UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
480 W. Dussel Drive, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (419) 893-5050
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 its form of organization, there is no market for any partnership
interests in the registrant. See "Item 12. Security Ownership of Certain
Beneficial Owners and Management."
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business
(a) General Development of Business
The Andersons (the "Partnership" or "Company") is engaged in grain
merchandising and operates grain elevator facilities located in Ohio,
Michigan, Indiana and Illinois. The Partnership is also engaged in the
distribution of agricultural products such as fertilizers, seeds and farm
supplies. The Partnership operates retail general stores; produces,
distributes and markets lawn care products and corncob products; and repairs
and leases rail cars.
The Partnership is the successor to other Ohio limited partnerships
which have operated as "The Andersons" continuously since 1947. Except where
the context otherwise requires, the terms "Partnership," "Company" and "The
Andersons" include The Andersons and all predecessor and successor entities.
The Andersons Management Corp. (the "Corporation") was formed in 1987
and is the sole General Partner of the Partnership. All of the common shares
of the Corporation are owned by Limited Partners of the Partnership. The
Corporation's Board of Directors has overall responsibility for the management
of the Corporation, including its responsibilities as General Partner of the
Partnership. The Corporation provides all management and labor services
required by the Partnership in its operations under a Management Agreement
entered into between the Partnership and the Corporation. See "Item 13.
Certain Relationships and Related Transactions - Management Agreement."
(b) Financial Information About Industry Segments
See Note 12 to the Partnership's Consolidated Financial Statements for
information regarding the Partnership's business segments.
(c) Narrative Description of Business
Agriculture Group
The agriculture group consists of grain operations, wholesale fertilizer
operations, retail farm centers and farmer services.
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 67 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
referenced 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 1994, approximately 63% of the grain sold by the Partnership was
purchased domestically by grain processors and feeders and approximately 37%
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.
Fixed price purchases and sales of cash grain expose the Partnership to
adverse changes in price. Hedging of these purchase and sales positions
provides protection from the potential adverse changes in price, avoiding
unacceptable risk and the potential for significant loss.
The Partnership hedges fixed price purchase and sales transactions
through the use of futures contracts with the Chicago Board of Trade ("CBOT").
The CBOT is a regulated commodity futures exchange that maintains futures
markets for the grains merchandised by the Partnership (mainly corn, wheat and
soybeans). Futures prices are determined by supply and demand.
Purchases of grain can be made the day the grain is delivered to a
terminal or via a forward contract made prior to actual delivery. Sales of
grain are generally made by contract for delivery in a future period. When
the Partnership purchases grain at a fixed price, the purchase is hedged with
the sale of a futures contract on the CBOT. Similarly, when the Partnership
sells grain at a fixed price, the sale is hedged with the purchase of a
futures contract on the CBOT. At the close of business each day, the open
fixed price cash positions as well as open futures positions, are marked-to-
market. Gains/Losses in value on the Partnership's cash positions from price
changes are off-set by losses/gains in value on the Partnership's futures
positions.
When a futures contract is entered into, an initial margin deposit must
be sent to the CBOT. The amount of the margin deposit is set by the CBOT and
varies by commodity. If the market price of a short futures contract
increases, then an additional margin deposit, called a maintenance margin,
would be required by the CBOT. Similarly, if the price of a long futures
contract decreases, a maintenance margin deposit would be required to be sent
to the CBOT. Subsequent price changes could require additional maintenance
margins or could result in the return of maintenance margins by the CBOT.
Significant changes in market prices--such as occurs when weather conditions
are unfavorable for extended periods, can have an effect on liquidity and
requires the Partnership to maintain appropriate short-term lines of credit.
The hedging program is designed to reduce the risk of changing commodity
prices. In that regard, hedging transactions also limit potential gains from
further changes in market prices. The Agriculture Group's profitability from
its grain operation is derived from margins on grain sold and revenues
generated from its other merchandising activities with its customers, not from
its hedging transactions.
At any one time the Agriculture Group's purchase contract portfolio may
approximate 60 million bushels for delivery to the Partnership over the next
three years. Because of this volume, the Partnership relies heavily on its
hedging program as the method for minimizing price risk in its grain
inventories and contracts. The Agriculture Group has adopted a policy which
specifies the key controls over the hedging program. This policy includes a
description of the hedging programs, mandatory review of positions by key
management outside of the trading function on a biweekly basis, daily position
limits, modeling of positions for changes in market conditions, and other
internal controls.
The Partnership's wholesale agricultural fertilizer operations involve
purchasing, storing, formulating, and selling dry and liquid fertilizers;
providing fertilizer warehousing and services to manufacturers and customers;
and wholesale distribution of seeds and various farm supplies. 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 wholesale agricultural fertilizer market area
primarily includes Illinois, Indiana, Michigan and Ohio and customers for the
Partnership's agricultural fertilizer products are principally retail dealers.
Sales of agricultural fertilizer products are heaviest in the spring and fall.
The Partnership's aggregate wholesale storage capacity for dry
fertilizer is 14 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 31 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.
The Partnership operates eight retail farm centers located throughout
Michigan, Indiana and Ohio. These centers, often strategically located at or
near the Partnership's grain or wholesale fertilizer facilities, offer
agricultural fertilizer, custom application of fertilizer, and chemical seeds
and supplies to the farmer. In addition, farmer services representatives
based at the retail farm centers, provide a link between the grain and
fertilizer operations and offer assistance with grain marketing and farm
financial management.
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 Group
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. 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 1000 granular retail and professional
lawn care products for national distribution. 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 agriculture
group. 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 seven 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 lawn care
products and corncob products. Approximately $490,000, $450,000, and $380,000
was expended on research and development during 1994, 1993 and 1992,
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, 1994, there were 1,151 full-
time and 1,982 part-time or seasonal employees of the Corporation providing
services to the Partnership.
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. The Partnership made capital expenditures of approximately
$600,000 in 1994 in order to comply with these regulations.
Environmental Proceeding
In 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 involved 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
was the apparent source of the alleged contamination at issue. In November,
1994, a Consent Order was filed in the Lucas County Court of Common Pleas
which resolved the on-going dispute. In addition, the Agency has reserved the
right to investigate whether further action will be necessary at the river
elevator facility.
Item 2. Properties
The Partnership's principal agriculture, retail and other properties are
described below. Except as otherwise indicated, all properties are owned by
the Partnership.
Agriculture Facilities
Location Grain Wholesale Fertilizer
Bushel Dry Storage Liquid Storage
Capacity (in cu. ft.) (in. gal.)
