SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
Commission file number 2-55070
THE ANDERSONS
(Exact name of registrant as specified in its charter)
OHIO 34-4437884
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
480 W. Dussel Drive, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
(419) 893-5050
(Telephone Number)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The Registrant is a limited partnership and has no voting stock. Because of
transfer restrictions contained in the partnership agreement, there is no
market for any partnership interest in the Registrant.
THE ANDERSONS
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994. . . . . . . . . . 3
Condensed Consolidated Statements of Income -
Three months ended September 30, 1995 and 1994. . . . . . . 6
Nine months ended September 30, 1995 and 1994 . . . . . . . 7
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1995 and 1994 . . . . . . . 8
Notes to Condensed Consolidated Financial Statements. . . . 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 15
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE ANDERSONS
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30 December 31
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 3,794,421 $ 6,186,695
Accounts Receivable:
Trade accounts - net 66,356,821 55,157,316
Margin deposits 28,805,202 7,034,058
95,162,023 62,191,374
Inventories:
Grain 89,015,708 113,554,519
Agricultural fertilizer and supplies 17,909,772 21,110,719
Merchandise 35,823,335 32,240,845
Lawn and corn cob products 14,144,162 20,992,385
Other 14,922,394 10,736,558
171,815,371 198,635,026
Prepaid expenses 1,393,610 899,268
TOTAL CURRENT ASSETS 272,165,425 267,912,363
OTHER ASSETS
Investments in and advances to affiliates 683,870 1,591,673
Notes receivable (net) and other assets 4,054,995 3,083,583
TOTAL OTHER ASSETS 4,738,865 4,675,256
PROPERTY, PLANT AND EQUIPMENT
Land 13,340,456 13,063,330
Land improvements and leasehold
improvements 23,178,767 22,569,686
Buildings and storage facilities 75,836,311 71,700,138
Machinery and equipment 96,169,818 87,308,030
Construction in progress 4,616,707 1,387,362
213,142,059 196,028,546
Less allowances for depreciation and
amortization 128,891,868 118,432,043
NET PROPERTY, PLANT AND EQUIPMENT 84,250,191 77,596,503
$361,154,481 $350,184,122
NOTE: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
THE ANDERSONS
CONDENSED CONSOLIDATED BALANCE SHEETS - (continued)
(UNAUDITED)
September 30 December 31
1995 1994
CURRENT LIABILITIES
Notes payable $100,307,850 $ 50,000,000
Accounts payable for grain 37,188,579 83,843,840
Other accounts payable 65,569,543 60,990,810
Amounts due General Partner 6,131,012 4,700,699
Accrued expenses 5,831,531 7,708,295
Current maturities of long-term debt 8,161,000 3,615,000
TOTAL CURRENT LIABILITIES 223,189,515 210,858,644
LONG-TERM DEBT
Note payable, 7.84%, payable
quarterly, ($75,000 through 7/97,
$398,000 thereafter) due 2004 14,625,000 14,850,000
Note payable, variable rate (6.475% at
9/30/95) payable quarterly beginning
10/97, due 2002 5,600,000 6,000,000
Notes payable relating to revolving
credit facility, variable rate
(6.4375% at 9/30/95), due 1997 16,000,000 10,000,000
Note payable, variable rate (7.875% at
9/30/95), payable quarterly beginning
10/97, due 2002 4,262,068 4,661,089
Other notes payable 1,087,194 795,686
Industrial development revenue bonds:
6.5% due 1999 4,400,000 4,400,000
Variable rate (5.8625% at 9/30/95),
due 1995 to 2004 7,232,600 8,114,000
Variable rate (4.17% at 9/30/95),
due 2025 3,100,000 3,100,000
Debenture bonds:
9.2% to 10%, due 1995 and 1996 6,074,000 6,088,000
6.5% to 8%, due 1997 to 2000 5,815,000 5,530,000
10% due 1997 and 1998 2,117,000 2,117,000
10% due 2000 and 2001 2,704,000 2,742,000
7.5% to 8.7%, due 2002 to 2005 5,689,000 5,590,000
Other bonds, 4% to 10% 851,129 844,533
79,556,991 74,832,308
Less current maturities of long-term debt 8,161,000 3,615,000
TOTAL LONG-TERM DEBT 71,395,991 71,217,308
THE ANDERSONS
CONDENSED CONSOLIDATED BALANCE SHEETS - (continued)
(UNAUDITED)
September 30 December 31
1995 1994
DEFERRED INCOME TAX 689,200 -
AMOUNT DUE GENERAL PARTNER 3,820,032 3,059,742
MINORITY INTEREST 907,537 1,070,878
PARTNERS' CAPITAL
General partner 986,244 969,376
Limited partners 60,165,962 63,008,174
TOTAL PARTNERS' CAPITAL 61,152,206 63,977,550
$361,154,481 $350,184,122
NOTE: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
