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, 1995
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 000-20557
(Previously 33-16936)
THE ANDERSONS, INC.
(FORMERLY THE ANDERSONS MANAGEMENT CORP.)
(Exact name of registrant as specified in its charter)
OHIO 34-1562374
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
480 W. Dussel Dr., 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: Common Shares
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the registrant's voting stock which may
be voted by persons other than affiliates of the registrant was $78,501,277 on
February 29, 1996, computed by reference to the last sales price for such stock
on that date as reported on the Nasdaq National Market.
The registrant had 8,430,286 Common Shares outstanding, no par value,
at February 29, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report of The Andersons, Inc. and Proxy
Statement for the Annual Meeting of Shareholders to be held on May 23, 1996,
are incorporated by reference into Parts II (Items 6, 7 and 8), III (Items 10,
11 and 12) and IV of this Annual Report on Form 10-K. The Proxy Statement will
be filed with the commission approximately April 15, 1996.
PART I
Item 1. Business
(a) General Development of Business
The Andersons Management Corp., (the "Corporation") was formed in
August 1987, principally for the purpose of providing management services to
The Andersons, a limited partnership (the "Partnership") and to act as the
Partnership's sole general partner. On January 2, 1996, the Partnership merged
with and into the Corporation (the "Merger") and the Corporation changed its
name to The Andersons, Inc. (the "Company"). See Note 1 to the consolidated
financial statements of The Andersons, Inc. for further discussion of the
Merger. Unless the context otherwise requires, references herein to the
"Company" shall mean the combination of the Partnership and the Corporation
prior to the Merger and The Andersons, Inc. after the Merger. References
herein to the "Corporation" and the "Partnership" shall mean the separate
entities prior to the Merger.
(b) Financial Information about Industry Segments
See Note 14 to the consolidated financial statements of The Andersons,
Inc. for information regarding the Company's business segments.
(c) Narrative Description of Business
General
The Company is engaged in grain merchandising and operates grain
elevator facilities located in Ohio, Michigan, Indiana and Illinois. The
Company is also engaged in the distribution of agricultural products such as
fertilizers, seeds and farm supplies. The Company operates retail general
stores; produces, distributes and markets lawn care products and corncob
products; and repairs and leases rail cars.
Agriculture Group
The agriculture group consists of grain operations, wholesale
fertilizer operations and retail farm centers.
The Company'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
Company as well as grain owned by others, and selling grain. The principal
grains sold by the Company are yellow corn, yellow soybeans and soft red and
white wheat. The Company's total grain storage capacity was approximately 67
million bushels at December 31, 1995.
Virtually all grain merchandised by the Company is grown in the
Midwestern part of the United States and is acquired from country elevators,
dealers and producers. The Company effects grain purchases at prices
referenced to Chicago Board of Trade quotations. The Company competes for the
purchase of grain with grain processors and feeders, as well as with other
grain merchandisers.
The Company'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 Company.
During 1995, approximately 62% of the grain sold by the Company was
purchased domestically by grain processors and feeders and approximately 38%
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.
Grain sales are effected on a negotiated basis by the Company's
merchandising staff. As with agricultural commodities generally, the volume
and pricing of the Company'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 Company'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. Since the Company does not usually 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 Company to
adverse changes in price. Hedging of these purchase and sales positions
provides protection from the potential adverse changes in price. The Company
hedges fixed price purchase and sales transactions through the use of futures
and option 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 Company. Futures prices are determined by supply
and demand.
The Company's 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 is primarily derived from margins on grain sold and revenues
generated from other merchandising activities with its customers, not from its
hedging transactions.
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 some future period. When
the Company purchase s or contracts for future delivery for grain at a fixed
price, the purchase is immediately hedged with the sale of a futures contract
on the CBOT. Similarly, when the Company sells grain at a fixed price, the
sale is immediately hedged with the purchase of a futures contract on the CBOT.
At the close of business each day, the open inventory ownership positions, as
well as open futures and option positions, are marked-to-market. Gains /losses
in value on the Company's owned inventory positions from changing prices are
netted with and generally off-set by losses/gains in value on the Company'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 to be sent to 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 Company to maintain appropriate short-term lines of
credit. The Company utilizes CBOT option contracts to reduce the potential
margin deposits in the event of a rapidly rising market.
At any one time the Agriculture Group's purchase contract portfolio may
exceed 100 million bushels for delivery to the Company. Because of this
volume, the Company 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 Company monitors current
market conditions and may expand or reduce the purchasing program in response
to changes in those conditions. In addition, the Company reviews its purchase
contracts and the parties to those contracts for delivery risk and provides
appropriate reserves for potential defaults and non-delivery.
The Company 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.
Some of the Company's competitors are also its customers and many of its
competitors have substantially greater financial resources than the Company.
The Company's wholesale agricultural fertilizer operations involve
purchasing, storing, formulating, and selling dry and liquid fertilizers;
manufacturing 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 Company are
nitrogen, phosphate and potassium, all of which are readily available from
various sources.
The Company's wholesale agricultural fertilizer market area primarily
includes Ohio, Michigan, Indiana and Illinois. Customers for the Company's
agricultural fertilizer products are principally retail dealers. Sales of
agricultural fertilizer products are heaviest in the spring and fall.
The Company's aggregate storage capacity for dry fertilizer at December
31, 1995, was 14 million cubic feet. The Company reserves five million cubic
feet of this space for various fertilizer manufacturers and customers. The
Company's aggregate storage capacity for liquid fertilizer was 34 million
gallons at December 31, 1995, and six million gallons of this space is reserved
for manufacturers and customers. The agreements for reserved space provide the
Company storage and handling fees and, generally, are for one year and are
renewed at the end of each term.
The Company operates ten retail farm centers located throughout
Michigan, Indiana and Ohio. These centers, often strategically located at or
near the Company's grain or wholesale fertilizer facilities, offer agricultural
fertilizer, chemicals, seeds and supplies, as well as custom application of
fertilizer and chemicals to the farmer.
In its agricultural products business, the Company 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 Company. Competition in the agricultural products business of the Company
is based principally on price, location and service.
Retail Group
The Company's retail store operations consist of six facilities
operated as The Andersons General Stores (hereafter "General Stores"), which
are located in the Columbus, Lima and Toledo, Ohio areas, and 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 housewares 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 Company
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. The Company's retail business is affected
by seasonal factors with significant sales occurring during the Christmas
season and in the spring.
Business Development Group
The Company produces more than 800 granular consumer and professional
lawn and garden care products for national distribution. The consumer granular
products are sold to mass merchandisers, home centers and regional retailers as
well as 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 primarily purchased from
the Company's agriculture group. The lawn and garden 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 Company's Railcar division operates a full service repair shop,
which specializes in repairs, renovations, cleaning and painting of railcars.
In addition, the division buys and sells cars, leases and subleases cars and
provides fleet management services. Competition for marketing services is
based primarily on service and access to financing. Repair shop competition is
based primarily on price, quality and location.
The Company 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 spill ed industrial liquids and
other waste products. The principal sources for the corncobs are the Company's
grain operations and seed corn producers.
The Company also produces dog and cat foods, operates seven auto
service centers, a steel fabrication shop and an outdoor power equipment sales
and service shop.
Research and Development
The Company's research and development program is mainly concerned with
the development of improved products and processes, primarily lawn care
products and corncob products. Approximately $370,000, $490,000, and $450,000
was expended on research and development during 1995, 1994 and 1993,
respectively.
Employees
During the period covered by this report, all management and labor
services were provided to the Partnership by the employees of the General
Partner prior to the Merger for a management fee. At December 31, 1995, the
General Partner had 1,187 full-time and 1,939 part-time or seasonal employees.
Government Regulation
Grain sold by the Company 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
Company 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
Company's grain sales are to exporters, the imposition of such restrictions
could have an adverse effect upon the Company's operations.
The Company, 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 Company's existing plant and processing facilities and could
restrict future facilities expansion or significantly increase their cost of
operation. The Company made capital expenditures of approximately $740,000 and
$617,000 in 1995 and 1994, respectively, in order to comply with these
regulations.
Item 2. Properties
The Company's principal agriculture, retail and other properties are
described below. Except as otherwise indicated, all properties are owned by
the Company.
Agriculture Facilities
Location Grain Wholesale Fertilizer
Storage Dry Storage Liquid Storage
(bushels) (cu. ft.) (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 6,480,000 --- ---
Lyons, OH (3) 380,000 47,000 160,000
Champaign, IL 13,000,000 833,000 ---
Delphi, IN 6,580,000 1,000,000 ---
Clymers, IN (1) 4,400,000 --- 7,600,000
Clymers, IN (3) --- 37,000 480,000
Dunkirk, IN 5,900,000 900,000 ---
Poneto, IN 530,000 --- 5,500,000
North Manchester, IN (3) --- 23,000 900,000
Logansport, IN --- 33,000 3,000,000
Walton, IN (3) --- 433,000 6,500,000
Albion, MI (3) 2,470,000 23,000 40,000
Potterville, MI (3) 790,000 23,000 ---
White Pigeon, MI 1,730,000 --- ---
Webberville, MI --- 2,017,000 3,300,000
Litchfield, MI (2)(3) --- 40,000 252,000
North Adams, MI(2)(3) --- 20,000 230,000
Union City, MI (3) --- 20,000 49,500
Munson, MI (3) --- 33,000 150,000
67,360,000 13,815,000 33,761,500
(1) Facility leased - lease expires in 1998, provides an option to purchase.
(2) Facility leased.
(3) Facility is or includes a retail farm center.
The grain facilities are mostly concrete and steel tanks, with some
flat storage. The Company 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 Company owns a seed processing facility in Delta, Ohio. The
Company also operates ten retail farm centers (two under lease agreements) in
Michigan, Indiana and Ohio. Aggregate storage capacity in the ten retail farm
centers for liquid fertilizer and dry fertilizer is 8.8 million gallons and
699,000 cubic feet, respectively.
Retail Store Properties
Name Location Square Feet
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 million. The General Store leases
provide for contingent lease payments based on achieved sales volume.
Other Properties
The Company 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 Company leases a lawn fertilizer production facility, a warehouse facility
and four lawn products sales outlets. In its Railcar leasing business, the
Partnership owns or leases approximately 2,000 railcars (primarily covered
hopper cars) with lease terms ranging from one to ten years and future minimum
lease payments aggregating $22.6 million with future minimum lease income of
$22.4 million. The Company also owns a railcar repair facility, a steel
fabrication facility, a service and sales facility for outdoor power equipment
and the Company owns or leases seven auto service centers.
The Company's administrative office building is leased at an annual
rental of approximately $850,000 under a net lease expiring in 2000. The
Company owns approximately 704 acres of land on which various of the above
properties and facilities are located; approximately 439 acres of farmland and
land held for future use; approximately 11 acres of improved land in an
office/industrial park held for sale; and certain other real estate. The
Company also owns or leases a number of switch engines, cranes and other
equipment.
Real properties, machinery and equipment of the Company were subject to
aggregate encumbrances of approximately $38 million at December 31, 1995.
Property additions for the years ended December 30, 1995, 1994 and 1993
amounted to $16 million , $26 million, and $11 million, respectively. See Note
8 to the Company's Consolidated Financial Statements for information as to the
Company's leases.
The Company 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 Company is not involved in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the shareholders of the Corporation was held on
November 16, 1995 to vote on the Merger and other related actions. There were
4,378 votes from the Class A Common Shareholders in favor of the Agreement and
Plan of Merger, 171 votes against and there were no abstentions. Of the Class
B Common Shareholders, 5,412 voted in favor of the Agreement and Plan of
Merger, 212 voted against and there were no abstentions.
In addition, Class B Common Shares were voted 5,453 in favor of
amending the Corporations Articles to eliminate cumulative voting in the
election of members to the Board of Directors, 78 voted against and 93
abstained. Class B Common Shares also voted 5,361 in favor of approving The
Andersons, Inc. Long-Term Performance Compensation Plan with 98 against and 165
abstaining. Finally, in the proposal to approve The Andersons, Inc. Employee
Share Purchase Plan, 5,453 Class B Common Shares were voted for the proposal,
78 against and 93 abstained. All proposals passed.
Item 4A. Executive Officers of the registrant
Pursuant to General Instruction G(3) of Form 10-K, the following
information with respect to the executive officers of the registrant is
included herein in lieu of being included in the registrant's Proxy Statement
for its Annual Meeting of Shareholders to be held May 23, 1996.
Year
Assumed
Name Position Age Present Office
Thomas H. Anderson Chairman of the Board 72 1987
Richard P. Anderson President and Chief
Executive Officer 66 1987
Christopher J. Anderson Vice President - Business
Development Group 41 1990
Michael J. Anderson Vice President and General
Manager - Retail Group 44 1994
Vice President and General
Manager - Grain Group 1990-1994
Richard M. Anderson Vice President and General
Manager - Industrial Products
Group 39 1990
Joseph L. Braker Vice President and General
Manager - Agriculture Group 45 1994
Vice President and General
Manager - Ag Products Group 1990-1994
Dale W. Fallat Vice President - Corporate
Services 51 1990
Richard R. George Corporate Controller and
Principal Accounting Officer 46 1979
Peter A. Machin Vice President and General
Manager - Lawn Products Group 48 1990
Beverly J. McBride General Counsel and Corporate
Secretary 54 1987
Gary L. Smith Corporate Treasurer 50 1985
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Because of ownership and transferability restrictions, there was no
market for the Class A and Class B Common Shares of the Corporation
prior to the Merger.
