Registration No. 33-62442
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933
The Andersons
(Exact name of registrant as specified in governing instrument)
Ohio 5150 34-4437884
(State or other juris- (Primary Standard Indus- (I.R.S. Employer
diction of incorporation trial Classification Identification No.)
or organization) Code Number)
480 W. Dussel Drive, Maumee, Ohio 43537 (419) 893-5050
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
Richard P. Anderson
President and Chief Executive Officer
The Andersons Management Corp. (General Partner of The Andersons)
(Same address and telephone number as registrants)
(Name, address including zip code, and telephone number, including area
code, of agent for service)
Copies of all communications to:
Law Department Peter E. Panarites, Esq.
The Andersons Freedman, Levy, Kroll & Simonds
480 W. Dussel Drive 1050 Connecticut Avenue, N.W.
Maumee, Ohio 43537 Washington, D.C. 20036
(419) 893-5050 (202) 457-5100
PROSPECTUS
The Andersons (logo)
(An Ohio Limited Partnership)
$5,000,000 7.5% Ten-Year Debentures
$5,000,000 6.5% Five-Year Debentures
SUBJECT TO A $1,000 MINIMUM PRINCIPAL AMOUNT REQUIREMENT
Interest will be payable to the registered holder annually on each
anniversary of the original issue date of a Debenture. Interest will begin
to accrue at the original issue date of a Debenture, which is the first day
of the month following the month in which payment for the Debenture is
received by The Andersons. The Debenture may be redeemed by the Partnership,
in whole or in part, without premium, at any time upon payment of principal
and accrued interest. No sinking fund will be provided for the Debentures
which will be unsecured obligations of the Partnership. Except for the rate
of interest and years to maturity, the terms and conditions of the Debentures
are identical. See "Description of Debentures."
The Debentures will not be listed on any national securities exchange.
Any over-the-counter market that may develop for the Debentures is expected
to be limited.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to Discounts and Partnership (1)
Public Commissions Maximum Minimum
Per Debenture . . . . 100% None 100% None
Total . . . . . . . . $10,000,000 None $10,000,000 None
(1) Before deduction of expenses payable by the Partnership, estimated at
$17,132. As of April 1, 1994, $1,115,000 and $1,667,000 of Ten-Year and Five-
Year Debentures, respectively, have been sold.
The Debentures are offered on a continuous basis direct by the
Partnership and no minimum principal amount of Debentures will be required for
the offering to become effective. No commissions or remuneration will be paid
for any selling activities hereunder. Subscriptions or inquiries should be
directed to the Partnership's principal administrative offices, as follows:
THE ANDERSONS
Treasurer
P.O. Box 119
Maumee, Ohio 43537
(419) 893-5050
The date of this Prospectus is April , 1994
TABLE OF CONTENTS
Page
Available Information...................................................
Prospectus Summary......................................................
The Partnership.........................................................
Certain Risk Factors....................................................
Use of Proceeds.........................................................
Capitalization..........................................................
Selected Financial Data.................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................
Business................................................................
Government Regulation...................................................
Possible Environmental Proceeding.....................................
Management..............................................................
Certain Relationships and Related Transactions..........................
Security Ownership of Certain Beneficial Owners and Management..........
Description of Debentures...............................................
Partnership Agreement...................................................
Legal Matters...........................................................
Experts.................................................................
Registration Statement..................................................
Index to Financial Statements...........................................
Subscription Agreement Form
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports with
the Securities and Exchange Commission (the "Commission"). Reports filed by
the Partnership with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and inspected at the Commission's
Regional Offices at Room 1028, 26 Federal Plaza, New York, N.Y., 10278; at
Room 1204, 219 South Dearborn Street, Chicago, Illinois 60604. Copies of such
materials may also be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The Partnership will furnish holders of the Debentures offered hereby,
upon request, with annual reports containing consolidated financial statements
audited by an independent public auditing firm.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
The Partnership
The Andersons is an Ohio limited partnership which, together with its
predecessor partnerships, has operated continuously since 1947. The
Partnership is engaged in grain merchandising and the operation of grain
elevator facilities. A significant part of the business involves the
distribution of agricultural products such as fertilizers, seeds and farm
supplies. The Partnership also operates retail general stores, produces and
sells lawn care products and corncob products and repairs and leases rail
cars.
The Offering
Securities....... $5,000,000 principal amount 7.5% Ten-Year Debentures.
$5,000,000 principal amount 6.5% Five-Year Debentures.
Offered directly by the Partnership. Subject to a $1000
minimum principal amount requirement. As of April 1, 1994,
$1,115,000 and $1,667,000 of Ten-Year and Five-Year
Debentures, respectively, have been sold.
Use of Proceeds...Add to working capital and general partnership purposes.
Summary Financial Information
(In thousands except for per $1,000 of weighted average capital and
ratio of earnings to fixed charges)
Year Ended
December 31
1993 1992 1991
Sales and merchandising revenues $776,457 $753,167 $643,063
Income from continuing operations (a) 11,079 10,130 4,516
Weighted average partners capital 47,405 43,101 41,939
Income allocation and distributions per
$1,000 of weighted average capital:
Income from continuing operations 234 235 107
Cash distributions 32 34 34
Tax distributions 88 10 88
Ratio of earnings to fixed charges (b) 2.29 2.17 1.47
As of December 31
1993 1992 1991
Working capital $ 47,007 $ 40,098 $ 30,980
Total assets 356,502 255,501 290,110
Total long-term debt 52,259 46,077 48,018
Partners' capital 55,410 51,120 42,508
(a) See Note 3 to the Partnership's Consolidated Financial Statements.
(b) See footnote (c) on page 6 for explanation of ratio of earnings to fixed
charges.
THE PARTNERSHIP
The Partnership is engaged in grain merchandising and operates grain
elevator facilities located in Ohio, Illinois, Indiana, and Michigan. The
Partnership is also engaged in the distribution of agricultural products such
as fertilizer, seeds and farm supplies; the operation of retail general
stores; the production, distribution and marketing of lawn care product and
corncob products; the production of pet products; and the repairing and
leasing of rail cars.
The Partnership is the successor to other Ohio limited partnerships
which have operated as "The Andersons" continuously since 1947. The
Partnership currently operates under a Partnership Agreement dated January 1,
1994. No specific termination date is set forth in the Partnership Agreement
which will continue in force until the occurrence of one of the events
described under "Partnership Agreement - Term and Dissolution." The
Partnership Agreement provides for the continuation of the business of the
Partnership following a dissolution. It is a condition of the Indenture
pursuant to which the Debentures are issued that there may be no successor to
the Partnership unless the successor expressly assumes the payment of
principal and interest on all Debentures and the performance of all
obligations of the Partnership under the Indenture. In the event of a default
in payment of the Debentures by a successor entity, the General Partner would
continue to be liable for Debentures issued prior to the succession. The
Andersons Management Corp. (the "Corporation"), an Ohio corporation, was
formed in 1987 and is the sole General Partner of the Partnership. A decision
to purchase any of the Debentures offered hereby should be made on the basis
of the financial condition of the Partnership and not on that of the General
Partner. See "Certain Risk Factors," "Management" and "Description of
Debentures."
Except where the context otherwise requires, the term "Partnership"
includes The Andersons, all predecessor and successor limited partnerships and
any subsidiaries of the Partnership.
The principal administrative office of the Partnership is located at 480
W. Dussel Drive, Maumee, Ohio 43537; telephone number (419) 893-5050.
CERTAIN RISK FACTORS
Under the limited partnership laws of Ohio, a general partner is liable
for partnership obligations in the event of default in payment by the
partnership. Limited partners are liable for partnership obligations only to
the extent of their capital accounts. The sole General Partner of the
Partnership has equity of approximately $1,607,000 at December 31, 1993.
Because this equity is less than the principal amount of the Debentures being
offered, and the Partnership's other indebtedness (see Financial Statements
of the Partnership), the amount of the General Partner's equity may be
considered a risk factor. However, the Partnership does not believe that the
amount of the General Partner's equity presents a material risk in view of the
total amount of Partners' capital (both General and Limited) available to the
Partnership, which, at December 31, 1993, was $55,410,713. Also, as of the
same date, the Partnership had total assets of $356,501,778.
The terms of the Partnership Agreement do not prohibit partners from
withdrawing from the Partnership; however, a partner who has withdrawn has no
right to receive the value of his or her capital account until the end of the
fifth year after the year of withdrawal. Depending upon the extent of any
such withdrawals, the Partnership's capital position and its operations could
be adversely affected. See "Partnership Agreement" and the Partnership's
Consolidated Financial Statements.
USE OF PROCEEDS
The offering is not underwritten and no assurance can be given as to the
amount of proceeds that may be realized by the Partnership from this offering
or when any such proceeds may be received. The net proceeds from the sale of
the Debentures will be added to working capital and used for general
Partnership purposes with the payment of current maturities of long-term debt
as the first priority and funding of capital expenditures as the second
priority. The offering is not conditioned upon the sale of any minimum amount
of Debentures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" for a
discussion of proposed capital projects.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Partnership as of December 31, 1993. No effect has been given in the table
below to the receipt of any proceeds from the offering described herein, since
the amount of proceeds and when the proceeds will be received is uncertain.
Long-Term Debt
Notes payable.................................... $ 13,500,000
Debenture bonds.................................. 22,164,000
Industrial Development Revenue Bonds............. 15,614,000
Other............................................ 981,120
Total Long-Term Debt....................... 52,259,120
Minority Interest...................................... 1,103,892
Partners' Capital
General partner.................................. 761,839
Limited partners................................. 54,648,874
Total Partners' Capital.................... 55,410,713
Total Capitalization................. $108,773,725
See Notes 6, 7, 8 and 10 of Notes to Consolidated Financial Statements
for additional information as to the lines of credit, long-term debt, leases,
and commitments of the Partnership.
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Sales and merchandising revenues $776,457,070 $753,166,752 $643,063,190 $643,417,165 $663,564,821
Operating profit (a) 21,197,205 18,299,809 13,986,953 16,157,416 11,622,537
Income from continuing operations (b) 11,079,360 10,129,692 4,516,046 5,259,776 1,661,908
Net income 11,079,360 7,635,748 2,825,309 3,859,392 780,196
Ratio of earnings to fixed charges (c) 2.29 2.17 1.47 1.52 1.16
Weighted average partners' capital (d) 47,405,022 43,101,473 41,938,671 43,047,859 44,845,806
Allocations and distributions per $1,000
of weighted average partners' capital:
Allocation of income from continuing
operations 234 235 107 122 37
Allocation of net income 234 177 67 90 17
Cash distributions 32 34 34 32 26
Tax distributions (e) 88 10 88 6 7
As of December 31
Balance Sheet Data: 1993 1992 1991 1990 1989
Total assets $356,501,778 $255,500,637 $290,110,477 $234,319,164 $224,142,693
Long-term debt 52,259,120 46,077,319 48,018,161 47,881,282 51,373,643
Partners' capital:
General partner 761,839 622,659 531,322 546,453 505,556
Limited partners 54,648,874 50,497,148 41,976,399 45,265,201 44,246,847
$ 55,410,713 $ 51,119,807 $ 42,507,721 $ 45,811,654 $ 44,752,403
<FN>
(a) See Note 11 to the Partnership's Consolidated Financial Statements for the definition of operating profits.
(b) See Note 3 to the Partnership's Consolidated Financial Statements.
(c) For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income from continuing
operations plus certain fixed charges. Fixed charges consist of interest expense, one-third of rental expense
representative of the interest factor and capitalized interest.
(d) Weighted average partners' capital represents the average daily outstanding partners' capital balance, which
includes the effects of distributions and investments made during the year.
(e) Tax distributions can fluctuate widely due to the timing of the distributions and the amount of Partnership
taxable income. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital at December 31, 1993 was $47 million, up $6.9 million
from last year. Inventories were up $63 million, with grain inventories
accounting for $50 million of the increase. The number of bushels owned at
December 31, 1993 were about the same as the prior year, but prices were up.
The average price of corn was up almost 50% and the average price of soybeans
was up about 25%. In addition, the mix of the grain inventories changed, with
approximately 3.7 million more bushels of soybeans in grain inventories at
December 31, 1993, at an average price of $6.99 per bushel compared to corn
at $2.96 per bushel and red wheat at $3.69. Lawn products inventories were
up $8 million as a result of a build up of inventory to better meet the heavy
spring demand. Retail (merchandise) inventories were up about $6 million,
mostly due to an additional general store opened in 1993. The grain commodity
price increases resulted in additional margin deposits at December 31, 1993,
as well as an increase in accounts payable for grain. Accounts receivable
were up $19 million, with most of the increase in grain and agricultural
products receivables due to year end sales. Short-term borrowings were up to
fund the inventory and accounts receivable increases.
Partners' capital at December 31, 1993 totalled $55.4 million, up $4.3
million from December 31, 1992. During 1993 the Partnership offered limited
partnership interests and received $424,000 of proceeds. The offering is
continuing in 1994 and $750,000 of additional proceeds has been received. Any
additional amounts received in 1994 are not expected to be significant.
Withdrawals of capital by partners in 1993 totalled $828,000. Withdrawals in
1994 are not expected to be significant.
Quarterly cash distributions to partners totaled $1.5 million in 1993
and are expected to be approximately $1.3 million in 1994.