THE ANDERSONS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended September 30
1995 1994
Grain sales and revenues $190,299,764 $102,382,642
Fertilizer, retail and other sales 89,089,828 81,800,645
Other income 605,698 681,715
279,995,290 184,865,002
Cost of grain sales and revenues 181,203,902 96,120,326
Cost of fertilizer, retail and
other sales 67,753,986 59,525,496
248,957,888 155,645,822
GROSS PROFIT 31,037,402 29,219,180
Operating, administrative and
general expenses 31,180,797 29,757,198
Interest expense 3,300,545 1,852,142
34,481,342 31,609,340
NET LOSS - Note B $ (3,443,940) $ (2,390,160)
Allocation of loss:
To general partner $ (53,071) $ (34,244)
To limited partners (3,390,869) (2,355,916)
$ (3,443,940) $ (2,390,160)
Loss allocation per $1,000 of
partners' capital:
Weighted average capital for
allocation purposes - Note C $ 60,746,073 $ 51,906,327
Loss allocation per $1,000 $ (57) $ (46)
See notes to condensed consolidated financial statements.
THE ANDERSONS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months
Ended September 30
1995 1994
Grain sales and revenues $427,487,087 $333,213,066
Fertilizer, retail and other sales 310,731,354 300,045,914
Other income 2,224,166 1,981,638
740,442,607 635,240,618
Cost of grain sales and revenues 402,319,359 313,113,599
Cost of fertilizer, retail and
other sales 232,701,606 218,363,797
635,020,965 531,477,396
GROSS PROFIT 105,421,642 103,763,222
Operating, administrative and
general expenses 94,741,066 88,111,012
Interest expense 9,600,344 5,916,812
104,341,410 94,027,824
NET INCOME - Note B $ 1,080,232 $ 9,735,398
Allocation of income:
To general partner $ 16,868 $ 139,480
To limited partners 1,063,364 9,595,918
$ 1,080,232 $ 9,735,398
Income allocation per $1,000 of
partners' capital:
Weighted average capital for
allocation purposes - Note C $ 62,078,414 $ 53,174,736
Income allocation per $1,000 $ 17 $ 183
See notes to condensed consolidated financial statements.
THE ANDERSONS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30
OPERATING ACTIVITIES 1995 1994
Net income $ 1,080,232 $ 9,735,398
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 6,844,749 5,925,201
Amortization of deferred gain - (40,643)
Minority interest in net income
(loss) of subsidiaries (20,012) 100,916
Payments to minority interests (143,329) (222,052)
Provision for losses on receivables,
investments and other assets 619,571 396,242
Gain on sale of property, plant and
equipment (297,845) (196,247)
Changes in operating assets
and liabilities:
Accounts receivable (33,581,418) 18,357,423
Inventories 26,819,655 81,484,140
Prepaid expenses and other assets 4,479,104 (1,871,034)
Accounts payable for grain (46,655,261) (59,684,223)
Other accounts payable and
accrued expenses (1,160,159) (8,463,985)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (42,014,713) 45,521,136
INVESTING ACTIVITIES
Purchases of property, plant, equipment (9,348,527) (17,881,575)
Proceeds from sale of investment - 1,679,215
Proceeds from sale of property, plant
and equipment 490,349 824,074
Business acquisition - net of cash (1,426,431) -
Payments from affiliates 850,000 438,000
NET CASH USED IN INVESTING ACTIVITIES (9,434,609) (14,940,286)
THE ANDERSONS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Nine Months
Ended September 30
1995 1994
FINANCING ACTIVITIES
Net increase in short-term borrowings 48,619,389 (34,000,000)
Proceeds from issuance of long-term debt 36,518,018 24,332,388
Payments of long-term debt (32,174,783) (16,664,973)
Payments to partners and other deductions
from capital accounts (5,241,546) (4,811,788)
Capital invested by partners 1,335,970 733,675
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 49,057,048 (30,410,698)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,392,274) 170,152
Cash and cash equivalents at beginning
of year 6,186,695 3,936,955
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,794,421 $ 4,107,107
Noncash Operating, Investing and Financing Activities:
Acquisition of business
Working capital - other than cash $ 90,015
Property, plant and equipment (net) 4,095,525
Short and long-term debt assumed (2,069,909)
Other long term liabilities assumed (689,200)
Net cash expended $ 1,426,431
Assumption of long-term debt in purchase
of property, plant and equipment $ 5,216,918
See notes to condensed consolidated financial statements.