(b) After the Merger, the Common Shares of The Andersons, Inc. were
approved for trading on the Nasdaq National Market. Trading began on
February 20, 1996.
(c) At December 31, 1995, there were 187 holders of Class A Common Shares
and 184 holders of Class B Common Shares of the Corporation. As of
February 15, 1996, after the Merger and prior to the commencement of
trading on the Nasdaq National Market, there were 305 Common
Shareholders of The Andersons, Inc.
(d) The Corporation does not intend to pay cash dividends in the
foreseeable future.
Item 6. Selected Financial Data
The following table presents the selected financial data in thousand, except
share and per share data of the Corporation:
Year Ended December 31
1995 1994 1993 1992 1991
Management Fees $74,201 $70,395 $63,107 $57,388 $55,358
Net income 228 252 146 9 25
Net income
per Class A Share 49.48 54.72 31.66 1.96 5.38
Weighted average number
of Class A Common
Shares outstanding 4,608 4,612 4,624 4,633 4,591
As of December 31
1995 1994 1993 1992 1991
Total assets $12,895 $12,984 $11,432 $ 8,841 $ 8,580
Shareholders'
equity 2,104 1,862 1,607 1,473 1,445
The five year selected financial data appearing on page 1 of The Andersons,
Inc. 1995 Annual Report to Shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information under the caption Management's Discussion and Analysis
appearing on pages 6 and 7 of The Andersons, Inc. 1995 Annual Report to
Shareholders is incorporated herein by reference.
The following discussion of results of operations and liquidity and capital
resources is included for the Corporation prior to the Merger.
Results of Operations
Years ended December 31, 1995 and 1994:
Net income in 1995 was $228,010 or $49.48 per Class A Common Share,
compared to $252,351 or $54.72 per share in 1994. Income earned by the
Corporation on its investment in the Partnership was down $58,852 in 1995 and
the management fee earned by the Corporation based on the Partnership's return
on equity and rent and other reimbursable expenses was down $40,174. These
decreases were due to reduced 1995 operating results of the Partnership
Interest earned and other income increased by $64,146, primarily due to higher
returns on the Corporation's other investments. Federal income tax expense
decreased due to the decrease in income.
Years ended December 31, 1994 and 1993:
Net income in 1994 was $252,351 or $54.72 per Class A Common Share,
compared to $146,399 or $31.66 per share in 1993. Income earned by the
Corporation on its investment in the Partnership was up $73,318 in 1994 and the
management fee earned by the Corporation based on the Partnership's return on
equity and rent and other reimbursable expenses was up $213,563. These
increases were due to improved 1994 operating results of the Partnership and an
increase in space utilized by the Partnership in the Corporation's office
building. Interest earned and other income decreased by $27,096, primarily due
to less space leased by outside tenants in the Corporation's office building.
Federal income tax expense increased due to the increase in income.
Liquidity and Capital Resources
The Corporation had cash and cash equivalents and short-term
investments of approximately $890,000 and $1.2 million at December 31, 1995 and
1994, respectively. The largest component of the Corporation's working capital
was a receivable from the Partnership. This receivable represents the costs
incurred by the Corporation in providing management and labor services to the
Partnership but not yet paid by the Corporation and therefore not yet collected
from the Partnership. This receivable was eliminated in the Merger. The
Corporation has no short-term or long-term debt. Management believes, given the
relationship between the Corporation and the Partnership and the January 2,
1996 Merger with the Partnership, that the Corporation's cash and cash
equivalents of $890,000 are adequate to meet both short-term and long-term
needs.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of The Andersons, Inc.
and Report of Independent Auditors set forth on pages 8 through 19 of The
Andersons, Inc. 1995 Annual Report to Shareholders are incorporated herein by
reference:
Report of Independent Auditors
Consolidated Statements of Income for the years ended December 31, 1995,
1994 and 1993
Consolidated Balance Sheets for December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Changes in Owners' Equity for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Following are the financial statements of the Corporation.
Report of Independent Auditors
Board of Directors
The Andersons, Inc.
We have audited the accompanying balance sheets of The Andersons Management
Corp. as of December 31, 1995 and 1994, and the related statements of income,
cash flows, and changes in shareholders' equity for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Andersons Management Corp.
at December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
February 2, 1996
Toledo, Ohio
The Andersons Management Corp.
Statements of Income
Year ended December 31
1995 1994 1993
Management fees (Note 2) $74,201,056 $70,394,855 $63,107,331
Equity in income of The Andersons 159,992 218,844 145,526
Interest earned and other income 212,992 148,829 175,925
74,574,040 70,762,528 63,428,782
Costs and expenses:
Salaries, wages and benefits 73,246,523 69,400,144 62,326,184
Rent expense 770,494 754,867 731,209
General expenses 248,713 227,966 153,590
74,265,730 70,382,977 63,210,983
Income before income taxes 308,310 379,551 217,799
Federal income taxes:
Current 90,700 140,100 68,500
Deferred (credit) (10,400) (12,900) 2,900
80,300 127,200 71,400
Net income $ 228,010 $ 252,351 $ 146,399
Net income per weighted average
Class A Common Share $49.48 $54.72 $31.66
Weighted average number of Class A
shares outstanding 4,608 4,612 4,624
See accompanying notes.
The Andersons Management Corp.
Balance Sheets
December 31
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 889,126 $ 736,599
U.S. Treasury security held-to-maturity, fair
value of $486,875 -- 490,532
Receivable from The Andersons 4,759,352 4,700,699
Prepaid expenses 2,828,185 2,703,173
Total current assets 8,476,663 8,631,003
Receivable from The Andersons 2,929,723 3,059,742
Investment in The Andersons 1,102,457 969,376
Investment in mutual fund, at fair value 325,244 250,000
Other 60,897 73,843
$12,894,984 $12,983,964
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 1,952,809 $ 869,704
Accrued compensation and benefits 5,908,822 7,192,479
Total current liabilities 7,861,631 8,062,183
Pension and postretirement benefits 2,929,723 3,059,742
Shareholders' equity:
Common Shares, without par value:
Class A non-voting:
Authorized--25,000 shares
Issued-- 4,855 shares at stated value 1,456,405 1,456,405
Class B voting:
Authorized--25,000 shares
Issued--5,683 and 5,014 shares at stated
value in 1995 and 1994, respectively 5,683 5,014
Retained earnings 699,451 471,441
2,161,539 1,932,860
Unrealized gain on available-for-sale securities 28,957 --
(net of tax)
Less common shares in treasury, at cost--(275 and
236 Class A shares in 1995 and 1994, respectively) (86,866) (70,821)
2,103,630 1,862,039
$12,894,984 $12,983,964
See accompanying notes.
The Andersons Management Corp.
Statements of Cash Flows
Year ended December 31
1995 1994 1993
Operating activities
Net income $ 228,010 $ 252,351 $ 146,399
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Equity in earnings of The Andersons in
excess of cash received (159,992) (207,537) (139,180)
Provision for deferred income tax (10,400) (12,900) 2,900
(credits)
Amortization 2,655 4,110 41,411
Changes in operating assets and
liabilities:
Prepaid expenses and other assets (96,715) 6,328 (258,684)
Receivable from The Andersons 71,366 (1,174,113) (2,160,348)
Accounts payable and accrued
expenses (330,571) 1,309,346 2,457,183
Net cash provided by (used in)
operating activities (295,647) 177,585 89,681
Investing activities
Sales and maturities of investments 565,000 500,000 1,000,000
Purchases of investments (101,450) (739,329) (505,313)
Net cash provided by (used in)
investing activities 463,550 (239,329) 494,687
Financing activities
Purchase of common shares for treasury (29,582) (18,405) (23,697)
Sale of common shares from treasury 13,537 21,036 11,141
Proceeds from sale of common shares 669 333 -
Net cash provided by (used in)
financing activities (15,376) 2,964 (12,556)
Increase (decrease) in cash and cash
equivalents 152,527 (58,780) 571,812
Cash and cash equivalents at
beginning of year 736,599 795,379 223,567
Cash and cash equivalents at end of year $ 889,126 $ 736,599 $ 795,379
See accompanying notes.
<TABLE>
<CAPTION>
The Andersons Management Corp.
Statements of Changes in Shareholders' Equity
Unrealized
Gain on
Common Shares Available-
Retained Treasury for-Sale
Class A Class B Earnings Shares Securities
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992 $1,456,405 $4,681 $ 72,691 $(60,896) $ --
Sale of 35 Class A and
251 Class B shares from
treasury 11,141
Purchase of 75 Class A and
73 Class B shares for
treasury (23,697)
Net income for the year 146,399
Balances at December 31, 1993 $1,456,405 $4,681 $219,090 $(73,452) $ --
Sale of 59 Class A and 200
Class B shares from
treasury 21,036
Purchase of 53 Class A and
53 Class B shares for
treasury (18,405)
Issuance of 333 shares 333
Net income for the year 252,351
Balances at December 31, 1994 $1,456,405 $5,014 $471,441 $(70,821) $ --
Sale of 34 Class A and
37 Class B shares from
treasury 13,537
Purchase of 73 Class A and
37 Class B shares for
treasury (29,582)
Issuance of 669 shares 669
Unrealized gain on securities $28,957
Net income for the year $228,010
Balances at December 31, 1995 $1,456,405 $5,683 $699,451 $(86,866) $28,957
See accompanying notes.
</TABLE>
The Andersons Management Corp.
Notes to Financial Statements
December 31, 1995
1. Significant Accounting Policies
Estimates and Assumptions
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Corporation considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Securities
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 the Corporation
has the 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 shareholders' equity. Cost of these
available-for-sale securities at December 31, 1995 and 1994 was $276,981 and
$250,000, respectively. The unrealized gain of $48,262 is shown as a separate
component of shareholders' equity, net of applicable income taxes of $19,305.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Temporary differences relating to costs and expenses
incurred on behalf of the Partnership are passed on to the Partnership through
offsetting differences in the recognition of management fees by the
Corporation. Deferred tax assets of the Corporation relate primarily to
temporary differences associated with the Corporation's share of Partnership
net income and amounted to $50,700 and $29,900 at December 31, 1995 and 1994,
respectively.
Taxes paid during 1995, 1994 and 1993 amounted to $146,000, $135,500, and
$5,000, respectively.
Description of Common Shares
Common shares of the Corporation are held by limited partners of The Andersons.
The holders of Class A shares are entitled to dividends, if declared, and to
any surplus, earned or otherwise, of the Corporation upon liquidation or
dissolution. The holders of Class B shares have sole voting power, but are not
entitled to share in any dividends or surplus of the Corporation.
Net income per share of Common Stock is computed based on the weighted average
number of Class A Common Shares outstanding during the year.
Reclassifications
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the 1995 presentation. These reclassifications
had no effect on net income.
2. Investment in The Andersons
The Corporation is the sole general partner of The Andersons (the
Partnership). As sole general partner, the Corporation provides all management
and labor services required by the Partnership in its operations. In exchange
for providing management services the Corporation charges the Partnership a
management fee equal to: a) the salaries and cost of all employee benefits and
other normal employee costs, paid or accrued for services performed by the
Corporation's employees on behalf of the Partnership, b) reimbursable expenses
incurred by the Corporation in connection with its services to the Partnership,
or on the Partnership's behalf, and c) an amount based on an achieved level of
return on partners' invested capital of the Partnership to cover the
Corporation's general overhead and to provide an element of profit to the
Corporation.
The Corporation leases an office building under a lease that commenced on May
1, 1990. The Corporation is required to pay annual lease payments of $767,515
through 2000, then increasing to $792,402 through 2005. The Corporation
charges the Partnership rent for the space utilized in its operations, which
amounted to $659,716, $635,714, and $529,982 in 1995, 1994 and 1993,
respectively.
The Partnership generally pays the Corporation for salaries and employee
benefits as those costs are paid by the Corporation. Amounts due from the
Partnership relating to postretirement benefits that will not be received
within one year have been classified as a noncurrent asset.
The components of the management fee and rent charged by the Corporation to the
Partnership consisted of the following:
Year ended December 31
1995 1994 1993
Costs and expenses:
Salaries and wages $56,011,690 $53,726,460 $47,706,731
Employee benefits 17,234,830 15,673,685 14,619,453
Rent for office space and
other reimbursable expenses 747,070 803,830 641,491
Achieved level of return of the
Partnership 207,466 190,880 139,656
Total management fees $74,201,056 $70,394,855 $63,107,331
3. Employee Benefit Plans
The Corporation sponsors several employee benefit programs which include the
following: Defined Benefit Pension Plan and Supplemental Defined Benefit
Pension Plan, Retirement Savings Investment Plan, Cash Profit Sharing Plan,
Management Performance Program and health insurance benefits.
Substantially all permanent employees are covered by the Corporation's Defined
Benefit Pension Plan. The benefits are based on the employee's highest five
consecutive years of compensation during their last ten years of service. The
Corporation's policy is to pay into trusteed funds each year an amount equal to
the annual pension expense calculated under the Entry Age Normal method. In
addition, the Corporation has a Supplemental Retirement Plan which is a non-
qualified deferred compensation plan designed to cover all Defined Benefit Plan
participants whose compensation exceeds the Internal Revenue Code limitation.
Supplemental Plan benefits are calculated similarly to the Defined Benefit Plan
and are based on compensation in excess of the Internal Revenue Code
limitation.
The following table sets forth the plans' funded status and amounts recognized
in the Corporation's balance sheets as of December 31, 1995 and 1994.