Maumee, OH 18,800,000 6,333,000 2,600,000
Toledo, OH 6,300,000 2,000,000 3,000,000
Metamora, OH (2) 6,480,000
Lyons, OH (2) 380,000
Champaign, IL 13,000,000 833,000
Delphi, IN 6,580,000 1,667,000
Clymers, IN (1) 4,400,000 7,600,000
Dunkirk, IN 5,900,000 900,000
Poneto, IN 530,000 4,700,000
Logansport, IN 33,000 3,000,000
Walton, IN 433,000 6,500,000
Albion, MI 2,470,000
Potterville, MI 790,000
White Pigeon, MI 1,730,000
Webberville, MI 2,017,000 3,200,000
67,360,000 14,216,000 30,600,000
(1) Facility leased - lease expires in 1998, provides an option to purchase
(2) Facilities leased, option to purchase exercised in 1995
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 properties consist mainly of fertilizer warehouse
and distribution facilities for dry and liquid fertilizers. 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 operates eight retail farm centers (six under lease
agreements) in Michigan, Indiana and Ohio. Aggregate storage capacity in the
eight retail farm centers for liquid fertilizer and dry fertilizer is 1.4
million gallons and 240,000 cubic feet, respectively.
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 Columbus, OH 140,000
Sawmill General Store Columbus, OH 134,000
Warehouse (1) Maumee, OH 245,000
(1) Leased
The leases for the two general stores and the warehouse facility are
long-term leases with several renewal options and provide for minimum
aggregate annual lease payments approximating $1,016,000. The general store
leases provide for contingent lease payments based on achieved sales volume.
With respect to the Brice General Store, see "Item 13. Certain Relationships
and Related Transactions - Alshire-Columbus." 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 four lawn products sales outlets. In its rail car leasing
business, the Partnership owns or leases approximately 1600 rail cars
(primarily covered hopper cars) with lease terms ranging from one to ten years
and annual lease payments aggregating approximately $4,200,000. The majority
of the cars controlled are leased to other companies, although some cars are
maintained by the Partnership's Agriculture Division. 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
seven auto service centers.
The Partnership's administrative office building is leased at an annual
rental of $696,000 under a net lease expiring in 2000. See "Item 13. Certain
Relationships and Related Transactions - Management Agreement." The
Partnership owns approximately 618 acres of land on which various of the above
properties and facilities are located; approximately 363 acres of farmland and
land held for future use; approximately 102 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 $41,125,000 at December 31, 1994.
Additions to property for the years ended December 31, 1994, 1993 and 1992,
amounted to $26,300,359, $10,808,521, and $6,590,045, 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.
Item 3. Legal Proceedings
The Partnership is not involved in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Because of the form of its organization that includes restrictions
on the transfer of Limited Partnership Interests, there is no
market for the Limited Partnership Interests.
(b) The number of holders of Limited Partnership Interests as of March
1, 1995, was 218.
(c) The Partnership makes cash distributions and allocations of net
income to Limited Partners, and to the General Partner in
accordance with the terms of the Partnership Agreement. See "Item
6. Selected Financial Data." As previously noted, certain of the
Partnership's long-term borrowings and lines of credit agreements
include provisions that impose minimum levels of working capital
and partnership equity (as defined) and limit the addition of new
long-term debt along with other requirements.
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
Year Ended December 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Grain sales and revenues $551,836,287 $439,483,762 $440,553,476 $356,897,950 $359,549,837
Fertilizer, retail and other sales 400,922,131 336,973,308 312,613,276 286,165,240 283,867,328
Total sales and merchandising revenues 952,758,418 776,457,070 753,166,752 643,063,190 643,417,165
Operating profit (a) 28,720,201 21,170,205 18,299,809 13,986,953 16,157,416
Income from continuing operations (b) 15,137,430 11,079,360 10,129,692 4,516,046 5,259,776
Net income 15,137,430 11,079,360 7,635,748 2,825,309 3,859,392
Weighted average partners' capital (c) 52,696,376 47,405,022 43,101,473 41,938,671 43,047,859
Allocations and distributions per $1,000
of weighted average partners' capital:
Allocation of income from continuing
operations 287 234 235 107 122
Allocation of net income 287 234 177 67 90
Cash distributions 21 32 34 34 32
Tax distributions (d) 63 88 10 88 6
As of December 31
Balance Sheet Data: 1994 1993 1992 1991 1990
Total assets $350,184,122 $356,501,778 $255,500,637 $290,110,477 $234,319,164
Long-term debt 71,217,308 52,259,120 46,077,319 48,018,161 47,881,282
Partners' capital:
General partner 969,376 761,839 622,659 531,322 546,453
Limited partners 63,008,174 54,648,874 50,497,148 41,976,399 45,265,201
$ 63,977,550 $ 55,410,713 $ 51,119,807 $ 42,507,721 $ 45,811,654
(a) See Note 12 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) Weighted average partners' capital represents the average daily outstanding partners' capital balance, which
includes the effects of distributions and investments made during the year.
(d) Tax distributions fluctuate from year to year due to the timing of the distributions, the amount of partnership
taxable income and the amount of the distribution partners elect to receive. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Working capital at December 31, 1994 was $57 million, up $10 million
from 1993. Cash provided by operating activities was $52 million in 1994
compared to a use of cash in 1993 of $51 million. The increase in cash
provided by operating activities led to a decrease in short-term borrowings
from $87.9 million at December 31, 1993 to $50 million at December 31, 1994.
Partners' capital at December 31, 1994 totaled $64 million, up from
$55.4 million at December 31, 1993. Net income in 1994 of $15.1 million was
added to partners' capital, while partners added $733,675 to their capital
accounts at the beginning of the year and withdrew $604,000. During 1994
quarterly cash distributions to partners totaled $1.1 million. This amount
decreased from prior years due to partners' election to receive a reduced
distribution. In addition, at the end of the year distributions to certain
partners and charitable remainder trusts totaled $1.2 million and charitable
contributions charged to partners' capital accounts totaled $782,000. Tax
distributions to partners during 1994 totaled $3.3 million. An additional tax
distribution of $474,000 was paid in January 1995. Quarterly cash
distributions in 1995 are expected to be lower than 1994 distributions and
1995 tax distributions are also expected to be lower both as a result of
partners electing not to take all of the distributions available to them.
Tax distributions are made to partners for purposes of 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 "Item 6. Selected Financial Data")
due to changes in the amount and in the components of partnership taxable
income due to the timing of required tax payments by partners and due to the
elections made by partners to take all, none or a percentage of the tax
distribution available to them. Tax distributions and taxable income for the
last five years have been as follows:
Taxable
Year Distributions Income
1990 $ 278,000 $ 5,313,400
1991 3,700,000 3,880,200
1992 418,000 8,255,300
1993 4,200,000 11,855,970
1994 3,335,000 17,833,000
The 1990 tax distribution was based on 1989 taxable income of
$1,559,500. The tax distributions in 1991 were considerably higher due to the
increase in taxable income from 1989 to 1990 and due to the implementation of
quarterly tax distributions paid to partners in April, June and September.
