-----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, PnptvL3nZG5o7zRr+5tLPjOSt/bakoxW0YkOvgzo9OBAKhpjMPyicR7/xOJDBBwQ PwAoRYDXfnP/6TYLi31rnA== 0000821026-96-000021.txt : 19960928 0000821026-96-000021.hdr.sgml : 19960928 ACCESSION NUMBER: 0000821026-96-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDERSONS INC CENTRAL INDEX KEY: 0000821026 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS SERVICE CENTERS & OFFICES [5051] 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: 96618023 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 June 30, 1996 [ ] 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 8,430,286 Common Shares outstanding, no par value, at August 1, 1996. THE ANDERSONS, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3 Consolidated Statements of Income - Three months and six months ended June 30, 1996 and 1995 6 Consolidated Statements of Cash Flows - Six months ended June 30, 1996 and 1995 7 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE ANDERSONS, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS) June 30 December 31 1996 1995 CURRENT ASSETS Cash and cash equivalents $ 4,177 $ 5,052 Accounts Receivable: Trade accounts - net 81,413 68,362 Margin deposits 7,196 20,753 88,609 89,115 Inventories: Grain 96,458 186,989 Agricultural fertilizer and supplies 20,099 19,602 Merchandise 33,345 29,909 Lawn and corn cob products 13,550 21,729 Other 10,524 11,701 173,976 269,930 Deferred income taxes 5,876 - Prepaid expenses 2,268 4,314 TOTAL CURRENT ASSETS 274,906 368,411 OTHER ASSETS Investments in and advances to affiliates 804 670 Notes receivable (net) and other assets 4,958 4,575 TOTAL OTHER ASSETS 5,762 5,245 PROPERTY, PLANT AND EQUIPMENT Land 11,198 11,179 Land improvements and leasehold improvements 24,008 23,926 Buildings and storage facilities 78,676 78,210 Machinery and equipment 99,188 97,970 Construction in progress 1,763 972 214,833 212,257 Less allowances for depreciation and amortization 133,603 130,395 NET PROPERTY, PLANT AND EQUIPMENT 81,230 81,862 $ 361,898 $ 455,518 NOTE: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. See notes to consolidated financial statements. THE ANDERSONS, INC. CONSOLIDATED BALANCE SHEETS - (continued) (UNAUDITED) (IN THOUSANDS) June 30 December 31 1996 1995 CURRENT LIABILITIES Notes payable $ 110,892 $ 120,267 Accounts payable for grain 21,629 94,084 Other accounts payable 53,713 72,777 Accrued expenses 18,527 14,357 Current maturities of long-term debt 7,635 8,029 TOTAL CURRENT LIABILITIES 212,396 309,514 PENSION AND POSTRETIREMENT BENEFITS 3,025 2,929 LONG-TERM DEBT Note payable, 7.84%, payable quarterly ($75 thousand through 7/97, $398 thousand thereafter), due 2004 14,400 14,550 Note payable, variable rate (6.4648% at 6/30/96) payable $336 thousand quarterly beginning 10/97, due 2004 9,418 9,418 Notes payable relating to revolving credit facility, variable rate (6.1% at 6/30/96), due 1997 20,000 20,000 Other notes payable 1,110 1,101 Industrial development revenue bonds: 6.5%, sinking fund paid annually, due 1999 3,700 3,700 Variable rate (5.5275% at 6/30/96), due in annual installments of $881 thousand through 2004 7,233 7,233 Variable rate (3.85% at 6/30/96), due 2025 3,100 3,100 Debenture bonds: 9.2% to 10%, due 1996 2,949 5,868 6.5% to 8%, due 1997 to 1999 5,804 5,815 10% due 1997 and 1998 2,107 2,117 10% due 2000 and 2001 2,699 2,704 7.5% to 8.7%, due 2002 to 2004 5,684 5,689 Other bonds, 4% to 9.6% 505 873 78,709 82,168 Less current maturities of long-term debt 7,635 8,029 TOTAL LONG-TERM DEBT 71,074 74,139 THE ANDERSONS CONSOLIDATED BALANCE SHEETS - (continued) (UNAUDITED) (IN THOUSANDS) June 30 December 31 1996 1995 DEFERRED INCOME TAXES 4,395 675 MINORITY INTEREST 878 1,001 SHAREHOLDERS' EQUITY: Common stock (25,000,000 shares authorized, stated value $.01 per share, 8,430,286 outstanding) 84 84 Additional paid-in capital 66,659 66,448 Retained earnings 3,349 699 Unrealized gain on available-for-sale securities (net of tax) 38 29 TOTAL SHAREHOLDERS' EQUITY 70,130 67,260 $ 361,898 $ 455,518 NOTE: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. Shareholders' equity at December 31, 1995 reflects the effects of the merger consummated on January 2, 1996 of The Andersons, a limited partnership, into The Andersons Management Corp., the corporate general partner. See notes to consolidated financial statements. THE ANDERSONS, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA) Three Months Six Months Ended June 30 Ended June 30 1996 1995 1996 1995 Grain sales and revenues $ 201,696 $ 132,413 $ 355,059 $ 237,187 Fertilizer, retail and other sales 142,729 129,137 245,481 231,063 Other income 804 1,087 1,402 1,714 345,229 262,637 601,942 469,964 Cost of grain sales and revenues 195,468 127,342 335,531 221,115 Cost of fertilizer, retail and other sales 107,782 97,159 184,699 174,369 303,250 224,501 520,230 395,484 GROSS PROFIT 41,979 38,136 81,712 74,480 Operating, administrative and general expenses 32,898 32,003 64,124 63,048 Provision for bad debts 2,360 301 2,723 466 Interest expense 4,464 3,175 9,162 6,317 39,722 35,479 76,009 69,831 INCOME BEFORE INCOME TAXES 2,257 2,657 5,703 4,649 Provision for income taxes (Note