THIRD QUARTER EARNINGS CALL November 8, 2023 ...

The Andersons, Inc. (NASDAQ:ANDE) Q3 2023 Earnings Conference Call November 8, 2023 11:00 AM ET Company Participants Mike Hoelter – Vice President, Corporate Controller and Investor Relations Pat Bowe – President and Chief Executive Officer Brian Valentine – Executive Vice President and Chief Financial Officer Conference Call Participants Ben Bienvenu – Stephens Brian Wright – ROTH MKM Ben Klieve – Lake Street Capital Operator Good morning, ladies and gentlemen, and welcome to The Andersons' 2023 Third Quar ...

PART I. FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents the unaudited condensed consolidated financial statements, including statements of operations, comprehensive income, balance sheets, cash flows, and equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items for the periods ended September 30, 2023 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, gross profit, income before taxes, and net income for specified periods Three Months Ended September 30, 2023 vs. 2022 (Operations) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------ | :------------------ | :----------- | | Sales and merchandising revenues | $3,635,691 | $4,219,325 | -13.8% | | Gross profit | $157,701 | $163,765 | -3.7% | | Income before income taxes from continuing operations | $38,385 | $34,719 | +10.5% | | Net income attributable to The Andersons, Inc. | $9,708 | $36,748 | -73.6% | | Basic EPS (Continuing Operations) | $0.29 | $0.51 | -43.1% | | Diluted EPS (Continuing Operations) | $0.28 | $0.50 | -44.0% | | Basic EPS (Total) | $0.29 | $1.08 | -73.1% | | Diluted EPS (Total) | $0.28 | $1.06 | -73.6% | Nine Months Ended September 30, 2023 vs. 2022 (Operations) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------ | :------------------ | :----------- | | Sales and merchandising revenues | $11,537,112 | $12,647,896 | -8.8% | | Gross profit | $527,649 | $514,141 | +2.6% | | Income before income taxes from continuing operations | $77,802 | $163,479 | -52.4% | | Net income attributable to The Andersons, Inc. | $50,004 | $122,056 | -59.0% | | Basic EPS (Continuing Operations) | $1.48 | $3.08 | -51.9% | | Diluted EPS (Continuing Operations) | $1.46 | $3.02 | -51.7% | | Basic EPS (Total) | $1.48 | $3.62 | -59.1% | | Diluted EPS (Total) | $1.46 | $3.55 | -58.9% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Presents net income and other comprehensive income components, leading to total comprehensive income Three Months Ended September 30, 2023 vs. 2022 (Comprehensive Income) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------ | :------------------ | :----------- | | Net income | $30,523 | $44,272 | -31.0% | | Other comprehensive income | $3,097 | $760 | +307.5% | | Comprehensive income attributable to The Andersons, Inc. | $12,805 | $37,508 | -65.9% | Nine Months Ended September 30, 2023 vs. 2022 (Comprehensive Income) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------ | :------------------ | :----------- | | Net income | $54,092 | $151,883 | -64.4% | | Other comprehensive income | $8,095 | $14,656 | -44.8% | | Comprehensive income attributable to The Andersons, Inc. | $58,099 | $136,712 | -57.5% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and equity at specific balance sheet dates Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :----------------------------------------- | :----------- | :----------- | :----------- | | Total assets | $3,588,102 | $4,607,996 | $4,418,621 | | Total current assets | $2,527,099 | $3,465,953 | $3,265,227 | | Inventories | $985,292 | $1,731,725 | $1,556,426 | | Total liabilities | $2,139,016 | $3,178,227 | $2,992,080 | | Short-term debt | $14,138 | $272,575 | $652,947 | | Total equity | $1,449,086 | $1,429,769 | $1,426,541 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Outlines cash inflows and outflows from operating, investing, and financing activities Nine Months Ended September 30, 2023 vs. 2022 (Cash Flows) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (YoY) | | :----------------------------------------- | :------------------ | :------------------ | :----------- | | Net cash provided by (used in) operating activities | $696,087 | $(153,370) | +554.7% | | Net cash (used in) provided by investing activities | $(117,263) | $2,919 | -4119.2% | | Net cash (used in) provided by financing activities | $(275,846) | $75,489 | -465.4% | | Increase (decrease) in cash and cash equivalents | $302,786 | $(75,673) | +500.3% | | Cash and cash equivalents at end of period | $418,055 | $140,771 | +196.9% | [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Details changes in shareholders' equity, including net income, other comprehensive income, and