Quarterly tax distributions were made to coincide with the timing of estimated
tax payments due by partners. Tax distributions paid in 1992 decreased due
to the decrease in taxable income from 1990 to 1991 and due to the quarterly
tax payments made in 1991. In 1993, the tax distributions were very high due
to the increase in taxable income in 1992, which also impacted the quarterly
tax distributions needed by partners to meet their 1993 estimated tax
payments. In 1994 tax distributions were lower than 1993 due to elections by
partners to take smaller tax distributions.
During 1994 the Partnership issued $639,000 Five-Year and $1.5 million
Ten-Year debentures and additional debentures are being offered in 1995.
Proceeds from the issuance of the debentures in 1994 were used to fund current
maturities of long-term debt and for capital expenditures. The amount of
proceeds to be realized in 1995 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.
The Partnership finances part of its inventories through short-term
borrowings under lines of credit which are also used from time to time for
other Partnership purposes. Generally, the highest borrowings occur in the
spring and are related to payments of grain payables, credit sales of
agricultural products related to spring planting and a seasonal peak in credit
sales of lawn care products. The amount of borrowings outstanding during the
year, and from one year to another, may fluctuate widely depending upon
inventory levels, and changes in hedged values which affect maintenance margin
requirements. The Partnership has available lines of credit for unsecured
short-term debt with banks aggregating $207,000,000. The credit arrangements,
the amounts of which are adjusted from time to time to meet the Partnership's
needs, are demand notes without termination dates but are reviewed at least
annually for renewal. See Note 6 to the Partnership's Consolidated Financial
Statements for additional information relating to the lines of credit. The
Partnership also has a $20 million long-term revolving line of credit. See
Note 7 to the Partnership's Consolidated Financial Statements.
Certain of the Partnership's long-term indebtedness is secured by first
mortgages on various facilities of the Partnership. Some of the Partnership's
long-term borrowings include provisions that impose minimum levels of working
capital and partnership equity (as defined); the addition of new long-term
debt; restrict the Partnership from certain sale, lease, merger and
consolidation transactions; require the Partnership to be substantially hedged
in its grain transactions; and certain other requirements. At December 31,
1994, the Partnership was, and it believes it continues to be, in compliance
with all terms and conditions of the secured borrowings and short and long
term lines of credit. See Note 7 to the Partnership's Consolidated Financial
Statements for further information with respect to long-term financing.
The Partnership periodically utilizes interest rate contracts to manage
interest rate risk by locking in rates consistent with projected borrowing
needs. There were no open interest rate contracts at December 31, 1994.
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.
Capital expenditures were approximately $26 million in 1994 and are
expected to be approximately $24 million in 1995. Anticipated capital
expenditures in 1995 include $4.4 million for grain elevator and retail farm
center acquisitions, $2.6 million for additional storage capacity, $3.5
million for store renovations, $5.9 million for plant upgrades and
improvements and $2 million for information systems improvements. Funding for
capital expenditures in 1995 is expected to come from cash generated from
operations and additional long-term debt or new equity. Capital expenditures
could be curtailed if necessary.
Results of Operations
Years ended December 31, 1994 and 1993:
Net income in 1994 increased to $15 million from $11 million in 1993.
Gross profit increased by $19 million or 15%. Operating, administrative and
general expenses were up $13 million or about 11%, including an increase of
$7.3 million (11%) in the management fee paid to the general partner. Most
of the management fee increase was for salaries, wages and benefits.
Additional facilities in the Agriculture Group added approximately $5 million
to salaries, wages and benefits and a full year of operation at the Lima
General Store added more than $1 million to salaries, wages and benefits in
the Retail Group. Operating profit increased by $7.5 million.
Grain sales and merchandising revenues were $551.8 million compared to
$439.5 million in 1993, a 26% increase. Sales of grain commodities were up
$110 million. Bushels sold increased almost 20% and the average selling
price per bushel increased from $3.25 to $3.44. Cents per bushel sold
(margin) increased 19%. Merchandising revenues increased from $23.2 million
in 1993 to $25.5 million in 1994. Storage income was up $3.6 million, while
basis income was down 1.4 million due to a larger than expected wheat and corn
crop. Drying and mixing income was down $2 million during 1994, due in part
to a better quality 1993 corn crop and 1994 wheat crop than those of the
preceding crop years. Gross profit on grain sales and merchandising revenues
was up $4.3 million or 13%.
Sales of wholesale fertilizer were up $22.8 million or 26% and retail
fertilizer sales and sales of other agricultural products were up $7.6 million
or 45%. Wholesale fertilizer tonnage increased by 11% and the average selling
price increased 6%. Gross profit on wholesale fertilizer increased $5.3
million or 64% while retail and other agricultural products gross profit
increased $2.1 million or 26%. Approximately one-half of the wholesale
fertilizer gross profit increase was the result of the liquidation in 1994 of
phosphate inventories purchased in 1993 when the market price of phosphate was
depressed. In 1994, the market price appreciated significantly and the
Partnership liquidated its inventory.
Sales in the Agriculture Group were $661.4 million compared to $520.9
million in 1993, while gross profit and operating profit increased $11.7
million and $4.3 million, respectively.
Sales in the Retail Group were $172 million in 1994 compared to $155
million in 1993. Sales in the Columbus stores were up $4.4 million and sales
in the Toledo stores were up $3 million. Sales in the Lima store which opened
in September 1993 were up $10 million. Margins increased by about 3%.
Operating profit in the Retail Group was up $2.7 million.
Sales in the other businesses of the Partnership also increased. Sales
of lawn care products totalled $47.6 million, up $9.5 million from 1993.
Volume increased 27%, while average selling prices decreased 5%. Margins were
down just a little. Sales of corn cob products were $14.6 million compared
to $14.2 million in 1993. Volume was down in corn cob products and up in
sorbent products. Railcar leasing activity doubled from 1993 and sales and
repairs of railcars also increased. Sales from the Partnership's auto service
centers were up, as were steel fabrication sales. Sales from the
Partnership's outdoor power equipment and service shop also improved.
Operating profit in the other businesses was up $570,000.
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 a 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. By major business segment the results were as follows:
Grain sales and merchandising revenues were $439.5 million compared to
$440.6 million in 1992. Sales of grain commodities were down $7.5 million or
2%. Bushels sold increased 2% and the average selling price per bushel
decreased 4% from $3.39 to $3.25. Cents per bushel sold (margin) decreased
11%. 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. Gross profit on grain sales and merchandising revenues was up $5.7
million or 20%.
Sales of wholesale fertilizer were up $11.6 million or 11% and retail
fertilizer sales and sales of other agricultural products were down $800,000
or 5%. Wholesale fertilizer tonnage increased by 19% and the average selling
price decreased 3%. Gross profit on wholesale fertilizer increased $1.4
million or 16% while retail and other agricultural products gross profit
increased $400,000 or 7%.
Sales in the Agriculture Group were $520.9 million compared to $517.6
million in 1992, while gross profit and operating profit increased $7.5
million and $2.9 million, respectively.
Sales in the retail group 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 in the other businesses of the Partnership also increased. Sales
of lawn products totalled $38 million, up 7% from 1992. 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 $440,000.