B) 877 61 3,054 114 NET INCOME $ 1,380 2,596 $ 2,649 4,535 Pro forma income taxes (Note B) 981 1,722 Pro forma net income $ 1,615 $ 2,813 Earnings per share (Note B) $ 0.16 $ 0.19 $ 0.31 $ 0.33 Average shares outstanding 8,430 8,430 8,430 8,430 See notes to consolidated financial statements. THE ANDERSONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) Six Months Ended June 30 1996 1995 OPERATING ACTIVITIES Net income $ 2,649 $ 4,535 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 4,951 4,492 Minority interest in net loss of subsidiaries (65) (36) Payments to minority interests (74) (143) Provision for losses on receivables, investments and other assets 2,443 387 Gain on sale of property, plant and equipment (196) (341) Deferred income taxes (2,221) - Changes in operating assets and liabilities: Accounts receivable (1,941) 1,458 Inventories 95,955 54,242 Prepaid expenses and other assets 1,855 385 Accounts payable for grain (72,455) (62,451) Other accounts payable and accrued expenses (14,898) (20,020) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 16,003 (17,492) INVESTING ACTIVITIES Purchases of property, plant, equipment (4,533) (5,877) Proceeds from sale of property, plant and equipment 277 489 Business acquisition - net of cash - (1,426) Purchases of investments - (74) Payments received from affiliates - 100 NET CASH USED IN INVESTING ACTIVITIES (4,256) (6,788) FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings (9,375) 23,519 Proceeds from issuance of long-term debt 20,017 20,497 Payments of long-term debt (23,200) (20,893) Payments to partners and other deductions from capital accounts (64) (4,429) Capital invested by partners and shareholders - 1,350 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (12,622) 20,044 DECREASE IN CASH AND CASH EQUIVALENTS (875) (4,236) Cash and cash equivalents at beginning of year 5,052 6,923 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,177 $ 2,687 See notes to consolidated financial statements. THE ANDERSONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED) (IN THOUSANDS) Six Months Ended June 30 1996 1995 Noncash investing and financing activities: Exchange of fixed assets for investment in LLC $ 513 Exchange of employee bonds for common shares $ 276 Acquisition of business: Working capital - other than cash $ 90 Property, plant and equipment (net) 4,095 Short and long-term debt assumed (2,070) Other long-term liabilities assumed (689) Net cash expended $ 1,426 See notes to consolidated financial statements. THE ANDERSONS, INC. NOTES TO 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 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, 1995. 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. Prior year financial statements were restated to reflect the effects of the merger. The pro forma provision for income taxes at a corporate level and pro forma earnings per common share for 1995 are presented in the income statement for comparison. 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 and included as a component of the provision for income taxes. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of the three months ended June 30, 1996 with the three months ended June 30, 1995: Sales and revenues for the three months ended June 30, 1996 totaled $345.2 million, an increase of $82.6 million or 31% from the 1995 second quarter sales and revenue of $262.6 million. The Agriculture Group contributed $73 million of the $82.6 million increase, with $69.3 million in increases in grain sales and revenue. While grain shipment volume remained constant, a significant increase in the average bushel price of approximately 55%, reflecting continued high market prices, caused the higher sales and revenues. Commodity market prices maintained their record levels in the second quarter on the expectation of low carryover stocks, heavy export demand and concerns about the current crop due to weather conditions. Since the end of the second quarter, commodity prices have fallen somewhat. Wholesale fertilizer contributed additional sales and revenues of $4.4 million, or 14%, on volume and price increases, while the retail agricultural business experienced decreases in sales of $0.7 million. The Retail Group experienced a 7.7% increase in sales, with mixed results. The Toledo area and Lima stores posted increases while the Columbus stores continue to feel the impact of new competition in that market. The three Toledo area stores have benefited from the closure of some competitors and an extensive upgrade of one of the three Toledo area stores resulting in 16.3% higher sales in the second quarter of 1996 as compared to the second quarter of 1995. New competition is expected in Toledo market in late 1996. The Business Development Group contributed increased sales and revenue of $6.7 million with all major businesses showing increases. The lawn products business had the majority of the Group's increase with a 27% or $4.3 million increase in sales on higher volume and increased prices. Gross profit for the three months ended June 30, 1996 totaled $42 million, an increase of $3.8 million or 10% from the 1995 second quarter gross profit of $38.1 