EX-99.4 6 a994proformacombinedconsol.htm EXHIBIT 99.4 Exhibit


Exhibit 99.4
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Effective January 1, 2019, The Andersons, Inc. (the "Company") completed its acquisition of the remaining 67.5% equity of Lansing Trade Group, LLC ("Lansing"). The transaction resulted in the consolidation of Thompsons Limited of Ontario, Canada ("Thompsons" or "Lux JV") and related entities as they were jointly owned by the Company and Lansing in equal portions. 

Total consideration paid by the Company to complete the acquisition of Lansing (the "Transaction") was approximately $322 million. The Company paid $199 million in cash, which includes preliminary working capital adjustments of $30 million, and issued 4.1 million unregistered shares valued at approximately $123 million. In addition, it issued approximately 280 thousand unregistered shares and may issue up to approximately 370 thousand additional unregistered shares to replace existing unvested incentive compensation and fund employee retention payments.

Additionally, the Company assumed approximately $160 million of long-term debt and approximately $220 million of line of credit borrowings of Lansing and Thompsons. In conjunction with the Transaction, the Company refinanced this debt.

See Note 2 to these unaudited pro forma combined financial statements for additional information on the total purchase price considerations.

The following unaudited pro forma combined balance sheet as of December 31, 2018 gives effect to the Transaction as if it had occurred on December 31, 2018. The unaudited pro forma combined statements of income for the year ended December 31, 2018 give effect to the Transaction as if it had occurred on January 1, 2018.

The unaudited pro forma combined financial statements were primarily derived from, and should be read in conjunction with the accompanying notes to the following historical consolidated financial statements for Lansing, Lux JV and the Company:

•
Lansing's separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018 (included herein as Exhibit 99.2).

•
Lux JV's separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018 (included herein as Exhibit 99.3). The audited statements have been converted from Canadian dollars to U.S. dollars for pro forma purposes. The Company used a spot rate and average rate in preparing the Pro Forma Combined Balance Sheet and Pro Forma Combined Statement of Income, respectively.

•
The Company's separate audited historical consolidated financial statements and accompanying notes as of and for the fiscal year ended December 31, 2018 (included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2019).

The unaudited pro forma combined financial information has been prepared for illustrative purposes only and is not necessarily indicative of what the combined company's financial position or results of operations actually would have been had the Transaction been completed at the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company and does not give consideration to the impact of cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Transaction or the costs necessary to achieve these cost savings, operating synergies or revenue enhancements.


1



UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 2018
(Amounts in thousands)
 
The Andersons, Inc.
(see Note 1)
 
Lansing Trade Group, LLC (see Note 1)
 
Lux JV Treasury Holding Company, S.à r.l. (see Note 1)
 
Reclassification adjustments (see Note 1)
 
Pro Forma Transaction Adjustments (see Note 3)
 
Pro Forma Combined
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
22,593

 
$
27,086

 
$
3,056

 
$
—

 
$
(1,000
)
3(a)
$
51,735

Accounts receivable, net
207,285

 
296,627

 
46,052

 
—

 
(3,916
)
3(b)
546,048

Inventories
690,804

 
320,268

 
135,794

 
—

 
(1,224
)
3(c)
1,145,642

Commodity derivative assets – current
51,421

 
63,305

 
19,017

 
—

 
4,420

3(c)
138,163

Other current assets
50,703

 
13,691

 
10,238

 
—

 
—

 
74,632

Assets held for sale
392

 
—

 
—

 
—

 
—

 
392

Total current assets
1,023,198

 
720,977

 
214,157

 
—

 
(1,720
)
 
1,956,612

Other assets:
 
 
 
 
 
 
 
 
 
 
 
Commodity derivative assets – noncurrent
480

 
331

 
13,041

 
—

 
—

 
13,852

Goodwill
6,024

 
25,732

 
3,412

 
—

 
90,342

3(d)
125,510

Other intangible assets, net
99,138

 
11,696

 
13,604

 
—

 
113,400

3(e)
237,838

Other assets, net
22,341

 
4,653

 
638

 
(1,177
)
 