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.
Item 8. Financial Statements and Supplementary Data
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, 1994 and 1993, 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, 1994.
Our audits also included the financial statement schedule listed in the index
at Item 14(a). These financial statements and schedule are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements and schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Andersons and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Toledo, Ohio
February 6, 1995
The Andersons and Subsidiaries
Consolidated Statements of Income
Year ended December 31
1994 1993 1992
Grain sales and revenues $551,836,287 $439,483,762 $440,553,476
Fertilizer, retail and other sales 400,922,131 336,973,308 312,613,276
Other income 2,608,671 3,763,737 3,834,457
955,367,089 780,220,807 757,001,209
Cost of grain sales and revenues 513,893,485 405,889,171 412,623,606
Cost of fertilizer, retail
and other sales 292,258,780 244,254,571 227,130,480
806,152,265 650,143,742 639,754,086
Gross profit 149,214,824 130,077,065 117,247,123
Operating, administrative and
general expenses (Note 2) 125,682,788 112,829,334 100,791,991
Interest expense 8,394,606 6,168,371 6,325,440
134,077,394 118,997,705 107,117,431
Income from continuing operations 15,137,430 11,079,360 10,129,692
Discontinued operations (Note 3):
Loss from discontinued operations (396,177)
Loss on sale of discontinued
operations (2,097,767)
Net income $ 15,137,430 $ 11,079,360 $ 7,635,748
Net income (loss) was allocated to:
General partner:
From continuing operations $ 218,844 $ 145,526 $ 124,871
From discontinued operations - - (30,743)
218,844 145,526 94,128
Limited partners:
From continuing operations 14,918,586 10,933,834 10,004,821
From discontinued operations (2,463,201)
14,918,586 10,933,834 7,541,620
$ 15,137,430 $ 11,079,360 $ 7,635,748
Net income (loss) allocation per
$1,000 of partners' capital:
Weighted average capital for
allocation purposes $ 52,696,376 $ 47,405,022 $ 43,101,473
Allocation per $1,000:
From continuing operations $ 287 $ 234 $ 235
From discontinued operations (58)
$ 287 $ 234 $ 177
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Balance Sheets
December 31
1994 1993
Assets
Current assets:
Cash and cash equivalents (Note 10) $ 6,186,695 $ 3,936,955
Accounts receivable:
Trade accounts, less allowance for
doubtful accounts of $2,292,000 in
1994; $1,178,000 in 1993 55,157,316 60,036,382
Margin deposits (Note 10) 7,034,058 15,320,979
62,191,374 75,357,361
Inventories (Note 4) 198,635,026 211,023,651
Prepaid expenses 899,268 858,941
Total current assets 267,912,363 291,176,908
Other assets:
Notes receivable and other assets,
less allowance for doubtful notes
receivable of $717,000 in 1994 3,083,583 3,965,729
Investments in and advances to
affiliates 1,591,673 942,053
4,675,256 4,907,782
Property, plant and equipment (Notes 5 and 7) 77,596,503 60,417,088
$350,184,122 $356,501,778
Liabilities and partners' capital
Current liabilities:
Notes payable (Note 6) $ 50,000,000 $ 87,900,000
Accounts payable for grain 83,843,840 83,712,076
Other accounts payable 60,990,810 58,896,317
Amounts due General Partner (Note 2) 4,700,699 4,173,287
Accrued expenses 7,708,295 7,496,181
Current maturities of long-term debt 3,615,000 1,992,000
Total current liabilities 210,858,644 244,169,861
Amounts due General Partner (Note 2) 3,059,742 2,413,041
Long-term debt (Note 7) 71,217,308 52,259,120
Deferred gain 1,145,151
Minority interest 1,070,878 1,103,892
Partners' capital:
General partner 969,376 761,839
Limited partners 63,008,174 54,648,874
63,977,550 55,410,713
$350,184,122 $356,501,778
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Statements of Cash Flows
Year ended
1994 1993 1992
Operating activities
Net income $15,137,430 $11,079,360 $ 7,635,748
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 8,101,058 7,109,223 7,010,579
Provision for losses on accounts
and notes receivable 2,682,904 909,724 763,677
Payments to minority interests (222,052) (166,198) (132,896)
Minority interest in net income
of subsidiaries 189,038 236,224 154,392
Gain on sale of property,
plant and equipment (160,988) (1,107,707) (1,645,421)
Amortization of deferred gain (43,823) (385,956) (373,238)
Loss on sale of discontinued
operations - - 1,582,630
Equity in undistributed loss of
affiliates - - 4,255
Changes in operating assets and
liabilities:
Accounts receivable 10,483,083 (32,109,849) (5,866,574)
Inventories 12,388,625 (61,137,730) 37,905,112
Prepaid expenses and other
assets (1,006,667) (1,255,649) (501,424)
Accounts payable for grain 131,764 18,966,696 (3,086,492)
Other accounts payable and
accrued expenses 4,451,416 6,719,097 5,074,170
Net cash provided by (used in)
operating activities 52,131,788 (51,142,765) 48,524,518
Investing activities
Purchases of property, plant and
equipment (22,663,348) (10,808,521) (6,590,045)
Proceeds from sale of investment 1,679,215 - -
Proceeds from sale of property,
plant and equipment 848,408 1,696,989 2,586,539
(Advances to) payments received
from affiliates (640,000) 149,999 5,145
Proceeds from sale of discontinued
operations - - 1,299,340
Net cash used in investing activities (20,775,725) (8,961,533) (2,699,021)
Financing activities
Net increase (decrease) in short-term
borrowings (37,900,000) 64,150,000 (45,330,000)
Proceeds from issuance of long-term
debt 35,508,820 22,753,656 16,022,652
Payments of long-term debt (20,144,550) (17,439,855) (17,887,109)
Payments to partners and other
deductions from capital accounts (7,304,268) (7,212,084) (3,177,162)
Capital invested by partners 733,675 423,630 4,153,500
Net cash provided by (used in)
financing activities (29,106,323 62,675,347 (46,218,119)
Increase (decrease) in cash and cash
equivalents 2,249,740 2,571,049 (392,622)
Cash and cash equivalents at beginning
of year 3,936,955 1,365,906 1,758,528
Cash and cash equivalents at end of
year $ 6,186,695 $ 3,936,955 $ 1,365,906
Noncash investing and financing
activities:
Assumption of long-term debt in
purchase of property, plant and
equipment $ 5,216,918
See accompanying notes.
