<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 000-20557
THE ANDERSONS, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-1562374
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
480 W. Dussel Drive, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
(419) 893-5050
(Telephone Number)
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The registrant had 7,507,597 Common shares outstanding, no par value, at August
1, 2000.
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THE ANDERSONS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Operations -
Three months and six months ended June 30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------
THE ANDERSONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
--------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 5,332 $ 25,614
Accounts and notes receivable:
Trade accounts (net) 60,236 51,812
Margin deposits 106 1,339
--------------------------------
60,342 53,151
Inventories:
Grain 45,017 83,796
Agricultural fertilizer and supplies 17,737 17,766
--------------------------------
Agriculture 62,754 101,562
Retail 32,212 29,540
Processing 35,243 28,386
Manufacturing 23,178 17,365
Other 594 1,470
--------------------------------
153,981 178,323
Deferred income taxes 3,752 5,641
Prepaid expenses 3,295 5,796
--------------------------------
Total current assets 226,702 268,525
Other assets:
Notes receivable (net) and other assets 10,123 4,640
Investments in and advances to affiliates 988 954
--------------------------------
11,111 5,594
Property, plant and equipment:
Land 11,885 12,237
Land improvements and leasehold improvements 26,774 27,266
Buildings and storage facilities 91,305 91,374
Machinery and equipment 124,188 118,872
Software 3,655 3,555
Construction in progress 7,960 8,895
--------------------------------
265,767 262,199
Less allowances for depreciation and amortization 159,948 159,542
--------------------------------
105,819 102,657
--------------------------------
$343,632 $376,776
================================
</TABLE>
See notes to condensed consolidated financial statements.
3
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THE ANDERSONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (continued)
(UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
------------------------------
<S> <C> <C>
Current liabilities
Notes payable $ 52,200 $ 45,000
Accounts payable for grain 27,489 68,883
Other accounts payable 66,006 65,079
Accrued expenses 16,027 17,465
Current maturities of long-term debt 8,009 4,159
------------------------------
Total current liabilities 169,731 200,586
Deferred income 1,205 4,026
Pension and postretirement benefits 3,590 3,255
Long-term debt 71,836 74,127
Deferred income taxes 7,415 8,742
Minority interest 231 1,235
Shareholders' equity:
Common stock (25,000 shares authorized, stated value $.01 per share,
7,503 and 7,707 outstanding at 6/30/00 and 12/31/99, respectively) 84 84
Additional paid-in capital 66,488 67,227
Treasury stock (927 and 723 shares at 6/30/00 and
12/31/99, respectively; at cost) (8,597) (7,158)
Accumulated other comprehensive income (144) (144)
Unearned compensation (194) (158)
Retained earnings 31,987 24,954
------------------------------
89,624 84,805
------------------------------
$343,632 $376,776
==============================
</TABLE>
See notes to condensed consolidated financial statements.
4
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THE ANDERSONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
2000 1999 2000 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales and merchandising revenues $ 258,101 $ 259,247 $ 455,049 $ 459,212
Other income 1,112 1,078 3,029 1,868
---------------------------------------------------------------
259,213 260,325 458,078 461,080
Cost of sales and merchandising revenues 207,108 208,544 361,928 370,433
---------------------------------------------------------------
Gross Profit 52,105 51,781 96,150 90,647
Operating, administrative and general
expenses 39,404 38,602 78,935 75,336
Interest expense 2,594 2,052 5,270 4,118
---------------------------------------------------------------
41,998 40,654 84,205 79,454
---------------------------------------------------------------
Income before income taxes 10,107 11,127 11,945 11,193
Provision for income taxes 3,389 3,668 4,005 3,690
---------------------------------------------------------------
Net income $ 6,718 $ 7,459 $ 7,940 $ 7,503
===============================================================
Per common share:
Basic earnings $ 0.89 $ 0.92 $ 1.05 $ 0.92
===============================================================
Diluted earnings $ 0.89 $ 0.90 $ 1.04 $ 0.91
===============================================================
Dividends paid $ 0.06 $ 0.05 $ 0.12 $ 0.10
===============================================================
Weighted average common shares
Outstanding - basic 7,524 8,075 7,597 8,116
=================================================================
Weighted average common shares
Outstanding - diluted 7,533 8,243 7,605 8,273
=================================================================
</TABLE>
See notes to condensed consolidated financial statements.