million. The Agriculture Group contributed $1.5 million of the increase. The increase in grain sales and revenues, attributable to the unusually high prices, did not result in income growth since the cost of sales rose as well. Gross profit on sales in the Retail Group was up $0.8 million or 5.5%. All major businesses in the Business Development Group showed favorable results with the lawn business posting a 29% or $1.1 million increase, the railcar business gross profit up 36% or $0.4 million and the industrial products business up 8.5% or $0.2 million. In total, the Business Development Group had a gross profit increase of $1.8 million or 19%. Operating, administrative and general expenses for the three months ended June 30, 1996 totaled $32.9 million, a slight increase from the 1995 second quarter expense of $32 million. The provision for bad debts increased $2.1 million from the $0.3 million for the second quarter of 1995 to $2.4 million for the second quarter of 1996. This increase resulted primarily from the increased expenses of the Company's grain purchasing program including the provision for losses on grain producer receivables and nondelivery on their underlying contracts. Interest expense for the three months ended June 30, 1996 totaled $4.5 million, an increase of $1.3 million or 40% from the 1995 second quarter expense of $3.2 million. Increased inventory values in the grain business, because of the high market prices, required additional short-term borrowings for the quarter. Short-term borrowing at the end of the second quarter of 1996 was $111 million as compared to short-term borrowings of $75 million at June 30, 1995. Income before income taxes for the three months ended June 30, 1996 totaled $2.3 million, a decrease of $0.4 million or 15% from the 1995 second quarter income of $2.7 million. Net income decreased from $1.6 million in the three months ended June 30, 1995 to $1.4 million for the same period in 1996. Comparison of the six months ended June 30, 1996 with the six months ended June 30, 1995: Sales and revenues for the six months ended June 30, 1996 totaled $601.9 million, an increase of $132 million or 28% from the 1995 first half sales and revenue of $469.9 million. The Agriculture Group contributed $119 million of the $132 million increase, with $117.9 million increase in grain sales and revenues. While grain shipment volume increased only slightly from the first half of 1995, a significant increase in the average bushel price of approximately 49%, reflecting continued high market prices, caused the higher sales and revenue. Wholesale fertilizer contributed additional sales and revenues of $2.5 million, or 4%, on volume and price increases, while the retail agricultural business experienced decreases in sales of $1.4 million. The Retail Group experienced a 4.2% increase in sales, with mixed results. The Toledo area and Lima stores posted increases while the Columbus stores continue to feel the impact of new competition in that market. The three Toledo area stores have benefited from the closure of some competitors and an extensive upgrade to one of the three Toledo area stores resulting in 10.6% higher sales in the first half of 1996 when compared to the same period in 1995. New competition is expected in the Toledo market in late 1996. The Business Development Group contributed increased sales and revenue of $10.2 million with all major businesses showing increases. The lawn products business had the majority of the Group's increase with a 19% or $6.8 million increase in sales on higher volume and increased prices. Gross profit for the six months ended June 30, 1996 totaled $81.7 million, an increase of $7.2 million or 9.7% from the 1995 first half gross profit of $74.5 million. The Agriculture Group contributed $4.1 million of the increase. The increase in grain sales and revenues, attributable to the unusually high prices, did not result in income growth since the cost of sales rose as well. Gross profit on sales in the Retail Group was up $0.5 million or 2.1%. All major businesses in the Business Development Group showed favorable results with the lawn business posting a 25% or $2.4 million increase, the railcar business gross profit up 18% or $0.4 million and the industrial products business up slightly. In total, the Business Development Group had a gross profit increase of $3 million or 15%. Operating, administrative and general expenses for the six months ended June 30, 1996 totaled $64.1 million, a slight increase from the 1995 expense of $63 million. The provision for bad debts increase $2.2 million from the $0.5 million in 1995 to $2.7 million for the six months ended June 30, 1996. This increase resulted primarily from the increased expenses of the Company's grain purchasing program including the provision for losses on grain producer receivables and nondelivery on their underlying contracts. Interest expense for the six months ended June 30, 1996 totaled $9.2 million, an increase of $2.9 million or 45% from the 1995 expense for the same period of $6.3 million. Increased inventory values in the grain business, because of the high market prices, required additional short-term borrowings