Tax distributions are made to partners to assist them in making federal,
state and local tax payments since the taxable income of the Partnership is
taxable to the partners and not to the Partnership. Tax distributions can
fluctuate widely from year to year (see "Selected Financial Data") due to
changes in the amount and in the components of partnership taxable income and
due to the timing of required tax payments by partners. In the years 1989,
1990 and 1991, tax distributions were made in April based on the previous
year's taxable income. Tax distributions made in 1989, 1990 and 1991 were
$336,000, $278,000 and $3.7 million, respectively. Tax distributions were
higher in 1991 due to a significant increase in taxable (and book) income and
due to a change in policy whereby the Partnership began making tax
distributions on a quarterly basis coinciding with the dates estimated tax
payments are due by partners. In 1992, tax distributions dropped to $418,000
as a result of the quarterly tax distributions paid in 1991. In 1993, tax
distributions totalled $4.2 million. Of this amount, $2.2 million was paid
in January and April as tax distributions on 1992 taxable income. The
remainder of the 1993 tax distributions were made in April, June and September
for 1993 estimated tax payments by partners. In 1994, a tax distribution of
$660,000 was made in January and a final tax distribution of $932,000 for 1993
taxable income was made in April. A 1994 quarterly tax distribution of
$685,000 was paid in April, and future quarterly distributions of the same
amount are expected to be paid in June and September 1994 and January 1995.
During 1993 the Partnership issued $3.5 million of Five-Year and $2.3
million of Ten-Year debentures and additional debentures are being offered in
1994. Proceeds from the issuance of the debentures in 1993 were used to fund
current maturities of long-term debt and for capital expenditures. The amount
of proceeds to be realized in 1994 from the sale of debentures is unknown
since the offering is not underwritten. Any proceeds realized will be added
to working capital and used for such purposes as the funding of current
maturities of long-term debt and for capital expenditures.
Unused short-term lines of credit were $29.1 million at December 31,
1993, and unused long-term lines of credit were $2.5 million. The
Partnership's liquidity is enhanced by the fact that grain inventories are
readily marketable. In management's opinion, the Partnership's liquidity is
adequate to meet short and long-term needs. The Partnership's short-term
lines of credit have been higher in the past and in 1994 have been increased
by $35 million on a temporary basis.
Capital expenditures totaled $10.8 million in 1993 and are expected to
be approximately $26 million in 1994. Anticipated capital expenditures in
1994 include $12 million for two general stores previously leased and $1
million for facilities in the Agricultural Products area subject to a lease
expiring in 1994. Funding for capital expenditures in 1994 is expected to
come from additional long-term debt of approximately $14 million and cash
generated from operations. If cash generated from operations is not
sufficient, capital expenditures will be curtailed or additional long-term
borrowings could be obtained.
Results of Operations
Years ended December 31, 1993 and 1992:
Income from continuing operations was $11 million in 1993 compared to
$10 million in 1992. Operating, administrative and general expenses were up
$12 million or about 12%. Included is an increase of $5.7 million (10%) in
the management fee paid to the general partner. The more significant items
comprising the increase are additional salaries, wages and benefits for the
new general store, as well as an expanded work force in several other
operating areas and additional cash profit sharing and management performance
payments as a result of improved net income. The management fee also
increased as a result of the Corporation's adoption of Statement of Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Corporation has elected to recognize the
$8.4 million of accrued benefits as of January 1, 1993 (transition obligation)
prospectively as a component of annual postretirement benefit cost over
approximately 20 years. The additional annual cost incurred by the
Corporation and passed on to the Partnership as part of the management fee was
approximately $850,000 for 1993 and is expected to be about the same in future
years. During 1993, as a result of lower prevailing interest rates, the
Corporation decreased the discount rate used to determine its projected
benefit obligation for its pension plan and for its postretirement health care
benefits. The change in the discount rate, from 8% to 7.5%, is expected to
increase the management fee charged by the Corporation to the Partnership in
future years by approximately $365,000.
By major business segment the operating results were as follows:
Sales in the grain area were $416 million, down 2% from 1992. The
average selling price was down 4%, from $3.39 per bushel in 1992 to $3.25 per
bushel in 1993. Bushels sold increased by 2%. Gross profit on grain sales
decreased by 9%, due to the average price decrease and a decrease in margins.
Most of these changes were a result of an increase in yields in 1993 as well
as an improvement in the quality of the crops in the eastern corn belt.
Merchandising revenues were up $6.4 million. Income earned in 1993 from
holding owned grain was up from the depressed levels in 1992, due in part to
the effects of the floods in 1993 and to a shortage of wheat in the first half
of 1993. Income from drying and blending grain was also up in 1993, with most
of the increase coming in the first six months of the year. This is a result
of the high moisture content in the 1992 corn crop carried into 1993 and due
to the depressed level of drying and blending income in the first six months
of 1992. As a result of the increase in merchandising revenues, coupled with
an increase in operating expenses, operating profit in the grain area was up
$3.8 million, or 52% from 1992.
In the agricultural products area, sales were $105 million in 1993, up
11% from a year ago. Wholesale sales of fertilizer products accounted for
most of the sales increase as a result of a 19% increase in sales volume.
Average selling prices were down and margins were also down. Sales of other
agricultural products were mixed, as sales of seeds and supplies were down and
retail sales were up. Storage income continued to decrease, due to an
industry oversupply of warehouse space, although the level of decrease seems
to have slowed down. As a result of the increased volume in wholesale
fertilizer sales, gross profit in the agricultural products area was up 13%
and operating profit was up $1 million, or 44% from 1992.
Sales in the retail area were $155 million in 1993, up 4% from 1992.
Sales in the Columbus market were up 5%, sales in the Toledo market were down
2% and sales from a new store opened in Lima, Ohio, in the fourth quarter of
1993 accounted for the remainder of the sales increase. Gross profit was up
about $1.2 million, or 3%, as a result of the sales increase along with a
small decrease in margins due to the competitive pressures in the retail
market. As a result of a $3.7 million (10%) increase in operating expenses,
due to increased advertising and the costs associated with opening the new
general store, operating profit decreased from $4 million in 1992 to $1.6
million in 1993.
Sales of lawn products totalled $38 million, up 7% from a year ago.
Volume increased 2% and average selling prices increased 5%. Margins were up
about 11%. In the industrial products area sales were $14.2 million, up 1%.
Sales of sorbent products were up, due to volume increases, and sales of
corncob products were down, due to a decrease in volume. Sales from the
Partnership's auto service centers were up, as were steel fabrication sales.
Railcar leasing activity improved, while railcar repairs for external
customers were down due to utilizing the shop capacity for repairs to cars
owned by the Partnership. Sales from the Partnership's outdoor power
equipment and service shop were $4 million. In total, the operating profits
of lawn and corn cob products and other businesses of the Partnership improved
by $470,000.
Years ended December 31, 1992 and 1991:
Income from continuing operations was $10 million in 1992, more than
double the results of 1991, with almost every major business segment showing
improvement. Interest expense was down, due in general to lower interest
rates. During 1992 the Partnership disposed of its pet products distribution
business. See Note 3 to the Partnership's Consolidated Financial Statements.
Sales from discontinued operations were approximately $9.8 million and $18.7
million in 1992 and 1991, respectively.
Sales in the grain area were $424 million, up 24% from 1991. The
average selling price was $3.39 per bushel compared to $3.03 in the previous
year and the number of bushels sold also increased. Due to the higher volume,
higher average selling prices and an increase in margins, gross profit on
grain sales improved by $2.9 million. Merchandising revenues, however, were
down by $3.1 million. The largest decrease was in the income earned from
holding and storing grain, which decreased by 50%. Fewer bushels were
received during the first nine months of the year due to a smaller harvest in
the fall of 1991 and a smaller wheat harvest in the summer of 1992 and the
prevailing grain market during 1992 did not allow the Partnership to earn as
much income from holding grain as in the prior year. In addition, fewer
bushels of grain were held in storage during most of 1992. On the other hand,
income from drying grain and blending high quality grain with lower quality
grain was up about 90% from 1991. The entire increase occurred in the fourth
quarter as a result of the high moisture content in the 1992 corn crop due to
the wet growing season. Operating expenses increased by about 2.5%.
Operating profit in the grain area was $7.4 million, down about $637,000 from
1991 as a result of the decrease in merchandising revenues.
In the agricultural products area, sales totalled $94 million, down $3
million from 1991. Wholesale sales of fertilizer products were down $4.7
million, as a result of a 5% decrease in average selling prices. Retail sales
were up $960,000 and sales of agricultural supplies were up $425,000. As a
result of an increase in margins on wholesale sales and the increases in
retail sales and sales of agricultural products, gross profit was up 7%.
Storage income, however, was down 40%. An industry oversupply of warehouse
space in the last five years has resulted in shorter lease terms with
fertilizer producers and reduced storage prices. Some of the reduced storage
income is offset by an increase in handling fees. Although total gross profit
in the agricultural products area was down in 1992, due to the decrease in
storage income, a reduction in operating expenses resulted in an improvement
in operating profit from $1.8 million in 1991 to $2.3 million in 1992.
Sales in the retail area were $149 million in 1992, up $9.7 million from
1991. The Columbus market accounted for 60% of the sales increase and the
Toledo market accounted for 40%. As a result of the sales increase and an
improvement in margins, operating profit was $4.1 million, an increase of $2.4
million.
Sales of lawn products totalled $35 million, up $8 million from 1991.
Volume increased 24% and average selling prices increased 4%. Margins were
up about 1.5%. In the industrial products area sales were $14 million, up
$1.4 million. Volume was up in both corncob products and sorbent products.
Sales at the Partnership's auto service centers were about $7 million, while
sales in the rail car repair and leasing business were $5 million, up $3.8
million. In total, the operating profits of lawn and corn cob products and
other businesses of the Partnership were $4.5 million, an increase of $2
million.
Impact of Inflation:
Although inflation has slowed in recent years, it is still a factor in
the economy and the Partnership continues to seek ways to cope with its
impact. To the extent permitted by competition, the Partnership passes
increased costs on through increased selling prices. Grain inventories are
valued at the current replacement market price and substantially all purchases
and sales of grain are hedged as a result of buying or selling commodity
futures contracts. Consequently, grain inventories and cost of goods sold are
not directly affected by inflation but rather by market supply and demand.
If adjusted for inflation, net income would be lower than reported due
primarily to increased depreciation costs resulting from the replacement costs
associated with property, plant and equipment.
BUSINESS
Financial Information About Industry Segments
See Note 11 to the Partnership's Consolidated Financial Statements for
information regarding the Partnership's business segments.
Grain Operations
The Partnership's grain operations involve merchandising grain and
operating terminal grain elevator facilities, which includes purchasing,
handling, processing and conditioning grain, storing grain purchased by the
Partnership as well as grain owned by others, and selling grain. The
principal grains sold by the Partnership are yellow corn, yellow soybeans and
soft red and white wheat. The Partnership's total grain storage capacity
aggregates approximately 51 million bushels.
Virtually all grain merchandised by the Partnership is grown in the
midwestern part of the United States and is acquired from country elevators,
dealers and producers. The Partnership effects grain purchases at prices
related to Chicago Board of Trade quotations. The Partnership competes for
the purchase of grain with grain processors and feeders, as well as with other
grain merchandisers.
The Partnership's grain business may be adversely affected by
unfavorable weather conditions, disease, insect damage, the total acreage
planted by farmers, government regulations and policies, and commodity price
levels as they affect grower incentive or a supplier's decision when to
deliver grain for sale. See "Government Regulation." The grain business is
seasonal coinciding with the harvest of the principal grains purchased and
sold by the Partnership.
During 1993, approximately 77% of the grain sold by the Partnership was
purchased domestically by grain processors and feeders and approximately 23%
was exported. Most of the exported grain was purchased by exporters for
shipment to foreign markets. Some grain is shipped directly to foreign
countries, mainly Canada. Almost all grain shipments are by rail or boat.
Rail shipments are made primarily to grain processors and feeders, with some
rail shipments made to exporters on the Gulf or east coast. All boat
shipments are from the Toledo, Ohio port elevator.
The Partnership competes in the sale of grain with other grain
merchants, other private elevator operators and farmer cooperatives which
operate elevator facilities. Competition is based primarily on price, service
and reliability. The Partnership believes that it is the largest terminal
elevator operator in the Maumee/Toledo area and that it accounts for
substantial portions of the grain elevator business done in its other
principal geographic areas of operations. Some of the Partnership's
competitors are also its customers and many of its competitors have
substantially greater financial resources than the Partnership.
Grain sales are effected on a negotiated basis by the Partnership's
merchandising staff. As with agricultural commodities generally, the volume
and pricing of the Partnership's sales are sensitive to changes in supply and
demand relationships, which in turn are affected by factors such as weather,
crop disease and government programs, including subsidies and acreage
allotments. The Partnership's business also is affected by factors such as
conditions in the shipping industry, currency exchange fluctuations,
government export programs and the relationships of other countries with the
United States and similar considerations. Since the Partnership does not know
the ultimate destination of the grain it sells for export, it is unable to
determine the relative importance, in terms of sales, of the various countries
to which grain is shipped by its customers.
The Partnership hedges virtually all grain transactions through
offsetting sales or purchases of grain for future delivery. These hedging
transactions customarily involve trading in grain futures on the Chicago Board
of Trade, a regulated commodity futures exchange which maintains futures
markets for virtually all grains merchandised by the Partnership. Hedging
transactions are designed to provide protection against changes in the market
prices of the grain purchased and sold by the Partnership.
Agricultural Products
The Partnership's agricultural products operations involve purchasing,
storing, formulating, and selling dry and liquid fertilizers; providing
fertilizer warehousing and services to manufacturers and customers; wholesale
distribution of seeds and various farm supplies; and retail sales of seeds,
farm supplies and fertilizer. The major fertilizer ingredients sold by the
Partnership are nitrogen, phosphate and potassium, all of which are readily
available from various sources.
The Partnership's market area primarily includes Illinois, Indiana,
Michigan and Ohio and customers for the Partnership's agricultural products
are principally retail dealers. Sales of agricultural products are heaviest
in the spring and fall.
The Partnership's aggregate storage capacity for dry fertilizer is 13
million cubic feet. The Partnership reserves 5 million cubic feet of this
space for various fertilizer manufacturers and customers. The Partnership's
aggregate storage capacity for liquid fertilizer is 21 million gallons and 6
million gallons of this space is reserved for manufacturers and customers.
The agreements for reserved space provide the Partnership storage and handling
fees and, generally, are for one year and are renewed at the end of each term.