December 31
1995 1994
Actuarial present value of benefit obligation:
Vested benefits $6,666,393 $5,743,223
Non-vested benefits 329,443 364,007
Accumulated benefits obligation 6,995,836 6,107,230
Impact of future salary increases 4,195,199 3,417,369
Projected benefit obligation for service
rendered to date 11,191,035 9,524,599
Plan assets at fair value 9,605,800 7,297,051
Projected benefit obligation in excess of plan
assets 1,585,235 2,227,548
Unrecognized net asset at adoption of FAS 87,
net of amortization 142,859 193,338
Unrecognized net gain (loss) 526,377 (435,467)
Prior service cost (292,296) (29,044)
Net pension liability recognized in balance
sheet (includes current portion of $1,498,000
in 1995 and $415,365 in 1994) $1,962,175 $1,956,375
Net periodic pension cost includes the following components:
Year ended December 31
1995 1994 1993
Service cost -benefits earned during the $1,233,838 $1,082,143 $1,135,948
period
Interest cost on projected benefit
obligation 680,739 563,333 571,278
Return on plan assets (2,017,708) 70,796 (493,623)
Net amortization and deferral 1,425,058 (655,230) 10,420
Net periodic pension cost $1,321,927 $1,061,042 $1,224,023
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation was 7.5% and 4%, respectively. The weighted average long-term rate
of return on plan assets used in determining the expected return on plan assets
included in net periodic pension cost was 8% for all years presented.
Substantially all of the plan assets are invested in a family of mutual funds.
Under the Retirement Savings Investment Plan (RSIP) eligible participating
employees may elect to contribute specified amounts up to 15% of their gross
pay on a tax-deferred basis, subject to certain limitations, to a trust for
investment in a family of mutual funds. The Corporation contributes an amount
equal to 50% of the participant's contributions, but not in excess of 3% of the
participant's annual gross pay. Participants are fully vested in their
contributions to the RSIP. Participants hired before January 1, 1993 vest
immediately in the Corporation's matching contributions and participants hired
after December 31, 1992 vest ratably over five years. The matching
contributions to the RSIP amounted to $920,845, $857,804, and $761,536 in 1995,
1994 and 1993, respectively.
Substantially all permanent employees are included in the Cash Profit Sharing
Plan. The Plan provides for participants to receive certain percentages of
their pay as various threshold levels of return on capital of the Partnership
are achieved. The Corporation also has a Management Performance Program for
certain levels of management. Participants in the Management Performance
Program are not eligible to participate in the Cash Profit Sharing Plan. The
expense for profit sharing/management performance programs was $1,226,893,
$3,040,207 and $2,050,273 for 1995, 1994 and 1993, respectively.
The Corporation currently provides certain health insurance benefits to its
employees, including retired employees. The Corporation has reserved the right
in most circumstances to modify the benefits provided and in recent years has
in fact made changes. Further changes were implemented in 1993 that will
effect the benefits provided to future retirees. These changes include the
minimum retirement age, years of service and a sharing in the cost of providing
these benefits. In addition, the Medicare Part B reimbursement currently
paid by the Corporation for retirees is being phased out over a five-year
period. The Corporation has elected to recognize the accrued benefits earned
by employees as of January 1, 1993 (transition obligation) prospectively,
which means this cost will be recognized as a component of the net periodic
postretirement benefit cost over a period of approximately 20 years.
The Corporation's postretirement benefits are not funded. The status of the
plan as of December 31 is as follows:
1995 1994
Accumulated postretirement benefit obligation:
Retirees $5,502,090 $5,267,700
Fully eligible active plan participants 569,619 1,516,379
Other active participants 3,679,649 2,551,870
9,751,358 9,335,949
Unrecognized net transition obligation (7,150,383) (7,570,994)
Unrecognized net loss (135,931) (246,223)
Accrued postretirement benefit cost $2,465,044 $1,518,732
Net periodic postretirement benefit cost includes the following
components:
Year ended December 31
1995 1994 1993
Service cost $ 247,493 $ 245,186 $ 181,457
Interest cost 679,416 749,651 653,625
Net amortization 420,611 451,999 420,611
Net periodic postretirement benefit
cost $1,347,520 $1,446,836 $1,255,693
The weighted average discount rate used in determining the postretirement
benefit cost was 7.5% for all years. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation at December
31, 1995 and 1994 was 7.5%.
The assumed health care cost trend rate used to measure the expected cost of
benefits covered by the plan was 7% in 1995, declining to 5% through the year
1997 and remaining at that level thereafter. A 1% increase in the assumed
health care cost trend rate would increase the annual postretirement benefit
cost by approximately $181,000 and the accumulated postretirement benefit
obligation as of December 31, 1995 by approximately $1.6 million.
To partially fund self-insured health care and other employee benefits, the
Corporation makes payments to a trust. Assets of the trust amounted to
$2,730,315 and $2,639,566 at December 31, 1995 and 1994, respectively, and such
amounts are included in prepaid expenses.
4. Merger with the Partnership
On January 2, 1996, the Partnership merged with and into the Corporation and
the Partnership was dissolved. Concurrent with the merger, the name of the
Corporation was changed to The Andersons, Inc. The merger has been accounted
for as a reorganization of entities under common control similar to a pooling
of interests. All future financial statements will be combined and historical
periods restated to give effect to the merger.
Presented below is a condensed balance sheet as of January 2, 1996 (the date of
the merger) and a condensed statement of income for the years ended December
31, 1995, 1994 and 1993 showing the effect of the merger had it been
consummated at the beginning of the period.
Condensed Balance Sheet (in thousands)
January 2, 1996
Assets
Current assets $ 371,342
Property plant and equipment - net 81,862
Other noncurrent assets 5,245
$ 458,449
Liabilities
Current liabilities $ 309,578
Long-term obligations 76,792
Other noncurrent liabilities 4,327
390,697
Minority interest 1,001
Shareholders' Equity 66,751
$ 458,449
Condensed Pro forma Statements of Income (in thousands)
Year Ended December 31
1995 1994 1993
Net sales and revenues $1,092,410 $ 968,880 $ 796,471
Other income 5,320 2,758 3,874
1,097,730 971,638 800,345
Cost of sales and revenues 944,176 822,274 670,158
153,554 149,364 130,187
Operating, general and
administrative expenses 129,347 125,798 112,939
Interest expense 14,019 8,395 6,168
143,366 134,193 119,107
Net income - historical 10,188 15,171 11,080
Pro forma income tax expense 3,915 5,886 4,094
Pro forma net income $ 6,273 $ 9,285 $ 6,986
The Partnership's net income was includable in the federal income tax returns
of its partners and therefore it did not pay federal income taxes. The
Partnership's operations will be included in the Corporation's U.S. federal
income tax return effective January 2, 1996. This table includes separate
unaudited pro forma net income which reflect the pro forma adjustments to
present income taxes on the basis on which they will be reported in future
periods.
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
For information with respect to the executive officers of the
registrant, see "Executive Officers of the Registrant" in Item 4A included in
Part I of this report. For information with respect to the Directors of the
registrant, see "Election of Directors" in the Proxy Statement for the Annual
Meeting of the Shareholders to be held on May 23, 1996 (the "Proxy Statement"),
which is incorporated herein by reference; for information concerning 1934
Securities and Exchange Act Section 16(a) Compliance, see such section in the
Proxy Statement, incorporated herein by reference. In addition to the directors
disclosed in the Proxy Statement, the following directors of the Company are
not standing for re-election at the 1996 annual meeting:
Name Age Position
Daniel T. Anderson 40 Director; General Merchandise Manager
Retail Group
Dale W. Fallat 51 Director; Vice President Corporate
Services
Janet M. Schoen 36 Director
Item 11. Executive Compensation
The information set forth under the captions "Executive Compensation"
in the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership" in the
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
See "Item 1. Business" regarding personnel and management services
provided by the Corporation to the Partnership. The management fee received by
the Corporation in 1995 under the Management Agreement between the Corporation
and the Partner ship was $74.2 million. See Note 2 to the Corporation's
Financial Statements.
The office building utilized by the Partnership was leased by the
Corporation from an unaffiliated lessor under a net lease expiring in 2000.
The Partnership subleased approximately 90% of the building from the
Corporation and paid the Corporation rent for the space it occupies. Under the
terms of the sublease, the Partnership also was responsible for insurance,
utilities, taxes, general maintenance, snow removal, lawn care and similar
upkeep expenses for the entire building. The Corporation reimbursed the
Partnership for management and maintenance of the building, including the space
it did not occupy. The amount paid by the Partnership to the Corporation for
the portion of the building occupied by the Partnership was designed to
reimburse the Corporation for its equivalent cost under the Corporation's
lease. In 1995, the rental payments made by the Partnership to the
Corporation, net of the reimbursement for management and maintenance of the
building was $692,918, which is included in the management fee referred to in
the preceding paragraph.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following financial statements of the registrant are
included in Item 8:
Page
Report of Independent Auditors................................... 15
Statements of Income - years ended
December 31, 1995, 1994 and 1993............................... 16
Balance Sheets - December 31, 1995 and 1994...................... 17
Statements of Cash Flows - years ended
December 31, 1995, 1994 and 1993............................... 18
Statements of Changes in Shareholders' Equity -
years ended December 31, 1995, 1994 and 1993................... 19
Notes to Financial Statements.................................... 20
In addition the consolidated financial statements of the Company, as
set forth under Item 8 of this report on Form 10-K, are incorporated herein by
reference from The Andersons, Inc. 1995 Annual Report to Shareholders.
(a) (2) All 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 for the Corporation.
(3) Exhibits:
2.1 Agreement and Plan of Merger, dated April 28, 1995 and
amended as of September 26, 1995, by and between The
Andersons Management Corp. and The Andersons.
(Incorporated by reference to Exhibit 2.1 to
Registration Statement No. 33-58963).
3.1 Articles of Incorporation. (Incorporated by reference
to Exhibit 3(d) in Registration Statement No. 33-
16936.)
3.2 Code of Regulations. (Incorporated by reference to
Exhibit 3(e) in Registration Statement No. 33-16936.)
3.3 Articles of Incorporation of The Andersons, Inc.
(Incorporated by reference to Exhibit 3.3 to
Registration Statement No. 33-58963).
3.4 Code of Regulations of The Andersons, Inc.
(Incorporated by reference to Exhibit 3.4 to
Registration Statement No. 33-58963).
4.1 Specimen certificate of Class A Shares. (Incorporated
by reference to Exhibit 4(b)(i) in Registration
Statement No. 33-16936.)
4.2 Specimen certificate of Class B Shares. (Incorporated
by reference to Exhibit 4(b)(ii) in Registration
Statement No. 33-16936.)
4.3 Specimen Common Share Certificate. (Incorporated by
reference to Exhibit 4.1 in Registration Statement 33-
58963).
4.4 The Fifteenth Supplemental Indenture dated as of
January 2, 1995, between The Andersons, Inc. 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.
10.1 Management Performance Program.* (Incorporated by
reference to Exhibit 10(a) to the Partnership's Form
10-K dated December 31, 1990, File no. 2-55070.)
10.2 Lease agreement effective May 1, 1990, between
Carentmon and The Andersons Management Corp.
(Incorporated by reference to Exhibit 10(b) to
Registrants Form 10-K dated December 31, 1992.)
10.3 Management Agreement between The Andersons and The
Andersons Management Corp., effective as of January 1,
1988. (Incorporated by reference to Exhibit 10(h) in
Registration Statement No. 33-13538.)
13 The Andersons, Inc. 1995 Annual Report to Shareholders
22 Subsidiaries of The Andersons, Inc. (Incorporated by
reference to the Partnership's Form 10-K dated December
31, 1995)
23.1 Consent of Independent Auditors
28 Partnership Form 10-K for the year ended December 31,
1995. (Incorporated by reference to File No. 2-55070.)
The Corporation 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 "Signatures".
* Management contract or compensatory plan.
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 28th day of March, 1996.
THE ANDERSONS, INC. (FORMERLY
THE ANDERSONS MANAGEMENT CORP.)
(Registrant)
By \s\Thomas H. Anderson
Thomas H. Anderson
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March, 1996.
Signature Title
\s\Richard P. Anderson President and Chief Executive Officer,
Richard P. Anderson Director
(Principal Executive and Financial Officer)
\s\Richard R. George Corporate Controller
Richard R. George (Principal Accounting Officer)
Signature Title Signature Title
\s\Daniel T. Anderson Director \s\Dale S. Fallat Director
Daniel T. Anderson Dale W. Fallat
Director \s\Paul M. Kraus Director
Donald E. Anderson Paul M. Kraus
\s\Michael J. Anderson Director Director
Michael J. Anderson Donald M. Mennel
\s\Richard M. Anderson Director Director
Richard M. Anderson David L. Nichols
\s\Thomas H. Anderson Director Director
Thomas H. Anderson Janet M. Schoen
Director
John F. Barrett
Except for those portions of The Andersons, Inc. 1995 Annual Report to
Shareholders specifically incorporated by reference in this report on Form 10-
K, such annual report is furnished solely for the information of the Securities
and Exchange Commission and is not to be deemed "filed" as a part of this
filing.
Exhibit 13
The Andersons, Inc.
1995 Annual Report
Mission Statement
We firmly believe that our Company is a powerful vehicle through which we
channel our time, talent, and energy in pursuit of the fundamental goal of
serving God by serving others.