for the quarter. Income before income taxes for the six months ended June 30, 1996 totaled $5.7 million, an increase of $1.1 million or 23% from the 1995 first half income of $4.6 million. Net income decreased from $2.8 million in the six months ended June 30, 1995 to $2.6 million for the same period in 1996. Income tax expense for the first quarter of 1996 included a charge of $0.8 million to establish deferred taxes on the conversion from a partnership to a corporation. Liquidity and Capital Resources The Company's operations provided cash of $16 million in the first half of 1996 as compared to using $17 million in cash in the first half of 1995. The significant change in cash provided by operations is due to the liquidation of a portion of the Company's grain inventories at a faster pace than that of prior years. The Company has significant short-term lines of credit available to finance working capital, primarily inventories and accounts receivable. Lines of credit available at August 1, 1996 were $385 million, of which $111 million was used at June 30, 1996. Typically, the Company's highest borrowing occurs in the spring due to seasonal inventory requirements in several of the Company's businesses, credit sales in the lawn products and agricultural fertilizer and supply business and a customary reduction in grain payables due to customer cash needs and market strategies. The final payments to former partners electing not to participate in the merger were made in the first quarter of 1996. No cash dividends have been declared or are anticipated at this time. The Company will be required to pay income taxes at the corporate level beginning with 1996 income from operations. As the majority of the income was previously earned in a partnership, corporate taxes prior to 1996 were minimal and as such, the Company must only make tax deposits at that level for 1996. Total capital expenditures for 1996 are expected to approximate $13 million, including $2.5 million for renovations to the Maumee and Toledo General Stores and $1 million for plant upgrades and improvements. Funding for these expenditures is expected to come from cash generated from operations and additional long-term debt. Capital expenditures can be, and in the past have been, 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 and the Maumee and Toledo, Ohio elevators serve as delivery points for Chicago Board of Trade contracts. In the opinion of management, the Company's liquidity is adequate to meet short-term and long-term needs. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company, like others in the agricultural industry, utilizes different types of contracts with producers (including contracts commonly referred to as "Hedged To-Arrive" or "HTA" contracts) to purchase grain. Some producers have recently 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. The Company currently is engaged in litigation 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 Company believes its grain contracts are enforceable obligations and intends to enforce them. Although no assurance can be given that the current litigation and proceedings will not result in liability or loss, the Company believes that it has valid claims and defenses in the lawsuits and proceedings in which it is involved. Based upon the advice of counsel, management also believes that it has valid defenses to the purported "class action" nature of the Harter lawsuit and intends to defend vigorously against the certification of the class. The Commodities Futures Trading Commission, has served subpoenas duces tecum for the Company to produce certain records and testify 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 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 proceedings. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of the shareholders of The Andersons, Inc. was held on May 16, 1996 to elect nine directors and to ratify the appointment of the Company's independent public accountants. Results of the voting follows: Director For Against Withheld Not Voted Thomas H. Anderson 7,718,911 0 15,757 695,618 Richard P. Anderson 7,728,358 0 6,310 695,618 Donald E. Anderson 7,723,260 0 11,408 695,618 Michael J. Anderson 7,728,358 0 6,310 695,618 Richard M. Anderson 7,728,358 0 6,310 695,618 John F. Barrett 7,728,358 0 6,310 695,618 Paul M. Kraus 7,728,358 0 6,310 695,618 Donald M. Mennel 7,718,911 0 15,757 695,618 David L. Nichols 7,728,358 0 6,631 695,618 Independent Accountant 7,685,778 340 48,550 695,618 Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. There were no reports on Form 8-K for the three months ended June 30, 1996. 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: August 13, 1996 By /s/Richard P. Anderson Richard P. Anderson President and Chief Executive Officer Date: August 13, 1996 By /s/Richard R. George Richard R. George Corporate Controller (Principal Accounting Officer) EX-27 2
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 4177 0 94225 5615 173976 274906 214833 133603 361898 212396 33781 0 0 84 70046 361898 600540 601942 520230 520230 64124 2723 9162 5703 3054 2649 0 0 0 2649 0.31 0.31
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