In its agricultural products business, the Partnership competes with
regional cooperatives; fertilizer manufacturers; multi-state retail/wholesale
chain store organizations; and other independent wholesalers of agricultural
products. Many of these competitors have considerably larger resources than
the Partnership. Competition in the agricultural products business of the
Partnership is based principally on price, location and service. The
Partnership believes that it is a strong competitor in these areas.
Retail Store Operations
The Partnership's retail store operations consist of six general stores
located in the Columbus, Lima and Toledo, Ohio areas, which serve urban, rural
and suburban customers. A smaller store is located in Delphi, Indiana. Major
product categories in the general stores include: hardware, home remodeling
and building supplies; automotive accessories and parts; small appliances,
electronics and houseware products; work clothes and footwear; wine, specialty
meats and cheeses, baked goods and produce; pet care products; lawn and garden
supplies, nursery stock and Christmas decorations and trim; toys, sporting
goods, bicycles and marine accessories. The general store concept features
self-selection of a wide range and variety of brand name, quality merchandise.
Each general store carries more than 70,000 different items, has over 100,000
square feet of in-store display space plus 40,000 square feet of outdoor
garden center space, and has a center aisle that features do-it-yourself
clinics, special promotions and varying merchandise displays.
The retail merchandising business is highly competitive. The
Partnership competes with a variety of retail merchandisers, including
numerous mass retailers, department and hardware stores, and farm equipment
and supply companies. The principal competitive factors are quality of
product, price, service and breadth of selection. In each of these areas the
Partnership is an effective competitor. Its wide selection of brand names and
other quality merchandise is attractively displayed in the Partnership's
general stores. Each store is located on landscaped property with ample well-
lit parking facilities. The Partnership's retail business is affected by
seasonal factors with significant sales occurring during the Christmas season
and in the spring.
Other Activities
The Partnership produces more than 2000 granular retail and professional
lawn care products which are distributed in the snowbelt states from the Rocky
Mountains to the east coast. The retail granular products are sold to mass
merchandisers, small independent retailers and other lawn fertilizer
manufacturers. The professional granular products are sold both direct and
through distributors to lawn service applicators and to golf courses. The
principal raw materials for the lawn care products are nitrogen, potash and
phosphate, which are available from the Partnership's agricultural products
division. The lawn care industry is highly seasonal, with the majority of the
sales occurring from early spring to early summer. Competition is based
principally on merchandising ability, service and quality.
The Partnership is one of the largest producers of processed corncob
products in the United States. These products serve the chemical carrier,
animal bedding, industrial and sorbent markets and are distributed throughout
the United States and Canada and into Europe and Asia. The unique absorption
characteristics of the corncob has led to the development of "sorbent"
products. Sorbents include products made from corncobs as well as synthetic
and other materials and are used to absorb spilled industrial lubricants and
other waste products. The principal sources for the corncobs are the
Partnership's grain operations and seed corn producers.
The Partnership produces dog and cat foods, which are marketed through
a joint venture partnership. The Partnership is also involved in repairing,
buying, selling and leasing rail cars, the operation of six auto service
centers, a steel fabrication shop, a restaurant and an outdoor power equipment
sales and service shop.
Research and Development
The Partnership's research and development program is mainly concerned
with the development of improved products and processes, primarily in lawn
care products and corncob products. Approximately $450,000, $380,000 and
$220,000 was expended on research and development during 1993, 1992 and 1991,
respectively, including materials, salaries and outside consultants.
Employees
All management and labor services are provided to the Partnership by the
employees of the Corporation. The Partnership pays a management fee to the
Corporation for these services. At December 31, 1993, there were 939 full-
time and 1972 part-time or seasonal employees of the Corporation providing
services to the Partnership, which does not have any of its own employees.
Properties
The Partnership's principal grain, agricultural products, retail store
and other properties are described below. Except as otherwise indicated, all
properties are owned by the Partnership.
Grain Facilities:
Bushel Bushel
Location Capacity Location Capacity
Maumee, OH 17,500,000 Poneto, IN 550,000
Toledo, OH 6,300,000 Albion, MI 1,600,000
Champaign, IL 12,000,000 Potterville, MI 800,000
Delphi, IN 4,900,000 White Pigeon, MI 1,500,000
Dunkirk, IN 5,700,000
The Partnership's grain facilities have an aggregate storage capacity
of approximately 51 million bushels. The grain facilities are mostly concrete
and steel tanks, with some flat storage. The Partnership also owns grain
inspection buildings and driers, a corn sheller plant, maintenance buildings
and truck scales and dumps.
Agricultural Products Facilities:
Dry Storage Liquid Storage
Location (in cu. ft.) (in gallons)
Maumee, OH 5,667,000
Toledo, OH 2,000,000 2,857,000
Clymers, IN (1) 7,000 900,000
Delphi, IN 1,500,000
Dunkirk, IN 817,000
Logansport, IN (1) 37,000 3,274,000
Poneto, IN 4,700,000
Walton, IN (1) 247,000 5,867,000
Champaign, IL 800,000
Webberville, MI 1,833,000 3,250,000
(1) Leased facilities - lease expires in 1994, contains a five-year
renewal option and an option to purchase the facilities.
Agricultural products properties consist mainly of fertilizer warehouse
and distribution facilities for dry and liquid fertilizers. The dry
fertilizer storage capacity totals approximately 13 million cubic feet and the
liquid fertilizer storage capacity totals approximately 21 million gallons.
The Maumee, Ohio and Walton, Indiana locations have fertilizer mixing, bagging
and bag storage facilities. The Partnership owns a seed processing facility
in Delta, Ohio. The Partnership also leases four retail supply and sales
facilities in Michigan.
Retail Store Properties:
Name Location Sq. Ft.
Maumee General Store Maumee, OH 128,000
Toledo General Store Toledo, OH 134,000
Woodville General Store (1) Northwood, OH 105,000
Lima General Store (1) Lima, OH 103,000
Brice General Store (1) Columbus, OH 140,000
Sawmill General Store Columbus, OH 134,000
Delphi Store Delphi, IN 28,000
Warehouse (1) Maumee, OH 245,000
(1) Leased
The leases for the three general stores and the warehouse facility are
long-term leases with several renewal options and provide for minimum
aggregate annual lease payments approximating $1,750,000. The general store
leases provide for contingent lease payments based on achieved sales volume.
With respect to the Brice General Store lease, see "Management - Compensation
Committee Interlocks and Insider Participation - Certain Transactions -
Alshire-Columbus."
Lawn, Pet, Cob and Other Properties:
The Partnership owns lawn fertilizer production facilities and automated
pet food production and storage facilities in Maumee, Ohio. It also owns
corncob processing and storage facilities in Maumee, Ohio and Delphi, Indiana.
The Partnership leases a lawn fertilizer production facility, a warehouse
facility and two lawn products sales outlets. In its rail car leasing
business, the Partnership owns or leases approximately 700 covered hopper cars
with lease terms ranging from one to five years and annual lease payments
aggregating approximately $1,900,000. The Partnership also owns a rail car
repair facility, a steel fabrication facility, a service and sales facility
for outdoor power equipment and the Partnership owns or leases six auto
service centers.
The Partnership's administrative office building is leased at an annual
rental of $631,000 under a net lease expiring in 2000. See "Certain
Relationships and Related Transactions - Management Agreement." The
Partnership owns approximately 488 acres of land on which various of the above
properties and facilities are located; approximately 485 acres of farmland and
land held for future use; approximately 105 acres of improved land in an
office/industrial park held for sale; and certain other meeting and
recreational facilities, dwellings and parcels. The Partnership also owns or
leases a number of switch engines, cranes and other equipment.
Real properties, machinery and equipment of the Partnership were subject
to aggregate encumbrances of approximately $23,150,000 at December 31, 1993.
In addition, a general store that was previously leased was purchased in early
1994 and is subject to an encumbrance of $5,217,000. Additions to property
for the years ended December 31, 1993, 1992 and 1991, amounted to $10,808,521,
$6,590,045 and $6,770,883, respectively. See Note 8 to the Partnership's
Consolidated Financial Statements for information as to the Partnership's
leases.
The Partnership believes that its properties, including its machinery,
equipment and vehicles, are adequate for its business, well maintained and
utilized, suitable for their intended uses and adequately insured.
GOVERNMENT REGULATION
Grain sold by the Partnership must conform to official grade standards
imposed under a federal system of grain grading and inspection administered
by the United States Department of Agriculture ("USDA").
The production levels, markets and prices of the grains which the
Partnership merchandises are materially affected by United States government
programs, including acreage control and price support programs of the USDA.
Also, under federal law, the President may prohibit the export of any product,
the scarcity of which is deemed detrimental to the domestic economy, or under
circumstances relating to national security. Because a portion of the
Partnership's grain sales are to exporters, the imposition of such
restrictions could have an adverse effect upon the Partnership's operations.
The Partnership, like other companies engaged in similar businesses, is
subject to a multitude of federal, state and local environmental protection
laws and regulations including, but not limited to, laws and regulations
relating to air quality, water quality, pesticides and hazardous materials.
The provisions of these various regulations could require modifications of
certain of the Partnership's existing plant and processing facilities and
could restrict future facilities expansion or significantly increase their
cost of operation. To date, none of these requirements has had a materially
adverse impact on the Partnership's operations.
Possible Environmental Proceeding
In October 1992, the Partnership was notified by the Ohio Environmental
Protection Agency (the "Agency") that a water contamination discharge issue
had been referred to the Ohio Attorney General. The issue involves the
Partnership's Toledo, Ohio river elevator facility, built during the 1960's
and 1970's on low lying land that had, in part, been filled by an unrelated
corporation with material from its manufacturing operations. This material
is the apparent source of the alleged contamination at issue. No proceedings
have yet been instituted against the Partnership, but the Partnership has been
advised that it may become the subject of an action seeking injunctive relief
and monetary penalties. The Partnership is diligently working to resolve this
matter and has had continuing discussions with the Agency and the Ohio
Attorney General's office in that regard. Although no representation can be
made as to the outcome, it is management's opinion that the resolution of this
matter will not have a material adverse effect on the consolidated financial
position of the Partnership.
MANAGEMENT
The Partnership is managed by the Corporation acting in its capacity as
sole General Partner. The Board of Directors of the Corporation has overall
responsibility for the management of the Corporation's affairs, including its
responsibilities as General Partner of the Partnership. Day-to-day operating
decisions, relative to the Partnership, have been delegated by the Board to
the Corporation's Chief Executive Officer. The directors and executive
officers of the Corporation are:
Name Age Position
Thomas H. Anderson 70 Chairman of the Board (1) (2)
Richard P. Anderson 64 Director; President and Chief Executive
Officer
Christopher J. Anderson 39 Vice President Business Development
Group (3)
Daniel T. Anderson 38 Director; General Merchandise Manager
Retail Group (3)
Donald E. Anderson 67 Director; Science Advisor
Michael J. Anderson 42 Director; Vice President and General
Manager Retail Group (2)
Richard M. Anderson 37 Director; Vice President and General
Manager Industrial Products Group (2)
John F. Barrett 44 Director
Joseph L. Braker 43 Vice President and General Manager Ag
Group (3)
Dale W. Fallat 49 Director; Vice President Corporate
Services
Richard R. George 44 Corporate Controller and Principal
Accounting Officer (1)
Paul M. Kraus 61 Director (2)
Peter A. Machin 46 Vice President and General Manager Lawn
Products Group (1)
Beverly J. McBride 52 General Counsel and Corporate
Secretary (2)
Rene C. McPherson 69 Director (1) (2)
Donald M. Mennel 75 Director (1) (3)
Larry D. Rigel 52 Vice President Marketing (1)
Janet M. Schoen 34 Director (2)
Gary L. Smith 48 Corporate Treasurer (3)
(1) Member of Nominating and Advisory Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
Thomas H. Anderson - Held the position of Manager-Company Services of The
Andersons for several years and was named Senior Partner in 1987. When the
Corporation was formed in 1987, he was named Chairman of the Board. He served
as a General Partner of The Andersons and a member of its Managing Committee
from 1947 through 1987.
Richard P. Anderson - He was Managing Partner of The Andersons from 1984 to
1987 when he was named Chief Executive Officer. Served as a General Partner
of The Andersons and a member of its Managing Committee from 1947 through 1987
and has been a Director of the Corporation since its inception in 1987. He
is also a director of Centerior Energy Corporation, First Mississippi Corp.
and N-Viro, International Corp.
Christopher J. Anderson - Began full-time employment with the Partnership in
1983. He held several positions in the Grain Group, including Planning
Manager and Administrative Services Manager, until 1988 when he formed a
private consulting business. He returned to the Company in 1990 in his
present position.
Daniel T. Anderson - Began full-time employment with The Andersons in 1979.
He has served in various positions in the Retail Group since 1984, including
Store Manager and Retail Operations Manager. In 1990, he assumed the position
of General Merchandise Manager for the Retail Group. He was elected a
Director in 1990.
Donald E. Anderson - In charge of scientific research for the Partnership
since 1980, he semi-retired in 1992. He served as a General Partner of The
Andersons from 1947 through 1987 and has served the Corporation as a Director
since its inception in 1987.
Michael J. Anderson - Began his employment with The Andersons in 1978. He has
served in several capacities in the Grain Group and he held the position of
Vice President and General Manager Grain Group from 1990 to February 1994 when
he was named Vice President and General Manager of the Retail Group. He has
served as a Director of the Corporation since 1988.
Richard M. Anderson - Began his employment with The Andersons in 1986 as
Planning Analyst and was named the Manager of Technical Development in 1987.
In 1990, he assumed his present position. He has served as a Director since
1988.
John F. Barrett - He has served in various capacities at The Western and
Southern Life Insurance Company, including Executive Vice President and Chief
Financial Officer and President and Chief Operating Officer, and currently
serves as Chief Executive Officer. He is a director of Cincinnati Bell, Inc.
and Fifth Third Bancorp. He was elected a Director of the Corporation in
December 1992.