distributions Equity Attributable to The Andersons, Inc. (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :----------------------------------------- | :----------- | :----------- | :----------- | | Total shareholders' equity of The Andersons, Inc. | $1,240,735 | $1,198,601 | $1,193,915 | | Noncontrolling interests | $208,351 | $231,168 | $232,626 | | Total equity | $1,449,086 | $1,429,769 | $1,426,541 | - Key equity changes for the nine months ended September 30, 2023, include net income attributable to The Andersons, Inc. of **$50.0 million** and other comprehensive income of **$16.1 million**, partially offset by distributions to noncontrolling interests of **$(44.3) million** and dividends declared of **$(18.7) million**[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation and Consolidation](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Consolidation) Describes principles for financial statement preparation and entities included in consolidation - ELEMENT, LLC, a joint venture ethanol plant within the Renewables segment, was deconsolidated from the Company's Condensed Consolidated Financial Statements in the second quarter of 2023[26](index=26&type=chunk) - The operating results of the Rail segment have been classified as discontinued operations for all periods presented, following the sale of its businesses in 2021 and 2022[28](index=28&type=chunk) [Note 2. Inventories](index=10&type=section&id=Note%202.%20Inventories) Details the composition and valuation methods for the company's inventory balances Major Classes of Inventories (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :------------------------------------- | :----------- | :----------- | :----------- | | Grain and other agricultural products | $718,290 | $1,326,531 | $1,198,790 | | Energy inventories | $18,939 | $21,084 | $25,797 | | Ethanol and co-products | $94,375 | $156,341 | $117,310 | | Plant nutrients and cob products | $153,688 | $227,769 | $214,529 | | **Total inventories** | **$985,292** | **$1,731,725** | **$1,556,426** | - Readily Marketable Inventories (RMI), such as corn, soybeans, wheat, and ethanol co-products, are carried at net realizable value, which approximates fair value[31](index=31&type=chunk) [Note 3. Property, Plant and Equipment](index=11&type=section&id=Note%203.%20Property,%20Plant%20and%20Equipment) Provides a breakdown of fixed assets and discusses related impairment charges Property, Plant and Equipment, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :------------------------------------- | :----------- | :----------- | :----------- | | Land | $30,872 | $38,689 | $38,508 | | Buildings and storage facilities | $360,234 | $364,721 | $366,453 | | Machinery and equipment | $916,552 | $980,159 | $956,471 | | Construction in progress | $44,420 | $41,429 | $40,599 | | Less: accumulated depreciation | $751,719 | $754,353 | $729,118 | | **Property, plant and equipment, net** | **$680,188** | **$762,729** | **$765,939** | - An **$87.2 million impairment charge** related to ELEMENT was recorded in the first quarter of 2023 due to operational and market-based challenges[35](index=35&type=chunk) [Note 4. Debt](index=11&type=section&id=Note%204.%20Debt) Outlines the company's debt structure, borrowing capacity, and compliance with financial covenants - On April 3, 2023, the Company entered into a new **$100 million 8-year term loan**, with approximately half of the proceeds used to repay current maturities of long-term debt and the remainder to pay down outstanding line of credit borrowings[36](index=36&type=chunk) - The deconsolidation of ELEMENT in April 2023 resulted in the removal of **$62.8 million of non-recourse debt** associated with ELEMENT from Current maturities of long-term debt[36](index=36&type=chunk) - The Company's total borrowing capacity from lines of credit was **$1,858.5 million** at September 30, 2023, with **$1,841.4 million available for borrowing**, and the Company is in compliance with all financial covenants[37](index=37&type=chunk) [Note 5. Derivatives](index=12&type=section&id=Note%205.