—

 
26,455

Equity method investments
242,326

 
75,670

 
—

 
—

 
(199,688
)
3(f)
118,308

 
370,309

 
118,082

 
30,695

 
(1,177
)
 
4,054

 
521,963

Rail Group assets leased to others, net
521,785

 
—

 
—

 
—

 
—

 
521,785

Property, plant and equipment, net
476,711

 
98,282

 
68,370

 
—

 
—

3(g)
643,363

Total assets
$
2,392,003

 
$
937,341

 
$
313,222

 
$
(1,177
)
 
$
2,334

 
$
3,643,723

Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Short-term debt
$
205,000

 
$
119,987

 
$
97,391

 
$
—

 
$
—

 
$
422,378

Trade and other payables
462,535

 
296,466

 
35,254

 
—

 
(3,916
)
3(h)
790,339

Customer prepayments and deferred revenue
32,533

 
87,488

 
11,889

 
—

 
—

 
131,910

Commodity derivative liabilities – current
32,647

 
25,121

 
7,311

 
—

 
—

 
65,079

Accrued expenses and other current liabilities
79,046

 
27,795

 
17,755

 
—

 
27,660

3(i)
152,256

Current maturities of long-term debt
21,589

 
11,307

 
2,322

 
—

 
—

 
35,218

Total current liabilities
833,350

 
568,164

 
171,922

 
—

 
23,744

 
1,597,180

 
 
 
 
 
 
 
 
 
 
 
 
Other long-term liabilities
32,184

 
75

 
—

 
—

 
1,100

3(j)
33,359

Commodity derivative liabilities – noncurrent
889

 
250

 
2,806

 
—

 
—

 
3,945

Employee benefit plan obligations
22,542

 
—

 
—

 
—

 
—

 
22,542

Long-term debt
496,187

 
114,817

 
31,306

 
(1,177
)
 
169,218

3(k)
810,351

Deferred income taxes
130,087

 
4,271

 
17,999

 
—

 
18,626

3(l)
170,983

Total liabilities
1,515,239

 
687,577

 
224,033

 
(1,177
)
 
212,688

 
2,638,360

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
 
 
Common shares
96

 
—

 
 
 
—

 
—

 
96

Share capital
—

 
—

 
15

 
—

 
(15
)
3(m)
—

Additional paid-in-capital
224,396

 
—

 
68,832

 
—

 
54,314

3(m)
347,542

Members' equity
—

 
266,214

 
—

 
—

 
(266,214
)
3(m)
—

Treasury shares
(35,300
)
 
—

 
—

 
—

 
—

 
(35,300
)
Accumulated other comprehensive loss (gain)
(6,387
)
 
(16,450
)
 
—

 
—

 
28,116

3(m)
5,279

Retained earnings
647,517

 
—

 
20,342

 
—

 
(26,555
)
3(m)
641,304

Total shareholders’ equity of common shareholders
830,322

 
249,764

 
89,189

 
—

 
(210,354
)
3(m)
958,921

Noncontrolling interests
46,442

 
—

 
—

 
—

 
—

 
46,442

Total equity
876,764

 
249,764

 
89,189

 
—

 
(210,354
)
 
1,005,363

Total liabilities and equity
$
2,392,003

 
$
937,341

 
$
313,222

 
$
(1,177
)
 
$
2,334

 
$
3,643,723

See the accompanying notes to the unaudited pro forma combined financial statements.

2




UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2018
(In thousands, except per share data)
 
The Andersons, Inc.
(see Note 1)
 
Lansing Trade Group, LLC (see Note 1)
 
Lux JV Treasury Holding Company, S.à r.l. (see Note 1)
 
Pro Forma Transaction Adjustments (see Note 4)
 
Pro Forma Combined
Sales and merchandising revenues
$
3,045,382

 
$
4,769,450

 
$
559,503

 
$
(280,869
)
4(a)
$
8,093,466

Cost of sales and merchandising revenues
2,743,377

 
4,588,499

 
519,183

 
(277,673
)
4(b)
7,573,386

Income before operating expenses, other income, and income taxes
302,005

 
180,951

 
40,320

 
(3,196
)
 
