-----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, Iurh/v7VRbWFAcaXe/kTv+fvm+XqnDeky10EbQ+eJ7bgBSwaa4f2B0qjxZsd4bpU cxvr281ShS6lkpVH9ynM1w== /in/edgar/work/20000811/0000950152-00-005902/0000950152-00-005902.txt : 20000921 0000950152-00-005902.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950152-00-005902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDERSONS INC CENTRAL INDEX KEY: 0000821026 STANDARD INDUSTRIAL CLASSIFICATION: [5150 ] IRS NUMBER: 341562374 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20557 FILM NUMBER: 693438 BUSINESS ADDRESS: STREET 1: 480 W DUSSEL DR CITY: MAUMEE STATE: OH ZIP: 43537 BUSINESS PHONE: 4198935050 MAIL ADDRESS: STREET 1: 480 W DUSSEL DR CITY: MAUMEE STATE: OH ZIP: 43537 FORMER COMPANY: FORMER CONFORMED NAME: ANDERSONS MANAGEMENT CORP DATE OF NAME CHANGE: 19931119 10-Q 1 e10-q.txt THE ANDERSONS, INC. 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, 2000 [ ] 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 7,507,597 Common shares outstanding, no par value, at August 1, 2000. 2 THE ANDERSONS, INC. INDEX Page No. PART I. FINANCIAL INFORMATION - ------------------------------- Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Operations - Three months and six months ended June 30, 2000 and 1999 5 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2000 and 1999 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ---------------------------- THE ANDERSONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30 December 31 2000 1999 -------------------------------- Current assets Cash and cash equivalents $ 5,332 $ 25,614 Accounts and notes receivable: Trade accounts (net) 60,236 51,812 Margin deposits 106 1,339 -------------------------------- 60,342 53,151 Inventories: Grain 45,017 83,796 Agricultural fertilizer and supplies 17,737 17,766 -------------------------------- Agriculture 62,754 101,562 Retail 32,212 29,540 Processing 35,243 28,386 Manufacturing 23,178 17,365 Other 594 1,470 -------------------------------- 153,981 178,323 Deferred income taxes 3,752 5,641 Prepaid expenses 3,295 5,796 -------------------------------- Total current assets 226,702 268,525 Other assets: Notes receivable (net) and other assets 10,123 4,640 Investments in and advances to affiliates 988 954 -------------------------------- 11,111 5,594 Property, plant and equipment: Land 11,885 12,237 Land improvements and leasehold improvements 26,774 27,266 Buildings and storage facilities 91,305 91,374 Machinery and equipment 124,188 118,872 Software 3,655 3,555 Construction in progress 7,960 8,895 -------------------------------- 265,767 262,199 Less allowances for depreciation and amortization 159,948 159,542 -------------------------------- 105,819 102,657 -------------------------------- $343,632 $376,776 ================================
See notes to condensed consolidated financial statements. 3 4 THE ANDERSONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS - (continued) (UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30 December 31 2000 1999 ------------------------------ Current liabilities Notes payable $ 52,200 $ 45,000 Accounts payable for grain 27,489 68,883 Other accounts payable 66,006 65,079 Accrued expenses 16,027 17,465 Current maturities of long-term debt 8,009 4,159 ------------------------------ Total current liabilities 169,731 200,586 Deferred income 1,205 4,026 Pension and postretirement benefits 3,590 3,255 Long-term debt 71,836 74,127 Deferred income taxes 7,415 8,742 Minority interest 231 1,235 Shareholders' equity: Common stock (25,000 shares authorized, stated value $.01 per share, 7,503 and 7,707 outstanding at 6/30/00 and 12/31/99, respectively) 84 84 Additional paid-in capital 66,488 67,227 Treasury stock (927 and 723 shares at 6/30/00 and 12/31/99, respectively; at cost) (8,597) (7,158) Accumulated other comprehensive income (144) (144) Unearned compensation (194) (158) Retained earnings 31,987 24,954 ------------------------------ 89,624 84,805 ------------------------------ $343,632 $376,776 ==============================