THE ANDERSONS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of
the results of operations for the periods indicated have been made.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K for the year ended Dec ember 31, 1994.
Note B - 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.
Provision for federal income taxes is made on the net income or loss
of the Partnership's corporate subsidiaries, but is insignificant.
Note C - The Partnership Agreement of the Registrant reflects each partner's
invested capital as of the beginning of each year. Partners' capital
used in determining the allocation of net income per $1,000 of
partners' capital is weighted to re flect cash distributions made to
partners during the year. The indicated allocations for the three and
nine-month periods ended September 30, 1995 and 1994 are the
allocations which would have been made had such periods constituted an
entire fiscal year.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Partners' capital in The Andersons (the "Partnership") at September 30,
1995 was $61.2 million, down $2.8 million from December 31, 1994. Net income
in the first nine months added $1.1 million to partners' capital and new equity
of $1.3 million was received. Decreases to partners' capital included
distributions to partners of $4.7 million and equity withdrawals of $550,000.
In connection with the General Partner's registration statement as
discussed in Item 5 of this document and contingent on its approval, the
Partnership has adopted a distribution policy to govern cash and tax
distributions and withdrawals of partner's capital. The Partnership will
generally allow all Limited Partners to elect to receive any amounts contained
in their capital account as withdrawals of capital prior to the merger if such
election is received by November 7, 1995. Withdrawal requests have been
received for approximately $1.7 million. These withdrawals will be distributed
prior to December 31, 1995.
Short-term lines of credit available at December 31, 1994 were $207
million. Total available lines at September 30, 1995 were $285 million, of
which $100 million was used. Typically, the Partnership's highest borrowing
occurs in the spring due to seasonal inventory requirements in several of the
Partnership's businesses, credit sales in the lawn products and agricultural
fertilizer and supply business and a customary reduction in grain payables due
to customer cash needs and market strategies. The highest borrowing against
the short-term lines through the third quarter was $134.5 million in March.
The Partnership's large portfolio of purchase contracts (approximately 83
million bushels at October 31, 1995) has required it to take significant
positions at the Chicago Board of Trade in order to maintain its hedged
position. Unusually high futures prices, coupled with the volume of contracts
booked, have increased margin deposits required of the Partnership. In
addition, the Partnership's net grain ownership position (inventory less
accounts payable for grain) and accounts receivable have increased from
December 31, 1994 to September 30, 1995 and short term borrowings have
increased accordingly. As of this filing, short term borrowings were
approaching $200 million in response to additional grain deliveries without a
reduction of continued higher than normal futures prices. The Partnership
continues to review the contracts it holds with grain producers and dealers for
nondelivery risk and believes it has adequately reserved for potential
defaults. 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-term and long-term needs.
The Partnership sold $449,000 of new Five-Year and Ten-Year debentures in
1995. Although the Partnership will not have additional sales in the remainder
of the current year, it may offer bonds in the future.
The Partnership periodically uses interest rate contracts to manage
interest rate risk by locking in rates consistent with projected borrowing
needs. While there were no open interest rate contracts at September 30, 1995,
three contracts have be en entered into subsequently to convert intermediate
term variable rate debt to fixed rates. The contracts have a total notional
amount of $30 million.