5
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THE ANDERSONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30
2000 1999
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,940 $ 7,503
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 6,264 5,515
Provision for losses on accounts and notes receivable 65 532
Deferred income tax 563 624
Gain on sale of business and property, plant &
equipment (949) (2)
Other 36 6
----------------------------
Cash provided by operations before changes in
operating assets and liabilities 13,919 14,178
Changes in operating assets and liabilities:
Accounts receivable (7,407) 3,168
Inventories 38,592 41,767
Prepaid expenses and other assets 1,321 2,859
Accounts payable for grain (42,494) (60,512)
Other accounts payable and accrued expenses (1,340) (11,999)
----------------------------
Net cash provided by (used in) operating activities 2,591 (10,539)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (11,061) (6,907)
Purchase of working capital and intangibles of business (15,861) -
Proceeds from sale of business & property, plant and equipment 2,237 184
----------------------------
Net cash used in investing activities (24,685) (6,723)
FINANCING ACTIVITIES
Net increase in short-term borrowings 7,200 27,300
Proceeds from issuance of long-term debt 109,791 56,920
Payments of long-term debt (111,926) (61,006)
Purchase of common stock for the treasury (2,652) (2,115)
Proceeds from sale of treasury stock to employees 321 380
Dividends paid (922) (818)
----------------------------
Net cash provided by financing activities 1,812 20,661
----------------------------
Increase (decrease) in cash and cash equivalents (20,282) 3,399
Cash and cash equivalents at beginning of period 25,614 3,253
----------------------------
Cash and cash equivalents at end of period $ 5,332 $ 6,652
============================
</TABLE>
See notes to condensed consolidated financial statements.
6
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THE ANDERSONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - In the opinion of management, all adjustments necessary for a
fair presentation of the results of operations for the periods
indicated, have been made.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required
by generally accepted accounting principles.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in The Andersons,
Inc. Annual Report on Form 10-K for the year ended December 31, 1999.
Note B - Total comprehensive income was $7.9 million for the six months
ended June 30, 2000 and $7.5 million for the six months ended June
30, 1999. Total comprehensive income for the quarters ended June 30,
2000 and 1999 was $6.7 million and $7.5 million, respectively.
Note C - The June 30, 2000 balance sheet includes preliminary inventory,
intangibles and related liabilities purchased from The Scotts Company
in connection with the purchase of the Pro Turf product line. The
purchase was effective May 31, 2000, and the accounting should be
finalized in the third quarter.
Note D - The Retail segment was restated for the addition of a retail
store selling lawn and garden equipment (the "Mower Center"). The
results of this operation were previously reported in Other.
Note E RESULTS OF OPERATIONS - SEGMENT DISCLOSURES
(in thousands)
<TABLE>
<CAPTION>
SECOND QUARTER, 2000 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C>
Revenues from external
customers $164,997 $ 9,079 $30,390 $53,635 $ -- $258,101
Inter-segment sales 1,491 262 314 -- -- 2,067
Other income 308 17 100 211 476 1,112
Interest expense (credit) (a)
1,202 416 764 399 (187) 2,594
Operating income (loss)
6,210 358 80 3,864 (405) 10,107
Identifiable assets at June
30, 2000 144,454 38,493 77,911 63,144 19,630 343,632
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
SECOND QUARTER, 1999 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C>
Revenues from external
customers $164,523 $ 8,232 $27,646 $55,889 $ 2,957 $259,247
Inter-segment sales 835 240 425 -- -- 1,500
Other income 319 37 135 124 463 1,078
Interest expense (credit) (a)
274 477 389 (124) 2,052
Operating income (loss)
5,961 1,122 1,012 3,917 (885) 11,127
Identifiable assets at June
30, 1999 149,127 31,828 50,185 64,793 21,392 317,325
FIRST HALF, 2000 AGRICULTURE MANUFACTURING PROCESSING RETAIL OTHER TOTAL
Revenues from external
customers $283,611 $15,552 $64,572 $88,825 $ 2,489 $455,049
Inter-segment sales 2,683 502 973 -- -- 4,158
Other income 574 153 192 317 1,793 3,029