Joseph L. Braker - Began his employment with the Partnership in 1968. He held
several positions within the Grain area and in 1988, he was named Group Vice
President Grain. In 1990, he was named Vice President and General Manager Ag
Products Group and in February 1994 he was named Vice President and General
Manager Ag Group. He served as a General Partner of The Andersons from 1985
to 1987.
Dale W. Fallat - Began his employment with The Andersons in 1967 and in 1988
was named Senior Vice President Law and Corporate Affairs. He assumed his
present position in 1990. He served as a General Partner of The Andersons
from 1983 through 1987 and a member of its Managing Committee in 1986 and
1987. He has served as a Director of the Corporation since its inception in
1987.
Richard R. George - Began his employment with the Partnership in 1976 and has
served as Controller since 1979.
Paul M. Kraus - General partner in the law firm of Marshall & Melhorn. He has
been a Director of the Corporation since 1988.
Peter A. Machin - Began his employment with The Andersons in the Lawn Products
Group in 1987 as Sales Manager of Professional Products. In 1988 he was
promoted to Sales and Marketing Manager and assumed his present position in
1990.
Beverly J. McBride - Began her employment with The Andersons in 1976. She has
served as Assistant General Counsel, Senior Counsel and since 1987 as General
Counsel and Corporate Secretary.
Rene C. McPherson - He has been a Director of the Corporation since 1988 and
currently serves as a director of BancOne Corporation, Dow Jones & Company,
Inc., Mercantile Stores Company, Inc., Milliken & Company, and Westinghouse
Electric Corporation.
Donald M. Mennel - Retired Chairman of the Board and Chief Executive Officer
of the Mennel Milling Company. He began a private law practice in 1986.
Elected as a Director in 1990.
Larry D. Rigel - Began his employment with the Partnership in 1966. From 1987
to February 1994 was in charge of the Partnership's Retail operations and
currently serves as Vice President Marketing for the Company.
Janet M. Schoen - A former school teacher, she is currently a full-time
homemaker. She was elected a Director of the Corporation in 1990.
Gary L. Smith - Began his employment with the Partnership in 1980 and has
served as Treasurer since 1985.
Donald E., Richard P. and Thomas H. Anderson are brothers; Paul M. Kraus is
a brother-in-law. Christopher J. and Daniel T. Anderson are sons of Richard
P. Anderson and Janet M. Schoen is a daughter of Thomas H. Anderson. Michael
J. and Richard M. Anderson are nephews of the three brothers.
Executive Compensation
The Corporation provides all management services to the Partnership
pursuant to a Management Agreement entered into between the Partnership and
the Corporation as further described under "Certain Relationships and Related
Transactions - Management Agreement." The fee paid to the Corporation
includes an amount equal to the salaries and cost of all employee benefits,
and other normal employee costs, paid or accrued on behalf of the
Corporation's employees who are engaged in furnishing services to the
Partnership. The following table sets forth the compensation paid by the
Corporation to the Chief Executive Officer and the four highest paid executive
officers.
Summary Compensation Table
Annual Compensation All Other
Name and Position Year Salary Bonus Compensation (a)
Richard P. Anderson 1993 $308,333 $150,000 $4,497
President and Chief 1992 286,666 60,000 4,300
Executive Officer 1991 280,008 4,200
Thomas H. Anderson 1993 206,669 90,000 4,497
Chairman of the Board 1992 190,004 35,000 4,364
1991 185,004 4,238
Joseph L. Braker 1993 194,634 70,000 4,497
Vice President and General 1992 181,408 30,000 4,364
Manager Ag Products Group 1991 175,106 15,000 4,238
Larry Rigel 1993 162,558 15,000 4,497
Vice President and General 1992 151,924 30,000 4,364
Manager Retail Group 1991 146,876 4,238
Michael J. Anderson 1993 161,962 100,000 4,497
Vice President and General 1992 146,978 30,000 4,364
Manager Grain Group 1991 136,238 41,000 4,087
(a) Corporation's matching contributions to its 401(k) retirement plan.
Pension Plan
The Corporation has a Defined Benefit Pension Plan (the "Pension Plan")
which covers substantially all permanent and regular part-time employees. The
amounts listed in the table below are payable annually upon retirement at age
65 or older. A discount of six percent per year is applied for retirement
before age 65. The pension benefits are based on a single-life annuity and
have been reduced for Social Security covered compensation. The compensation
covered by the Pension Plan is equal to the employees' base pay, which in the
Summary Compensation Table is the executive's salary, but beginning in 1989,
was limited by the Internal Revenue Code to $200,000, adjusted for inflation,
and beginning in 1994 is limited to $150,000, which will also be adjusted for
inflation in future years. Each of the named executives has six years of
credited service.
Average Approximate Annual Retirement Benefit Based
Five-Year Upon the Indicated Years of Service
Compensation 5 Years 10 Years 15 Years 25 Years
$ 50,000 $ 3,292 $ 6,584 $ 9,877 $ 16,461
100,000 7,042 14,084 21,127 35,211
150,000 10,792 21,584 32,377 53,961
200,000 14,542 29,084 43,627 72,711
250,000 18,292 36,584 54,877 91,461
Directors' Fees
Directors who are not employees of the Corporation and who are not
members of the Anderson family receive an annual retainer of $10,000.
Directors who are not employees of the Corporation receive a fee of $600 for
each Board Meeting attended. There are three committees of the Board of
Directors: the Audit Committee; the Nominating and Advisory Committee; and
the Compensation Committee. The chairman of these committees receives a
retainer of $2,000 provided they are not an employee of the Corporation, and
members of the committees who are not employees of the Corporation receive
$400 for each meeting attended.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee includes the following executive officers and
directors: Michael J. Anderson, Richard M. Anderson, Richard P. Anderson (ex
officio), Thomas H. Anderson (ex officio), Dale W. Fallat, Paul M. Kraus,
Beverly J. McBride, Rene C. McPherson (chairman), and Janet M. Schoen. In
addition, Charles E. Gallagher, Director of Personnel, is an ex officio member
of the committee.
Certain Transactions - Alshire-Columbus:
The Partnership and certain of the directors and executive officers of
the Corporation are limited partners in Alshire-Columbus Limited Partnership
("Alshire-Columbus"), an Ohio limited partnership, which owns the
Partnership's Brice General Store in Columbus, Ohio. The store is leased to
the Partnership by Alshire-Columbus at an annual base rental of $732,000.
Additional rental payments are due if net sales exceed $35 million. The lease
is a "net lease" and has an initial term expiring in 2000, with three five-
year renewal periods and options to purchase the building, land and
improvements at the end of the initial term and each renewal period. The
Partnership believes that the terms of the Brice General Store lease are at
least as favorable to the Partnership as terms obtainable from other third
parties.
The Partnership contributed the land, at its cost ($1,367,000), for its
original limited partner interest. As original limited partner, the
Partnership has no economic interest in the income from operations of Alshire-
Columbus but will receive a preferential distribution upon any sale of the
real estate equal to the cost of the land plus an amount equal to the
aggregate cash distributions received by the limited partners in excess of
their capital contributions. The remaining cash proceeds from any sale of the
Brice General Store will be distributed to the limited partners - 75%; the
Partnership, as original limited partner - 24%; and the general partner - 1%.
The other limited partners of Alshire-Columbus contributed $1,450,000,
representing 35 limited partnership units. None of the directors and
executive officers of the Corporation or their family members own more than
one limited partnership unit, except for Richard P. Anderson, who owns two
units. In the aggregate, 8 3/4 units are owned by directors and executive
officers of the Corporation, and their family members own an additional four
units. The limited partners, other than the Partnership, have 99% of the
economic interest in the income from operations of Alshire-Columbus and the
general partner has a 1% economic interest.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement
The Corporation provides all personnel and management services to the
Partnership pursuant to a Management Agreement. The fee paid to the
Corporation for its services is an amount equal to (a) the salaries and cost
of all employee benefits, and other normal employee costs, paid or accrued on
behalf of the Corporation's employees who furnish services to the Partnership,
(b) reimbursable expenses incurred by the Corporation in connection with its
services to the Partnership, or on the Partnership's behalf, and (c) an amount
equal to $5,000 for each 1% of return on partners' capital up to a 15% annual
return on partners' capital, plus $7,500 for each 1% of return on partners'
capital between 15% and 25%, plus $10,000 for each 1% of return on partners'
capital greater than a 25% annual return to cover that part of the
Corporation's general overhead which is attributable to Partnership services
and to provide an element of profit to the Corporation. The management fee
incurred by the Partnership in 1993 totaled $63,107,331. See Note 2 to the
Partnership's Consolidated Financial Statements. Management believes that the
amount of the management fee paid to the Corporation is as favorable to the
Partnership as it would be if paid to an unaffiliated third party providing
similar management services. In this connection, approximately 88% of the
limited partners in the Partnership are also shareholders in the Corporation
and no one may own shares in the Corporation unless they are a limited partner
in the Partnership. In addition to the fee payable to the Corporation, the
Management Agreement also provides for certain other customary terms and
conditions, including termination rights, and requires the Corporation to make
its books and records available to the Partnership for inspection at
reasonable times.
Sublease Arrangement
The office building utilized by the Partnership is leased by the
Corporation from an unaffiliated lessor under a net lease expiring in 2000.
The Partnership subleases approximately 80% of the building from the
Corporation and pays the Corporation rent for the space it occupies. Under
the terms of the sublease, the Partnership also is responsible for insurance,
utilities, taxes, general maintenance, snow removal, lawn care and similar
upkeep expenses for the entire building. The Corporation reimburses the
Partnership for management and maintenance of the building, including the
space it does not occupy. The amount paid by the Partnership to the
Corporation for the portion of the building occupied by the Partnership is
designed to reimburse the Corporation for its equivalent cost under the
Corporation's lease. In 1993, the rental payments made by the Partnership to
the Corporation, net of the reimbursement for management and maintenance of
the building was $529,982, which is included in the total management fee
referred to under "Management Agreement" above. See Note 2 to the
Partnership's Consolidated Financial Statements.
Alshire-Columbus
See "Management - Compensation Committee Interlocks and Insider
Participation - Certain Transactions - Alshire-Columbus."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No Limited Partner beneficially owns as much as 5% of the Partnership's
total capital. As of March 1, 1994, the descendants of Harold and Margaret
Anderson, founders of the Partnership, beneficially held Partnership capital
in the aggregate amount of $39,349,105, constituting 72% of the Partnership's
total capital of $54,880,282 as of that date. All capital amounts as of March
1, 1994 are before the allocation of Partnership income for 1994. The
Anderson family members also own a total of 80% of the Class A (non-voting)
Shares and 79% of the outstanding Class B (voting) Shares of the Corporation.
The Partnership knows of no arrangements which may at a subsequent date
result in a change in control of the Partnership.
DESCRIPTION OF DEBENTURES
The Debentures offered hereby are to be issued under an Indenture, dated
as of October 1, 1985, as supplemented by a Thirteenth Supplemental Indenture,
dated as of January 1, 1994, between the Partnership and Fifth Third Bank
of Northwestern Ohio, N.A. ("Fifth Third Bank"), as Trustee (the "Trustee").
Under the Thirteenth Supplemental Indenture the current successor Partnership
assumed all Partnership obligations under the Indenture, including the payment
of principal and interest on the previously issued debentures. Except for the
rate of interest and years to maturity, the terms and conditions of the
Debentures, including all debentures previously issued under the Indenture,
are identical. The following summaries of certain provisions of the Indenture
are not complete and are subject to and qualified by reference to all the
provisions of and definitions in the Indenture, a copy of which is filed as
an exhibit to the Registration Statement. Wherever particular Sections or
defined terms of the Indenture are referred to, it is intended that such
Sections or defined terms shall be incorporated herein by reference.
General
The Debentures are not limited in principal amount by the Indenture
either in the aggregate or as to any series. The Debentures will be unsecured
direct obligations of the partnership and any successor entities. In this
connection, the Indenture provides that the Partnership shall not consolidate
with or merge into any other partnership or corporation or convey or transfer
its properties and assets substantially as an entirety to any corporation,
partnership or other entity or person, unless the successor expressly assumes,
by a supplemental indenture, the due and punctual payment of the principal of,
and interest on, all outstanding debentures issued under the Indenture,
including the Debentures. A dissolution of the Partnership followed by the
continuation of the Partnership's business and formation of a successor
entity, shall be deemed to constitute a transfer of the Partnership's
properties and assets substantially as an entirety for purposes of the
Indenture (Section 801).
Although it has no present plans, understandings or arrangements, the
Partnership may in the future, in order to meet capital requirements, issue
unsecured debt, which by its terms would be senior to the Debentures. Upon
any insolvency or bankruptcy proceedings, or any other receivership,
liquidation, reorganization or similar proceedings, the holders of any such
senior debt, or of any secured debt of the Partnership would be entitled to
receive payment in full before the holders of the Debentures are entitled to
receive any payment of principal or interest on the Debentures. The Indenture
contains no restriction against the issuance by the Partnership of additional
indebtedness, including unsecured debt senior to the Debentures, or secured
debt. The Debentures are of equal rank with other debenture bonds of the
Partnership due through 2003 at interest rates ranging from 6.5% to 11.4%.
See Note 7 of Notes to Consolidated Financial Statements with respect to the
Partnership's secured borrowings.
The Indenture contains no minimum working capital, current ratio or
other such requirements, or any protective provisions in the event of a highly
leveraged transaction. No such transactions are contemplated.
The Debentures will be issued as of the first of the month next
following the month in which payment for the Debentures is received by the
Partnership. The Debentures offered hereby will be due five years or ten
years from their Original Issue Date, subject to the right of the Partnership
to redeem the Debentures at any time by payment of the principal amount plus
accrued interest to the date of redemption (Section 1101) and will bear
interest at the rate per annum shown on the front cover of this Prospectus,
payable annually, commencing one year from their Original Issue Date, to the
holder of record at the close of business on the fifteenth day next preceding
the Interest Payment Date. (Section 301.) Principal and interest will be
payable, and the Debentures will be transferable, at the office of the
Trustee, 606 Madison Avenue, Toledo, Ohio 43604, provided that any payment
of interest or principal may be made at the option of the Partnership by check
mailed to the address of the person entitled thereto as it appears on the
Debenture Register. (Sections 301 and 307.)