Through our collective action we greatly magnify the impact of our individual
efforts to:
. Provide extraordinary service to our
customers
. Help each other improve
. Support our communities
. Increase the value of our Company.
Table of Contents
Corporate Profile 1
Selected Financial Data 1
Letter to Shareholders 2
Business Review
Agriculture 3
Retail 4
Business Development 5
Management's Discussion and Analysis 6
Report of Independent Auditors 8
Consolidated Financial Statements 9
Notes to Consolidated Financial Statements 13
Directors and Officers 20
Investor Information Inside Back Cover
Corporate Profile
The Andersons, Inc. is a strong regional company based in Maumee, Ohio. The
firm organizes its businesses into three strategic business groups:
Agriculture, Retail and Business Development.
The Agriculture Group consists of eleven grain elevators located in Ohio,
Michigan, Indiana and Illinois with a combined total storage capacity of 67
million bushels, wholesale fertilizer operations in the same eastern corn belt
area, and ten Retail Farm Centers.
The Retail Group operates six large General Stores in Ohio which feature a
"store-within-a-store" concept, whereby more than 70,000 different items are
sold through several specialty stores under one roof.
The Business Development Group includes railcar repair and marketing, lawn-care
products, industrial products, and several smaller businesses.
The Company began in 1947 with a one-half million bushel elevator in Maumee.
Since that time it has achieved an excellent reputation and a solid record of
growth. The Company has been profitable every year but one since its
inception.
Looking forward, the Company anticipates continued earnings growth. The
Agriculture Group is positioned to take advantage of anticipated increases in
planted acreage, fertilizer usage and volume. In Retail, the Company is taking
steps to improve operating margins and define a prototype for expansion. The
Business Development Group also envisions growth through continued expansion of
its railcar fleet, improved operating efficiencies, and development of new
products.
Selected Financial Data
The following selected financial information presents highlights of the
consolidated income statement and balance sheet of The Andersons, an Ohio
limited partnership (the "Partnership") and The Andersons Management Corp. (the
"General Partner") for the five years ended December 31, 1995. This selected
financial information should be read in conjunction with and is qualified in
its entirety by reference to the Consolidated Financial Statements contained
elsewhere in this report.
On January 2, 1996, the Partnership merged with and into the General Partner
(the "Merger") and the General Partner changed its name to The Andersons, Inc.
See Note 1 to the Consolidated Financial Statements for a discussion of the
Merger. Unless the context otherwise requires, references herein to the
"Company" shall mean the combination of the Partnership and the General Partner
prior to the merger and The Andersons, Inc. after the Merger.
(in thousands) 1995 1994 1993 1992 1991
Income Statement Data
Grain sales and revenues $ 660,121 $551,836 $439,484 $440,800 $356,898
Fertilizer, retail and
other sales 432,289 417,044 356,987 326,636 299,974
Total sales and
merchandising revenues 1,092,410 968,880 796,471 767,436 656,872
Operating Profit (a) 28,031 29,091 22,640 19,673 14,108
Operating, administrative
and general expenses 129,347 125,798 112,939 100,987 93,408
Interest expense 14,019 8,395 6,168 6,325 7,298
Income from continuing
operations (b) 10,188 15,171 11,080 10,045 4,506
Balance Sheet Data
Total assets $ 455,518 $344,809 $360,586 $259,294 $293,001
Working capital 58,897 57,623 47,795 40,940 31,881
Long-term debt and other
long-term obligations 77,743 74,277 55,817 49,327 51,373
Owners' equity 67,260 64,870 56,256 51,970 43,421
(a) See Note 12 to the Consolidated Financial Statements for the definition
of Operating Profit.
(b) Prior to the Merger, income tax expense was not significant as the net
income of the Partnership was included in the federal tax returns of
its limited partners. See Note 1 to the Consolidated Financial
Statements for pro forma income tax expense and net income per common
share.
Letter to Shareholders
On January 2, 1996, The Andersons, Inc. was created by the merger of The
Andersons, an Ohio limited partnership, into its corporate general partner.
Several weeks later, the common shares of the Company were included in the
Nasdaq National Market and public trading commenced. While the partnership
form served us well for almost half a century, we have grown to such an extent
that corporate status is now clearly warranted. In this form, our owners have
improved liquidity and a market value for their shares. We gain better access
to capital markets, a noncash currency for future acquisitions, a vehicle for
performance compensation and a means for expanded employee participation in
Company ownership.
The consolidated financial statements that follow reflect the results of
operations for the final three years in our prior business form. Also included
are pro forma data reflecting our new corporate form. Total revenue for 1995
was $1.1 billion, almost 13% higher than 1994 due to volume growth as well as
increases in grain and fertilizer prices. Our net income of $10.2 million was
down from the $15.2 million generated in 1994. This decline was primarily due
to the volatility in the agriculture-related businesses. On a pro forma basis,
The Andersons earned $0.74 per share in 1995 on 8.43 million shares
outstanding, $1.10 in 1994 and $0.83 in 1993.
During the past year, we continued to invest heavily in plant and
equipment. We completed the purchase of the Metamora Elevator facilities,
began renovation of the Toledo General Store, developed several new products,
invested in new information systems and continued to make improvements related
to safety, environmental stewardship and operating efficiency.
We welcome the addition of David L. Nichols, Chairman & CEO of Mercantile
Stores Company, Inc., to our Board of Directors. At the same time, we mourn
the loss of Rene McPherson, a long-time member of our Board.
In summary, we have experienced a great deal of change during the past
year. However, our commitment to the goals and principles outlined in our
Mission Statement has not changed. We firmly believe that The Andersons, Inc.
is positioned to grow and prosper. Agriculture is an inherently volatile
industry due to factors such as weather and worldwide grain demand, however,
over time, our financial objectives are to average a 25% pretax return on
equity, achieve average annual equity growth of 15%, and to work toward a
long-term debt-to-equity ratio of no more than 0.8 to 1.
The following pages review in greater detail the performance of our three
strategic business groups.
/s/ Richard P. Anderson, President & CEO
/s/ Thomas H. Anderson, Chairman
Agriculture Group
SALES GRAPH: OPERATING INCOME GRAPH:
1991 $ 473 million 1991 $ 3.9 million
1992 $ 555 million 1992 $ 4.5 million
1993 $ 571 million 1993 $ 9.2 million
1994 $ 711 million 1994 $12.3 million
1995 $ 831 million 1995 $ 6.0 million
LOCATIONS:
Illinois Champaign
Indiana Delphi, Clymers, Dunkirk, Poneto,
Walton, Logansport, North Manchester
Michigan Albion, Potterville, White Pigeon,
Webberville, Litchfield, North Adams,
Union City, Munson
Ohio Maumee, Toledo, Metamora, Lyons,
Delta
The Agriculture Group, consisting of our Grain, Wholesale Fertilizer and Retail
Farm Center businesses, experienced a $6.3 million drop in operating income in
1995. Several factors contributed to this decline. First the government's
agriculture policy included a 7 1/2% acreage set-aside (farmland removed from
production). In addition, unusually cold and wet conditions occurred during
the spring planting period. As a result, 8 million fewer corn acres were
planted this year, average yields we re down, and total U.S. corn production
declined by 27%. At the same time, export demand was increasing, leaving U.S.
grain stocks at the lowest levels in twenty years and prices higher than we've
seen in the past decade.
Our Grain division felt the impact of these forces directly. The higher grain
prices lead to a noticeable increase in carrying costs, specifically interest
expense. In addition, the crop was unusually dry in 1995. This caused a
reduction in our drying and mixing income. Operating expenses for the Grain
division were higher in 1995. In total, operating income for the division
declined from 1994.
The Wholesale Fertilizer division achieved volume and gross profit levels in
1995 which were about equivalent to those recorded in 1994. Overall operating
expenses were down somewhat. Year-to-year income comparisons were affected,
however, by the $ 1.6 million non-recurring gain on phosphate materials
realized in 1994.
Our Retail Farm Centers were affected by the poor conditions at planting time.
While overall tonnage and gross profit were up slightly year-to-year, this
growth was more than offset by an increase in expenses. As a result, income
for this segment was down.
Looking forward, we are well positioned to take advantage of the present
situation. With acreage set-asides removed for 1996, we anticipate a strong
fertilizer demand this spring and more bushels to handle next fall. We also
believe that there will continue to be growth opportunities within the region.
Retail Group
SALES GRAPH: OPERATING INCOME GRAPH:
1991 $ 139 million 1991 $ 0.4 million
1992 $ 149 million 1992 $ 2.8 million
1993 $ 153 million 1993 $ 0.4 million
1994 $ 169 million 1994 $ 2.3 million
1995 $ 168 million 1995 $ 1.8 million
LOCATIONS:
Ohio Maumee
Toledo
Northwood (Woodville Mall)
Lima
Columbus (Brice Road)
Columbus (Sawmill Road)
The Retail Group operates six stores in Ohio: three in the Toledo area, two in
Columbus and one in Lima. These are large (105,000 to 130,000 square feet)
General Stores with a unique product mix configured in several "Stores-With in-
A-Store." Among these are hardware, home remodeling, housewares, automotive,
sporting goods, lawn and garden, pet, workwear, and food (bakery, deli,
produce, specialty groceries and wine).
1995 was a tough year for the retail industry in the United States. As the
graphs indicate, this was true for The Andersons as well. Sales were virtually
flat year-to-year, and operating income declined. However, individual store
results were some what mixed. 1995 was the best year ever for us in Toledo
with gains in both sales and income. Lima, our newest store, continued to
achieve sales growth. The Columbus stores, however, experienced a large influx
of new competition in the past year. This caused a reduction in sales and
profitability.
During the year, we made a significant investment to improve the Toledo General
Store. This included a new facade, an additional entrance, a drive-through
customer pick-up warehouse and other exterior enhancements. In 1996, we will
complete this project, focusing on improvements within the store, and begin a
similar upgrade of our flagship store in Maumee.
In 1995, the Company also invested in improved operating systems and training
programs to ensure a consistently positive customer experience within our
stores. We also continued to work hard on building relationships with our
suppliers.
In 1996 and beyond, we plan to adjust our store operations to better align with
each market we serve. In addition, we are defining a prototype store design
for potential use in the event of future expansion.
Business Development Group
SALES GRAPH: OPERATING INCOME GRAPH:
1991 $ 47 million 1991 ($ 1.4) million
1992 $ 69 million 1992 $ 1.8 million
1993 $ 79 million 1993 $ 4.4 million
1994 $ 95 million 1994 $ 3.2 million
1995 $ 105 million 1995 $ 3.7 million
LOCATIONS:
Railcar Repair Shop Maumee, Ohio
Lawn Products Manufacturing Maumee, Ohio
Bowling Green, Ohio
Industrial Products Manufacturing Maumee, Ohio
Delphi, Indiana
Perrysburg, Ohio
The Business Development Group, made up of several businesses which grew out of
the abilities and experience gained in the Company's Agriculture and Retail
Groups, achieved growth in revenue and operating income in 1995.
The Railcar division, which grew out of our expertise in transportation,
fabrication and leasing, continued to be a significant profit contributor
during the past year. This segment purchases, sells, leases, and repairs
railcars. It is also beginning to develop fleet management and railcar
component manufacturing capabilities. The division hopes to capitalize on the
aging fleet of railcars in the United States and our central location.
The Lawn Products division, among the top five or six U.S. manufacturers of
lawn fertilizer and related turf care products, experienced a decline in
operating income from 1994 to 1995. This was due to a rapid run-up in the
price of urea, a key raw material for this business, which was not fully
recouped through customer price increases. Initiatives to simplify and
streamline the product line and distribution systems were begun during the
year.
The Industrial Products division, in the midst of a transition to higher
"value-added" products, saw its profitability decline in 1995. This unit
develops products for industrial and consumer markets utilizing milled corn cob
products as the basic feedstock. Primary product categories include
agricultural chemical carriers, mild abrasives, cat litter, lab animal bedding
and various absorbents.
The Business Development Group also includes gains from liquidation of excess
prime real estate. While these earnings are not sustainable long-term,
significant income was generated in 1995.
The performance in 1995 of several smaller businesses in this group
collectively matched year-earlier levels.
Management's Discussion and Analysis
Introduction
The following discussion should be read in conjunction with the consolidated
financial statements and the notes to the consolidated financial statements.
The Merger
On November 16, 1995, the partners of The Andersons and the shareholders of The
Andersons Management Corp. approved a merger of the two entities, effective on
January 2, 1996. As part of the merger, the Partnership was terminated, the
name was changed to The Andersons, Inc., common shares of The Andersons, Inc.
were issued to former partners and shareholders for their previous ownership
interests and certain other changes were adopted. This annual report presents
the financial position and results of operations of the Partnership and the
General Partner on a historical basis, with all necessary eliminations. Note 1
to the financial statements presents pro forma adjustments to reflect taxes as
if the merger had been completed on January 1, 1993. In addition, the January
2, 1996 balance sheet of the Company with the appropriate adjustments to
establish deferred income taxes and the equity conversion has been presented.
The following discussions of results of operations and liquidity and capital
resources are presented for the Company on a consolidated basis.
Operating Results
Operating results for The Andersons, Inc. business segments are discussed in
the Business Review on pages 3, 4 and 5 of this annual report. In addition,
Note 14 to the consolidated financial statements discloses sales, operating
profit, identifiable assets, capital expenditures and depreciation and
amortization for each of the Company's three business segments. The following
discussion will focus on the consolidated operating results as shown in the
Statements of Income.