%20Derivatives) Describes the company's use of derivative instruments to manage commodity and interest rate risks - The Company uses exchange-traded commodity futures and options contracts and over-the-counter forward and option contracts to reduce exposure to market price risk on commodities owned and forward purchase and sale contracts[38](index=38&type=chunk) - Commodity derivatives are primarily accounted for at estimated fair value, with realized and unrealized gains and losses included in cost of sales and merchandising revenues[39](index=39&type=chunk)[40](index=40&type=chunk) Net Pretax Gains (Losses) on Commodity Derivatives (in thousands) | Period | 2023 | 2022 | | :------------------------------------------------------------------------------------------------------------------------ | :---------- | :------------ | | Three months ended September 30 | $(26,918)$ | $(169,478)$ | | Nine months ended September 30 | $(49,659)$ | $94,708 | - Interest rate swaps are used to add stability to interest expense and manage exposure to interest rate movements, with gains or losses on these designated hedging instruments recorded in Other comprehensive income (loss) and subsequently reclassified into interest expense[53](index=53&type=chunk)[54](index=54&type=chunk) [Note 6. Revenue](index=16&type=section&id=Note%206.%20Revenue) Provides a breakdown of total revenues by accounting standard and discusses contract liabilities Total Revenues (in thousands) | Period | 2023 | 2022 | | :----------------------------------------- | :------------ | :------------ | | Three months ended September 30 | $3,635,691 | $4,219,325 | | Nine months ended September 30 | $11,537,112 | $12,647,896 | Revenues by Accounting Standard (Three Months Ended Sep 30, in thousands) | Standard | 2023 | 2022 | | :------------ | :---------- | :---------- | | ASC 606 | $688,111 | $635,445 | | ASC 815 | $2,947,580 | $3,583,880 | Revenues by Accounting Standard (Nine Months Ended Sep 30, in thousands) | Standard | 2023 | 2022 | | :------------ | :------------ | :------------ | | ASC 606 | $2,402,358 | $2,269,314 | | ASC 815 | $9,134,754 | $10,378,582 | - Contract liabilities decreased from **$55.4 million** at December 31, 2022, to **$28.6 million** at September 30, 2023, primarily due to the satisfaction of performance obligations for primary and specialty nutrients during the spring application season[66](index=66&type=chunk) [Note 7. Income Taxes](index=18&type=section&id=Note%207.%20Income%20Taxes) Details the income tax provision, effective tax rates, and significant tax-related adjustments Income Tax Provision and Effective Tax Rate (in thousands) | Period | Income Before Taxes (2023) | Tax Provision (2023) | Effective Tax Rate (2023) | Income Before Taxes (2022) | Tax Provision (2022) | Effective Tax Rate (2022) | | :----------------------------------------- | :------------------------- | :------------------- | :------------------------ | :------------------------- | :------------------- | :------------------------ | | Three months ended September 30 | $38,385 | $7,862 | 20.5% | $34,719 | $9,839 | 28.3% | | Nine months ended September 30 | $77,802 | $23,710 | 30.5% | $163,479 | $29,695 | 18.2% | - The **30.5% effective tax rate** for the nine months ended September 30, 2023, is primarily attributable to the tax impact of non-controlling interest, state and local income taxes, nondeductible compensation, and a net income tax benefit of **$10.6 million** related to ELEMENT's operations, impairment charge, and gain on deconsolidation[68](index=68&type=chunk) [Note 8. Accumulated Other Comprehensive Income](index=19&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Income) Presents the components and changes within accumulated other comprehensive income Total AOCI Ending Balance (in thousands) | Date | Balance | | :------------- | :----------- | | Sep 30, 2023 | $28,579 | | Sep 30, 2022 | $15,850 | - The Hedging Adjustment component of AOCI increased from **$24.5 million** at September 30, 2022, to **$31.5 million** at September 30, 2023[71](index=71&type=chunk) - The Currency Translation Adjustment component of AOCI changed from a loss of **$(9.8) million** at September 30, 2022, to a loss of **$(7.4) million** at September 30, 2023[71](index=71&type=chunk) [Note 9. Earnings Per Share](index=20&type=section&id=Note%209.%20Earnings%20Per%20Share) Provides the calculation and figures for basic and diluted earnings per share from continuing operations Basic and Diluted EPS (Continuing Operations) | Period | Basic EPS (2023) | Basic EPS (2022) | Diluted EPS (2023) | Diluted EPS (2022) | | :----------------------------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three months ended September 30 | $0.29 | $0.51 | $0.28 | $0.50 | | Nine months ended September 30 | $1.48 | $3.08 | $1.46 | $3.02 | - Net income attributable to The Andersons, Inc. common shareholders from continuing operations was **$9.7 million** for the three months and **$50.0 million** for the nine months ended September 30, 2023[73](index=73&type=chunk) [Note 10. Fair Value Measurements](index=20&type=section&id=Note%2010.