Interest expense (credit) (a)
2,840 729 1,370 857 (526) 5,270
Operating income (loss)
7,625 839 1,780 1,695 6 11,945
FIRST HALF, 1999
Revenues from external
customers $291,124 $14,859 $57,513 $90,239 $ 5,477 $459,212
Inter-segment sales 2,470 490 1,095 -- -- 4,055
Other income 512 71 212 209 864 1,868
Interest expense (credit) (a)
2,396 560 868 811 (517) 4,118
Operating income (loss)
4,843 1,883 3,590 1,758 (881) 11,193
</TABLE>
(a) The other category of interest expense includes net interest income at the
company level, representing rate differential between the interest rate on
which interest is allocated to the operating segments and the actual rate
at which borrowings were made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 WITH THE THREE MONTHS ENDED
JUNE 30, 1999:
SALES AND MERCHANDISING REVENUES for the three months ended June 30,
2000 totaled $258.1 million, a decrease of $1.1 million, or less than 1%, from
1999. SALES in the Agriculture Segment were down $2.3 million, or 1%. Grain
sales were up $2.7 million with no change in volume and a 3% increase in the
average price per bushel sold. Fertilizer sales were down $5
8
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million with a $2.8 million, or 7%, decrease in the wholesale division and a
$2.2 million, or 9%, decrease in the farm center division. Average price per
fertilizer ton sold was down in both divisions, while wholesale had increased
volume and the farm centers experienced a volume decrease. At least a portion of
the farm center decrease was based on unusually wet spring weather in some
locations. MERCHANDISING REVENUES for the Agriculture Group were up $2.8
million, or 36%, due primarily to increases in income from storing grain for
others and favorable basis movement in the grain business. This was offset by a
decrease in drying and mixing income due to the generally good quality of grain
received from the last harvest.
The Manufacturing Segment had a sales increase of $.8 million, or 10%.
Total revenues in the railcar repair and fabrication shops were down slightly.
Railcar sales and financings completed during the second quarter of 2000 were
down $.3 million, or 10%, however gross lease fleet income was up $1.2 million
or 32%. This fleet income growth was due to additional railcars and locomotives
controlled and in service as compared to 1999.
The Processing Segment had a $2.7 million, or 10%, increase in sales.
All of this increase was attributable to increased volumes and price per ton
sold in the lawn fertilizer division. The cob-based businesses experienced a
reduction of volume partially offset by a 7% increase in the average price per
ton sold. There are two additional lawn fertilizer blending facilities being
operated in 2000 when compared to 1999. They are located in Montgomery, Alabama
and Pottstown, Pennsylvania. The Processing Segment also completed its purchase
of Pro Turf assets from The Scotts Company. Assets purchased included inventory
and intangibles as well as the assumption of certain employee benefit
liabilities of the business. The Company anticipates that this acquisition will
significantly increase future revenues for the Processing Segment.
The Retail Segment experienced a $2.2 million, or 4%, decrease in
sales, with five of the six stores showing decreases. The majority of the
decrease is related to unusually wet weather in the second quarter. Management
anticipates that some of the lost sales will be recovered in the third quarter.
GROSS PROFIT for the second quarter of 2000 totaled $52.1 million, an
increase of $.3 million, or 1%, over the second quarter of 1999. The Agriculture
Segment had a gross profit increase of $.9 million, or 4%, due to the increase
in merchandising revenues described previously and additional wholesale
fertilizer volume and margin per ton, partially offset by decreases in gross
profit on sales in grain and the farm centers.
Gross profit in the Manufacturing Segment decreased $.1 million, or 4%,
from the prior year. This was due to fewer railcar sales and a soft market for
the segment's primary car type - the covered hopper - reducing margins.
Gross profit for the Processing Segment increased $1.5 million, or 19%,
from the second quarter of 1999. As a whole, this segment experienced both
improved volume and gross profit per ton. The lawn fertilizer businesses
experienced increases that were partially offset by decreases in the cob-based
businesses.