Comparison of 1995 with 1994
Total sales and revenue for 1995 was $1,098 million, a $126 million or 13%
increase from 1994. Grain shipment volume increased 11% and the average price
per bushel increased 9%, resulting in 85% of the total increase. A portion of
the volume increase resulted from two grain facilities that were opened during
1994 and therefore did not have a full year of operations in 1994. The
Company's Retail Group experienced a 1% decrease in sales and revenues but all
other operating units experienced some level of increase. Notable increases
include the Railcar division of the Business Development Group which
experienced an $8 million or 88% increase in revenue and the Retail Farm
Centers which experienced a $7 million or 35% increase. Half of the Retail
Farm Center increase was related to additional facilities. In addition, the
Company liquidated some of its excess real estate, realizing gains of
approximately $2.5 million.
Gross profit for 1995 was $154 million, a $4 million or 3% increase from 1994.
The increase in other income of $2.6 million accounts for the majority of the
gross profit increase. Gross profit, as a percent of total sales and revenue
decreased from 15.4% in 1994 to 14% in 1995.
Operating, administrative and general expenses for 1995 were $129 million, a $4
million or 2.8% increase over 1994. 1% of this increase was due to facilities
opened during 1994. As a percent of total sales and revenue, expenses again
decreased from 12.9% in 1994 to 11.8% in 1995.
Interest expense for 1995 was $14 million, a $5.6 million or 67% increase over
1994. This was due to a 64% higher average daily borrowing and a 1.5% increase
in the average short-term interest rate. See Note 6 to the consolidated
financial statements.
Net income of $10.2 million represented a $5 million or 33% decrease from the
1994 level. After the pro forma tax adjustment, net income per share for 1995
was $0.74 as compared to $1.10 in 1994.
Comparison of 1994 with 1993
Total sales and revenue for 1994 was $972 million, an increase of $171 million
or 22% from 1993. This was due primarily to a $112 million increase in grain
sales and revenue resulting from volume increases due to both a large harvest
and additional facilities. Wholesale Fertilizer and Retail Farm Centers, the
Retail General Stores, the Lawn division and the Railcar division all
experienced proportionally significant sales and revenue increases. The 1994
Agriculture Group facility acquisitions (by lease) contributed approximately
$44 million of the $171 million increase.
Gross profit for 1994 was $149 million, a $19 million or 15% increase from
1993. As a percentage of total sales and revenue, the 1994 gross profit
percentage of 15.4% represented a reduction from the 1993 gross profit
percentage of 16.3%. This was due to a net decrease in the percentage of gross
profit generated on grain sales and revenue (from 7.6% of grain sales and
revenue in 1993 to 6.9% in 1994). The gross profit percentage for fertilizer,
retail and other sales decreased only slightly from 1993 to 1994. In addition,
other income decreased $1.1 million.
Operating, administrative and general expenses for 1994 were $126 million, an
increase of $12.8 million or 11.4% from 1993. This was due primarily to
increased operations for the additional facilities discussed previously. As a
percent of total sales and revenue, operating, administrative and general
expenses decreased from 14.1% in 1993 to 12.9% in 1994.
Interest expense for 1994 was $8.4 million, an increase of $2.2 million or 36%
from 1993. This was due to both a higher average daily borrowing under the
short-term lines of credit and an almost full percentage increase in the
average interest rate.
Historical income from continuing operations in 1994 represented a 37% increase
from 1993. After considering the pro forma tax adjustment, net income per
share increased from $0.83 in 1993 to $1.10 in 1994.
Liquidity and Capital Resources
The Company used cash of $60 million in its 1995 operations as compared with
operations providing $52 million in 1994. Accounts receivable increases of $39
million from 1994 to 1995 and inventory increases of $71 million for the same
period accounted for virtually all of this change. The Company's position as a
grain merchandiser requires it to forward contract for purchases of grain and
hold grain in inventory. In order to hedge these positions against changing
prices in the commodity markets, the Company holds futures and option contracts
on the Chicago Board of Trade. These positions, as well as the bushels held in
inventory, are marked to the market price on a daily basis.
The addition of ten million bushels of storage in 1994 and a more aggressive
purchasing program has significantly increased the Company's portfolio of
purchase contracts. Commodity prices, in general, were unusually high
throughout 1995 and, as such , the cost to purchase, hedge and carry
inventories required more cash. The Company's hedging positions with the
Chicago Board of Trade increased in volume and value and required additional
margin monies to be forwarded to the brokers holding them. These margin
deposits are classified with accounts receivable for reporting purposes. The
Company continues to review the contracts it holds with grain producers and
dealers for non-delivery risk and believes it has adequately reserved for
potential defaults.
In order to finance operations, the Company has short-term lines of credit
available for $292 million. At December 31, 1995, $120 million of these lines
were used, an increase of $70 million from the prior year. Because of the
significant availability of short-term funds, cash generated from operations is
often utilized to pay down debt or finance capital improvements or
acquisitions. Cash on hand at December 31, 1995 was $5.1 million, a decrease
of $1.9 million from 1994. In addition to financing the programs of the grain
division, the short-term lines are used to finance inventories and accounts
receivable in other businesses. Typically, borrowings under these lines are
highest in the spring due to seasonal inventory requirements in several of the
Company's businesses, peak credit sales of lawn and agricultural fertilizer and
a customary reduction in grain payables due to customer cash needs and market
strategies.
Because of its significant short-term borrowings, the Company periodically
utilizes interest rate contracts to manage interest rate risk by converting
variable rates on short-term borrowings to intermediate-term fixed rates,
consistent with projected borrowing needs. At December 31, 1995, the Company
had three $10 million interest rate swap agreements, maturing in 1996, that
converted variable rates to fixed rates ranging from 5.815% to 5.87%. Because
these rates approximated the actual variable rates, the effect on 1995 interest
expense was not significant.
During 1995, the Company invested $11.9 million in capital additions and
improvements. The Company also used $1.4 million to purchase the outstanding
stock of the Metamora Elevator Company, Inc., a facility it had previously
leased. In 1996, the Company anticipates capital expenditures of $13 million,
including $1.5 million for Retail Farm Center expansion, $2.5 million for
renovations to two General Stores, $2.3 million for additional storage capacity
and $2.4 million for plant upgrades and improvements. Funding for these
expenditures is expected to come from cash generated from operations and
additional long-term debt. Capital expenditures could be curtailed if
necessary.
Prior to the merger, the taxable income of the Partnership was included in the
individual tax returns of its partners. To make cash available to these
partners to pay estimated tax payments, the Partnership made quarterly cash
distributions available. Partners could elect whether to take all, none or a
portion of these distributions. All partners made their final requests for tax
distributions and equity withdrawals prior to the merger vote and all
distributions were made prior to December 31, 1995. The Company will pay
federal, state and local tax as a corporation beginning January 2, 1996. Pro
forma after-tax results of the Company's prior three years are included in Note
1 to the consolidated financial statements. In addition, the January 2, 1996
balance sheet reflects a charge of approximately $0.7 million to establish
deferred taxes in accordance with generally accepted accounting principles for
a corporation. The $2.4 million increase in owners' equity from December 31,
1994 to December 31, 1995 reflects income of $10.2 million, withdrawals and
distributions of $6.1 million and charitable contributions of $1.7 million.
Certain of the Company's long-term debt is secured by first mortgages on
various facilities. In addition, some of the long-term borrowings include
provisions that impose minimum levels of working capital and equity,
limitations on additional debt an d require the Company to be substantially
hedged in its grain transactions. The Company's liquidity is enhanced by the
fact that grain inventories are readily marketable and the Maumee and Toledo,
Ohio elevators serve as delivery points for Chicago Board of Trade contracts.
In the opinion of management, the Company's liquidity is adequate to meet
short-term and long-term needs.
Report of Independent Auditors
Board of Directors
The Andersons, Inc.
We have audited the accompanying consolidated balance sheets of The Andersons,
Inc. as of January 2, 1996 and as of December 31, 1995 and 1994, and the
related consolidated statements of income, cash flows and changes in owners'
equity for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Andersons,
Inc. at January 2, 1996 and at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
February 2, 1996 /s/ ERNST & YOUNG LLP
Toledo, Ohio
The Andersons, Inc.
Consolidated Statements of Income
Year ended December 31
(in thousands) 1995 1994 1993
Grain sales and revenues $ 660,121 $ 551,836 $ 439,484
Fertilizer, retail and other sales 432,289 417,044 356,987
Other income 5,320 2,758 3,874
1,097,730 971,638 800,345
Cost of grain sales and revenues 617,934 513,893 405,889
Cost of fertilizer, retail and other
sales 326,242 308,381 264,269
944,176 822,274 670,158
Gross profit 153,554 149,364 130,187
Operating, administrative and general
expenses 129,347 125,798 112,939
Interest expense 14,019 8,395 6,168
143,366 134,193 119,107
Net Income $ 10,188 $ 15,171 $ 11,080
Pro forma earnings per share $ 0.74 $ 1.10 $ 0.83
See accompanying notes.
The Andersons, Inc.
Consolidated Balance Sheets
January 2 December 31
(in thousands) 1996 1995 1994
Assets
Current assets:
Cash and cash equivalents $ 5,052 $ 5,052 $ 6,923
Short-term investment, at amortized
cost (fair value of $487) - - 491
Accounts receivable:
Trade accounts, less allowance for
doubtful accounts of $3,514 in
1995 and $2,292 in 1994 68,362 68,362 45,529
Margin deposits 20,753 20,753 7,034
89,115 89,115 52,563
Inventories 269,930 269,930 198,635
Deferred income taxes 2,982 - -
Prepaid expenses 4,263 4,314 3,602
Total current assets 371,342 368,411 262,214
Other assets:
Notes receivable and other assets,
less allowance for doubtful notes
receivable of $1,277 in 1995; $717
in 1994 4,575 4,575 3,407
Investments in and advances to
affiliates 670 670 1,592
5,245 5,245 4,999
Property, plant and equipment 81,862 81,862 77,596
$458,449 $455,518 $344,809
Liabilities and owners' equity
Current liabilities:
Notes payable $120,267 $120,267 $ 50,000
Accounts payable for grain 94,084 94,084 83,844
Other accounts payable 72,841 72,777 52,231
Accrued expenses 14,357 14,357 14,901
Current maturities of long-term debt 8,029 8,029 3,615
Total current liabilities 309,578 309,514 204,591
Pension and postretirement benefits 2,929 2,929 3,060
Long-term debt 73,863 74,139 71,217
Deferred income taxes 4,327 675 -
Minority interest 1,001 1,001 1,071
Owners' equity:
The Andersons, Inc. 66,751 - -
The Andersons - 65,156 63,008
The Andersons Management Corp. - 2,104 1,862
66,751 67,260 64,870
$458,449 $455,518 $344,809
See accompanying notes.
The Andersons, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
(in thousands) 1995 1994 1993
Operating activities
Net income 10,188 15,171 11,080
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 9,318 8,105 7,109
Gain on sale of property, plant
and equipment (2,568) (161) (1,108)
Provision for losses on accounts notes 2,229 2,683 910
receivable
Payments to minority interests (162) (222) (166)
Minority interest in net income of
subsidiaries 92 189 236
Amortization of deferred gain - (44) (386)
Changes in operating assets and liabilities:
Accounts receivable (38,775) 10,486 (32,064)
Inventories (71,295) 12,388 (61,138)
Prepaid expenses (571) (90) (560)
Accounts payable for grain 10,240 132 18,967
Other accounts payable and accrued
expenses 19,818 4,574 7,019
Other assets 1,386 (902) (1,000)
Net cash provided by (used in) operating
activities (60,100) 52,309 (51,101)
Investing activities
Purchases of property, plant and equipment (11,894) (22,663) (10,809)
Acquisition of business - net of cash acquired (1,427) - -
Proceeds from sale of property, plant and
equipment 1,242 848 1,697
Sales and maturities of investments 565 2,179 1,041
(Advances to)/payments received from affiliates 518 (640) 150
Purchases of investments (101) (739) (505)
Net cash used in investing activities (11,097) (21,015) (8,426)
Financing activities
Net increase (decrease) in short-term borrowings 68,578 (37,900) 64,150
Proceeds from issuance of long-term debt 56,570 35,509 22,754
Payments of long-term debt (49,616) (20,144) (17,440)
Payments to partners and shareholders and other
deductions from owners' equity accounts (7,556) (7,323) (7,229)
Capital invested by partners and shareholders 1,350 755 435
Net cash provided by (used in) financing
activities 69,326 (29,103) 62,669
Increase (decrease) in cash and cash equivalents (1,871) 2,191 3,143
Cash and cash equivalents at beginning of year 6,923 4,732 1,589
Cash and cash equivalents at end of year $ 5,052 $ 6,923 $ 4,732
Noncash operating, investing and financing
activities:
Acquisition of business:
Working capital - other than cash 90
Property, plant and equipment 4,096
Short and long-term debt assumed (2,070)
Other long-term liabilities assumed (689)
Net cash expended $ 1,427
Donation of land to charity $ 1,648
Notes received on sale of land $ 2,431
Assumption of long-term debt in purchase
of property, plant and equipment $ 5,217
See accompanying notes.
<TABLE>
<CAPTION>
The Andersons, Inc.
Consolidated Statements of Changes in Owners' Equity
The Andersons The Andersons Management Corp.