The Andersons and Subsidiaries
Consolidated Statements of Changes in Partners' Capital
Year ended December 31
1994 1993 1992
General partner capital
Balance at beginning of year $ 761,839 $ 622,659 $ 531,322
Amounts credited (charged) to capital:
Net income for the year 218,844 145,526 94,128
Charitable contributions (11,307) (6,346) (2,791)
207,537 139,180 91,337
Balance at end of year $ 969,376 $ 761,839 $ 622,659
Limited partners' capital
Balance at beginning of year $54,648,874 $50,497,148 $41,976,399
Amounts credited (charged) to capital:
Net income for the year 14,918,586 10,933,834 7,541,620
Increase in invested capital 733,675 423,630 4,153,500
Charitable contributions (770,809) (476,772) (223,623)
Withdrawals (1,759,072) (827,573) (899,793)
Distributions (4,763,080) (5,901,393) (2,050,955)
8,359,300 4,151,726 8,520,749
Balance at end of year $63,008,174 $54,648,874 $50,497,148
Total partners' capital--at
end of year $63,977,550 $55,410,713 $51,119,807
See accompanying notes.
The Andersons and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
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.
Securities
The Partnership adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" in 1994.
There was no cumulative effect as a result of the adoption.
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when there is
positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are stated at amortized cost.
Marketable equity securities and debt securities not classified as held-to-
maturity are classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of partners' capital.
Inventories
Inventories of grain are hedged to the extent practicable and 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 method.
Property, Plant and Equipment
Land, buildings and equipment are carried at cost. Depreciation is provided
over the estimated useful lives of the individual assets principally by the
straight-line method.
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.
Revenue Recognition
Sales of grain and other products are recognized at the time of shipment.
Revenues from merchandising activities are recognized as open contracts are
marked to market or as services are provided.
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, 1994 and 1993, the Partnership s net assets for
financial reporting purposes were approximately $1,800,000 and $3,800,000,
respectively, 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
Through January 31, 1994, the deferred portion of a gain from the sale and
leaseback of a retail store was being amortized into income over the ten-year
leaseback period by the straight-line method. On February 1, 1994 the store
was reacquired and the remaining deferred gain was recorded as a component of
the reacquisition cost.
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. Final 1994 tax distributions of
approximately $5,200,000 may be paid to partners in 1995 from the year end
partners' capital balances upon each Partner's election.
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 1993 and 1992 financial statements have been
reclassified to conform with the 1994 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 $840,000 and $850,000 for 1994 and 1993,
respectively.
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. The net lease payments amounted to $635,714, $529,982
and $516,344 in 1994, 1993 and 1992, respectively.
The components of the management fee and rent incurred by the Partnership
consisted of the following:
Year ended December 31
1994 1993 1992
Salaries and wages $53,726,460 $47,706,731 $43,356,247
Employee benefits 15,673,685 14,619,453 13,426,059
Rent for office space and other
reimbursable expenses 803,830 641,491 516,344
Achieved level of return of the
Partnership 190,880 139,656 89,618
Totals $70,394,855 $63,107,331 $57,388,268
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 for the year
ended December 31, 1992.
4. Inventories
Major classes of inventory are as follows:
December 31
1994 1993
Grain $113,554,519 $135,346,670
Agricultural fertilizer and supplies 21,110,719 16,170,908
Merchandise 32,240,845 32,497,574
Lawn and corn cob products 20,992,385 20,579,022
Other 10,736,558 6,429,477
$198,635,026 $211,023,651
5. Property, Plant and Equipment
The components of property, plant and equipment are as follows:
December 31
1994 1993
Land $ 13,063,330 $ 9,457,460
Land improvements and leasehold improvements 22,569,686 19,378,810
Buildings and storage facilities 71,700,138 62,022,387
Machinery and equipment 87,308,030 80,141,615
Construction in progress 1,387,362 1,707,564
196,028,546 172,707,836
Less allowances for depreciation
and amortization 118,432,043 112,290,748
$ 77,596,503 $ 60,417,088
6. Banking and Credit Arrangements
The Partnership has available lines of credit for unsecured short-term debt
with banks aggregating $207,000,000. 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.
1994 1993 1992
Maximum borrowed $127,600,000 $100,500,000 $104,000,000
Average daily amount borrowed
(total of daily borrowings
divided by number of days
in period) 72,182,603 60,404,384 50,341,667
Average interest rate (computed
by dividing interest expense
by average daily amount
outstanding) 5.03% 4.15% 5.20%
7. Long-Term Debt
Long-term debt consists of the following:
December 31
1994 1993
Note payable, 7.84%, payable $75,000 quarterly
through October 1997, and $398,000 quarterly
thereafter, due 2004 $14,850,000 $ -
Notes payable relating to revolving credit
facility 10,000,000 7,500,000
Note payable, variable rate (7.625% at
December 31, 1994), payable $800,000
annually, due 1997 6,000,000 6,800,000
Note payable, variable rate (6.9375% at
December 31, 1994), payable $72,470 monthly
including interest, due 1996 4,661,089 -
Other notes payable 795,686 888,409
Industrial development revenue bonds:
6.5%, due 1999 4,400,000 5,000,000
Variable rate (5.695% at December 31, 1994),
due in annual installments of $881,000 in
1995 through 2004 8,114,000 8,114,000
Variable rate (5.85% at December 31, 1994),
due 2025 3,100,000 3,100,000
Debenture bonds:
9.2% to 11.4%, due 1995 and 1996 6,088,000 7,586,000
6.5% to 8%, due 1997 through 1999 5,530,000 4,894,000
10% to 10.5%, due 1997 and 1998 2,117,000 2,849,000
10%, due 2000 and 2001 2,742,000 2,774,000
7.5% to 8.7%, due 2002 through 2004 5,590,000 4,061,000
Employee bonds, variable rate
(18% at December 31, 1994) 233,312 59,581
Other bonds, 4% to 10% 611,221 625,130
74,832,308 54,251,120
Less current maturities 3,615,000 1,992,000
$71,217,308 $52,259,120
The Partnership has a $20,000,000 revolving line of credit with a bank which
bears interest based on the LIBOR rate (4.345% at December 31, 1994).
Borrowings under this agreement totalled $10,000,000 at December 31, 1994. The
revolving line of credit expires on July 1, 1997.
The variable rate notes payable, the note payable due in quarterly
installments and the industrial development revenue bonds are collateralized
by first mortgages on certain facilities and related property with a cost
aggregating approximately $80,640,000.
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 $32,000,000 and net
Partnership equity (as defined) of $43,000,000, limit the addition of new
long-term debt, and limit its unhedged grain position to 2,000,000 bushels.
The aggregate annual maturities, including sinking fund requirements, through
1999 of long-term debt are as follows: 1995--$3,615,000; 1996--$22,895,000;
1997--$10,388,000, 1998--$7,125,000 and 1999--$4,230,000.
Interest paid (including short-term lines of credit) amounted to $8,175,747,
$5,425,491 and $6,595,883 in 1994, 1993 and 1992, respectively.
8. Leases
The Partnership and subsidiaries lease certain equipment and real property
under operating leases, including rail cars which the Partnership subleases to
third parties.