The Debentures will be issued only in fully registered form without
coupons in denominations of $1,000 or any multiple thereof. (Section 302.)
No service charge will be made for any transfer or exchange of Debentures, but
the Partnership may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. (Section 305.)
Debentures may be issued in series from time to time upon the written
order of the Partnership in such aggregate principal amount as is authorized
by the Board of Directors of the Corporation. (Section 311.) The Debentures
do not provide for any sinking fund. As of December 31, 1993, there were
outstanding Debentures of the Partnership in the total principal amount of
$22,190,000.
Modification and Waiver
Modification and amendment of the Indenture may be made by the
Partnership and the Trustee with the consent of the holders of 66 2/3% in
principal amount of the outstanding Debentures, and, in case one or more but
less than all the series of Debentures issued under the Indenture are so
affected, of at least 66 2/3% in principal amount of the Debentures of each
series affected thereby consenting as a separate class. No such modification
or amendment may, without the consent of the holder of each Debenture affected
thereby, (a) change the stated maturity date of the principal of, or any
installment of interest on, any Debenture; (b) reduce the principal amount of,
or the interest on, any Debenture; (c) change the place or currency of payment
of principal or interest on any Debenture; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debenture;
(e) reduce the above-stated percentage of holders of Debentures necessary to
modify or amend the Indenture; or (f) modify the foregoing requirements or
reduce the percentage of outstanding Debentures necessary to waive any past
default to less than a majority. The holders of 66 2/3% in principal amount
of the outstanding Debentures may waive compliance by the Partnership with
certain restrictions. (Sections 902 and 1006.)
Events of Default
The following will be events of default: (a) failure to pay principal
when due; (b) failure to pay any interest when due, continued for 30 days; (c)
failure to perform any other covenant of the Partnership, continued for 60
days after written notice; and (d) certain events in bankruptcy, insolvency
or reorganization. The Trustee may withhold notice to the holders of
Debentures of any default (except in the payment of principal or interest) on
the Debentures if it considers such withholding to be in the interests of the
holders. (Sections 501 and 602.)
If a default shall happen and be continuing, either the Trustee or the
holders of at least 25% in principal amount of the Debentures may accelerate
the maturity of all outstanding Debentures, and prior to acceleration of
maturity of the Debentures, the holders of a majority in principal amount may
waive any past default under the Indenture, except a default in the payment
of principal or interest. The holders of a majority in principal amount of
the outstanding Debentures may waive a default resulting in acceleration of
the Debentures, but only if all defaults have been remedied and all payments
due (other than by acceleration) have been made. (Sections 502 and 513.)
Each holder of a Debenture has the unconditional right to receive the
payment of principal and interest when due and to institute suit for the
enforcement of such payment. (Section 508.)
The Trustee
Subject to provisions relating to its duties in the case of default, the
Trustee is under no obligation to exercise any of its rights or powers under
the Indenture at the request, order or direction of any holders, unless such
holders have offered to the Trustee reasonable indemnity. (Section 603.)
Subject to such provisions for indemnification, the holders of a majority in
principal amount of the outstanding Debentures will be entitled to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or of exercising any trust or power conferred upon the
Trustee. (Section 512.)
The Partnership is required to furnish to the Trustee annually a
statement as to performance or fulfillment of covenants, agreements or
conditions in the Indenture and as to the absence of default. (Section 1004.)
PARTNERSHIP AGREEMENT
A description of certain provisions of the Partnership Agreement and
certain of the rights, duties and obligations of the General Partner and of
Limited Partners under the Ohio Revised Uniform Limited Partnership Act, is
set forth below. This description is not complete and is qualified by
reference to the full text of the Partnership Agreement, a copy of which is
filed as an exhibit to the Registration Statement.
General Partner
The General Partner, which is the Corporation, is liable for all
obligations of the Partnership and accountable to the Partnership as a
fiduciary. Accordingly, the General Partner must exercise good faith and
integrity in handling Partnership affairs. The General Partner, except as
indicated below, has the authority to make all decisions with respect to the
management of the Partnership.
The General Partner may admit such additional Limited Partners as it,
in its sole discretion, determines appropriate. Without the written consent
or ratification by all of the Limited Partners, the General Partner has no
authority to (i) do any act in contravention of the Partnership Agreement;
(ii) do any act which would make it impossible to carry on the ordinary
business of the Partnership; (iii) confess a judgment against the Partnership;
(iv) possess Partnership property, or assign its rights in specific
Partnership property, for other than a Partnership purpose; (v) admit another
General Partner or (vi) sell or otherwise dispose of all or substantially all
the assets of the Partnership.
Limited Partners
Under Ohio's Revised Uniform Limited Partnership Act, Limited Partners
are liable for Partnership obligations only to the extent of their capital
accounts. The Limited Partners do have rights to (i) have the Partnership
books kept at the principal offices of the Partnership and to inspect and copy
them at any time; (ii) have on demand true and full information of all matters
affecting the Partnership, and a formal account of Partnership affairs
whenever circumstances render such account just and reasonable; and (iii) have
a dissolution and winding up by decree of court.
Allocation of Income and Losses
Net profits and losses are allocated to the General Partner and Limited
Partners pro rata on the basis of the capital account of each partner.
Charitable Contributions
Each December, the General Partner estimates the net income of the
Partnership and determines an aggregate dollar amount of charitable
contributions to be made by the Partnership for that year. Charitable
contributions are allocated to the General Partner and each Limited Partner
in the same manner as net income and losses are allocated.
Term and Dissolution
The Partnership shall continue in force until dissolved by (i) the
written agreement of the General and all the Limited Partners, (ii) the
withdrawal, transfer of interest, dissolution, bankruptcy or appointment of
a receiver of the General Partner, or (iii) the transfer of interest of any
Limited Partner. In the event of dissolution of the Partnership, all
partners, within ninety (90) days after the event of dissolution, may agree
in writing to continue the business of the Partnership and to the appointment
of one or more additional general partners if necessary or desired. In the
event that the business of the Partnership is carried on, the new partnership
has the right to carry on the business under the same name. A dissolution
followed by the formation of a new partnership would not, by itself, change
the manner in which allocations to partners are made. In the event of
dissolution of the Partnership and a decision by some of the partners to form
a new partnership, the capital account of any General or Limited Partner who
does not become a member of the new partnership shall be treated as if said
person or persons had caused the dissolution.
Any partner may withdraw at will, but the withdrawal of a Limited
Partner shall not cause a dissolution of the Partnership. Likewise, the death
of a Limited Partner shall not cause a dissolution of the Partnership.
In the event of the death or withdrawal of a Limited Partner or in the
event of dissolution and formation of a new partnership, the Partnership,
including any successor partnership, will continue to allocate profits and
losses to the capital account of any partner who has died, withdrawn, caused
the dissolution, or ceased to become a member of the new partnership, in the
same manner as allocations to all other capital accounts until the capital
account has been paid. Payment of the capital account shall be made no later
than the end of the calendar year of the fifth anniversary of the date of
death, withdrawal, dissolution or ceasing to become a member of the new
partnership and the amount paid shall be equal to the balance of the capital
account as shown on the Partnership's books at the time of payment.
The Partnership, including any successor partnership, as an alternative,
may pay to the partner (or his or her estate) who has died, withdrawn, caused
the dissolution or who has not become a member of the new partnership formed
after dissolution, an amount equal to such partner's capital account as shown
on the Partnership books as of the date of death, withdrawal, dissolution, or
ceasing to become a member of the new partnership, adjusted by the allocated
share of such partner in the net profits, losses and contributions for that
portion of the year prior to such date. No allowance shall be made for
goodwill, trade name or other intangible assets, except as such assets have
been reflected on the Partnership books immediately prior to the date of
payment.
Payment of a capital account under the alternative method described in
the immediately preceding paragraph, shall be made no later than the end of
the calendar year of the fifth anniversary of the date of death, withdrawal,
dissolution, or ceasing to become a member of the new partnership, with
interest on the unpaid balance payable annually. The interest rate shall be
determined by the General Partner and shall be not less than six percent (6%)
nor more than two percent (2%) over the then prime rate of Citibank, N.A. The
interest rate will be established initially and may remain the same throughout
the period of payment or may be changed annually, as the General Partner shall
elect.
In the event all partners choose to voluntarily dissolve the Partnership
and not form a new partnership or in the event the partners do not choose to
form a new partnership after any other dissolution, all partners shall
continue to share profits and losses during the period after dissolution in
the same manner as before dissolution. Any gain or loss on disposition of
Partnership property after dissolution shall be credited or charged to the
partners in the same manner and in the same proportion as ordinary profits and
losses are credited or charged.
LEGAL MATTERS
The legality of the Debentures offered hereby and matters with respect
to Ohio law have been passed on by Beverly J. McBride, Esq., General Counsel
and Corporate Secretary of the Corporation, and a Limited Partner of the
Partnership whose capital account on March 1, 1994, was $205,797, exclusive
of 1994 income. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C.,
have acted as special counsel to the Partnership in this offering with respect
to certain legal matters under the Securities Act of 1933 and the Trust
Indenture Act of 1939.
EXPERTS
The consolidated financial statements of The Andersons (a partnership)
at December 31, 1993 and 1992, and for each of the three years in the period
ended December 31, 1993, and the balance sheets of The Andersons Management
Corp. at December 31, 1993 and 1992, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
REGISTRATION STATEMENT
The Registrant has filed with the Securities and Exchange Commission,
Washington, D.C. a Registration Statement (the "Registration Statement") under
the Securities Act of 1933 with respect to the securities offered hereby. For
further information reference is made to the Registration Statement and to the
Exhibits thereto.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made such information or representations must not
be relied upon as having been authorized by the Partnership. This Prospectus
does not constitute an offer to sell or a solicitation of any offer to buy any
securities other than the Debentures to which it relates, or an offer to or
solicitation of any person in any state or other jurisdiction in which such
offer of solicitation would be unlawful. Neither delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create an
implication that there has been no change in the affairs of the Partnership
since the date hereof.
Index to Financial Statements
The Andersons (A Partnership)
Audited Consolidated Financial Statements:
Report of Independent Auditors
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Partners' Capital
Notes to Consolidated Financial Statements
The Andersons Management Corp.
Report of Independent Auditors
Balance Sheets
Notes to Balance Sheets
Report of Independent Auditors
Partners
The Andersons
We have audited the accompanying consolidated balance sheets of The Andersons
(a partnership) and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, cash flows and changes in partners'
capital for each of the three years in the period ended December 31, 1993.