General Limited
Partner Partners Common Shares Retained Treasury
(in thousands) Capital Capital Class A Class B Earnings Shares Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 $ - $50,497 $1,456 $ 5 $ 73 $ (61) $1,473
Elimination 623
Balances at beginning of year 623 50,497
Net income for the year 145 10,934 146
Increase in invested capital 424
Charitable contributions (6) (477)
Withdrawals of capital (828)
Distributions (5,901)
Sale of shares from treasury 11 11
Purchase of shares for treasury (23) (23)
762 54,649 1,456 5 219 (73) 1,607
Elimination (762)
Balances at December 31, 1993 - 54,649 1,456 5 219 (73) 1,607
Elimination 762
Balances at beginning of year 762 54,649
Net income for the year 218 14,919 252 252
Increase in invested capital 734
Issuance of 333 shares - Class B - -
Charitable contributions (11) (771)
Withdrawals of capital (1,759)
Distributions (4,764)
Sale of shares from treasury 21 21
Purchase of shares for treasury (18) (18)
969 63,008 1,456 5 471 (70) 1,862
Elimination (969)
Balances at December 31, 1994 - 63,008 1,456 5 471 (70) 1,862
Elimination 969
Balances at beginning of year 969 63,008
Net income for the year 160 9,960 228 228
Increase in invested capital 1,336
Charitable contributions (27) (1,675)
Withdrawals of capital (2,072)
Distributions (5,401)
Sale of shares from treasury 13 13
Purchase of shares for treasury (29) (29)
Issuance of 669 shares - Class B 1 1
Unrealized gain on available-for-
sale securities 29 29
1,102 65,156 1,456 6 728 (86) 2,104
Elimination (1,102)
Balances at December 31, 1995 $ - $65,156 $1,456 $6 $728 $(86) $2,104
See accompanying notes.
</TABLE>
The Andersons, Inc.
Notes to Consolidated Financial Statements
December 31, 1995
1. Basis of Financial Presentation
On January 2, 1996, The Andersons, an Ohio limited partnership (the
"Partnership") merged with and into The Andersons Management Corp. (the
"Company") and the partnership was dissolved. Concurrent with the merger, the
Company changed its name to The Andersons, Inc. Prior to the merger and
dissolution of the Partnership, the Company was the sole general partner of the
Partnership, and the Company and the Partnership shared common ownership since
ownership of Class A Common shares of the Company was restricted to limited
partners of the Partnership and ownership of Class B Common shares (voting
shares) was restricted to holders of Class A Common shares.
The merger has been accounted for as a reorganization of entities under common
control similar to a pooling of interests. The Company's financial statements
have been restated to include the accounts and operations of the Partnership
for all periods prior to the merger. The Company, in previous years, had
presented financial statements that combined the accounts and results of
operations of the Company and the Partnership. All material intercompany
accounts and transactions had been eliminated in the combined presentation and,
consequently, the restatement to reflect the merger was not material to the
historical presentation.
The Partnership's net income was includable in the federal income tax returns
of its partners and therefore it did not pay federal income taxes. The
Partnership's operations will be included in the Company's U. S. federal income
tax return effective January 2, 1996, and therefore, a net deferred tax
liability and corresponding expense of $0.7 million will be recorded in the
first quarter of 1996.
The table below presents unaudited pro forma net income and net income per
share for 1995, 1994 and 1993 after deducting income taxes in the same manner
in which they will be reported in future periods.
Year ended December 31
(in thousands, except per 1995 1994 1993
share data)
Net income as reported $10,188 $15,171 $11,080
Pro forma income taxes on
partnership income 3,915 5,886 4,094
Pro forma net income $ 6,273 $ 9,285 $ 6,986
Pro forma net income per share $ 0.74 $ 1.10 $ 0.83
Weighted average shares
outstanding (in thousands) 8,430 8,430 8,430
Pro forma net income per share is calculated on the actual shares that were
outstanding at the date of the merger. In the merger transaction, 8.1 million
shares were issued to the partners of the Partnership and the remainder to
shareholders of the Company and employee bondholders of the Partnership. There
have been no significant new investors in the Company or the Partnership in
the prior three years.
The January 2, 1996 consolidated balance sheet is presented to show the effect
of the merger transaction on the Company. Unless otherwise indicated, the
notes to the consolidated financial statements with the heading "December 31,
1995" are also applicable to the January 2, 1996 consolidated balance sheet.
In connection with the merger, approximately $0.6 of merger costs and expenses
were incurred and have been charged to expense in 1995. The merger costs
consisted of legal, accounting and benefits consulting fees.
2. Significant Accounting Policies
Estimates and Assumptions
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid debt instruments
purchased with a maturity of three months or less. The carrying value of these
assets approximate their fair values.
Securities
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 owners' equity.
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 grain sales and 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.
Preopening Expenses
Preopening expenses are charged to income when incurred.
Advertising
Advertising costs are expensed when incurred. Advertising expense of $3.6
million, $4.2 million and $3.9 million is included in operating, administrative
and general expense in 1995, 1994 and 1993, respectively.
Income Allocations and Cash Distributions to Partners
Prior to the merger, the Partnership was governed by a Partnership Agreement
which reflected 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, was 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 received the same allocation of net
income or loss per one thousand dollars of partner's capital. All
distributions to partners for the 1995 fiscal year were paid prior to the
merger.
Charitable Contributions
Provision was made in the Partnership Agreement for contributions to various
charitable, educational and other not-for-profit institutions. It was the
policy of the Partnership to account for charitable contributions as charges to
partners' capital, and not as deductions in determining Partnership net income.
Reclassifications
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the 1995 presentation. These reclassifications had
no effect on net income.
3. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Prior to the merger,
the Partnership's net income was included in the net income of its partners and
provision for federal income taxes was made on the net income of the Company
only and was included in general expenses as it was not significant. Income
tax payments were also not significant. In 1995, the Partnership recorded $689
thousand of deferred tax liabilities in connection with its acquisition of a
business. The net basis differences of the Partnership, as of the merger date,
are reflected in the January 2, 1996 balance sheet.
Details of these basis differences are as follows:
January 2, December 31
(in thousands) 1996 1995 1994
Deferred tax liabilities:
Property, plant & equipment $(7,475) $ (675) $ -
Prepaid employee benefits (1,079) - -
Other (213) - -
(8,767) (675) -
Deferred tax assets:
Employee benefits 2,586 - -
Accounts receivable valuation 1,943 - -
Inventory valuation 1,063 - -
Deferred income 837 - -
Investments 707 - -
Other 286 - -
7,422 - -
Net deferred tax liability $(1,345) $ (675) $ -
4. Inventories
Major classes of inventory are as follows:
December 31
(in thousands) 1995 1994
Grain $186,989 $113,555
Agricultural fertilizer and supplies 19,602 21,111
Merchandise 29,909 32,241
Lawn and corn cob products 21,729 20,992
Other 11,701 10,736
$269,930 $198,635
5. Property, Plant and Equipment
The components of property, plant and equipment are as follows:
December 31
(in thousands) 1995 1994
Land $ 11,179 $ 13,063
Land improvements and leasehold improvements 23,926 22,570
Buildings and storage facilities 78,210 71,700
Machinery and equipment 97,970 87,308
Construction in progress 972 1,387
212,257 196,028
Less allowances for depreciation
and amortization 130,395 118,432
$ 81,862 $ 77,596
6. Banking and Credit Arrangements
The Company has available lines of credit for unsecured short-term debt with
banks aggregating $292 million. The credit arrangements, the amounts of which
are adjusted from time to time to meet the Company's needs, do not have
termination dates but are reviewed at least annually for renewal. The terms of
certain of the lines of credit provide for annual commitment fees.
The following information relates to borrowings under short-term lines of
credit during the year indicated.
(in thousands, except for 1995 1994 1993
interest rate)
Maximum borrowed $195,500 $127,600 $100,500
Average daily amount borrowed
(total of daily borrowings
divided by number of days in
period) 118,382 72,183 60,404
Average interest rate (computed
by dividing interest expense
by average daily amount
outstanding) 6.55% 5.03% 4.15%
7. Long-Term Debt
Long-term debt consists of the following:
January 2 December 31
(in thousands) 1996 1995 1994
Note payable, 7.84% payable $75
thousand quarterly through
July 1997, and $398 thousand
quarterly thereafter, due 2004 $14,550 $14,550 $14,850
Note payable relating to revolving
credit agreement 20,000 20,000 10,000
Notes payable, variable rate
(6.9375% at December 31,
1995), payable $336 thousand
quarterly beginning October 1997,
due 2004 9,418 9,418 10,661
Other notes payable 1,101 1,101 796
Industrial development revenue bonds:
6.5%, sinking fund paid annually,
due 1999 3,700 3,700 4,400
Variable rate (5.80% at December 31,
1995), due in annual installments of
$881 thousand through 2004 7,233 7,233 8,114
Variable rate (5.30% at December 31,
1995), due 2025 3,100 3,100 3,100
Debenture bonds:
9.2% to 10%, due 1996 5,868 5,868 6,088
6.5% to 8%, due 1997 through 1999 5,815 5,815 5,530
10% , due 1997 and 1998 2,117 2,117 2,117
10%, due 2000 and 2001 2,704 2,704 2,742
7.5% to 8.7%, due 2002 through 2004 5,689 5,689 5,590
Employee bonds, variable rate
(12.38 % at December 1, 1995) 28 304 233
Other bonds, 4% to 9.6% 569 569 611
81,892 82,168 74,832
Less current maturities 8,029 8,029 3,615
$73,863 $74,139 $71,217
The Company has a $20 million revolving line of credit with a bank which bears
interest based on the LIBOR rate (6.725% at December 31, 1995). Borrowings
under this agreement totalled $20 million at December 31, 1995. The revolving
credit agreement expires on July 1, 1997.
The variable rate notes payable, the notes payable in quarterly installments,
and the industrial development revenue bonds are collateralized by first
mortgages on certain facilities and related property with a book value
aggregating approximately $24 million.
The various underlying loan agreements, including the Company's revolving line
of credit, contain certain provisions which require the Company to, among other
things, maintain minimum working capital of $32 million and net equity (as
defined) of $43 million, limit the addition of new long-term debt, limit its
unhedged grain position to 2 million bushels, and restrict the amount of
dividends. The Company was in compliance with these covenants at December 31,
1995.
The aggregate annual maturities, including sinking fund requirements, through
2000 of long-term debt are as follows: 1996--$8 million; 1997--$26 million;
1998--$8 million; 1999--$6 million and 2000--$4 million.
Interest paid (including short-term lines of credit) amounted to $13 million,
$8 million and $5 million in 1995, 1994 and 1993, respectively.
8. Owners' Equity
Owners' equity is comprised of the following:
January 2 December 31
(in thousands) 1996 1995 1994
The Andersons, Inc.
Common Shares, without par value
Authorized--25,000,000 shares
Issued-- 8,430,286 shares at stated
value of $.01 per share $ 84 $ - $ -
Additional paid in capital 65,939
Retained earnings 699
The Andersons:
Limited partners' capital - 65,156 63,008
The Andersons Management Corp.:
Common Shares, without par value:
Class A non-voting:
Authorized--25,000 shares
Issued--4,855 shares at stated value - 1,456 1,456
Class B voting:
Authorized--25,000 shares
Issued--5,683 and 5,014 shares
respectively at stated value - 6 5
Retained earnings - 699 472
Less common shares in treasury at cost:
Class A non-voting--275 and 236 shares,
respectively - (86) (71)
Unrealized gain on available-for-sale
securities 29 29 -
$66,751 $67,260 $64,870
Following are the details (in thousands) of the conversion of partners' equity
and Class A and Class B shares to common shares of The Andersons, Inc. upon
completion of the merger:
Combined equity at December 31, 1995 $ 67,260
Deferred tax liability recognized in
conversion from partnership status (721)
Conversion of employee bonds to common shares 276
Payment to partners not electing conversion (62)
Cash payments for fractional shares (2)
The Andersons, Inc. equity at January 2, 1996 $ 66,751
As part of the January 2, 1996 merger, the Company adopted a Long Term
Performance Compensation Plan (the "LT Plan") which is designed to promote the
interests of the Company and its shareholders by providing officers and other
key employees compensation that aligns their interests with shareholder
interests through share ownership and investment in the Company, and to
encourage long-term growth in shareholder value through the achievement of
specified financial objectives. The LT Plan provides for the award of
incentive stock options and other non-qualifying stock options to officers and
other key employees to purchase a specified number of common shares at a price
not less than the fair market value on the date of the grant and for a term not
to exceed ten years. In addition, the LT Plan provides for the grant of
performance awards to employees. These performance awards may be in common
shares, cash or both and will only be granted on the achievement of specified
performance targets. Finally, the LT Plan provides for formula grants of stock
options to non-employee directors at a price equal to the fair market value on
the date of the grant. These options shall have a one year vesting period and
a term of five years. The Company has reserved 500,000 shares for issuance
under this plan. The Company has not made any awards under the LT Plan.
Also as part of the merger, the Company adopted an Employee Share Purchase Plan
to enable and encourage employees to acquire an ownership interest in the
Company through purchase of common shares via payroll deductions, up to 10% of
eligible compensation. Annually, on December 31, participant account balances
will be used to purchase common shares at the lesser of the fair market value
of the shares on January 1 (the grant date, January 2 for the initial plan
year) or December 31 (the exercise date). The aggregate fair market value of
shares (as measured at the grant date) purchased by an employee may not exceed
$25,000. A total of 300,000 shares are reserved for issuance under this plan.