Net rent expense under operating leases was as follows:
1994 1993 1992
Total rent expense $8,442,535 $7,095,276 $7,400,356
Less rental income from subleases 2,805,440 1,320,544 1,312,205
Net rental expense $5,637,095 $5,774,732 $6,088,151
Future minimum rentals for all noncancelable operating leases and future
rental income from subleases are as follows:
Future Future
Minimum Sublease
Rentals Income
1995 $ 7,803,420 $ 4,132,351
1996 6,281,504 3,505,671
1997 5,172,363 3,104,040
1998 4,661,835 2,863,620
1999 3,319,158 1,229,235
Future years 3,386,948 157,390
$30,625,228 $14,992,307
9. Commitments and Risk Management
The Partnership has, in the normal course of its business, entered into
contracts to purchase and sell grain inventories and has interest in other
commodity contracts requiring performance in future periods. Contracts for
purchase of grain inventories and other commodities from producers generally
relate to the current or future crop years for delivery periods quoted by
regulated commodity exchanges. Contracts for sale of grain inventories and
other commodities to processors and other consumers generally do not extend
beyond one year. The terms of these contracts are consistent with industry
practice.
The Partnership utilizes futures contracts that are traded on a regulated
futures exchange to hedge its net price exposure from grain inventories held
and firm commitments to purchase or sell grain inventories and other
commodities. The Partnership's policy is to hedge its net price exposure and
at December 31, 1994, nearly 100% of the Partnership's grain inventories held
and firm commitments under forward contracts were hedged with futures
contracts. All grain inventories held, firm commitments under forward
contracts and futures contracts are marked to market on a daily basis.
The Partnership periodically utilizes interest rate contracts to manage
interest rate risk by converting variable interest rates on its short-term
borrowings to short-term fixed interest rates. The notional amounts of these
contracts are based upon the Partnership's projected short-term borrowing
needs. Additional interest expense incurred in holding these instruments was
$52,695, $92,545 and $1,783 in 1994, 1993 and 1992, respectively. There were
no open interest rate contracts at December 31, 1994.
10. Securities
The following is a summary of held-to-maturity securities which mature within
one year as of December 31, 1994 and 1993:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
December 31, 1994
Cash equivalent--commercial
paper $4,700,000 $ - $ - $4,700,000
Margin deposits--U.S. Treasury
securities 3,902,567 929 - 3,903,496
$8,602,567 $ 929 $ - $8,603,496
December 31, 1993
Cash equivalent--U.S. Treasury
securities $3,936,955 $ - $ - $3,936,955
Margin deposits--U.S. Treasury
securities 4,731,172 - 15,015 4,716,187
$8,668,127 $ - $15,015 $8,653,142
11. Fair Values of Financial Instruments
The fair values of the Partnership's financial instruments, consisting of cash
equivalents, margin deposits, investments in and advances to affiliates and
long and short-term debt, approximate their carrying values since the
instruments either provide for short terms to maturity or interest at variable
rates based on market indexes or, in the case of investments in affiliates,
the investments are being carried on the equity method which approximate fair
value. Certain long-term notes payable and the Partnership's debenture bonds
bear fixed rates of interest and terms of five or ten years. Based upon
current interest rates offered by the Partnership on similar bonds and rates
currently available to the Partnership for long-term borrowings with similar
terms and remaining maturities, the Partnership believes its long-term debt
instruments outstanding at December 31, 1994 and 1993, have fair values as
follows:
Carrying Fair
Amount Value
1994
Debenture bonds $22,144,000 $22,189,000
Long-term notes payable 52,688,000 51,316,000
$74,832,000 $73,505,000
1993
Debenture bonds $22,241,000 $23,750,000
Long-term notes payable 32,010,000 31,993,000
$54,251,000 $55,743,000
12. Segments of Business
The Partnership operates three business segments: Agriculture, Retail Stores
and Other. Agriculture includes grain merchandising, operation of terminal
grain elevator facilities, and distribution of agricultural products,
primarily fertilizer. Other includes production and distribution of lawn and
corn cob products and rail car leasing and repair.
Prior to 1994 the Partnership reported its agriculture business as two
segments: Grain Operations and Agricultural Products. The Partnership elected
to combine these operations into a single business segment based upon the
similarities in the customer bases and geographic markets.
Segment information for 1993 and 1992 has been restated to conform with the
1994 presentation.
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
1994 1993 1992
Revenues:
Agriculture:
Sales to unaffiliated customers $661,369,917 $520,890,521 $517,598,783
Intersegment sales 3,105,953 2,978,856 2,709,350
Merchandising revenue and other
income 30,446,394 27,350,033 20,007,958
694,922,264 551,219,410 540,316,091
Retail stores:
Sales to unaffiliated customers 172,337,256 155,424,855 149,090,921
Other income 112,763 118,337 82,344
172,450,019 155,543,192 149,173,265
Other:
Sales to unaffiliated customers 89,636,688 71,668,255 64,976,326
Intersegment sales 877,903 730,135 819,310
Other income 440,107 678,710 553,502
90,954,698 73,077,100 66,349,138
Other income 1,023,964 4,090,096 4,691,375
Eliminations--intersegment sales (3,983,856) (3,708,991) (3,528,660)
Total revenues $955,367,089 $780,220,807 $757,001,209
Operating profit:
Agriculture $ 18,900,530 $ 14,571,601 $ 9,720,038
Retail stores 4,290,252 1,639,953 4,062,370
Other 5,529,419 4,958,651 4,517,401
Total operating profit 28,720,201 21,170,205 18,299,809
Other income 863,147 2,090,567 2,533,177
Interest expense (8,394,606) (6,168,371) (6,325,440)
General expenses (6,051,312) (6,013,041) (4,377,854)
Income from continuing operations $ 15,137,430 $ 11,079,360 $ 10,129,692
Identifiable assets:
Agriculture $217,462,318 $244,064,853 $168,917,991
Retail stores 64,551,540 56,558,711 48,174,786
Other 53,720,115 44,091,096 29,021,506
General assets 14,450,149 11,787,118 9,386,354
Total assets $350,184,122 $356,501,778 $255,500,637
Depreciation and amortization expense:
Agriculture $ 3,390,835 $ 3,252,151 $ 3,364,773
Retail stores 2,602,692 1,957,190 1,882,966
Other 1,699,610 1,512,000 1,211,566
General 407,921 387,882 551,274
Total depreciation and
amortization expense $ 8,101,058 $ 7,109,223 $ 7,010,579
Capital expenditures:
Agriculture $ 6,688,988 $ 3,772,771 $ 2,420,837
Retail stores 12,985,881 4,228,566 728,538
Other 5,537,036 2,209,646 2,917,100
General 1,088,454 597,538 523,570
Total expenditures $ 26,300,359 $ 10,808,521 $ 6,590,045
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
in 1992. No unaffiliated customer accounted for more than 10% of sales and
merchandising revenues in 1994 or 1993. Grain sales for export to foreign
markets amounted to approximately $129,700,000 and $88,300,000, and
$101,300,000 in 1994, 1993 and 1992, respectively.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
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 71 Chairman of the Board (1)* (2)* (3)*
Richard P. Anderson 65 Director; President and Chief Executive
Officer (1)* (2)* (3)*
Christopher J. Anderson 40 Vice President Business Development
Group (3)
Daniel T. Anderson 39 Director; General Merchandise Manager
Retail Group (3)
Donald E. Anderson 68 Director; Science Advisor (1)
Michael J. Anderson 43 Director; Vice President and General
Manager Retail Group (2)
Richard M. Anderson 38 Director; Vice President and General
Manager Industrial Products Group (2)
John F. Barrett 45 Director
Joseph L. Braker 44 Vice President and General Manager
Agriculture Group (2)
Dale W. Fallat 50 Director; Vice President Corporate
Services (2)
Richard R. George 45 Corporate Controller and Principal
Accounting Officer (3)
Paul M. Kraus 62 Director (1)
Peter A. Machin 47 Vice President and General Manager Lawn
Products Group (1)
Beverly J. McBride 53 General Counsel and Corporate
Secretary (2)
Rene C. McPherson 70 Director (2)
Donald M. Mennel 76 Director (1) (3)
Larry D. Rigel 53 Vice President Marketing (1)
Janet M. Schoen 35 Director (2)
Gary L. Smith 49 Corporate Treasurer (1)
(1) Member of Nominating and Advisory Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
* Denotes Ex-officio member
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
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 Agriculture 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.