See notes to condensed consolidated financial statements. 4 5 THE ANDERSONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Six Months Ended June 30 Ended June 30 2000 1999 2000 1999 --------------------------------------------------------------- Sales and merchandising revenues $ 258,101 $ 259,247 $ 455,049 $ 459,212 Other income 1,112 1,078 3,029 1,868 --------------------------------------------------------------- 259,213 260,325 458,078 461,080 Cost of sales and merchandising revenues 207,108 208,544 361,928 370,433 --------------------------------------------------------------- Gross Profit 52,105 51,781 96,150 90,647 Operating, administrative and general expenses 39,404 38,602 78,935 75,336 Interest expense 2,594 2,052 5,270 4,118 --------------------------------------------------------------- 41,998 40,654 84,205 79,454 --------------------------------------------------------------- Income before income taxes 10,107 11,127 11,945 11,193 Provision for income taxes 3,389 3,668 4,005 3,690 --------------------------------------------------------------- Net income $ 6,718 $ 7,459 $ 7,940 $ 7,503 =============================================================== Per common share: Basic earnings $ 0.89 $ 0.92 $ 1.05 $ 0.92 =============================================================== Diluted earnings $ 0.89 $ 0.90 $ 1.04 $ 0.91 =============================================================== Dividends paid $ 0.06 $ 0.05 $ 0.12 $ 0.10 =============================================================== Weighted average common shares Outstanding - basic 7,524 8,075 7,597 8,116 ================================================================= Weighted average common shares Outstanding - diluted 7,533 8,243 7,605 8,273 =================================================================
See notes to condensed consolidated financial statements. 5 6 THE ANDERSONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(IN THOUSANDS)
Six months ended June 30 2000 1999 ---------------------------- OPERATING ACTIVITIES Net income $ 7,940 $ 7,503 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,264 5,515 Provision for losses on accounts and notes receivable 65 532 Deferred income tax 563 624 Gain on sale of business and property, plant & equipment (949) (2) Other 36 6 ---------------------------- Cash provided by operations before changes in operating assets and liabilities 13,919 14,178 Changes in operating assets and liabilities: Accounts receivable (7,407) 3,168 Inventories 38,592 41,767 Prepaid expenses and other assets 1,321 2,859 Accounts payable for grain (42,494) (60,512) Other accounts payable and accrued expenses (1,340) (11,999) ---------------------------- Net cash provided by (used in) operating activities 2,591 (10,539) INVESTING ACTIVITIES Purchases of property, plant and equipment (11,061) (6,907) Purchase of working capital and intangibles of business (15,861) - Proceeds from sale of business & property, plant and equipment 2,237 184 ---------------------------- Net cash used in investing activities (24,685) (6,723) FINANCING ACTIVITIES Net increase in short-term borrowings 7,200 27,300 Proceeds from issuance of long-term debt 109,791 56,920 Payments of long-term debt (111,926) (61,006) Purchase of common stock for the treasury (2,652) (2,115) Proceeds from sale of treasury stock to employees 321 380 Dividends paid (922) (818) ---------------------------- Net cash provided by financing activities 1,812 20,661 ---------------------------- Increase (decrease) in cash and cash equivalents (20,282) 3,399 Cash and cash equivalents at beginning of period 25,614 3,253 ---------------------------- Cash and cash equivalents at end of period $ 5,332 $ 6,652 ============================
See notes to condensed consolidated financial statements. 6 7 THE ANDERSONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note A - In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods indicated, have been made. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 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, 1999. Note B - Total comprehensive income was $7.9 million for the six months ended June 30, 2000 and $7.5 million for the six months ended June 30, 1999. Total comprehensive income for the quarters ended June 30, 2000 and 1999 was $6.7 million and $7.5 million, respectively. Note C - The June 30, 2000 balance sheet includes preliminary inventory, intangibles and related liabilities purchased from The Scotts Company in connection with the purchase of the Pro Turf product line. The purchase was effective May 31, 2000, and the accounting should be finalized in the third quarter. Note D - The Retail segment was restated for the addition of a retail store selling lawn and garden equipment (the "Mower Center"). The results of this operation were previously reported in Other. Note E RESULTS OF OPERATIONS - SEGMENT DISCLOSURES (in thousands)