9. Leases
The Company leases certain equipment and real property under operating leases,
including railcars which are subleased to third parties. Net rental expense
under operating leases was as follows:
(in thousands) 1995 1994 1993
Total rental expense $11,242 $8,562 $7,239
Less rental income from subleases 6,313 2,884 1,431
Net rental expense $ 4,929 $5,678 $5,808
Future minimum rentals for all noncancelable operating leases and future rental
income from subleases are as follows:
(in thousands) Future Minimum Future
Rentals Sublease
Income
1996 $10,124 $ 6,627
1997 8,470 5,608
1998 7,319 5,334
1999 4,849 3,071
2000 2,783 840
Future years 7,675 1,053
$41,220 $22,533
10. Employee Benefit Plans
The Company sponsors several employee benefit programs which include the
following: Defined Benefit Pension Plan and Supplemental Defined Benefit
Pension Plan, Retirement Savings Investment Plan, Cash Profit Sharing Plan,
Management Performance Program and health insurance benefits.
Substantially all permanent employees are covered by the Company's Defined
Benefit Pension Plan. The benefits are based on the employee's highest five
consecutive years of compensation during their last ten years of service. The
Company's policy is to pay into trusteed funds each year an amount equal to the
annual pension expense calculated under the Entry Age Normal method. In
addition, the Company has a Supplemental Retirement Plan which is a non-
qualified deferred compensation plan designed to cover all Defined Benefit Plan
participants whose compensation exceeds the Internal Revenue Code limitation.
Supplemental Plan benefits are calculated similarly to the Defined Benefit Plan
and are based on compensation in excess of the Internal Revenue Code
limitation.
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets as of December 31, 1995 and 1994.
December 31
(in thousands) 1995 1994
Actuarial present value of benefit obligation:
Vested benefits $6,666 $5,743
Non-vested benefits 329 364
Accumulated benefits obligation 6,995 6,107
Impact of future salary increases 4,196 3,417
Projected benefit obligation for service
rendered to date 11,191 9,524
Plan assets at fair value 9,606 7,297
Projected benefit obligation in excess of plan
assets 1,585 2,227
Unrecognized net asset at adoption of FAS 87,
net of amortization 143 193
Unrecognized net gain (loss) 526 (435)
Prior service cost (292) (29)
Net pension liability recognized in balance sheet
(includes current portion of $1,498 thousand in
1995 and $415 thousand in 1994) $1,962 $1,956
Net periodic pension cost includes the following components:
Year ended December 31
(in thousands) 1995 1994 1993
Service cost - benefits earned during
the period $1,234 $1,082 $1,136
Interest cost on projected benefit obligation 681 563 571
Return on plan assets (2,018) 71 (493)
Net amortization and deferral 1,425 (655) 10
Net periodic pension cost $1,322 $1,061 $1,224
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation was 7.5% and 4%, respectively. The weighted average long-term rate
of return on plan assets used in determining the expected return on plan
assets included in net periodic pension cost was 8% for all years presented.
Substantially all of the plan assets are invested in a family of mutual funds.
Under the Retirement Savings Investment Plan (RSIP) eligible participating
employees may elect to contribute specified amounts up to 15% of their gross
pay on a tax-deferred basis, subject to certain limitations, to a trust for
investment in a family of mutual funds. The Company contributes an amount equal
to 50% of the participant's contributions, but not in excess of 3% of the
participant's annual gross pay. Participants are fully vested in their
contributions to the RSIP. Participants hired before January 1, 1993 vest
immediately in the Company's matching contributions and participants hired
after December 31, 1992 vest ratably over five years. The matching
contributions to the RSIP amounted to $0.9 million, $0.9 million, and $0.8
million in 1995, 1994 and 1993, respectively.
Substantially all permanent employees are included in the Cash Profit Sharing
Plan. The Plan provides for participants to receive certain percentages of
their pay as various threshold levels of return on capital of the Partnership
are achieved. The Company also has a Management Performance Program for certain
levels of management. Participants in the Management Performance Program are
not eligible to participate in the Cash Profit Sharing Plan. The expense for
profit sharing/management performance programs was $1.2 million, $3 million
and $2 million for 1995, 1994 and 1993, respectively.
The Company currently provides certain health insurance benefits to its
employees, including retired employees. The Company has reserved the right in
most circumstances to modify the benefits provided and in recent years has in
fact made changes. Further changes were implemented in 1993 that will effect
the benefits provided to future retirees. These changes include the minimum
retirement age, years of service and a sharing in the cost of providing these
benefits. In addition, the Medicare Part B reimbursement currently paid by the
Company for retirees is being phased out over a five-year period. The Company
has elected to recognize the accrued benefits earned by employees as of January
1, 1993 (transition obligation) prospectively, which means this cost will be
recognized as a component of the net periodic postretirement benefit cost over
a period of approximately 20 years.
The Company's postretirement benefits are not funded. The status of the plan as
of December 31 is as follows:
(in thousands)
1995 1994
Accumulated postretirement benefit obligation:
Retirees $5,502 $5,268
Fully eligible active plan participants 656 628
Other active participants 3,593 3,440
9,751 9,336
Unrecognized net transition obligation (7,150) (7,571)
Unrecognized net loss (136) (246)
Accrued postretirement benefit cost $2,465 $1,519
Net periodic postretirement benefit cost includes the following components:
Year ended December 31
(in thousands) 1995 1994 1993
Service cost $ 247 $ 245 $ 181
Interest cost 679 750 654
Net amortization 421 452 421
Net periodic postretirement benefit costs $1,347 $1,447 $1,256
The weighted average discount rate used in determining the postretirement
benefit cost was 7.5% for all years. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation at December
31, 1995 and 1994 was 7.5%.
The assumed health care cost trend rate used to measure the expected cost of
benefits covered by the plan was 7% in 1995, declining to 5% through the year
1997 and remaining at that level thereafter. A 1% increase in the assumed
health care cost trend rate would increase the annual postretirement benefit
cost by approximately $181 thousand and the accumulated postretirement benefit
obligation as of December 31, 1995 by approximately $1.6 million.
To partially fund self-insured health care and other employee benefits, the
Company makes payments to a trust. Assets of the trust amounted to $2.7 million
and $2.6 million at December 31, 1995 and 1994, respectively, and such amounts
are included in prepaid expenses.
11. Commitments and Risk Management
The Company 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 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 to processors and other consumers generally do
not extend beyond one year. The terms of these contracts are consistent with
industry practice.
The Company utilizes futures and option contracts that are traded on a
regulated exchange to hedge its net price exposure from grain inventories held
and firm commitments to purchase or sell grain inventories and to limit its
cash requirements for margin calls in the event of rising market prices. The
Company's policy is to hedge its net price exposure and at December 31, 1995,
nearly 100% of the its 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 Company periodically utilizes interest rate contracts to manage interest
rate risk by converting variable interest rates on short term borrowings to
intermediate term fixed rates. Income or expense associated with interest rate
swap agreements is recognized on the accrual basis over the life of the swap
agreement as a component of interest expense. At December 31, 1995, the
Company was participating in three interest rate swap agreements, each with a
notional amount of $10 million. The interest rate swaps expire in March and
June of 1996 and convert variable interest rates to fixed rates of 5.815% to
5.87%. The effect of the interest rate swaps on the Company's interest expense
was not significant in 1995. The Company incurred $53 thousand and $93
thousand of additional interest expense from participating in interest rate
swaps in 1994 and 1993, respectively.
12. Fair Values of Financial Instruments
The fair values of the Company'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 Company's debenture bonds bear
fixed rates of interest and terms of five or ten years. Based upon current
interest rates offered by the Company on similar bonds and rates currently
available to the Company for long-term borrowings with similar terms and
remaining maturities, the Company believes its long-term debt instruments
outstanding at December 31, 1995 and 1994, have fair values as follows:
Carrying Fair
(in thousands) Amount Value
1995:
Debenture bonds $22,257 $22,251
Long-term notes payable 59,911 60,513
$82,168 $82,764
1994:
Debenture bonds $22,144 $22,189
Long-term notes payable 52,688 51,316
$74,832 $73,505
13. Securities
The following is a summary of held-to-maturity securities as of December 31,
1995 and 1994:
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
December 31, 1995
Cash equivalent:
Time deposit $ 276 $ $ $ 276
U.S. Treasury securities 595 2 -- 597
Margin deposits--
U.S. Treasury securities 5,131 8 83 5,056
$6,002 10 83 $5,929
December 31, 1994
Cash equivalent:
Commercial paper $4,700 $ -- $ -- $4,700
Time deposit 259 -- -- 259
Short-term investments--
U.S. Treasury securities 491 -- 3 488
Margin deposits--
U.S. Treasury securities 3,902 1 -- 3,903
$9,352 $ 1 3 $9,350
All held-to-maturity securities mature within one year. At December 31, 1995,
the Company held mutual fund securities with a cost of $277 thousand and fair
value of $325 thousand. The unrealized gain of $48 thousand is shown as a
separate component of owners' equity, net of applicable income taxes. The
mutual fund securities had a cost and fair value of $250 thousand at December
31, 1994. The mutual fund securities have been classified as available-for-sale
and are being carried as a noncurrent asset as they are expected to be held for
more than one year.
14. Business Segments
The Company operates three business segments: Agriculture Group, Retail Group
and Business Development Group. The Agriculture Group includes grain
merchandising, operation of terminal grain elevator facilities, and
distribution of agricultural products, primarily fertilizer. The Retail Group
includes operation of retail stores and a distribution center. The Business
Development Group includes production and distribution of lawn and corn cob
products, rail car leasing and repair and the marketing of the Company's excess
real estate as well as other, smaller businesses.
In 1995, the Company realigned its segments, moving some smaller divisions to
the Business Development Group to reflect the management structure and
development cycle of these businesses. Prior to 1994 the Company reported its
Agriculture businesses as two segments: Grain Operations and Agricultural
Products. The Company elected to combine these operations into a single
business segment based upon the similarities in the customer bases and
geographic markets. Prior year segment information has been restated.
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
(in thousands) 1995 1994 1993
Sales and revenues:
Agriculture Group:
Sales to unaffiliated customers $ 796,754 $678,316 $540,254
Intersegment sales 6,630 3,106 2,979
Merchandising revenue and other income 28,090 29,623 28,001
831,474 711,045 571,234
Retail Group:
Sales to unaffiliated customers 168,051 169,009 152,627
Other income 282 113 118
168,333 169,122 152,745
Business Development Group:
Sales to unaffiliated customers 100,402 92,965 76,535
Intersegment sales 929 870 730
Other income 3,296 765 1,875
104,627 94,600 79,140
Other income 855 847 935
Eliminations--intersegment sales (7,559) (3,976) (3,709)
Total sales and revenues $1,097,730 $971,638 $800,345
Operating profit:
Agriculture Group $ 16,920 $ 18,901 $ 14,571
Retail Group 4,392 4,596 1,640
Business Development Group 6,719 5,594 6,429
Total operating profit 28,031 29,091 22,640
Other income 664 641 730
Interest expense (14,019) (8,395) (6,168)
General expenses (4,488) (6,166) (6,122)
Income from continuing operations $ 10,188 $ 15,171 $ 11,080
Identifiable assets:
Agriculture Group $ 321,045 $207,833 $244,065
Retail Group 61,296 64,135 56,067
Business Development Group 62,313 59,881 50,438
General 10,864 12,960 10,016
Total assets $ 455,518 $344,809 $360,586
Depreciation and amortization expense:
Agriculture Group $ 4,186 $ 3,391 $ 3,252
Retail Group 2,771 2,567 1,914
Business Development Group 1,960 1,789 1,627
General 401 358 316
Total depreciation and amortization expense $ 9,318 $ 8,105 $ 7,109
Capital expenditures:
Agriculture Group $ 10,072 $ 6,689 $ 3,773
Retail Group 2,749 12,981 4,164
Business Development Group 2,536 5,995 2,738
General 633 635 134
Total expenditures $ 15,990 $ 26,300 $ 10,809
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 and
buildings and equipment associated with administration and services, and other
assets not directly identified with segment operations.
No unaffiliated customer accounted for more than 10% of sales and revenues in
1995, 1994 or 1993. Grain sales for export to foreign markets amounted to
approximately $194 million, $130 million and $88 million in 1995, 1994 and
1993, respectively.
Board of Directors
Richard P. Anderson,
President and Chief Executive
Officer, The Andersons, Inc.
Thomas H. Anderson
Chairman of the Board, The Andersons, Inc.
Daniel T. Anderson
General Merchandise Manager Retail Group,
The Andersons, Inc.
Donald E. Anderson
Science Advisor, retired
The Andersons, Inc.
Michael J. Anderson
Vice President & General Manager Retail Group
The Andersons, Inc.
Richard M. Anderson
Vice President & General Manager Industrial Products Group
The Andersons, Inc.
John F. Barrett
Chief Executive Officer,
The Western and Southern Life Insurance Company
Dale W. Fallat
Vice President Corporate Services
The Andersons, Inc.