520,080

 
 
 
 
 
 
 
 
 
 
Operating, administrative and general expenses
257,872

 
132,942

 
30,326

 
4,033

4(c)
425,173

Asset impairment
6,272

 
—

 
—

 
—

 
6,272

Interest expense
27,848

 
12,021

 
5,912

 
7,259

4(d)
53,040

Other income:
 
 
 
 
 
 
 
 

Equity in earnings of affiliates, net
27,141

 
(2,516
)
 
—

 
(14,176
)
4(e)
10,449

Other income, net
16,002

 
15

 
—

 
—

 
16,017

Income (loss) before income taxes
53,156

 
33,487

 
4,082

 
(28,664
)
 
62,061

Income tax provision (benefit)
11,931

 
2,272

 
320

 
(97
)
4(f)
14,426

Net income (loss)
41,225

 
31,215

 
3,762

 
(28,567
)
 
47,635

Net loss attributable to the noncontrolling interests
(259
)
 
—

 
—

 
—

 
(259
)
Net income (loss) attributable to common shareholders
$
41,484

 
$
31,215

 
$
3,762

 
$
(28,567
)
 
$
47,894

Per common share:
 
 
 
 
 
 
 
 
 
Basic earnings attributable to common shareholders
$
1.47

 
 
 
 
 
 
 
$
1.48

Diluted earnings attributable to common shareholders
$
1.46

 
 
 
 
 
 
 
$
1.47

Dividends declared
$
0.6650

 
 
 
 
 
 
 
$
0.6650

 
 
 
 
 
 
 
 
 
 
Average shares outstanding during the period - Basic
28,254

 
 
 
 
 
 
 
32,395

Average shares outstanding during the period - Diluted
28,487

 
 
 
 
 
 
 
32,649

See the accompanying notes to the unaudited pro forma combined financial statements.



3


NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

1. Basis of Presentation

The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Securities Exchange Commission Regulation S-X. The historical consolidated financial information has been adjusted in the accompanying pro forma financial information to give effect to unaudited pro forma events that are (1) directly attributable to the Transaction, (2) factually supportable and (3) with respect to the unaudited pro forma combined statements of income, are expected to have a continuing impact on the results of operations of the combined company. The pro forma financial information does not reflect any cost savings, operating synergies or revenue enhancements.

The Transaction is treated as a business combination for accounting purposes, with the Company being treated as the acquirer. The pro forma financial information was prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards ("FASB") Codification Topic 805, Business Combinations ("ASC 805"). ASC 805 requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. Fair value estimates used in preparing the pro forma financial information included herein are preliminary and have been presented solely for purposes of providing pro forma statements and will be revised as additional information becomes available and additional analysis is performed. Differences between preliminary estimates in the pro forma statements and the final acquisition accounting could have a material impact on the accompanying pro forma financial information and the combined company's future results of operations and financial position.

The Company was able to complete the Transaction using only borrowings on its existing line of credit. Subsequent to the completion of the Transaction, the Company entered into a new credit facility that considered the Transaction but was much broader in nature. As such, only the actual borrowings that were required to complete the transaction are considered in these unaudited pro forma combined financial statements. The Company used an interest rate assumption of 4.29%, which was the actual interest rate under the new credit facility at the date the facility was completed. A 0.125% change in rate would not materially impact the pro forma financial information.

Acquisition-related transaction costs are not included as a component of consideration transferred but are expensed as incurred. Estimated acquisition-related transaction costs associated with the acquisition total $11.1 million, of which $6.5 million and $3.6 million have been expensed in the Company's and Lansing's results for the year ended December 31, 2018, respectively. The remaining $1.0 million of other anticipated acquisition-related costs was adjusted as a reduction of cash with offsetting decreases in accrued expenses and other current liabilities and retained earnings. The Company also calculated a $7.3 million pretax loss on its preexisting investments in Lansing and Lux JV, including an $11.7 million loss for the cumulative translation adjustment. These items are not presented in the pro forma statements of income because they will not have a continuing impact on the consolidated results of the Company.