On May 1, 1995, the Partnership purchased all of the outstanding stock of
Metamora Elevator Company, Inc. for $1.6 million in cash and $2.1 million in
short and long-term debt assumed. The acquisition was accounted for as a
purchase. In additio n, the Partnership expended $9.3 million on other capital
equipment and projects in the first nine months. Total capital expenditures
for 1995 are expected to approximate $15 million. Additional expenditures
anticipated in 1995 include approximatel y $1 million for additional storage
capacity, $1 million for general store renovations and $.5 million for
information systems improvements. The Partnership expects to fund these
capital expenditures from cash generated from operations and additiona l long-
term debt or new equity. Capital expenditures have been curtailed from the
original 1995 plan of $24 million and could be further reduced if necessary.
Results of Operations
Comparison of the Partnership's three months ended September 30, 1995 with the
three months ended September 30, 1994:
The Partnership experienced a net loss in the third quarter of 1995 of $3.4
million, as compared to a 1994 third quarter loss of $2.4 million. Revenues
were $280 million, up from $185 million in the third quarter of 1994. Interest
expense was u p $1.4 million due primarily to an increase in short-term debt.
Operating, administrative and general expenses were also up 4.8%, with most of
the increase coming from expanded operations.
The Agriculture Group (including grain, wholesale agricultural fertilizer
and retail farm centers) experienced a 77% increase in sales and merchandising
revenues from 1994 and a 37% increase in gross profit. Sales of grains were
$188 million in the third quarter of 1995, up $86 million from the third
quarter of 1994. The average selling price was $3.55 per bushel, up from $2.93
per bushel in the third quarter of last year, reflecting an industry-wide
increase in the overall level of prices . The increase in total sales is due
to an 86% increase in bushel volume (primarily corn and wheat) along with the
price increases. Margins on grain sales were down 18% from the third quarter
of 1994. The cost of holding owned grain was unchanged from 1994 levels.
Income from drying and mixing was up $1.1 million as compared to the third
quarter of 1994 due to an earlier 1995 harvest and additional volume of wheat
bushels handled. Storage income was unchanged. Overall, merchandising revenu
es were up 135% from last year. Gross profit from the grain area was also up
by $2.8 million or 45% in the third quarter of 1995.
In agricultural fertilizer and supply, sales were $30 million, up $8
million for the quarter as compared to the prior year. Wholesale sales of
fertilizer products accounted for almost 80% of the sales increase. Volume was
up 19% and selling pri ces were up 11%. The volume increases were due to the
earlier grain harvest, higher prices for grain sales allowing more dollars to
be spent on fertilizer and no government set-aside program for the next crop
year. Margins were up slightly. Retail sales were up $1.2 million because of
additional acres planted and more liquidity for producers due to higher grain
prices. Sales of agricultural supplies were up approximately $400,000. Gross
profit on sales of agricultural products was up 20% fo r the quarter.
Sales in the retail area were $38 million in the third quarter of 1995
compared to $39 million last year. Sales in the Columbus market were down $1.3
million or 11%, sales at the Lima, Ohio store were up $94,000 or 3% and sales
in the Toledo mar ket were up 1%. As a result of margins comparable to the
third quarter of 1994, along with decreased sales, gross profit in the retail
area was down 4%.
Sales of lawn care products were $8 million, down 12% from the third
quarter of 1994. Tons sold decreased by about 14% while average selling prices
increased by about 2%. Increased material costs and product mix were the
primary causes of the 1 9% decrease in gross profit. In the industrial
products area, sales were comparable to the third quarter of 1994. Gross
profit was down 3%. In other businesses, sales were up $1.5 million, a 26%
increase from the third quarter of 1994. Gross prof it in the other businesses
was down about 16%. Both of these changes were due primarily to the rail
division.
Comparison of the Partnership's nine months ended September 30, 1995 with the
nine months ended September 30, 1994:
Net income in the first nine months of 1995 was $1 million, significantly
lower than the net income of $9.7 million in the same period of 1994. Revenues
were $740 million, up from $635 million in 1994. Interest expense was up 62%
due primarily to an increase in short-term borrowings. Operating,
administrative and general expenses were up 7.5%, with most of the increase
coming from expanded operations.