SECOND QUARTER, 2000 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL Revenues from external customers $164,997 $ 9,079 $30,390 $53,635 $ -- $258,101 Inter-segment sales 1,491 262 314 -- -- 2,067 Other income 308 17 100 211 476 1,112 Interest expense (credit) (a) 1,202 416 764 399 (187) 2,594 Operating income (loss) 6,210 358 80 3,864 (405) 10,107 Identifiable assets at June 30, 2000 144,454 38,493 77,911 63,144 19,630 343,632
7 8
SECOND QUARTER, 1999 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL Revenues from external customers $164,523 $ 8,232 $27,646 $55,889 $ 2,957 $259,247 Inter-segment sales 835 240 425 -- -- 1,500 Other income 319 37 135 124 463 1,078 Interest expense (credit) (a) 274 477 389 (124) 2,052 Operating income (loss) 5,961 1,122 1,012 3,917 (885) 11,127 Identifiable assets at June 30, 1999 149,127 31,828 50,185 64,793 21,392 317,325 FIRST HALF, 2000 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL Revenues from external customers $283,611 $15,552 $64,572 $88,825 $ 2,489 $455,049 Inter-segment sales 2,683 502 973 -- -- 4,158 Other income 574 153 192 317 1,793 3,029 Interest expense (credit) (a) 2,840 729 1,370 857 (526) 5,270 Operating income (loss) 7,625 839 1,780 1,695 6 11,945 FIRST HALF, 1999 Revenues from external customers $291,124 $14,859 $57,513 $90,239 $ 5,477 $459,212 Inter-segment sales 2,470 490 1,095 -- -- 4,055 Other income 512 71 212 209 864 1,868 Interest expense (credit) (a) 2,396 560 868 811 (517) 4,118 Operating income (loss) 4,843 1,883 3,590 1,758 (881) 11,193
(a) The other category of interest expense includes net interest income at the company level, representing rate differential between the interest rate on which interest is allocated to the operating segments and the actual rate at which borrowings were made. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS ------------- COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 WITH THE THREE MONTHS ENDED JUNE 30, 1999: SALES AND MERCHANDISING REVENUES for the three months ended June 30, 2000 totaled $258.1 million, a decrease of $1.1 million, or less than 1%, from 1999. SALES in the Agriculture Segment were down $2.3 million, or 1%. Grain sales were up $2.7 million with no change in volume and a 3% increase in the average price per bushel sold. Fertilizer sales were down $5 8 9 million with a $2.8 million, or 7%, decrease in the wholesale division and a $2.2 million, or 9%, decrease in the farm center division. Average price per fertilizer ton sold was down in both divisions, while wholesale had increased volume and the farm centers experienced a volume decrease. At least a portion of the farm center decrease was based on unusually wet spring weather in some locations. MERCHANDISING REVENUES for the Agriculture Group were up $2.8 million, or 36%, due primarily to increases in income from storing grain for others and favorable basis movement in the grain business. This was offset by a decrease in drying and mixing income due to the generally good quality of grain received from the last harvest. The Manufacturing Segment had a sales increase of $.8 million, or 10%. Total revenues in the railcar repair and fabrication shops were down slightly. Railcar sales and financings completed during the second quarter of 2000 were down $.3 million, or 10%, however gross lease fleet income was up $1.2 million or 32%. This fleet income growth was due to additional railcars and locomotives controlled and in service as compared to 1999. The Processing Segment had a $2.7 million, or 10%, increase in sales. All of this increase was attributable to increased volumes and price per ton sold in the lawn fertilizer division. The cob-based businesses experienced a reduction of volume partially offset by a 7% increase in the average price per ton sold. There are two additional lawn fertilizer blending facilities being operated in 2000 when compared to 1999. They are located in Montgomery, Alabama and Pottstown, Pennsylvania. The Processing Segment also completed its purchase of Pro Turf assets from The Scotts Company. Assets purchased included inventory and intangibles as well as the assumption of certain employee benefit liabilities of the business. The Company anticipates that this acquisition will significantly increase future revenues for the Processing Segment. The Retail Segment experienced a $2.2 million, or 4%, decrease in sales, with five of the six stores showing decreases. The majority of the decrease is related to unusually wet weather in the second quarter. Management anticipates that some of the lost sales will be recovered in the third quarter. GROSS PROFIT for the second quarter of 2000 totaled $52.1 million, an increase of $.3 million, or 1%, over the second quarter of 1999. The Agriculture Segment