Payments made to date have excluded certain holdback amounts covering specific and general indemnities, as well as working capital items. The purchase price holdback presented in the pro forma statements reflects the estimated potential remaining cash to be paid subject to finalization and resolution of those items covered by the holdback.

The profit remaining in inventory as a result of intercompany transactions was not material as of the dates of these unaudited pro forma combined financial statements.

Reclassification Adjustments

Certain reclassification adjustments have been made to the Lansing and Lux JV historical financial statements presented within the pro forma financial information to conform to the presentation of the Company's historical balances.

The following reclassification adjustments were made to the unaudited pro forma combined balance sheet:

•
On their historical balance sheets, Lansing and Lux JV included certain deferred financing charges for their revolving lines of credit in Other assets, net. Deferred financing charges have been reclassified into Long-term debt, less current maturities on the pro forma combined balance sheet to conform to the Company's accounting policies.

4



Other than the reclassification of deferred financing charges, noted above, and the impact of adopting FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), there were no further adjustments presented herein to conform acquired entities' historical accounting policies to those of the Company. Additional adjustments were considered immaterial for the periods presented.

2. Purchase Price and Preliminary Purchase Price Allocation

The purchase price for Lansing is as follows:
Cash consideration paid
$
169,218

Purchase price holdback
29,730

Fair value of The Andersons, Inc. issued unregistered shares
123,146

Total purchase price consideration
$
322,094


The preliminary purchase price allocation at December 31, 2018, is as follows:
Cash and cash equivalents
$
30,142

Accounts receivable
342,679

Inventories
454,838

Commodity derivative assets - current
86,742

Other current assets
23,929

Commodity derivative assets - noncurrent
13,372

Goodwill
119,486

Other intangible assets
138,700

Other noncurrent assets
5,291

Equity method investments
26,683

Property, plant and equipment
166,652

 
1,408,514

 
 
Short-term debt
217,378

Trade and other payables and accrued expenses and other current liabilities
331,720

Commodity derivative liabilities - current
99,377

Customer prepayments and deferred revenue
32,432

Accrued expense and other current liabilities
45,551

Other long-term liabilities, including commodity derivative liabilities - noncurrent
4,231

Long-term debt, including current maturities
159,752

Deferred income taxes
40,896

 
931,337

Fair value of acquired assets and assumed liabilities
477,177

 
 
Removal of preexisting ownership interest, including associated cumulative translation adjustment
(162,367
)
Pre-tax loss on derecognition of preexisting ownership interest
7,284

 
 
Total purchase price
$
322,094




5


3. Pro forma balance sheet transaction adjustments

(a) Cash and cash equivalents

Total adjustments are comprised of the following:
Proceeds from line of credit borrowings
$
169,218

Cash used for purchase price
(169,218
)
To record estimated acquisition-related transaction costs
(1,000
)
 
$
(1,000
)

(b) Accounts receivable

Total adjustment is comprised of the following:
To eliminate intercompany accounts receivable
$
(3,916
)

(c) Inventory and Commodity derivative assets - current

Total adjustment is comprised of the following:
To adjust carrying value of inventory to conform to the Company's fair value methodology
$
(1,224
)
To adjust carrying value of commodity derivative assets to conform to the Company's fair value methodology
4,420

 
$
3,196


(d) Goodwill

Goodwill is preliminarily calculated as the excess of the purchase price over the net assets acquired and a portion is expected to be deductible for tax purposes. Goodwill relates to the addition of an assembled workforce and complementary assets with greater scale that significantly expands the Company's reach in the agricultural market place.