%20Fair%20Value%20Measurements) Describes the fair value hierarchy and valuation techniques applied to financial instruments Fair Value Measurements (in thousands) as of Sep 30, 2023 | Asset/Liability | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------- | :----------- | :----------- | :----------- | :----------- | | Commodity derivatives, net | $54,324 | $45,526 | $— | $99,850 | | Provisionally priced contracts | $(80,657) | $(24,460) | $— | $(105,117) | | Convertible preferred securities | $— | $— | $20,628 | $20,628 | | Other assets and liabilities | $2,331 | $41,978 | $— | $44,309 | | **Total** | **$(24,002)** | **$63,044** | **$20,628** | **$59,670** | - The majority of the Company's assets and liabilities measured at fair value are based on the market approach valuation technique[76](index=76&type=chunk) - Convertible preferred securities, representing interests in early-stage enterprises, are valued at **Level 3** in the fair value hierarchy[80](index=80&type=chunk)[82](index=82&type=chunk) [Note 11. Related Parties](index=23&type=section&id=Note%2011.%20Related%20Parties) Discloses significant transactions and balances with related parties Related Party Transactions (in thousands) | Transaction | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales of products | $98,062 | $102,565 | $270,112 | $291,820 | | Purchases of products | $9,061 | $13,405 | $39,286 | $51,814 | - Accounts receivable from related parties were **$13.7 million** at September 30, 2023, and accounts payable were **$4.7 million**[85](index=85&type=chunk) [Note 12. Segment Information](index=23&type=section&id=Note%2012.%20Segment%20Information) Presents financial data broken down by the company's operating segments, including revenues and income Revenues from External Customers (in thousands) | Segment | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Trade | $2,639,059 | $3,240,526 | $8,213,649 | $9,422,974 | | Renewables | $868,099 | $814,923 | $2,585,396 | $2,380,721 | | Nutrient & Industrial | $128,533 | $163,876 | $738,067 | $844,201 | | **Total** | **$3,635,691** | **$4,219,325** | **$11,537,112** | **$12,647,896** | Income (Loss) Before Income Taxes from Continuing Operations (in thousands) | Segment | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Trade | $8,073 | $40,658 | $52,427 | $67,993 | | Renewables | $47,096 | $15,901 | $31,187 | $89,639 | | Nutrient & Industrial | $(8,452) | $(11,609) | $23,675 | $37,445 | | Other | $(8,332) | $(10,231) | $(29,487) | $(31,598) | | **Total** | **$38,385** | **$34,719** | **$77,802** | **$163,479** | [Note 13. Commitments and Contingencies](index=24&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) Outlines the company's legal proceedings, claims, and other contractual commitments - The Company is party to litigation in the ordinary course of business and establishes reserves for claimed amounts considered probable and estimable[88](index=88&type=chunk) - Management believes it is unlikely that the results of current legal proceedings for which it is the defendant, even if unfavorable, will be material[88](index=88&type=chunk) - The estimated losses for outstanding claims that are considered reasonably possible are not material[89](index=89&type=chunk) [Note 14. Other Income](index=24&type=section&id=Note%2014.%20Other%20Income) Details the various sources and amounts of other income recognized by the company Other Income, Net (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Gain on deconsolidation of joint venture | $— | $— | $6,544 | $— | | Property insurance recoveries | $— | $— | $3,183 | $3,106 | | Interest income | $3,296 | $544 | $6,471 | $1,837 | | Gain on sale of assets and businesses | $6,515 | $— | $5,836 | $3,979 | | Biofuel Producer Program funds | $2,190 | $— | $2,190 | $17,643 | | Gain on investments | $4,798 | $91 | $5,144 | $91 | | **Total** | **$15,178** | **$1,475** | **$35,623** | **$22,185** | - A **$6.5 million gain** on deconsolidation of the ELEMENT joint venture was recognized in the nine months ended September 30, 2023[90](index=90&type=chunk)[96](index=96&type=chunk) - Property insurance recoveries in 2023 included **$1.5 million** relating to a conveyor collapse and **$1.0 million** relating to a fire at grain assets[91](index=91&type=chunk) - Interest income in 2023 included **$5.0 million** from cash and cash equivalents and **$1.5 million** from an inventory financing program[92](index=92&type=chunk) - A **$4.8 million revaluation gain** of an investment within the Company's corporate venture fund contributed to gains on investments in 2023[94](index=94&type=chunk) [Note 15. ELEMENT](index=25&type=section&id=Note%2015.