Item 11. 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 "Item 13. 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 1994 $335,000 $202,500 $4,620
President and Chief 1993 308,333 150,000 4,497
Executive Officer 1992 286,666 60,000 4,300
Thomas H. Anderson 1994 226,667 125,000 4,620
Chairman of the Board 1993 206,669 90,000 4,497
1992 190,004 35,000 4,364
Joseph L. Braker 1994 224,071 150,000 4,620
Vice President and General 1993 194,634 70,000 4,497
Manager Agriculture Group 1992 181,408 30,000 4,364
Michael J. Anderson 1994 200,765 100,000 4,620
Vice President and General 1993 161,962 100,000 4,497
Manager Retail Group 1992 146,978 30,000 4,364
Larry Rigel 1994 171,981 25,000 4,620
Vice President Marketing 1993 162,558 15,000 4,497
1992 151,924 30,000 4,364
(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 seven 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 $ 3,142 $ 6,284 $ 9,427 $ 15,711
100,000 6,892 13,784 20,677 34,461
150,000 10,642 21,284 31,927 53,211
200,000 14,392 28,784 43,177 71,961
250,000 18,142 36,284 54,427 90,711
Directors' Fees
Directors who are not employees of the Corporation and who are not
members of the Anderson family receive an annual retainer of $15,000.
Directors who are not employees of the Corporation receive a fee of $1,000 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 $3,000 provided they are not an employee of the Corporation, and
members of the committees who are not employees of the Corporation receive
$750 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, Joseph L. Braker,
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 were limited partners in Alshire-Columbus Limited Partnership
("Alshire-Columbus"), an Ohio limited partnership, which owned the
Partnership's Brice General Store in Columbus, Ohio. The store was leased to
the Partnership by Alshire-Columbus at an annual base rental of $732,000.
The Partnership contributed the land, at its cost ($1,367,000), for its
original limited partner interest. 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 owned more than one limited partnership unit, except for
Richard P. Anderson, who owned two units.
In the aggregate, 8 3/4 units were owned by directors and executive
officers of the Corporation, and their family members owned an additional four
units. The general partner of Alshire-Columbus experienced difficulties in
refinancing the real property after the original seven year term of their
note. During 1994, The Andersons obtained an independent appraisal of the
property valued at $8.5 million and made an offer to purchase the property for
that price. The initial lease term was scheduled to expire in 2000. The
limited partners of Alshire-Columbus accepted the purchase offer from The
Andersons. According to the partnership agreement, upon the sale of the real
estate The Andersons received a preferential distribution from the proceeds
of the sale equal to the original cost of the land contributed by The
Andersons. The remaining proceeds from the sale, after payment of the debt
and return of capital to limited partners, was distributed according to the
partnership agreement which was 75% to the limited partners; 24% to The
Andersons, as original limited partner; and 1% to the general partner. Each
limited partner received approximately $33,400 per unit held from the proceeds
of the sale.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No Limited Partner beneficially owns as much as 5% of the
Partnership's total capital. As of March 1, 1995, the descendants
of Harold and Margaret Anderson, founders of the Partnership,
beneficially held Partnership capital in the aggregate amount of
$45,849,956, constituting 72% of the Partnership's total capital
of $64,029,765 as of that date. All capital amounts as of March
1, 1995 are before the allocation of Partnership income for 1995.
The Anderson family members also own a total of 80% of the Class
A (non-voting) Shares and 78% of the outstanding Class B (voting)
Shares of the Corporation.
(c) The Partnership knows of no arrangements which may at a subsequent
date result in a change in control of the Partnership.
Item 13. 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 1994 totaled $70,394,855. 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 85% 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 90% 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 1994, the rental payments made by the Partnership to
the Corporation, net of the reimbursement for management and maintenance of
the building was $635,714, 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 "Item 11. Executive Compensation - Compensation Committee
Interlocks and Insider Participation - Certain Transactions - Alshire-
Columbus."
PART IV
Item 14. Financial Statement Schedules and Reports on Form 8-K
(a) (1) The following consolidated financial statements of the registrant
are included in Item 8:
Page
Report of Independent Auditors.............................. 14
Consolidated Statements of Income - years ended
December 31, 1994, 1993 and 1992.......................... 15
Consolidated Balance Sheets - December 31, 1994 and 1993.... 16
Consolidated Statements of Cash Flows - years ended
December 31, 1994, 1993 and 1992.......................... 17
Consolidated Statements of Changes in Partners' Capital
- years ended December 31, 1994, 1993 and 1992............ 18
Notes to Consolidated Financial Statements.................. 19
(2) The following consolidated financial statement schedule is
included in Item 14(d):
II. Consolidated Valuation and Qualifying Accounts - years
ended December 31, 1994, 1993 and 1992.................... 34
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.
(3) Exhibits:
3(a) Certificate of Limited Partnership filed by the
Partnership on January 9, 1995 with the Secretary of
the State of Ohio.
3(b) The Andersons Partnership Agreement, dated as of
January 1, 1994. (Incorporated by reference to the
Partnership's Form 10-K dated December 31, 1993.)
4(a) Form of Indenture dated as of October 1, 1985,
between the Registrant and Ohio Citizens Bank, as
Trustee. (Incorporated by reference to Exhibit 4(a)
in Registration Statement No. 33-819.)
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 the Partnership's Form
10-K dated December 31, 1993.)
10(a) Management Performance Program.* (Incorporated by
reference to Exhibit 10(a) to the Partnership's Form
10-K dated December 31, 1990.)