Total adjustments are comprised of the following:
To eliminate acquirees' legacy goodwill
$
(29,144
)
To record goodwill as a result of the Transaction
119,486

 
$
90,342


(e) Other intangible assets, net

Represents adjustments to record the preliminary estimated fair value of intangible assets of $138.7 million, which is an increase of $113.4 million over acquirees' book value of intangible assets.The fair value of intangible assets were determined using a combination of income and market valuation approaches. The weighted-average life is based on the Company's historical experience and nature of underlying agreements. The fair value and estimated useful lives of the identifiable intangible assets is subject to change upon completion of the final valuation, some of which may be material. The following is a summary of the identifiable intangible assets acquired as part of the Transaction:
 
 
Estimated useful life
Customer relationships
$
106,900

10 years
Noncompete agreements
30,900

3 years
Off-market interest rate swaps
900

1 to 3 years
 
$
138,700

8 years *
*weighted average number of years


6


(f) Equity method investments

Total adjustments are comprised of the following:
To eliminate The Andersons, Inc. investment in Lansing
$
(101,714
)
To eliminate The Andersons, Inc. and Lansing investments in Thompsons
(97,974
)
 
$
(199,688
)

(g) Property, plant and equipment, net

Preliminary fair value adjustments related to Property, plant and equipment from its recorded book value to its estimated fair value are not deemed material as of the dates of these unaudited pro forma combined financial statements.

(h) Trade and other payable

Total adjustment is comprised of the following:
To eliminate intercompany accounts payable
$
(3,916
)

(i) Accrued expenses and other current liabilities

Total adjustment is comprised of the following:
To record the remaining purchase price holdback
$
29,730

To record the estimated reduction in income tax liability related to pro forma adjustments
(2,070
)
 
$
27,660


(j) Other long-term liabilities

Total adjustment is comprised of the following:
To record off-market lease intangible liabilities
$
1,100


(k) Long-term debt

Total adjustments are comprised of the following:
Proceeds from line of credit borrowings
$
169,218


(l) Deferred income taxes

The deferred tax impact of the Transaction adjustments was recorded using a blended statutory tax rate of approximately 25%.
Total adjustments are comprised of the following:
To record the estimated incremental deferred income tax liability related to pro forma adjustments
$
18,626



7


(m) Shareholders equity

Total adjustments are comprised of the following:
To eliminate acquirees' historical share capital
(15
)
To eliminate acquirees' historical additional paid-in-capital
(68,832
)
To eliminate acquirees' historical members' equity
(266,214
)
To eliminate acquirees' historical accumulated other comprehensive loss
16,450

To eliminate acquirees' historical retained earnings
(20,342
)
To eliminate The Anderson Inc.'s cumulative translation adjustment related to its preexisting investments
11,666

To record the fair value of issued unregistered shares
123,146

To record acquisition-related loss related to its preexisting investments
(5,463
)
To record estimated acquisition-related transaction costs
(750
)
 
$
(210,354
)
Acquisition-related loss related to its preexisting investments and transaction costs were not reflected in the historical statement of income.

4. Pro forma statement of income transaction adjustments

(a) Sales and merchandising revenues

Total adjustments are comprised of the following:
To eliminate intercompany sales
$
(126,569
)
Impact of adopting ASC 606, effective January 1, 2018
(154,300
)
 
$
(280,869
)

(b) Cost of sales and merchandising revenues

Total adjustments are comprised of the following:
To eliminate intercompany cost of sales
$
(126,569
)
Adjustment for inventory and commodity derivatives revaluaion
3,196

Impact of adopting ASC 606, effective January 1, 2018
(154,300
)
 
$
(277,673
)

(c) Operating, administrative and general expenses

Total adjustments are comprised of the following:
Incremental depreciation and amortization expense due to asset revaluations
$
14,133

Elimination of acquisition-related transaction costs, detailed in Note 1
(10,100
)
 
$
4,033


(d) Interest expense

Total adjustments are comprised of the following:
Interest expense associated with line of credit borrowings
$
7,259


(e) Equity in earnings of affiliates, net

Total adjustments are comprised of the following:
To eliminate existing equity earnings
$
(14,176
)


8


(f) Income taxes

A statutory tax rate of 25% was used to record the tax effects of the statement of income Transaction adjustments.

Total adjustments are comprised of the following:
Pro forma adjustments
$
(28,664
)
Acquired entities' income previously treated as partnership income
28,275

Net decrease to pro forma combined Income before income taxes
(389
)
The Andersons, Inc. statutory tax rate
25
%
Decrease to pro forma combined income tax provision
$
(97
)


9