9
<PAGE> 10
Gross profit in the Retail Segment decreased by $.2 million, or 1%,
from the second quarter of 1999. This was due primarily to the decreased sales
noted previously, partially offset by an increase in gross margin percentage.
OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES for the second quarter
of 2000 totaled $39.4 million, a $.8 million, or 2%, increase from the second
quarter of 1999. Full time employees increased 5% from the second quarter of
1999 due to acquisitions and added capacity in the Processing Segment. The
increase reflects planned growth in the Processing Segment, offset by the
reduction of expenses related to the sale of the investment in the
Andersons-Tireman joint venture at the end of the first quarter.
INTEREST EXPENSE for the second quarter of 2000 was $2.6 million, a $.5
million, or 26%, increase from the second quarter of 1999. Average quarterly
short-term borrowings were flat when comparing 2000 to 1999, while the effective
short-term interest rate increased by more than a full percentage point.
INCOME BEFORE INCOME TAXES of $10.1 million decreased 9% from the 1999
second quarter pretax income of $11.1 million. Income tax expense has been
provided at 33.5%, the Company's expected effective tax rate for 2000.
NET INCOME of $6.7 million decreased $.8 million from the 1999 second
quarter net income of $7.5 million. Basic and diluted earnings per share were
$.89, a $.03 and $.01 decrease, respectively, from the 1999 second quarter
earnings per share.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 WITH THE SIX MONTHS ENDED JUNE
30, 1999:
SALES AND MERCHANDISING REVENUES for the six months ended June 30, 2000
totaled $455 million, a decrease of $4.2 million, or 1%, from 1999. SALES in the
Agriculture Segment were down $11.4 million, or 4%. Grain sales were down $9.4
million with a 9% decrease in volume offset by a 4% increase in the average
price per bushel sold. Fertilizer sales were down $2 million with a $.5 million
decrease in the wholesale division and a $1.5 million decrease in the farm
center division. Average price per fertilizer ton sold was down in both
divisions while the wholesale division had a 12% increase in volume and the farm
centers experienced a volume decrease. At least a portion of the farm center
decrease was based on unusually wet weather in the second quarter in some
locations. MERCHANDISING REVENUES for the Agriculture Group were up $3.9
million, or 25%, due primarily to increases in income from storing grain for
others and favorable basis movement in the grain business. This was offset by a
decrease in drying and mixing income due to the generally good quality of grain
received from the last harvest.
The Manufacturing Segment had a sales increase of $.7 million, or 5%.
Total revenues in the railcar repair and fabrication shops were down slightly.
Railcar sales and financings completed during 2000 were down $2.1 million, or
40%, however lease fleet income was up $3 million or 39%. This fleet income
growth was due to additional railcars and locomotives controlled and in service
as compared to 1999.
10
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The Processing Segment had a $7.1 million, or 12%, increase in sales.
All of this increase was attributable to increased volumes and price per ton
sold in the lawn fertilizer division. The cob-based businesses experienced a
reduction of volume partially offset by a 4% increase in the average price per
ton sold. There are two additional lawn fertilizer blending facilities being
operated in 2000 when compared to 1999. They are located in Montgomery, Alabama
and Pottstown, Pennsylvania. The increased sales also reflect one month of sales
of the Pro Turf product line, formerly owned by The Scotts Company.
The Retail Segment experienced a $1.4 million, or 2%, decrease in
sales, with three of the six stores showing decreases. The decrease reflects
unusually wet weather in the second quarter, and in certain markets, increased
competition and heavy road construction.
GROSS PROFIT for the first half of 2000 totaled $96.2 million, an
increase of $5.5 million, or 6%, from 1999. Included in this amount is a $.9
million gain on the sale of the Company's investment in The Andersons-Tireman
joint venture. The Agriculture Segment had a gross profit increase of $3.8
million, or 11%, due primarily to the increase in merchandising revenues
described previously and additional wholesale fertilizer volume and margin per
ton, offset by decreases in gross profit on sales in grain and the farm centers.
Gross profit in the Manufacturing Segment decreased $.5 million, or 8%,
from the prior year. This was due to reduced railcar sales and a soft lease
market for the segment's primary car type - the covered hopper.