had a gross profit increase of $.9 million, or 4%, due to the increase in merchandising revenues described previously and additional wholesale fertilizer volume and margin per ton, partially offset by decreases in gross profit on sales in grain and the farm centers. Gross profit in the Manufacturing Segment decreased $.1 million, or 4%, from the prior year. This was due to fewer railcar sales and a soft market for the segment's primary car type - the covered hopper - reducing margins. Gross profit for the Processing Segment increased $1.5 million, or 19%, from the second quarter of 1999. As a whole, this segment experienced both improved volume and gross profit per ton. The lawn fertilizer businesses experienced increases that were partially offset by decreases in the cob-based businesses. 9 10 Gross profit in the Retail Segment decreased by $.2 million, or 1%, from the second quarter of 1999. This was due primarily to the decreased sales noted previously, partially offset by an increase in gross margin percentage. OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES for the second quarter of 2000 totaled $39.4 million, a $.8 million, or 2%, increase from the second quarter of 1999. Full time employees increased 5% from the second quarter of 1999 due to acquisitions and added capacity in the Processing Segment. The increase reflects planned growth in the Processing Segment, offset by the reduction of expenses related to the sale of the investment in the Andersons-Tireman joint venture at the end of the first quarter. INTEREST EXPENSE for the second quarter of 2000 was $2.6 million, a $.5 million, or 26%, increase from the second quarter of 1999. Average quarterly short-term borrowings were flat when comparing 2000 to 1999, while the effective short-term interest rate increased by more than a full percentage point. INCOME BEFORE INCOME TAXES of $10.1 million decreased 9% from the 1999 second quarter pretax income of $11.1 million. Income tax expense has been provided at 33.5%, the Company's expected effective tax rate for 2000. NET INCOME of $6.7 million decreased $.8 million from the 1999 second quarter net income of $7.5 million. Basic and diluted earnings per share were $.89, a $.03 and $.01 decrease, respectively, from the 1999 second quarter earnings per share. COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 WITH THE SIX MONTHS ENDED JUNE 30, 1999: SALES AND MERCHANDISING REVENUES for the six months ended June 30, 2000 totaled $455 million, a decrease of $4.2 million, or 1%, from 1999. SALES in the Agriculture Segment were down $11.4 million, or 4%. Grain sales were down $9.4 million with a 9% decrease in volume offset by a 4% increase in the average price per bushel sold. Fertilizer sales were down $2 million with a $.5 million decrease in the wholesale division and a $1.5 million decrease in the farm center division. Average price per fertilizer ton sold was down in both divisions while the wholesale division had a 12% increase in volume and the farm centers experienced a volume decrease. At least a portion of the farm center decrease was based on unusually wet weather in the second quarter in some locations. MERCHANDISING REVENUES for the Agriculture Group were up $3.9 million, or 25%, due primarily to increases in income from storing grain for others and favorable basis movement in the grain business. This was offset by a decrease in drying and mixing income due to the generally good quality of grain received from the last harvest. The Manufacturing Segment had a sales increase of $.7 million, or 5%. Total revenues in the railcar repair and fabrication shops were down slightly. Railcar sales and financings completed during 2000 were down $2.1 million, or 40%, however lease fleet income was up $3 million or 39%. This fleet income growth was due to additional railcars and locomotives controlled and in service as compared to 1999. 