Our audits also included the financial statement schedules listed in the index
at Item 14(a). These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Andersons
and subsidiaries at December 31, 1993 and 1992, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/Ernst & Young
ERNST & YOUNG
Toledo, Ohio
February 7, 1994
The Andersons and Subsidiaries
Consolidated Statements of Income
Year ended December 31
1993 1992 1991
Sales and merchandising revenues $776,457,070 $753,166,752 $643,063,190
Other income 3,763,737 3,834,457 3,824,408
780,220,807 757,001,209 646,887,598
Costs and expenses:
Cost of sales and revenues 650,143,742 639,754,086 541,906,184
Operating, administrative and
general expenses (Note 2) 112,829,334 100,791,991 93,167,633
Interest expense 6,168,371 6,325,440 7,297,735
769,141,447 746,871,517 642,371,552
Income from continuing operations 11,079,360 10,129,692 4,516,046
Discontinued operations (Note 3):
Loss from discontinued
operations - (396,177) (1,690,737)
Loss on sale of discontinued
operations - (2,097,767) -
Net income $ 11,079,360 $ 7,635,748 $ 2,825,309
Net income (loss) was allocated to:
General partner:
From continuing operations $ 145,526 $ 124,871 $ 55,353
From discontinued operations - (30,743) (20,723)
145,526 94,128 34,630
Limited partners:
From continuing operations 10,933,834 10,004,821 4,460,693
From discontinued operations - (2,463,201) (1,670,014)
10,933,834 7,541,620 2,790,679
$ 11,079,360 $ 7,635,748 $ 2,825,309
Net income (loss) allocation per
$1,000 of partners' capital:
Weighted average capital for
allocation purposes $ 47,405,022 $ 43,101,473 $ 41,938,671
Allocation per $1,000:
From continuing operations $ 234 $ 235 $ 107
From discontinued operations - (58) (40)
$ 234 $ 177 $ 67
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Balance Sheets
December 31
1993 1992
Assets
Current assets:
Cash and cash equivalents $ 3,936,955 $ 1,365,906
Accounts receivable:
Trade accounts, less allowance for
doubtful accounts of $1,178,000 in
1993; $775,000 in 1992 60,036,382 40,826,103
Margin deposits 15,320,979 3,123,451
75,357,361 43,949,554
Inventories (Note 4) 211,023,651 148,268,898
Prepaid expenses 858,941 543,492
Total current assets 291,176,908 194,127,850
Other assets:
Investments in and advances to affiliates 942,053 1,069,591
Investments and other assets 3,965,729 3,463,679
4,907,782 4,533,270
Property, plant and equipment (Notes 5 and 7) 60,417,088 56,839,517
$356,501,778 $255,500,637
Liabilities and partners' capital
Current liabilities:
Notes payable (Note 6) $ 87,900,000 $ 23,000,000
Accounts payable for grain 83,712,076 64,745,380
Other accounts payable 58,896,317 54,033,898
Amounts due General Partner (Note 2) 4,173,287 2,669,529
Accrued expenses 7,496,181 6,720,978
Current maturities of long-term debt 1,992,000 2,860,000
Total current liabilities 244,169,861 154,029,785
Amounts due General Partner (Note 2) 2,413,041 1,756,451
Long-term debt (Note 7) 52,259,120 46,077,319
Deferred gain 1,145,151 1,492,949
Minority interest 1,103,892 1,024,326
Partners' capital:
General partner 761,839 622,659
Limited partners 54,648,874 50,497,148
55,410,713 51,119,807
$356,501,778 $255,500,637
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31
1993 1992 1991
Operating activities
Net income $ 11,079,360 $ 7,635,748 $ 2,825,309
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,109,223 7,010,579 7,053,977
Amortization of deferred gain (385,956) (373,238) (386,200)
Minority interest in net
income of subsidiaries 236,224 154,392 88,879
Payments to minority interests (166,198) (132,896) (114,139)
Equity in undistributed loss
of affiliates - 4,255 133,439
Provision for losses on
receivables, investments and
other assets 909,724 763,677 930,456
(Gain) loss on sale of
property, plant and
equipment (1,107,707) (1,645,421) 3,293
Loss on sale of discontinued
operations - 1,582,630 -
Changes in operating assets
and liabilities:
Accounts receivable (32,109,849) (5,866,574) (4,250,862)
Inventories (61,137,730) 37,905,112 (55,339,694)
Prepaid expenses and
other assets (1,255,649) (501,424) (230,024)
Accounts payable for grain 18,966,696 (3,086,492) 6,542,586
Other accounts payable and
accrued expenses 6,719,097 5,074,170 (696,159)
Net cash provided by (used in)
operating activities (51,142,765) 48,524,518 (43,439,139)
Investing activities
Purchases of property, plant
and equipment (10,808,521) (6,590,045) (6,670,883)
Proceeds from sale of property,
plant and equipment 1,696,989 2,586,539 43,662
Proceeds from sale of
discontinued operations - 1,299,340 -
Payments received from affiliates 149,999 5,145 330,200
Net cash used in investing
activities (8,961,533) (2,699,021) (6,297,021)
Financing activities
Net increase (decrease) in
short-term borrowings 64,150,000 (45,330,000) 57,000,000
Proceeds from issuance of
long-term debt 22,753,656 16,022,652 30,216,000
Payments of long-term debt (17,439,855) (17,887,109) (33,555,721)
Payments to partners and
other deductions from
capital accounts (7,212,084) (3,177,162) (6,250,492)
Capital invested by partners 423,630 4,153,500 121,250
Net cash provided by (used in)
financing activities 62,675,347 (46,218,119) 47,531,037
Increase (decrease) in cash and
cash equivalents 2,571,049 (392,622) (2,205,123)
Cash and cash equivalents at
beginning of year 1,365,906 1,758,528 3,963,651
Cash and cash equivalents at
end of year $ 3,936,955 $ 1,365,906 $ 1,758,528
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Statements of Changes in Partners' Capital
Year ended December 31
1993 1992 1991
General partner capital
Balance at beginning of year $ 622,659 $ 531,322 $ 546,453
Amounts credited (charged)
to capital:
Net income for the year 145,526 94,128 34,630
Charitable contributions (6,346) (2,791) (442)
Distributions - - (49,319)
139,180 91,337 (15,131)
Balance at end of year $ 761,839 $ 622,659 $ 531,322
Limited partners' capital
Balance at beginning of year $50,497,148 $41,976,399 $45,265,201
Amounts credited (charged)
to capital:
Net income for the year 10,933,834 7,541,620 2,790,679
Increase in invested capital 423,630 4,153,500 121,250
Charitable contributions (476,772) (223,623) (35,597)
Withdrawals (827,573) (899,793) (1,016,214)
Distributions (5,901,393) (2,050,955) (5,148,920)
4,151,726 8,520,749 (3,288,802)
Balance at end of year $54,648,874 $50,497,148 $41,976,399
Total partners' capital
--at end of year $55,410,713 $51,119,807 $42,507,721
See accompanying notes.
The Andersons and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1993
1. Significant Accounting Policies
Principles of Consolidation and Related Matters: The consolidated financial
statements include the accounts of The Andersons (the Partnership) and its
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation. Other affiliated entities are not material.
Cash and Cash Equivalents: The Partnership considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. The carrying value of these assets approximate their fair value.
Inventories: Inventories of grain are valued on the basis of replacement
market prices prevailing at the end of the year. Such inventories are
adjusted for the amount of gain or loss (based on year-end market price
quotations) on open grain contracts at the end of the year. Contracts in the
commodities futures market, maintained for hedging purposes, are valued at
market at the end of the year and income or loss to that date is recognized.
Grain contracts maintained for other merchandising purposes are valued in a
similar manner and net margins from these transactions are included in sales
and merchandising revenues.
All other inventories are stated at the lower of cost or market. Cost is
determined by the average cost or retail methods.
Property, Plant and Equipment: Land, buildings and equipment are carried at
cost. For assets acquired subsequent to 1983, depreciation is provided over
the estimated useful lives of the individual assets by the straight-line
method. For assets acquired prior to 1984, depreciation is provided over the
estimated useful lives of the individual assets by accelerated methods.
Accounts Payable for Grain: The liability for grain purchases on which price
has not been established (delayed price), has been computed on the basis of
replacement market at the end of the year, adjusted for the applicable premium
or discount.
Income Taxes: No provision has been made for federal income taxes on the
Partnership's net income since such amounts are includable in the federal
income tax returns of its partners. At December 31, 1993, the Partnership's
net assets for financial reporting purposes were approximately $3,800,000
greater than their corresponding tax bases, as a result of temporary
differences in when revenues and expenses are recognized for financial
reporting purposes and in determining taxable income.
Preopening Expenses: Preopening expenses are charged to income when incurred.
Deferred Gain: The deferred portion of a gain from the sale and leaseback of
a retail store is being amortized into income over the ten-year leaseback
period by the straight-line method.
Income Allocations and Cash Distributions to Partners: The Partnership
Agreement reflects each partner's capital account as of the beginning of each
year. Partners' capital, used in determining the allocation of net income or
loss to each partner, is weighted to reflect cash and tax distributions made
to partners and additional investments made by partners during the year. The
general partner and each limited partner receive the same allocation of net
income or loss per $1,000 of partners' capital.
Partners may elect to receive quarterly cash distributions as declared by the
general partner. Partners may also elect to receive quarterly tax
distributions or an annual tax distribution. The final 1993 tax distributions
of approximately $1,500,000 will be paid to partners in 1994 from the year end
partners' capital balances.
Charitable Contributions: Provision is made in the Partnership Agreement for
contributions to various charitable, educational and other not-for-profit
institutions. It is the policy of the Partnership to account for charitable
contributions as charges to partners' capital, and they are not deducted in
determining Partnership net income.
Reclassifications: Certain amounts in the 1992 and 1991 financial statements
have been reclassified to conform with the 1993 presentation. These
reclassifications had no effect on net income.
2. Transactions with General Partner
The Andersons Management Corp. (the Corporation) is the sole general partner
of the Partnership and provides all management and labor services to the
Partnership. In exchange for providing these services, the Corporation
charges the Partnership a management fee equal to: a) the salaries and cost
of all employee benefits and other normal employee costs, paid or accrued for
services performed by the Corporation's employees on behalf of the
Partnership, b) reimbursable expenses incurred by the Corporation in
connection with its services to the Partnership, or on the Partnership's
behalf, and c) an amount based on an achieved level of return on partners'
capital to cover the Corporation's general overhead and to provide an element
of profit to the Corporation.
Employee benefit costs include the cost of pension and other postretirement
benefits. In 1993, the Corporation changed its method of accounting for
postretirement health insurance benefits. The Corporation now accrues for the
cost of providing these benefits during the employees' working career rather
than recognizing the cost of these benefits as claims are paid. The
Corporation has elected to recognize the accrued benefits earned by employees
as of January 1, 1993 (transition obligation) prospectively, which means this
cost will be recognized as a component of annual postretirement benefit costs
over a period of approximately 20 years. The change in the method of
accounting for these benefits increased management fees charged to the
Partnership by approximately $850,000 in 1993.
The Partnership generally pays the Corporation for salaries and employee
benefits as those costs are paid by the Corporation. Amounts owed to the
Corporation relating to postretirement benefits that will not be paid within
one year have been classified as a long-term liability.
The Partnership leases office space from the Corporation under a lease
expiring May 1, 2000. Net lease payments amounted to $529,982, $516,344 and
$498,699 in 1993, 1992 and 1991, respectively.
The components of the management fee and rent incurred by the Partnership
consisted of the following:
Year Ended December 31
1993 1992 1991
Salaries and wages $47,706,731 $43,356,247 $41,103,580
Employee benefits 14,619,453 13,426,059 13,721,230
Rent for office space and
other reimbursable expenses 641,491 516,344 498,699
Achieved level of return of
the Partnership 139,656 89,618 34,090
Totals $63,107,331 $57,388,268 $55,357,599
3. Discontinued Operations
In April 1992, the Partnership decided to dispose of its pet products
distribution business, which was represented by a majority investment in B&R
Pet Supplies, Inc. (B&R). During 1992, the Partnership sold the operations
of B&R for approximately $1,300,000, which resulted in a loss of $1,582,630.
Losses from operations from April 1, 1992 to the date of sale amounted to
$515,137. This transaction has been accounted for as a discontinued
operation.
Sales from discontinued operations were approximately $9,780,000 and
$18,700,000 for the years ended December 31, 1992 and 1991, respectively.
4. Inventories
Major classes of inventory are as follows:
December 31
1993 1992
Grain $135,346,670 $ 85,587,197
Agricultural products 16,170,908 20,994,809
Merchandise 32,497,574 26,726,585
Lawn and corn cob products 20,579,022 12,904,099
Supplies and other 6,429,477 2,056,208
$211,023,651 $148,268,898
5. Property, Plant and Equipment
The components of property, plant and equipment are as follows:
December 31
1993 1992
Land $ 9,457,460 $ 9,687,951
Land improvements and leasehold improvements 19,378,810 17,493,509
Buildings and storage facilities 62,022,387 60,809,927
Machinery and equipment 80,141,615 75,377,099
Construction in progress 1,707,564 1,331,205
172,707,836 164,699,691
Less allowances for depreciation
and amortization 112,290,748 107,860,174
$ 60,417,088 $ 56,839,517
6. Banking and Credit Arrangements
The Partnership has available lines of credit for unsecured short-term debt
with banks aggregating $117,000,000. The Partnership can exceed certain of
these base lines of credit as needed on a temporary basis without additional
fee costs. The credit arrangements, the amounts of which are adjusted from
time to time to meet the Partnership's needs, do not have termination dates
but are reviewed at least annually for renewal. The terms of certain of these
lines of credit provide for annual commitment fees.
The following information relates to borrowings under short-term lines of
credit during the years indicated.
1993 1992 1991
Maximum borrowed $100,500,000 $104,000,000 $84,000,000
Average daily amount borrowed
(total of daily borrowings
divided by number of days
in period) 60,404,384 50,341,667 41,650,972
Average interest rate
(computed by dividing interest
expense by average daily
amount outstanding) 4.15% 5.20% 6.48%
At December 31, 1993, the Partnership had an interest rate swap agreement and
an interest rate cap agreement with notional amounts of $10,000,000 and
$10,000,000, respectively. These financial instruments are used to convert
the variable interest rate of its short-term borrowings to intermediate-term
fixed interest rates of 4.99% and 4.86%, respectively. These agreements were
entered into to reduce the risk (hedge) to the Partnership of rising interest
rates and expire in April 1994.
7. Long-Term Debt
Long-term debt consists of the following:
December 31
1993 1992
Notes payable relating to revolving
credit facility $ 7,500,000 $ 5,000,000
Note payable, variable rate
(5.00% at December 31, 1993), payable
$800,000 annually, due 1997 6,800,000 7,600,000
Other notes payable 888,409 910,512
Industrial development revenue bonds:
6.0%, due 1993 - 500,000
6.5%, due 1999 5,000,000 5,000,000
Variable rate (4.02% at December 31, 1993),
due 1995 to 2004 8,114,000 8,514,000
Variable rate (2.37% at December 31, 1993),
due 2025 3,100,000 3,100,000
Debenture bonds:
8.5% to 9.6%, due 1993 - 1,007,000
9.2% to 11.4%, due 1995 and 1996 7,586,000 7,667,000
6.5% to 7.2%, due 1997 and 1998 4,894,000 1,482,000
10% to 10.5%, due 1997 and 1998 2,849,000 2,852,000
10%, due 2000 and 2001 2,774,000 2,780,000
7.5% to 8.5%, due 2002 and 2003 4,061,000 1,803,000
Other bonds, 4% to 9.6% 684,711 721,807
54,251,120 48,937,319
Less current maturities 1,992,000 2,860,000
$52,259,120 $46,077,319
The Partnership has a $10,000,000 revolving line of credit with a bank which
bears interest based on the LIBOR rate (4.25% to 4.345% at December 31, 1993).
Borrowings under this agreement totalled $7,500,000 at December 31, 1993.
This revolving line of credit replaced the $5,000,000 revolving line of credit
with a bank and bearing interest based on the LIBOR rate that was outstanding
at December 31, 1992. The current revolving line of credit expires on June
30, 1996.
The variable rate note payable and the industrial development revenue bonds
are collateralized by first mortgages on certain facilities and related
property with a cost aggregating approximately $42,700,000.
The various underlying loan agreements, including the Partnership's revolving
line of credit, contain certain provisions which require the Partnership to,
among other things, maintain minimum working capital of $28,000,000 and net
Partnership equity (as defined) of $40,000,000, limit the addition of new
long-term debt, limit its unhedged grain position to 2,000,000 bushels, and
restrict the amount of certain payments to partners.
The aggregate annual maturities, including sinking fund requirements, through
1998 of long-term debt are as follows: 1994--$2,539,000; 1995--$3,300,000;
1996--$18,070,000; 1997--$13,169,000 and 1998--$6,184,000. These amounts
include annual maturities of long-term debt relating to the purchase of a
retail store on February 1, 1994 as discussed in Note 8. Long-term debt
maturing in 1994 excluding this purchase is $1,992,000.