Gross profit for the Processing Segment increased $2.8 million, or 16%,
from 1999. As a whole, this segment experienced both improved volume and gross
profit per ton. The lawn fertilizer businesses experienced increases that were
partially offset by decreases in the cob-based businesses.
Gross profit in the Retail Segment for the first half of 2000 was flat
when compared to 1999. This was due primarily to the decreased sales noted
previously, partially offset by a slight increase in gross margin percentage.
OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES for the first half of
2000 totaled $78.9 million, a $3.6 million, or 5%, increase from 1999. Full time
employees increased 5% from the second quarter of 1999 due to acquisitions and
added capacity in the Processing Segment and the opening of an additional
wholesale fertilizer facility near the end of the second quarter of 1999. The
increase includes a $1 million increase in labor and benefits and a $1.7
million increase in occupancy expenses.
INTEREST EXPENSE for the first half of 2000 was $5.3 million, a $1.2
million, or 28%, increase from 1999. Average short-term borrowings increased 13%
when comparing 2000 to 1999 and the effective short-term interest rate increased
by more than a full percentage point.
INCOME BEFORE INCOME TAXES of $11.9 million increased 7% from the 1999
pretax income of $11.2 million. Income tax expense has been provided at 33.5%,
the Company's expected effective tax rate for 2000.
11
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NET INCOME of $7.9 million increased $.4 million from the 1999 net
income of $7.5 million. Basic and diluted earnings per share were $1.05 and
1.04, respectively. This represents $.13 increases from the 1999 basic and
diluted earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations (before changes in working capital) provided
cash of $13.9 million in the first half of 2000, a decrease of $.3 million from
the first half of 1999. Working capital at June 30, 2000 was $57 million, a
$10.9 million decrease from both December 31, 1999 and June 30, 1999.
The Company utilizes its short-term lines of credit to finance working
capital, primarily inventories and accounts receivable. Lines of credit
available on June 30, 2000 were $155 million. The Company had drawn $52.2
million on its short-term lines of credit at June 30, 2000, an increase of $7.2
million from December 31, 1999. The Company's peak short-term borrowing occurred
on March 23, 2000 and amounted to $113.8 million. Typically, the Company's
highest borrowing occurs in the spring due to seasonal inventory requirements in
the fertilizer and retail businesses, credit sales of fertilizer and a customary
reduction in grain payables due to cash needs and market strategies of grain
customers.
A quarterly cash dividend of $0.06 per common share was paid in the
first and second quarters of 2000. A cash dividend of $0.06 per common share was
declared on July 1, 2000 and was paid on July 21, 2000. Cash dividends of $0.05
per common share were paid quarterly in 1999. The Company made income tax
payments of $3.1 million in the first half of 2000 and expects to make payments
totaling approximately $.4 million for the remainder of the year. Also, in the
first half, the Company issued 58,476 shares to its employees under stock
compensation plans and purchased 330,600 of its common shares on the open market
at an average of $8.02 per share. The Company also issued 68,934 common shares
to complete its 1998 acquisition of Crop and Soil, Inc.
Total capital expenditures for 2000 are expected to approximate $24
million and include $8 million for additional facilities and businesses in the
Processing Segment, $5.2 million for the acquisition of additional railcars and
$.9 million to replace information systems hardware and software. Funding for
these expenditures is expected to come from cash generated from operations and
additional debt. Capital expenditures may be curtailed if cash generated from
operations is less than expected.
Certain of the Company's long-term debt is secured by first mortgages
on various facilities and/or collateralized by railcars owned by the Company.
Some of the long-term borrowings include provisions that impose minimum levels
of working capital and equity, limitations on additional debt and require the
Company to be substantially hedged in its grain transactions.