Paul M. Kraus
Attorney, Marshall & Melhorn
Rene C. McPherson
Retired Chairman of the Board and Chief Executive
Officer, Dana Corporation (deceased February, 1996)
Donald M. Mennel
Attorney, Retired Chairman of the Board and Chief
Executive Officer, The Mennel Milling Company
David L. Nichols
Chairman of the Board and Chief Executive Officer,
Mercantile Company, Inc. Stores
Janet M. Schoen
Private investor and former school teacher
Officers
Thomas H. Anderson
Chairman of the Board
Richard P. Anderson
President and Chief Executive Officer
Christopher J. Anderson
Vice President and General Manager
Business Development Group
Michael J. Anderson
Vice President & General Manager
Retail
Richard M. Anderson
Vice President & General Manager
Industrial Products Group
Joseph L. Braker
Vice President & General Manager
Agriculture Group
Dale W. Fallat
Vice President Corporate Services
Richard R. George
Corporate Controller
Peter A. Machin
Vice President & General Manager
Lawn Products Group
Beverly J. McBride
General Counsel and Corporate Secretary
Gary L. Smith
Corporate Treasurer
Board Committees
Audit Committee
Donald M. Mennel, Chairman
Richard M. Anderson
David L. Nichols
Nominating Committee
Thomas H. Anderson, Chairman
Richard P. Anderson
Michael J. Anderson
John F. Barrett
Rene C. McPherson
Donald M. Mennel
David L. Nichols
Compensation Committee
John F. Barrett, Chairman
Donald E. Anderson
Paul M. Kraus
Rene C. McPherson
Investor Information
Corporate Offices
The Andersons, Inc.
480 West Dussel Drive
Maumee, Ohio 43537
(419) 893-5050
Transfer Agent and Registrar
Harris Trust & Savings Bank
Shareholder Services Division
311 W. Monroe
P.O. Box A-3504
Chicago, Illinois 60690-3504
Shareholder Services
(312) 461-3309
Form 10-K
The Company will provide without charge to any person who is a
beneficial owner of its shares, a copy of the Company's 1995 Annual
Report on Form 10-K, as filed with the Securities and Exchange
Commission. Requests should be addressed to the Investor Relations
department of the Company.
Independent Auditors
Ernst & Young LLP, Toledo, Ohio
Annual Meeting
The annual shareholders' meeting of The Andersons, Inc. will be held at
the Lucas Auditorium of the Eleanor Dana Center, on the campus of the
Medical College of Ohio, Glendale Road entrance, Toledo, Ohio at 7:00
p.m. on May 23, 1996.
Nasdaq Symbol
The Andersons, Inc. common shares are trades on the Nasdaq National
Market under the symbol "ANDE."
Shareholders
On February 15, 1996, there were 305 common shareholders.
Investor Relations
Gary Smith, Corporate Treasurer, (419) 891-6417
Exhibit 4.4
THE ANDERSONS, INC.
AND
THE FIFTH THIRD BANK OF NORTHWESTERN OHIO, N.A.,
Trustee.
__________________
FIFTEENTH SUPPLEMENTAL INDENTURE
dated as of January 2, 1996
Supplementing Indenture Dated as of October 1, 1985
__________________
Debentures
Due Five Years or Ten Years
from Original Issue Date
THIS FIFTEENTH SUPPLEMENTAL INDENTURE, dated as of January 2, 1996,
between The Andersons, Inc., an Ohio corporation having its principal office at
480 W. Dussel Drive, City of Maumee, Lucas County, Ohio (hereinafter called the
"Corporation"), and The Fifth Third Bank of Northwestern Ohio, N.A., a national
banking association organized and existing under the laws of the United States
of America (hereinafter called the "Trustee");
W I T N E S E T H
WHEREAS, The Andersons, an Ohio limited partnership ("Partnership")
heretofore executed and delivered to the Trustee a certain indenture dated as
of October 1, 1985 (hereinafter called the "Indenture"), providing for the
issuance of debentures (hereinafter called the "Debentures") as therein
provided; and
WHEREAS, the Partnership heretofore executed and delivered to the Trustee
a Fourteenth Supplemental Indenture dated as of January 1, 1995; and
WHEREAS, at the time of the execution of the Fourteenth Supplemental
Indenture, the Partnership had been formed and existed under a Partnership
Agreement dated as of January 1, 1995; and
WHEREAS, the Partnership dated as of January 1, 1995, is no longer in
existence; and
WHEREAS, a Certificate of Merger has been filed on January 2, 1996,
wherein the Partnership and The Andersons Management Corp., an Ohio
corporation, and being the Partnership's sole General Partner, merged, with the
surviving entity being The Andersons Management Corp., which changed its name
to The Andersons, Inc. ("Corporation"), which merger resulted in the transfer
thereto of the Partnership's property and assets substantially as an entirety
for purposes of Sections 801 and 8 02 of the Indenture; and
WHEREAS, the Corporation and the Trustee may enter into supplemental
indentures to the Indenture without the consent of the holders of Debentures,
pursuant to Section 901(3) of the Indenture, to evidence the merger and the
assumption by the Corporation of the covenants of the Partnership contained in
the Indenture and the Debentures; and
WHEREAS, giving effect to the execution of the above-referenced merger as
of January 2, 1996, no Event of Default, as defined in Section 501 of the
Indenture, and no event which after notice or lapse of time, or both, would
become an Event of Default, has happened or is continuing; and
WHEREAS, the Corporation has delivered to the Trustee a Corporate
Certificate and an Opinion of Counsel, stating that the transfer of the
Partnership's properties and assets substantially as an entirety from the
Partnership, as formed under the Partnership Agreement dated as of January 1,
1995, to the Corporation, pursuant to the Certificate of Merger filed January
2, 1996, and this Fifteenth Supplemental Indenture comply with Article Eight of
the Indenture and that all condition s precedent therein provided for relating
to such transfer and change in interest rates have been complied with; and
WHEREAS, the Corporation has been authorized by its Board of Directors to
enter into this Fifteenth Supplemental Indenture in accordance with Section 901
of the Indenture;
NOW, THEREFORE,
The Corporation, hereby expressly assumes the due and punctual payment of
the principal of, including each installment thereof (and premium, if any), and
interest on all the Debentures and the performance of every covenant of the
Indenture on the part of the Corporation to be performed or observed; and
Pursuant to Section 802 of the Indenture, the Corporation, hereby succeeds
to, and is substituted for, and may exercise every right and power of the
Partnership, and all successors, under the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Fifteenth
Supplemental Indenture to be duly executed as of the day and year first above
written.
THE FIFTH THIRD BANK OF THE ANDERSONS, INC., an Ohio corporation
NORTHWESTERN OHIO, N.A.
By: \s\Douglas P. Foxx By: \s\Richard P. Anderson
Douglas P. Foxx Richard P. Anderson
Executive Vice President President and Chief Executive Officer
[Corporate Seal]
By: \s\ Gary Smith
Gary Smith
Treasurer
Attest:
\s\James A. Foote
James A. Foote
Trust Operations Officer
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
Before me, a Notary Public, in and for said county and state, personally
appeared Richard P. Anderson and Gary Smith, President and Chief Executive
Officer and Treasurer, respectively, of The Andersons, Inc., an Ohio
corporation, who acknowledged that, they being thereunto duly authorized, did
sign the foregoing instrument in behalf of said corporation and by authority of
its board of directors and that the same is the free act and deed of said
officers and of said corporation.
In Testimony Whereof, I have hereunto set my hand and official seal at
Maumee, Ohio this 24th day of January, 1996.
/s/ Julie Ann Dibble
Julie Ann Dibble
Notary Public
My Commission Expires:6/20/2000
[Notarial Seal]
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
On the 12th day of February, 1996, before me personally came Douglas P.
Foxx, Executive Vice President, and James A. Foote, Trust Operations Officer,
to me known, who, being by me duly sworn, did depose and say that they are
Trust Officers of THE FIFTH THIRD BANK OF NORTHWESTERN OHIO, N.A., a bank
organized under the laws of the United States of America, described in and
which executed the foregoing instrument; that they know the seal of said
corporation; that the seal affixed to said instrument is such corporation seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that they signed their names hereto by like authority.
\s\Karen S. Opblinger
Notary Public
My Commission Expires 2/16/2000
[Notarial Seal]
CORPORATE CERTIFICATE
This is to certify that The Andersons, Inc., an Ohio corporation, has
examined the above-mentioned Indenture, Fifteenth Supplemental Indenture, the
foregoing Opinion of Counsel and all other documents and matters as it deemed
necessary to express an informed opinion on compliance by the corporation with
the conditions precedent provided in said Indenture and that it concurs with
the aforesaid Opinion of Counsel.
THE ANDERSONS, INC., an Ohio corporation
By: /s/ Richard P. Anderson
Richard P. Anderson
President and Chief Executive Officer
By: /s/ Gary Smith
Gary Smith, Treasurer
January 23, 1996
Mr. James A. Foote
Trust Operations Officer
The Fifth Third Bank of
Northwestern Ohio, N.A.
606 Madison Avenue
Toledo, Ohio 43604
RE: The Andersons, Inc. Fifteenth Supplemental Indenture Dated as
of January 2, 1996
Dear Jim:
According to the terms of the Indenture dated October 1, 1985, each year, in
the past, it has been necessary to transfer the property and assets of the
partnership to the successor partnership formed. This year, there has been a
merger of The Andersons, an Ohio limited partnership, and The Andersons
Management Corp., an Ohio corporation, being the partnership's sole General
Partner, with The Andersons Management Corp. as the surviving entity. The name
of the Corporation was changed to The Andersons, Inc. A certified copy of the
Certificate of Merger, along with the Amended Articles of Incorporation, is
enclosed.
In order to accomplish transfer of the assets from the limited partnership
which was formed effective January 1, 1995, to The Andersons, Inc., the
following documents relative to the current debenture issue are enclosed:
1. Fifteenth Supplemental Indenture.
2. Opinion of Counsel.
3. Corporate Certificate.
If you have any questions regarding the above, please do not hesitate to
contact me. All of this is based upon work previously accepted in connection
with the Indenture dated as of October 1, 1985. Please return to me a copy of
the fully-executed Fifteenth Supplemental Indenture.
Thank you for your assistance. Best regards.
Sincerely,
/s/ Beverly J. McBride
Beverly J. McBride
General Counsel and
Corporate Secretary
BJM
Enclosures
cc: Ms. Cathy Redford, Legal Analyst
Ms. Anne Rex, Financial Accounting Manager
Mr. Gary Smith, Corporate Treasurer
January 23, 1996
The Fifth Third Bank of
Northwestern Ohio, N.A., Trustee
606 Madison Avenue
Toledo, Ohio 43604
Re: Indenture Dated As Of October 1, 1985 and Fifteenth Supplemental
Indenture Thereto Dated As Of January 2, 1996; Opinion of Counsel
and Corporate Certificate
Gentlemen:
In compliance with Section 801(3) of the above-referenced Indenture
between The Andersons, Inc., an Ohio corporation, as successor to The
Andersons, an Ohio limited partnership, by Certificate of Merger filed January
2, 1996, and The Fifth Third Bank of Northwestern Ohio, N.A., Trustee, please
be advised that I have examined the Certificate of Merger filed January 2,
1996, the aforementioned Indenture and Supplemental Indenture thereto and all
other documents and matters as I deemed necessary under the circumstances to
render the within opinion, and it is my opinion that the instruments which have
been or are herewith delivered to the Trustee conform to the requirements of
this Indenture, and it is my opinion that the transfer of the partnership's
property and assets to The Andersons, Inc. and the said Fifteenth Supplemental
Indenture comply with and are authorized by Article Eight of the Indenture and
that The Andersons, Inc. has complied with all conditions precedent therein
provided for relating to said transfer and Fifteenth Supplemental Indenture.
/s/ Beverly J. McBride
Beverly J. McBride
General Counsel
BJM
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000821026
<NAME> THE ANDERSONS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995<F1>
<CASH> 5052000
<SECURITIES> 0
<RECEIVABLES> 92629000
<ALLOWANCES> 3514000
<INVENTORY> 269930000
<CURRENT-ASSETS> 371342000
<PP&E> 212257000
<DEPRECIATION> 130395000
<TOTAL-ASSETS> 458449000
<CURRENT-LIABILITIES> 309578000
<BONDS> 73863000
0
0
<COMMON> 840000
<OTHER-SE> 66638000
<TOTAL-LIABILITY-AND-EQUITY> 458449000
<SALES> 1092410000
<TOTAL-REVENUES> 1097730000
<CGS> 944176000
<TOTAL-COSTS> 944176000
<OTHER-EXPENSES> 129347000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14019000
<INCOME-PRETAX> 10188000
<INCOME-TAX> 0<F2>
<INCOME-CONTINUING> 10188000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10188000
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1>Merger of The Andersons and The Andersons Management Corp. occurred on January
2, 1996. The Andersons Management Corp concurrently changed its name to The
Andersons, Inc. This Financial Data Schedule presents the balance sheet
information of The Andersons, Inc. as of the merger date (January 2, 1996) and
the income statement information of The Andersons, Inc. for the year ended
December 31, 1995 (historical combination of The Andersons and The Andersons
Management Corp.). See also Note 1 to The Andersons, Inc. annual report to
shareholders for further explanation.
<F2>See Note 3 to The Andersons, Inc. audited financial statement included in the
1995 annual report to shareholders.
<F3>See Note 1 to the audited financial statements included in The Andersons, Inc.
annual report to shareholders.
</FN>
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
pertaining to (Form S-8 No. 33-01249) The Andersons, Inc. Long-Term Performance
Compensation Plan and (Form S-8 No. 33-00233) The Andersons, Inc.
Employee Share Purchase Plan of The Andersons, Inc., of our report dated
February 2, 1996 with respect to the consolidated statements of The Andersons,
Inc. incorporated by reference in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
\s\Ernst & Young LLP
Toledo, Ohio
March 28, 1996