Interest paid (including short-term lines of credit) amounted to $5,425,491,
$6,595,883 and $6,594,646 in 1993, 1992 and 1991, respectively.
8. Leases
The Partnership and subsidiaries lease certain equipment and real property
under operating leases. Rental expense for all operating leases amounted to
$7,095,276, $7,400,356 and $7,695,639 in 1993, 1992 and 1991, respectively.
The leases for three retail stores and one agricultural facility contain
provisions for contingent lease payments based on sales volume. One lease is
for a retail store which is owned by a partnership in which certain directors
and executive officers of the General Partner hold limited partnership
interests. Rental expense for this lease amounted to $742,108, $741,523 and
$1,034,245 in 1993, 1992 and 1991, respectively.
On February 1, 1994 the Partnership purchased a retail store under lease for
$5,200,000 and eliminated future minimum rentals amounting to $2,631,600 at
December 31, 1993. Future minimum rentals under operating leases, after
excluding the lease for the retail store, are as follows:
1994 $ 6,054,590
1995 5,047,777
1996 4,191,547
1997 3,534,500
1998 3,326,495
Future years 4,842,676
$26,997,585
9. Fair Values of Financial Instruments
Most of the Partnership's short and long-term debt is borrowed under
instruments which provide for variable interest rates, or the Partnership has
agreements which fix the rate for intermediate periods. The Partnership
considers the carrying value of these liabilities to approximate their fair
value. Debenture bonds are generally issued at fixed rates of interest for
periods of five or ten years. Based upon current interest rates offered by
the Partnership on similar bonds, the Partnership believes that debenture
bonds outstanding at December 31, 1993 and 1992, with aggregate principal
balances of $22,241,000 and $17,636,000, respectively, have a fair value of
approximately $23,750,000 and $18,640,000, respectively.
10. Commitments
The Partnership has, in the normal course of its business, entered into
contracts to purchase and sell certain items of inventory in future periods
and has interest in other commodity contracts requiring performance in future
years. Management does not anticipate any significant net losses resulting
from such contracts.
11. Segments of Business
The Partnership's business includes grain merchandising and the operation of
terminal grain elevator facilities. Another significant part of the business
involves the distribution of agricultural products, primarily fertilizer. The
Partnership also is engaged in the operation of retail stores, the production
and distribution of lawn and corn cob products and rail car leasing and
repair.
The segment information includes the allocation of expenses shared by one or
more segments. Although management believes such allocations are reasonable,
the operating information does not necessarily reflect how such data might
appear if the segments were operated as separate businesses.
Year Ended December 31
1993 1992 1991
Revenues:
Grain operations:
Sales to unaffiliated
customers $416,242,442 $423,722,972 $342,223,031
Intersegment sales 37,893 241,145 73,447
Merchandising revenue and
other income 23,599,472 16,975,690 14,781,082
439,879,807 440,939,807 357,077,560
Agricultural products:
Sales to unaffiliated
customers 104,648,079 93,875,811 96,905,378
Intersegment sales 3,067,592 2,468,205 2,388,643
Merchandising revenue and
other income 3,750,561 3,032,268 4,310,214
111,466,232 99,376,284 103,604,235
Retail stores:
Sales to unaffiliated
customers 155,424,855 149,090,921 139,398,055
Other income 118,337 82,344 73,452
155,543,192 149,173,265 139,471,507
Lawn and corn cob products
and other:
Sales to unaffiliated
customers 71,668,255 64,976,326 43,839,610
Intersegment sales 730,135 819,310 677,195
Other income 678,710 553,502 323,944
73,077,100 66,349,138 44,840,749
Other income 4,090,096 4,691,375 5,032,832
Eliminations--intersegment sales (3,835,620) (3,528,660) (3,139,285)
Total revenues $780,220,807 $757,001,209 $646,887,598
Operating profit:
Grain operations $ 11,206,499 $ 7,382,088 $ 8,019,496
Agricultural products 3,365,102 2,337,950 1,762,059
Retail stores 1,639,953 4,062,370 1,643,177
Lawn and corn cob products
and other 4,985,651 4,517,401 2,562,221
Total operating profit 21,197,205 18,299,809 13,986,953
Other income 2,063,567 2,533,177 2,328,942
Interest expense (6,168,371) (6,325,440) (7,297,735)
General expenses (6,013,041) (4,377,854) (4,502,114)
Income from continuing operations $ 11,079,360 $ 10,129,692 $ 4,516,046
Identifiable assets:
Grain operations $197,352,136 $121,316,208 $164,811,996
Agricultural products 46,712,717 47,601,783 32,150,375
Retail stores 56,558,711 48,174,786 46,332,580
Lawn and corn cob products
and other 44,091,096 29,021,506 27,874,702
General assets 11,787,118 9,386,354 18,940,824
Total assets $356,501,778 $255,500,637 $290,110,477
Depreciation and amortization expense:
Grain operations $ 2,129,988 $ 2,259,243 $ 2,345,425
Agricultural products 1,122,163 1,105,530 1,102,502
Retail stores 1,957,190 1,882,966 1,829,175
Lawn and corn cob products
and other 1,512,000 1,211,566 938,859
General 387,882 551,274 838,016
Total depreciation and
amortization expense $ 7,109,223 $ 7,010,579 $ 7,053,977
Capital expenditures:
Grain operations $ 2,735,570 $ 1,578,192 $ 1,359,805
Agricultural products 1,037,201 842,645 557,074
Retail stores 4,228,566 728,538 1,522,244
Lawn and corn cob products
and other 2,209,646 2,917,100 558,348
General 597,538 523,570 2,673,412
Total expenditures $ 10,808,521 $ 6,590,045 $ 6,670,883
Intersegment sales are made at prices comparable to normal, unaffiliated
customer sales. Operating profit is sales and merchandising revenues plus
interest and other income attributable to the operating area less operating
expenses, excluding interest and general expenses. Identifiable assets by
segment include accounts receivable, inventories, advances to suppliers,
property, plant and equipment and other assets that are directly identified
with those operations. General assets consist of cash, investments, land held
for investment, land and buildings and equipment associated with
administration and Partnership services, assets of discontinued operations and
other assets not directly identified with segment operations.
An unaffiliated customer accounted for grain operations sales of $85,900,000
and $77,200,000 in 1992 and 1991, respectively. No unaffiliated customer
accounts for more than 10% of sales and merchandising revenues in 1993. Grain
sales for export to foreign markets amounted to approximately $88,300,000 and
$101,300,000 in 1993 and 1992, respectively. Sales for export to foreign
markets did not exceed 10% of consolidated sales and merchandising revenues
in 1991.
Report of Independent Auditors
Shareholders
The Andersons Management Corp.
We have audited the accompanying balance sheets of The Andersons Management
Corp. as of December 31, 1993 and 1992. These balance sheets are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these balance sheets based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits of the balance sheets provide a
reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of The Andersons Management Corp.
at December 31, 1993 and 1992, in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the balance sheets, in 1993 the Corporation changed
its method of accounting for postretirement benefits.
/s/Ernst & Young
ERNST & YOUNG
Toledo, Ohio
February 7, 1994
The Andersons Management Corp.
Balance Sheets
December 31
1993 1992
Assets
Current assets:
Cash and cash equivalents $ 795,379 $ 223,567
Short-term investments at cost 505,313 1,041,147
Receivable from The Andersons (Note 1) 4,173,287 2,669,529
Note and accounts receivable 3,026 51,867
Prepaid expenses (Note 2) 2,723,668 2,467,869
Total current assets 8,200,673 6,453,979
Receivable from The Andersons (Note 1) 2,413,041 1,756,451
Investment in The Andersons (Note 1) 761,839 622,659
Other 56,650 8,088
$11,432,203 $ 8,841,177
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 1,149,232 $ 1,526,941
Accrued compensation and benefits 6,263,206 4,084,904
Total current liabilities 7,412,438 5,611,845
Postretirement benefits (Note 2) 2,413,041 1,756,451
Shareholders' equity:
Common Shares, without par value (Note 3):
Class A non-voting:
Authorized--25,000 shares
Issued-- 4,855 shares at stated value 1,456,405 1,456,405
Class B voting:
Authorized--25,000 shares
Issued--4,681 shares at stated value 4,681 4,681
Retained earnings 219,090 72,691
1,680,176 1,533,777
Less common shares in treasury,
at cost--(242 and 202 Class A
shares and 147 and 325 Class B
shares in 1993 and 1992, respectively) (73,452) (60,896)
1,606,724 1,472,881
$11,432,203 $ 8,841,177
See accompanying notes.
The Andersons Management Corp.
Notes to Financial Statements
December 31, 1993
1. Investment in The Andersons
The Corporation is the sole general partner of The Andersons (the
Partnership). As sole general partner, the Corporation provides all
management and labor services required by the Partnership in its operations.
In exchange for providing management services the Corporation charges the
Partnership a management fee equal to: a) the salaries and cost of all
employee benefits and other normal employee costs, paid or accrued for
services performed by the Corporation's employees on behalf of the
Partnership, b) reimbursable expenses incurred by the Corporation in
connection with its services to the Partnership, or on the Partnership's
behalf, and c) an amount based on an achieved level of return on partners'
invested capital of the Partnership to cover the Corporation's general
overhead and to provide an element of profit to the Corporation.
The Corporation leases an office building under a lease that commenced on May
1, 1990. The Corporation is required to pay annual lease payments of $731,209
through 2000. The Corporation charges the Partnership rent under the
Management Agreement for the space utilized in its operations.
The Partnership generally pays the Corporation for salaries and employee
benefits as those costs are paid by the Corporation. Amounts due from the
Partnership relating to postretirement benefits that will not be received
within one year have been classified as a noncurrent asset.
2. Employee Benefit Plans
The Corporation sponsors several employee benefit programs which include the
following: Defined Benefit Pension Plan, Retirement Savings Investment Plan,
Cash Profit Sharing Plan, Management Performance Program and health insurance
benefits.
Substantially all permanent employees are covered by the Corporation's Defined
Benefit Pension Plan. The benefits are based on the employee's highest five
consecutive years of compensation during their last ten years of service. The
Corporation's policy is to pay into trusteed funds each year an amount equal
to the annual pension expense calculated under the Entry Age Normal method.
The following table sets forth the plan's funded status and amounts recognized
in the Corporation's balance sheets as of December 31, 1993 and 1992.
1993 1992
Accumulated benefit obligation, including
vested benefits of $4,815,512 in 1993
and $3,536,273 in 1992 $5,159,779 $3,852,363
Projected benefit obligation for service
rendered to date $ 8,222,470 $ 7,454,556
Plan assets at fair value 6,568,985 5,664,926
Projected benefit obligation in excess
of plan assets 1,653,485 1,789,630
Unrecognized net asset at adoption of
FAS 87, net of amortization 243,817 294,296
Unrecognized net gain (loss) 530,128 (158,736)
Prior service cost (147,663) (168,739)
Net pension liability recognized in
balance sheet (includes current portion
of $645,966 in 1993) $ 2,279,767 $ 1,756,451
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation were 7.5% and 4%, respectively, for 1993 and 8% and 5.5%,
respectively, for 1992. The weighted average long-term rate of return on plan
assets used in determining the expected return on plan assets included in net
periodic pension cost was 8% for 1993, 1992 and 1991. Substantially all of
the plan assets are invested in a family of mutual funds at December 31, 1993
and in equity securities and United States Government obligations at December
31, 1992.
Under the Retirement Savings Investment Plan (RSIP) eligible participating
employees may elect to contribute specified amounts up to the lesser of $8,994
or 15% (10% in 1992) of their gross pay on a tax-deferred basis to a trust for
investment in a family of mutual funds. The Corporation contributes an amount
equal to 50% of the participant's contributions, but not in excess of 3% of
the participant's annual gross pay. Participants are fully vested in their
contributions to the RSIP. Participants hired before January 1, 1993 vest
immediately in the Corporation's matching contributions and participants hired
after December 31, 1992 vest ratably over five years.
Substantially all permanent employees are included in the Cash Profit Sharing
Plan. The Plan provides for participants to receive certain percentages of
their pay as various threshold levels of return on partnership capital of the
Partnership are achieved. The Corporation also has a Management Performance
Program for certain levels of management. Participants in the Management
Performance Program are not eligible to participate in the Cash Profit Sharing
Plan.
The Corporation currently provides certain health insurance benefits to its
employees, including retired employees. The Corporation has reserved the
right in most circumstances to modify the benefits provided and in recent
years has in fact made changes. Further changes were implemented in 1993 that
will effect the benefits provided to future retirees. These changes include
the minimum retirement age, years of service and a sharing in the cost of
providing these benefits. In addition, the Medicare Part B reimbursement
currently paid by the Corporation for retirees is being phased out over a
five-year period.
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the cost of
providing postretirement health care benefits be accrued during the employees'
working career rather than recognizing the cost of these benefits as claims
are paid. The Corporation has elected to recognize the accrued benefits
earned by employees as of January 1, 1993 (transition obligation)
prospectively, which means this cost will be recognized as a component of the
net periodic postretirement benefit cost over a period of approximately 20
years.
The Corporation's postretirement benefits are not funded. The status of the
plan as of January 1 and December 31, 1993 is as follows:
December 31, January 1,
1993 1993
Accumulated postretirement benefit obligation:
Retirees $ 5,534,885 $ 5,311,584
Fully eligible active plan participants 752,975 619,988
Other active participants 3,065,722 2,480,644
9,353,582 8,412,216
Unrecognized net transition obligation (7,991,605) (8,412,216)
Unrecognized net loss (582,737) -
Accrued postretirement benefit cost $ 779,240 $ -
The assumed discount rate used in determining the accumulated postretirement
benefit obligation at January 1 and December 31, 1993 was 8% and 7.5%,
respectively.