12
<PAGE> 13
The Company's liquidity is enhanced by the fact that grain inventories
are readily marketable. In the opinion of management, the Company's liquidity is
adequate to meet short-term and long-term needs.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
FORWARD LOOKING STATEMENTS
The preceding Management's Discussion and Analysis contains various
"forward-looking statements" which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties, including but not
limited to those identified below, which could cause actual results to differ
materially from historical results or those anticipated. The words "believe,"
"expect," "anticipate" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially
from historical results or those anticipated; weather, supply and demand of
commodities including grains, fertilizer and other basic raw materials, market
prices for grains and the potential for increased margin requirements,
competition, economic conditions, risks associated with acquisitions, interest
rates and income taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from adverse changes in
commodity prices and interest rates as discussed below.
Commodities
The availability and price of agricultural commodities are subject to
wide fluctuations due to unpredictable factors such as weather, plantings,
government (domestic and foreign)
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<PAGE> 14
farm programs and policies, changes in global demand created by population
growth and higher standards of living, and global production of similar and
competitive crops. To reduce price risk caused by market fluctuations, the
Company follows a policy of hedging its inventories and related purchase and
sale contracts. The instruments used are readily marketable exchange-traded
futures contracts that are designated as hedges. To a lesser degree, the Company
uses exchange-traded option contracts, also designated as hedges. The changes in
market value of such contracts have a high correlation to the price changes of
the hedged commodity. The Company's accounting policy for these hedges, as well
as the underlying inventory positions and purchase and sale contracts, is to
mark them to the market daily and include gains and losses in the statement of
income in sales and merchandising revenues.
A sensitivity analysis has been prepared to estimate the Company's
exposure to market risk of its commodity position. The Company's daily net
commodity position consists of inventories, related purchase and sale contracts
and exchange traded contracts. The fair value of such position is a summation of
the fair values calculated for each commodity by valuing each net position at
quoted futures market prices. Market risk is estimated as the potential loss in
fair value resulting from a hypothetical 10% adverse change in such prices. The
result of this analysis, which may differ from actual results, is as follows:
(in thousands) JUNE 30, 2000 DECEMBER 31, 1999
------------------------ -------------------------
Net long (short) position $ 230 $ (153)
Market risk 23 15
Interest
The fair value of the Company's long-term debt is estimated using
quoted market prices or discounted future cash flows based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
Such fair value exceeded the long-term debt carrying value. In addition, the
Company has off-balance sheet interest rate contracts established as hedges. The
fair value of these contracts is estimated based on quoted market termination
values. Market risk, which is estimated as the potential increase in fair value
resulting from a hypothetical one-half percent decrease in interest rates, is
summarized below:
(in thousands) JUNE 30, 2000 DECEMBER 31, 1999
---------------------- -------------------
Fair value of long-term debt and
interest rate contracts $80,331 $77,964
Fair value less than carrying value (539) (322)
Market risk (1,034) 595
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<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
The annual meeting of the shareholders of The Andersons, Inc. was held
on April 20, 2000 to elect twelve directors and to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors. Results of the
voting follow:
<TABLE>
<CAPTION>
Director For Against Withheld Not Voted
-------- --- ------- -------- ---------
<S> <C> <C> <C> <C>
Donald E. Anderson 5,655,110 - 42,904 2,055,955
Michael J. Anderson 5,464,377 - 233,637 2,055,955
Richard M. Anderson 5,462,377 - 235,637 2,055,955
Richard P. Anderson 5,657,460 - 40,554 2,055,955
Thomas H. Anderson 5,655,960 - 42,054 2,055,955
John F. Barrett 5,658,460 - 39,554 2,055,955
Paul M. Kraus 5,656,960 - 41,054 2,055,955
Donald L. Mennel 5,658,460 - 39,554 2,055,955
David L. Nichols 5,658,460 - 39,554 2,055,955
Dr. Sidney A. Ribeau 5,652,056 - 45,958 2,055,955
Charles A. Sullivan 5,658,460 - 39,554 2,055,955
Jacqueline F. Woods 5,658,460 - 39,554 2,055,955
Independent Auditors 5,655,510 4,183 38,321 2,055,955
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended June 30, 2000.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ANDERSONS, INC.
(Registrant)
Date: August 11, 2000 By /s/Michael J. Anderson
Michael J. Anderson
President and Chief Executive Officer
Date: August 11, 2000 By /s/Richard R. George
Richard R. George
Vice President and Controller (Principal
Accounting Officer)
16