10(f) Management Agreement between The Andersons and The
Andersons Management Corp., effective as of January
1, 1988. (Incorporated by reference to Exhibit 10(f)
in Registration Statement No. 33-13538.)
10(h) Business Property Sublease effective January 1, 1993,
between The Andersons Management Corp. and The
Andersons. (Incorporated by Reference to Exhibit
10(h) in Registration Statement 33-42680.)
22 Subsidiaries of The Andersons. (Incorporated by
Reference to the Partnership's Form 10-K dated
December 31, 1993.)
23 Consent of Independent Auditors
28 Anderson Foundation Declaration of Trust, as amended.
(Incorporated by reference to Exhibit 28 to
Registrants Form 10-K dated December 31, 1992.)
* Management contract or compensatory plan.
The Partnership 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) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the
year.
(c) Exhibits:
The exhibits listed in Item 14(a)(3) of this report, and not
incorporated by reference, follow "Financial Statement Schedules"
referred to in (d) below.
(d) Financial Statement Schedules:
The financial statement schedules listed in 14(a)(2) follow
"Signatures".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Maumee, Ohio,
on the 23rd day of March, 1995.
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 Exchange Act of 1934,
this report has been signed below by the following persons as Directors of the
General Partner and on behalf of the Registrant on the 23rd day of March,
1995.
Signature Title* Signature Title*
/s/Richard P. Anderson Director Director
Richard P. Anderson John F. Barrett
/s/Daniel T. Anderson Director /s/Dale W. Fallat Director
Daniel T. Anderson Dale W. Fallat
Director Director
Donald E. Anderson Paul M. Kraus
/s/Michael J. Anderson Director Director
Michael J. Anderson Rene C. McPherson
/s/Richard M. Anderson Director /s/Donald M. Mennel Director
Richard M. Anderson Donald M. Mennel
/s/Thomas H. Anderson Director Director
Thomas H. Anderson Janet M. Schoen
*Titles with The Andersons Management Corp.
No proxy statement of the Partnership is furnished to Limited Partners.
Audited financial statements will be distributed to Limited Partners at a
later date.
<TABLE>
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THE ANDERSONS AND SUBSIDIARIES
<CAPTION>
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, 1994 $1,178,000 $2,682,904 $ -0- $1,568,904 (1) $2,292,000
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
(1) Uncollectible accounts written off, net of recoveries
</TABLE>
EXHIBIT INDEX
THE ANDERSONS
Exhibit
Number
3(a) Certificate of Limited Partnership filed by the Partnership January
9, 1995 with the Secretary of the State of Ohio.
23 Consent of Independent Auditors
Exhibit 3(a)
The State of Ohio
Bob Taft
Secretary of State
892336
Certificate
It is hereby certified that the Secretary of State of Ohio has custody of the
Records of Incorporation and Miscellaneous Filings: that said records show
the filing and recording of: CLP
THE ANDERSONS LIMITED PARTNERSHIP
Recorded on Roll 5030 at Frame 0536 of the
Records of Incorporation and Miscellaneous
Witness my hand and the seal of the Secretary of
State at Columbus, Ohio, this 9th day of Jan.
A.D. 1995
/s/ Bob Taft
Bob Taft
Secretary of State
05030-0536
Approved___________
Date_______________
Fee: No fee
Prescribed by
Bob Taft, Secretary of State
30 East Broad Street, 14th Floor
Columbus, Ohio 43266-0418
Form CLP (July 1994)
CERTIFICATE OF LIMITED PARTNERSHIP
The undersigned, desiring to form a limited partnership in accordance
with Ohio Revised Code Chapter 1782, do hereby certify as follows:
1. The name of the limited partnership shall be
The Andersons Limited Partnership.
2. The address of the principal place of business of the partnership shall
be:
480 West Dussel Drive,
Maumee, Ohio 43537
3. The name and address of the limited partnership's agent for service of
process in Ohio is:
Beverly J. McBride, Esq.,
c/o The Andersons,
480 West Dussel Drive,
Maumee, Ohio 43537
4. The name and business or residence address of each GENERAL PARTNER is:
The Andersons Management Corp.,
an Ohio Corporation,
480 West Dussel Drive,
Maumee, Ohio 43537.
5. The undersigned hereby certify that this limited partnership has been in
existence sine
January 30, 1947,
and that this certificate is being filed solely to comply with Ohio
Revised Code Section 1782.63(A)(1).
The foregoing item 5 is to be completed, and is applicable ONLY IF the
subject limited partnership was in existence prior to July 1, 1994. If not
applicable, please insert "N/A" in the blank designated for the pre-existing
date.
6. Other provisions (optional):
IN WITNESS WHEREOF, the undersigned have caused this Certificate to be
executed this
3rd day of January, 1995.
THE ANDERSONS MANAGEMENT CORP.
sole General Partner
By:/s/ Richard P. Anderson By:/s/ Beverly J. McBride
Richard P. Anderson, President Beverly J. McBride, Secretary
(If insufficient space for all signatures, please attach a separate sheet
containing additional signatures.)
INSTRUCTIONS
1. Pursuant to ORC 1782.02, the name of the limited partnership must include
the words "Limited Partnership", "L.P.", "Limited", or "Ltd.", and shall
NOT contain the name of a limited partner unless either of the following
are true:
a. It is also the name of a general partner;
b. the business of the limited partnership had been carried on
under that name before the admission of that limited partner.
2. Pursuant to ORC 1782.01(H), a limited partnership must be created by a
minimum of two persons. The certificate must be signed by all General
Partners.
3. *If this certificate of limited partnership is being filed solely to
comply with the provisions of Ohio Revised Code Section 1782.63(a)(1),
then no filing fee is required.
[Ohio Revised Code Section 1782.08]
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-51860) pertaining to the Employee Bond Purchase Plan of The
Andersons of our report dated February 6, 1995, with respect to the
consolidated financial statements and schedules of The Andersons included in
the Annual Report (Form 10-K) for the year ended December 31, 1994.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Toledo, Ohio
March 23, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000006474
<NAME> THE ANDERSONS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6186695
<SECURITIES> 0
<RECEIVABLES> 64483374
<ALLOWANCES> 2292000
<INVENTORY> 198635026
<CURRENT-ASSETS> 267912363
<PP&E> 196028546
<DEPRECIATION> 118432043
<TOTAL-ASSETS> 350184122
<CURRENT-LIABILITIES> 210858644
<BONDS> 71217308
<COMMON> 0
0
0
<OTHER-SE> 63977550
<TOTAL-LIABILITY-AND-EQUITY> 350184122
<SALES> 952758418
<TOTAL-REVENUES> 955367089
<CGS> 806152265
<TOTAL-COSTS> 806152265
<OTHER-EXPENSES> 125682788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8394606
<INCOME-PRETAX> 15137430
<INCOME-TAX> 0
<INCOME-CONTINUING> 15137430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15137430
<EPS-PRIMARY> .287
<EPS-DILUTED> 0
</TABLE>