The assumed health care cost trend rate used to measure the expected cost of
benefits covered by the plan was 12% in 1993, declining to 5% through the year
2000 and remaining at that level thereafter. A 1% increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by approximately $1,515,000.
To partially fund self-insured health care and other employee benefits, the
Corporation makes payments to a trust. Assets of the trust amounted to
$2,710,395 and $2,467,869 at December 31, 1993 and 1992, respectively, and
such amounts are included in prepaid expenses.
3. Description of Common Shares
Common shares of the Corporation are held by limited partners of The
Andersons. The holders of Class A shares are entitled to dividends, if
declared, and to any surplus, earned or otherwise, of the Corporation upon
liquidation or dissolution. The holders of Class B shares have sole voting
power, but are not entitled to share in any dividends or surplus of the
Corporation.
4. Income Taxes
Effective January 1, 1993, the Corporation changed its method of accounting
for income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The impact of this change was not significant.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Temporary differences relating to costs and expenses
incurred on behalf of the Partnership are passed on to the Partnership through
offsetting differences in the recognition of management fees by the
Corporation. Deferred tax assets of the Corporation relate primarily to
temporary differences associated with the Corporation's share of Partnership
net income and amounted to $17,000 and $19,900 at December 31, 1993 and 1992,
respectively.
5. Reclassification
Certain amounts of the 1992 balance sheet were reclassified in order to
conform with 1993 presentation.
SUBSCRIPTION AGREEMENT
FOR 7.5% TEN-YEAR DEBENTURES AND 6.5% FIVE-YEAR DEBENTURES OF
THE ANDERSONS
(A Limited Partnership Organized Under the Laws of Ohio)
(I) (We) hereby subscribe for:
__________ multiple(s) of 7.5% Ten-Year Debentures
__________ multiple(s) of 6.5% Five-Year Debentures
of The Andersons, a limited partnership at face value. Each multiple is
$1,000. Herewith find $__________ in full payment thereof.
The Debentures should be registered and issued in the following mode of
ownership: (ONLY ONE MODE OF OWNERSHIP MAY BE SELECTED.)
1. ______________________ an individual.
(Name)
2. ______________________ and _____________________ as joint tenants
(Name) (Name)
with right of survivorship and not as tenants in common.
3. _____________________ and _____________________ as tenants in common.
(Name) (Name)
4. ______________________ as custodian for ____________________ under the
(Name) (Name)
Uniform Gifts to Minors Act, as applicable.
5. ____________________ trustee for ____________________.
(Name) (Name)
I acknowledge receipt of a copy of the current Prospectus of The Andersons
with respect to the offering of the above Debentures subscribed for hereby
which will be issued, and interest will begin to accrue, as of the first day
of the month following the month in which payment for the Debentures has been
received by The Andersons. Under the penalties of perjury, I certify that the
information listed below is true, correct and complete.
Dated ____________________ Signed ________________________________
Signed ________________________________
Please print name, address, social security number and telephone number of
registered owner(s).
_______________________________ __________________________________
(Name) (Name)
_______________________________ _________________________________
(Street) (Street)
_______________________________ _________________________________
(City, State and Zip Code) (City, State and Zip Code)
_______________________________ _________________________________
(Social Security Number (Social Security Number
or Federal I.D. Number) or Federal I.D. Number)
________________________________ _________________________________
(Area Code) (Telephone Number) (Area Code) (Telephone Number)
Make check payable to: The Andersons
For tax reporting purposes, the
Mail to: The Andersons following Social Security or Federal
Treasurer I.D. number should be used:
P.O. Box 119
Maumee, OH 43537 _________________________________
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following are additional estimated expenses of the offering
described in the amended Prospectus:
Printing................................................ $ 2,000
Accounting Fees......................................... 1,000
Legal Fees.............................................. 1,500
Blue Sky Qualifications and Expenses.................... 1,500
Miscellaneous........................................... 500
Total............................................. $5,500
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
The following additional or amended exhibits are filed herewith, or are
incorporated by reference as indicated in parenthesis following exhibit
description.
3(a) Amendment No. 18 to Restated Certificate of Limited
Partnership filed by The Andersons on January 24,
1994 with the Clerk of the Court of Common Pleas of
Lucas County, Ohio. (Incorporated by reference to
Exhibit 3(a) to the Partnership's Form 10-K dated
December 31, 1993.)
3(b) The Andersons Partnership Agreement, dated as of
January 1, 1994. (Incorporated by reference to
Exhibit 3(b) to the Partnership's Form 10-K dated
December 31, 1993.)
4(b)(i) The Thirteenth Supplemental Indenture dated as of
January 1, 1994, between The Andersons and Fifth
Third Bank of Northwestern Ohio, N.A., successor
Trustee to an Indenture between The Andersons and
Ohio Citizens Bank, dated as of October 1, 1985.
(Incorporated by reference to Exhibit 4(b)(i) to the
Partnership's Form 10-K dated December 31, 1993.)
12 Computation of Ratio of Earnings to Fixed Charges.
22 Subsidiaries of The Andersons. (Incorporated by
reference to Exhibit 22 to the Partnership's Form 10-
K dated December 31, 1993.)
23 Consent and Report of Independent Auditors.
Registrant agrees to furnish to the Securities and Exchange Commission
a copy of any long-term debt instrument or loan agreement that it may request.
(b) Financial Statement Schedules
V. Consolidated Property, Plant and Equipment - years ended
December 31, 1993, 1992 and 1991
VI. Consolidated Accumulated Depreciation of Property, Plant
and Equipment - years ended December 31, 1993, 1992 and 1991
VIII. Consolidated Valuation and Qualifying Accounts - years ended
December 31, 1993, 1992 and 1991
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or amendment thereto
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Maumee, Ohio, on the 18th day of April, 1994.
THE ANDERSONS (Registrant)
By THE ANDERSONS MANAGEMENT CORP.
(General Partner)
By /s/Richard P. Anderson
Richard P. Anderson
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities indicated on the 18th day of April, 1994.
Signature Title* Signature Title*
/s/Daniel T. Anderson Director Director
Daniel T. Anderson John F. Barrett
/s/Donald E. Anderson Director /s/Dale W. Fallat Director
Donald E. Anderson Dale W. Fallat
/s/Michael J. Anderson Director Director
Michael J. Anderson Paul M. Kraus
/s/Richard M. Anderson Director Director
Richard M. Anderson Rene C. McPherson
/s/Richard P. Anderson Director Director
Richard P. Anderson Donald M. Mennel
/s/Thomas H. Anderson Director Director
Thomas H. Anderson Janet M. Schoen
* Titles with The Andersons Management Corp.
<TABLE>
SCHEDULE V - CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
THE ANDERSONS AND SUBSIDIARIES
<CAPTION>
Balance at Balance
Beginning Additions Other at End of
Classification of Period at Cost Retirements Changes Period
Year ended December 31, 1993:
<S> <C> <C> <C> <C> <C>
Land $ 9,687,951 $ 264,600 $ 495,091 $ $ 9,457,460
Land improvements and leasehold
improvements 17,493,509 2,049,520 182,496 18,277 a 19,378,810
Building and storage facilities 60,809,927 1,225,454 12,994 62,022,387
Machinery and equipment 75,377,099 6,892,588 2,271,742 143,670 a 80,141,615
Construction in progress 1,331,205 376,359 -0- 1,707,564
$164,699,691 $10,808,521 $2,962,323 $ 161,947 $172,707,836
Year ended December 31, 1992:
Land $ 9,984,207 $ 300,855 $ 597,111 $ -0- $ 9,687,951
Land improvements and leasehold
improvements 16,699,465 646,913 96,846 243,977 a 17,493,509
Building and storage facilities 60,643,109 178,244 11,426 -0- 60,809,927
Machinery and equipment 70,281,406 5,155,335 1,947,082 1,887,440 a 75,377,099
Construction in progress 1,022,507 308,698 -0- -0- 1,331,205
$158,630,694 $ 6,590,045 $2,652,465 $2,131,417 $164,699,691
Year ended December 31, 1991:
Land $ 7,770,396 $2,213,811 $ -0- $ -0- $ 9,984,207
Land improvements and leasehold
improvements 16,331,741 387,665 19,941 -0- 16,699,465
Building and storage facilities 59,839,573 796,185 6,311 13,662 b 60,643,109
Machinery and equipment 67,691,882 3,713,411 1,110,225 (13,662)b 70,281,406
Construction in progress 1,362,696 (340,189) -0- -0- 1,022,507
$152,996,288 $6,770,883 $1,136,477 $ -0- $158,630,694
<FN>
( ) - indicates deduction
a) Property, plant and equipment of subsidiary consolidated as of the beginning of the year.
b) Transfers
c) The annual provisions for depreciation have been computed principally by the straight-line method in accordance
with the following useful lives:
Land improvements 5 - 20 years
Leasehold improvements lease term
Buildings and storage facilities 20 - 50 years
Machinery and equipment 3 - 20 years<PAGE>
</TABLE>
<TABLE>
SCHEDULE VI - CONSOLIDATED ACCUMULATED DEPRECIATION
OF PROPERTY, PLANT AND EQUIPMENT
THE ANDERSONS AND SUBSIDIARIES
Balance at Charged to Balance
Beginning Costs and Other at End of
Classification of Period Expenses Retirements Changes Period
Year ended December 31, 1993:
<S> <C> <C> <C> <C> <C>
Land improvements and leasehold
improvements $ 11,861,432 $ 815,328 $ 135,546 $ 9,969 a $ 12,551,183
Building and storage facilities 36,083,140 1,771,321 5,870 37,848,591
Machinery and equipment 59,915,602 4,142,880 2,231,626 64,118 a 61,890,974
$107,860,174 $6,729,529 $2,373,042 $ 74,087 $112,290,748
Year ended December 31, 1992:
Land improvements and leasehold
improvements $ 11,031,432 $ 809,975 $ 30,419 $ 50,444 a $ 11,861,432
Building and storage facilities 34,304,951 1,782,234 4,045 -0- 36,083,140
Machinery and equipment 56,085,345 3,943,375 1,459,915 1,346,797 a 59,915,602
$101,421,728 $6,535,584 $1,494,379 $1,397,241 $107,860,174
Year ended December 31, 1991:
Land improvements and leasehold
improvements $ 10,157,508 $ 883,602 $ 11,476 $ 1,800 b $ 11,031,432
Building and storage facilities 32,490,571 1,808,960 2,156 7,576 b 34,304,951
Machinery and equipment 53,388,322 3,782,288 1,075,889 (9,376)b 56,085,345
$ 96,036,399 $6,474,850 $1,089,521 $ -0- $101,421,728
<FN>
( ) indicates deduction
a) Accumulated depreciation of property, plant and equipment of subsidiary consolidated as of the beginning of the
year.
b) Transfers
</TABLE>
<TABLE>
SCHEDULE VIII - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THE ANDERSONS AND SUBSIDIARIES
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
Description of Period Expenses - Describe - Describe of Period
Allowance for doubtful accounts receivable:
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993 $775,000 $909,724 $ -0- $ 506,724 (1) $1,178,000
Year ended December 31, 1992 487,000 763,677 -0- 475,677 (1) 775,000
Year ended December 31, 1991 586,500 930,456 -0- 1,029,956 (1) 487,000
<FN>
(1) Uncollectible accounts written off, net of recoveries
</TABLE>
INDEX TO EXHIBITS
Exhibit
Number Description Page*
12 Computation of Ratio of Earnings to Fixed Charges
23 Consent and Report of Independent Auditors
*Page numbers inserted in manually signed copy only
Exhibit 12
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year Ended December 31
1993 1992 1991 1990 1989
Computation of Earnings:
<S> <C> <C> <C> <C> <C>
Income from continuing operations $11,079,360 $10,129,692 $ 4,516,046 $ 5,259,776 $ 1,661,908
Add:
Interest expense on indebtedness 6,168,371 6,325,440 7,297,735 7,908,705 8,741,759
Interest portion of rent expense 2,410,135 2,332,736 2,210,995 2,288,081 1,907,116
Earnings (income from continuing
operations as adjusted) $19,657,866 $18,787,868 $14,024,776 $15,456,562 $12,310,783
Computation of Fixed Charges (from
continuing operations):
Interest expense on indebtedness $ 6,168,371 $ 6,325,440 $ 7,297,735 $ 7,908,705 $ 8,741,759
Interest portion of rent expense 2,410,135 2,332,736 2,210,995 2,288,081 1,907,116
Fixed charges $ 8,578,506 $ 8,658,176 $ 9,508,730 $10,196,786 $10,648,875
Ratio of earnings to fixed charges 2.29 2.17 1.47 1.52 1.16
<FN>
For the purpose of calculating the ratio of earnings to fixed charges, "earnings (income as adjusted)" consist of
income from continuing operations after adding certain fixed charges as noted above. "Fixed charges" consist of
interest expense, one-third of rental expense representative of the interest factor and capitalized interest.
</TABLE>
Exhibit 23
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 7, 1994, with respect to the consolidated
financial statements and schedules of The Andersons (a Partnership) in this
Post-Effective Amendment No. 1 to the Registration Statement (Form S-1 No. 33-
62442) and related Prospectus of The Andersons (a partnership) for the
registration of $10,000,000 of its debentures.
We also consent to the use of our report dated February 7, 1994 with respect
to the balance sheets of The Andersons Management Corp., in the aforementioned
Post-Effective Amendment No. 1 to the Registration Statement and related
Prospectus.
/s/Ernst & Young
ERNST & YOUNG
Toledo, Ohio
April 19, 1994
Report of Independent Auditors on Financial Statement Schedules
We have audited the consolidated financial statements of The Andersons (a
partnership) as of December 31, 1993 and 1992, and for each of the three years
in the period ended December 31, 1993, and have issued our report thereon
dated February 7, 1994 (included elsewhere in this Registration Statement).
Our audits also included the financial statement schedules listed in Item
16(b) of this Registration Statement. These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/Ernst & Young
ERNST & YOUNG
Toledo, Ohio
February 7, 1994