The Agriculture Group experienced a 23% increase in sales and merchandising
revenues from 1994 and an 8% increase in gross profit. Sales of grains were
$415 million for the first nine months of 1995, a 29% increase from the same
period of 1994. The average selling price was $3.43 per bushel, down 1% from
1994. A 30% (28 million bushel) increase in grain sales volume was
concentrated primarily in wheat (a 21 million bushel increase) and corn (a 10
million bushel increase) with the higher v alued soybeans experiencing a 3
million bushel decrease in sales volume. The volume increases for corn and
wheat were due to larger crops planted and harvested in 1995. Margins on grain
increased 9%. The income earned from holding owned grain was up $415,000 or
26% from the level of income experienced in the first nine months of 1994,
however storage income was down 10%. Because near term futures prices are
greater than 1996 futures prices, the market is not providing incentive to hold
or "carry" inventory into future years but rather to sell bushels now. Income
from drying and mixing was up $957,000 or 65% due to the additional wheat
bushels handled and the earlier harvest. Overall, merchandising revenues were
up 12% from the prior year. Gross profit from the grain area was up by $5
million or 25% in the nine months ended September 30, 1995 as compared to 1994,
resulting primarily (75%) from the increase in gross profit on put-thru grain.
In agricultural fertilizer and supply, sales were $111 million, up 8% from
the prior year due to the earlier harvest and consequently earlier demand for
fertilizer from agricultural producers. Wholesale sales of fertilizer products
accounted for a sales increase of $2.9 million. Volume was down 6% and selling
prices were up 10%. Margins were up 4% due to increased selling prices.
Retail sales were up $5.8 million due primarily to the addition of three retail
farm centers in mid 1994. Sales of agricultural supplies were unchanged.
Gross profit on sales of agricultural products was down 14% for the nine months
due primarily to an unusual level of profit in 1994 on the sale of phosphate
inventories purchased in 1993 when the market price of phosphate was depressed.
In 1994, the market price of phosphate appreciated significantly and the
Partnership liquidated its inventory.
Sales in the retail area were $118 million in the first nine months of 1995
compared to $122 million last year. Sales in the Columbus market were down
$2.6 million or 6%, sales at the Lima, Ohio store were up $313,000 or 3% and
sales in the Tole do market were up 1%. As a result of slightly improved
margins along with decreased sales, gross profit in the retail area was down
2%.
Sales of lawn care products were $45 million, up 7% from the first nine
months of 1994. Tons sold were unchanged while average selling prices
increased by about 4%. Increased material costs and increased sales of lower
margin products resulted in a 8% decrease in gross profit. In the industrial
products area, sales were up 10% or $1 million. Gross profit was also up
approximately 8% due to an average sales price increase of approximately 12%.
In other businesses, sales were up $2 millio n, an 11% increase from the prior
period due primarily to the rail division. Gross profit in the other
businesses was down about 4%.
PART II. OTHER INFORMATION
Item 5. Other Information
On October 26, 1995, subsequent to the period covered by this Report, The
Andersons Management Corp., an Ohio corporation and the sole general partner of
the Partnership (the "General Partner"), had its Registration Statement on Form
S-4 (File No . 33-58963) declared effective by the Securities and Exchange
Commission with respect to a proposed merger of the Partnership with and into
the General Partner and certain other related matters. The primary purpose of
the merger is to simplify the organizational structure of the Partnership and
the General Partner and allow current Shareholders and Limited Partners the
potential for additional liquidity. The General Partner currently anticipates
that, if the merger is approved by its shareholders and the limited partners of
the Partnership by a vote to be held on November 16, 1995, it will be effective
as of January 2, 1996.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. There were no reports on Form 8-K for the three
months ended September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ANDERSONS
(Registrant)
By THE ANDERSONS MANAGEMENT CORP.
(General Partner)
Date: November 13, 1995 By /s/Richard P. Anderson
Richard P. Anderson
President and Chief Executive Officer
Date: November 13, 1995 By /s/Richard R. George
Richard R. George
Corporate Controller (Principal
Accounting Officer)
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,794,421
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