million or 114% increase in sales, due primarily from the repair and sale of railcars. The processing business (lawn fertilizer and industrial products) had a sales decrease of $2.6 million or 10%. Of this decrease, $1.6 million represented 1996 sales and revenues of the sorbents business which was sold in the fourth quarter of 1996. Gross profit for the three months ended March 31, 1997 totaled $27.3 million, a decrease of $12.4 million or 31% from the 1996 first quarter gross profit of $39.7 million. The Agriculture Group had a $13.1 million or 71% decrease with $10.7 million related to margins on grain sales and merchandising activities. The remaining $2.4 million decrease in the Agriculture Group resulted primarily from wholesale fertilizer volume and margin per ton decreases. Gross profit on sales in the Retail Group increased 6% or $0.5 million. Overall, the Processing and Manufacturing Group experienced a decrease of 9% or $0.9 million. However, when excluding the 1996 gross profit related to the sorbents business, the decrease was 3% or $0.3 million. Operating, administrative and general expenses for the first quarter of 1997 totaled $31.9 million, an increase of $0.3 million or 1% from the first quarter of 1996. As a percent of total sales and revenues, operating, administrative and general expenses increased from 12% to 17%, due to the significant decrease in total sales. Interest expense for the first quarter of 1997 was $2.1 million, a $2.6 million decrease from the first quarter of 1996. Short-term borrowings at March 31, 1996 were $183 million as compared to $80 million at March 31, 1997. The loss before income tax credits of $6.7 million represents an unfavorable change of $10.1 million from the first quarter of 1996. The net loss of $4.1 million represents a $5.4 million decrease from the 1996 first quarter net income. Income tax expense and net income in the first quarter of 1996 include a non-recurring charge of $0.8 million which established deferred income taxes on the assets and liabilities of the Partnership. The loss of $0.49 per share is a $0.64 decrease from the first quarter of 1996 earnings per share of $0.15. Liquidity and Capital Resources The Company used $102 million in its operations in the first quarter of 1997 as compared to the first quarter of 1996 operations which used $60 million in cash. The Company has significant short-term lines of credit available to finance working capital, primarily inventories and accounts receivable. Lines of credit available at May 1, 1997 were $250 million, of which $80 million was borrowed at March 31, 1997. Typically the Company's highest borrowings occur in the spring due to seasonal inventory requirements in the wholesale fertilizer and retail businesses, credit sales in the wholesale fertilizer and lawn products business and a customary reduction in the liability for grain due to the cash needs of grain producers and market strategies. A quarterly cash dividend of $0.03 per common share was paid in the first quarter of 1997. A cash dividend of $0.03 per common share was declared on April 1, 1997 and was paid on April 21, 1997. No cash dividends were paid in 1996, but the final payment of $64 thousand to former partners electing not to participate in the merger and for fractional shares was paid in the first quarter of 1996. The Company made income tax payments of $2.4 million in the first quarter and expects to make payments totaling approximately $3.7 million for the remainder of 1997. Also in the first quarter, the Company purchased 147 thousand shares of its common stock for the treasury and reissued 49 thousand shares to its employees as part of the Employee Share Purchase Plan. Total capital expenditures for 1997 are expected to approximate $15 million, including $6 million for renovations to retail stores, $4 million for plant upgrades and improvements and the purchase of a retail farm center business that the Company has leased for several years. Funding for these expenditures is expected to come from cash generated from operations. Capital expenditures can be curtailed if cash generated from operations is less than expected. Certain of the Company's long-term debt is secured by first mortgages on various facilities. In addition, some of the long-term borrowings include provisions that impose minimum levels of working capital and equity, limitations on additional debt and require the Company to be substantially hedged in its grain transactions. The Company's liquidity is enhanced by the fact that grain inventories are readily marketable. In the opinion of management, the Company's liquidity is adequate to meet short-term and long- term needs. Forward Looking Statements The preceding Management's Discussion and Analysis contain various "forward- looking statements" which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including but not limited to those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "believe," "expect," "anticipate" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following factors could cause actual results to differ materially from historical results or those anticipated; weather, supply and demand of commodities including grains, fertilizer and other basic raw materials, market prices for grains and the potential for increased margin requirements, regulatory agency review of grain contracts and related contract default litigation, competition, interest rates and income taxes. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company, like others in the agriculture industry, utilizes different types of contracts with producers (including contracts commonly referred to as "Hedged To-Arrive" or "HTA" contracts) to purchase grain. Some grain producers have defaulted or threatened default on certain of these contracts, arguing that their contracts are unenforceable. The Company believes that this is due, in large part, to unprecedented high grain prices experienced in 1996 and in come cases, crop shortages due to poor weather in some of the primary growing areas served by the Company. The Company currently is engaged in litigation and/or arbitration with several defaulting producers, including one purported class action filed on May 16, 1996 in the United States District Court for the Northern District of Illinois, Eastern Division, Case no. 96C2936, Harter, et. al., v. Iowa Grain Company and The Andersons Investment Services Corp., d.b.a. The Andersons, Inc., wherein enforceability of the delivery obligation under certain grain contracts has been raised as an issue. The Harter lawsuit seeks declaratory and injunctive relief and compensatory, exemplary and punitive damages of an unspecified amount. The Court, in Harter, ordered arbitration by the National Grain and Feed Association and dismissed Iowa Grain Company as a defendant. The Company currently has several arbitration cases before the National Grain and Feed Association. The Company believes its grain contracts are enforceable obligations and intends to enforce them. Although no assurance can be given that the current litigation and arbitration will not result in liability or loss, the Company continues to believe that it has valid claims and defenses in the lawsuits and proceedings in which it is involved. Pursuant to subpoenas duces tecum served by the Commodities Futures Trading Commission (the "CFTC"), the Company has produced certain records, including names and phone numbers of certain customers, and the depositions of certain employees and former employees have been taken in the matter of "Certain Transactions and Practices Among Grain Elevators, et. al., Involving Futures Contracts." In light of the Company's current and prior use of Hedged To-Arrive contracts, related industry-wide litigation, and current conditions of the industry as a whole, there can be no assurance that other litigation will not be brought, that a class will not be certified or that other CFTC proceedings will not be instituted. There currently is no reasonable basis to predict the amount of future liability or loss, if any, that may arise from such litigation or CFTC proceedings. Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. A report on Form 8-K was filed with the SEC containing a March 21, 1997 press release discussing the Chicago Board of Trade's proposed changes to delivery locations for its corn and soybean futures contracts and the potential effect that this change may have on the Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE ANDERSONS, INC. (Registrant) Date: May 14, 1997 By /s/Richard P. Anderson Richard P. Anderson Chairman of the Board and Chief Executive Officer Date: May 14, 1997 By /s/Richard R. George Richard R. George Vice President and Controller (Principal Accounting Officer) EX-27 2
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