10 11 The Processing Segment had a $7.1 million, or 12%, increase in sales. All of this increase was attributable to increased volumes and price per ton sold in the lawn fertilizer division. The cob-based businesses experienced a reduction of volume partially offset by a 4% increase in the average price per ton sold. There are two additional lawn fertilizer blending facilities being operated in 2000 when compared to 1999. They are located in Montgomery, Alabama and Pottstown, Pennsylvania. The increased sales also reflect one month of sales of the Pro Turf product line, formerly owned by The Scotts Company. The Retail Segment experienced a $1.4 million, or 2%, decrease in sales, with three of the six stores showing decreases. The decrease reflects unusually wet weather in the second quarter, and in certain markets, increased competition and heavy road construction. GROSS PROFIT for the first half of 2000 totaled $96.2 million, an increase of $5.5 million, or 6%, from 1999. Included in this amount is a $.9 million gain on the sale of the Company's investment in The Andersons-Tireman joint venture. The Agriculture Segment had a gross profit increase of $3.8 million, or 11%, due primarily to the increase in merchandising revenues described previously and additional wholesale fertilizer volume and margin per ton, offset by decreases in gross profit on sales in grain and the farm centers. Gross profit in the Manufacturing Segment decreased $.5 million, or 8%, from the prior year. This was due to reduced railcar sales and a soft lease market for the segment's primary car type - the covered hopper. Gross profit for the Processing Segment increased $2.8 million, or 16%, from 1999. As a whole, this segment experienced both improved volume and gross profit per ton. The lawn fertilizer businesses experienced increases that were partially offset by decreases in the cob-based businesses. Gross profit in the Retail Segment for the first half of 2000 was flat when compared to 1999. This was due primarily to the decreased sales noted previously, partially offset by a slight increase in gross margin percentage. OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES for the first half of 2000 totaled $78.9 million, a $3.6 million, or 5%, increase from 1999. Full time employees increased 5% from the second quarter of 1999 due to acquisitions and added capacity in the Processing Segment and the opening of an additional wholesale fertilizer facility near the end of the second quarter of 1999. The increase includes a $1 million increase in labor and benefits and a $1.7 million increase in occupancy expenses. INTEREST EXPENSE for the first half of 2000 was $5.3 million, a $1.2 million, or 28%, increase from 1999. Average short-term borrowings increased 13% when comparing 2000 to 1999 and the effective short-term interest rate increased by more than a full percentage point. INCOME BEFORE INCOME TAXES of $11.9 million increased 7% from the 1999 pretax income of $11.2 million. Income tax expense has been provided at 33.5%, the Company's expected effective tax rate for 2000. 11 12 NET INCOME of $7.9 million increased $.4 million from the 1999 net income of $7.5 million. Basic and diluted earnings per share were $1.05 and 1.04, respectively. This represents $.13 increases from the 1999 basic and diluted earnings per share. LIQUIDITY AND CAPITAL RESOURCES The Company's operations (before changes in working capital) provided cash of $13.9 million in the first half of 2000, a decrease of $.3 million from the first half of 1999. Working capital at June 30, 2000 was $57 million, a $10.9 million decrease from both December 31, 1999 and June 30, 1999. The Company utilizes its short-term lines of credit to finance working capital, primarily inventories and accounts receivable. Lines of credit available on June 30, 2000 were $155 million. The Company had drawn $52.2 million on its short-term lines of credit at June 30, 2000, an increase of $7.2 million from December 31, 1999. The Company's peak short-term borrowing occurred on March 23, 2000 and amounted to $113.8 million. Typically, the Company's highest borrowing occurs in the spring due to seasonal inventory requirements in the fertilizer and retail businesses, credit sales of fertilizer and a customary reduction in grain payables due to cash needs and market strategies of grain customers. A quarterly cash dividend of $0.06 per common share was paid in the first and second quarters of 2000. A cash dividend of $0.06 per common share was declared on July 1, 2000 and was paid on July 21, 2000. Cash dividends of $0.05 per common share were paid quarterly in 1999. The Company made income tax payments of $3.1 million in the first half of 2000 and expects to make payments totaling approximately $.4 million for the remainder of the year. Also, in the first half, the Company issued 58,476 shares to its employees under stock compensation plans and purchased 330,600 of its common shares on the open market at an average of $8.02 per share. The Company also issued 68,934 common shares to complete its 1998 acquisition of Crop and Soil, Inc. Total capital expenditures for 2000 are expected to approximate $24 million and include $8 million for additional facilities and businesses in the Processing Segment, $5.2 million for the acquisition of additional railcars and $.9 million to replace information systems hardware and software. Funding for these expenditures is expected to come from cash generated from operations and additional debt. Capital expenditures may 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 and/or collateralized by railcars owned by the Company. 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. 12 13 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. IMPACT OF YEAR 2000 In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. FORWARD LOOKING STATEMENTS The preceding Management's Discussion and Analysis contains 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, competition, economic conditions, risks associated with acquisitions, interest rates and income taxes. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS The market risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices and interest rates as discussed below. Commodities The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) 13 14 farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations, the Company follows a policy of hedging its inventories and related purchase and sale contracts. The instruments used are readily marketable exchange-traded futures contracts that are designated as hedges. To a lesser degree, the Company uses exchange-traded option contracts, also designated as hedges. The changes in market value of such contracts have a high correlation to the price changes of the hedged commodity. The Company's accounting policy for these hedges, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the market daily and include gains and losses in the statement of income in sales and merchandising revenues. A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its commodity position. The Company's daily net commodity position consists of inventories, related purchase and sale contracts and exchange traded contracts. The fair value of such position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The result of this analysis, which may differ from actual results, is as follows: (in thousands) JUNE 30, 2000 DECEMBER 31, 1999 ------------------------ ------------------------- Net long (short) position $ 230 $ (153) Market risk 23 15 Interest The fair value of the Company's long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Such fair value exceeded the long-term debt carrying value. In addition, the Company has off-balance sheet interest rate contracts established as hedges. The fair value of these contracts is estimated based on quoted market termination values. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below: (in thousands) JUNE 30, 2000 DECEMBER 31, 1999 ---------------------- ------------------- Fair value of long-term debt and interest rate contracts $80,331 $77,964 Fair value less than carrying value (539) (322) Market risk (1,034) 595 14 15 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ The annual meeting of the shareholders of The Andersons, Inc. was held on April 20, 2000 to elect twelve directors and to ratify the appointment of PricewaterhouseCoopers LLP as the Company's independent auditors. Results of the voting follow:
Director For Against Withheld Not Voted - -------- --- ------- -------- --------- Donald E. Anderson 5,655,110 - 42,904 2,055,955 Michael J. Anderson 5,464,377 - 233,637 2,055,955 Richard M. Anderson 5,462,377 - 235,637 2,055,955 Richard P. Anderson 5,657,460 - 40,554 2,055,955 Thomas H. Anderson 5,655,960 - 42,054 2,055,955 John F. Barrett 5,658,460 - 39,554 2,055,955 Paul M. Kraus 5,656,960 - 41,054 2,055,955 Donald L. Mennel 5,658,460 - 39,554 2,055,955 David L. Nichols 5,658,460 - 39,554 2,055,955 Dr. Sidney A. Ribeau 5,652,056 - 45,958 2,055,955 Charles A. Sullivan 5,658,460 - 39,554 2,055,955 Jacqueline F. Woods 5,658,460 - 39,554 2,055,955 Independent Auditors 5,655,510 4,183 38,321 2,055,955
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 2000. 15 16 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 11, 2000 By /s/Michael J. Anderson Michael J. Anderson President and Chief Executive Officer Date: August 11, 2000 By /s/Richard R. George Richard R. George Vice President and Controller (Principal Accounting Officer) 16 EX-27 2 ex27.txt EXHIBIT 27
5 1,000 6-MOS DEC-31-2000 JUN-30-2000 5,332 0 64,234 3,892 153,981 226,702 265,767 159,948 343,632 169,731 71,836 0 0 84 89,540 343,632 455,049 458,078 361,928 361,928 78,935 0 5,270 11,945 4,005 7,940 0 0 0 7,940 1.05 1.04
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