%20ELEMENT) Provides specific details regarding the deconsolidation and financial impact of the ELEMENT joint venture - ELEMENT, a 51% owned ethanol plant, was placed into receivership on April 18, 2023, leading to its deconsolidation from the Company's financial statements[95](index=95&type=chunk)[96](index=96&type=chunk) - An **$87.2 million impairment charge** related to ELEMENT was recorded in the first quarter of 2023 due to operational and market challenges[95](index=95&type=chunk) - The deconsolidation resulted in a cumulative net pretax gain of **$6.5 million**, which includes an **$18.1 million gain** on deconsolidation offset by an **$11.6 million loss** from fully reserving receivables and loans from ELEMENT[96](index=96&type=chunk) [Note 16. Goodwill](index=27&type=section&id=Note%2016.%20Goodwill) Presents the goodwill balances by segment and explains changes during the reporting period Goodwill by Segment (in thousands) | Segment | Dec 31, 2022 | Sep 30, 2023 | | :-------------------- | :----------- | :----------- | | Trade | $119,867 | $119,067 | | Renewables | $8,789 | $8,789 | | Nutrient & Industrial | $686 | $686 | | **Total** | **$129,342** | **$128,542** | - Goodwill decreased by **$800 thousand** from December 31, 2022, to September 30, 2023, primarily due to divestitures in the Trade segment[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the Company's financial performance, condition, and liquidity for the three and nine months ended September 30, 2023, discussing results by segment, critical accounting policies, and forward-looking statements [Forward Looking Statements](index=28&type=section&id=Forward%20Looking%20Statements) Highlights inherent risks and uncertainties that may cause actual results to differ from expectations - The section contains forward-looking statements subject to various known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expectations[102](index=102&type=chunk) - Such factors include economic, weather, and agricultural conditions, regulatory conditions, competition, geopolitical risk, and fluctuations in commodity costs and availability[102](index=102&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Confirms the company's critical accounting policies and estimates remain consistent with prior disclosures - The Company's critical accounting policies and estimates, as described in its 2022 Form 10-K, have not materially changed through the third quarter of 2023[103](index=103&type=chunk) [Executive Overview](index=28&type=section&id=Executive%20Overview) Provides an overview of the company's business segments and key performance indicators - The Company's operations are organized, managed, and classified into three reportable business segments: Trade, Renewables, and Nutrient & Industrial[104](index=104&type=chunk) - In agricultural commodity-based businesses, changes in selling prices generally move in relationship to changes in purchase prices, making gross profit a more significant indicator of overall performance than sales and merchandising revenues[104](index=104&type=chunk) [Trade (Operating Results Discussion)](index=28&type=section&id=Trade%20(Operating%20Results%20Discussion)) Discusses the operating performance and key drivers for the Trade segment - For the three months ended September 30, 2023, Trade segment operating results decreased by **$32.6 million**, primarily due to a **$38.4 million decrease in gross profit** driven by sharp commodity price decreases and a **$19.2 million foreign currency loss** in Egypt[116](index=116&type=chunk) - For the nine months ended September 30, 2023, Trade segment operating results decreased by **$15.6 million**, with a **$10.1 million decrease in gross profit** mainly from international merchandising challenges, partially offset by **$9.3 million in inventory insurance recoveries**[128](index=128&type=chunk) - Operating, administrative and general expenses for the nine months increased by **$24.5 million** due to new merchandising locations, **$6.8 million in clean-up costs** from a Michigan grain asset fire, increased insurance, and additional bad debt expense[129](index=129&type=chunk) [Renewables (Operating Results Discussion)](index=29&type=section&id=Renewables%20(Operating%20Results%20Discussion)) Discusses the operating performance and key drivers for the Renewables segment - For the three months ended September 30, 2023, Renewables segment operating results increased by **$17.9 million**, driven by a **$28.4 million increase in gross profit** from improved ethanol crush margins, lower natural gas prices, and growth in renewable diesel feedstocks merchandising[118](index=118&type=chunk) - For the nine months ended September 30, 2023, Renewables segment operating results decreased by **$32.7 million**, despite a **$37.4 million increase in gross profit** from improved ethanol plant margins, due to an **$87.2 million asset impairment charge** related to ELEMENT and lower unrealized mark-to-market gains[130](index=130&type=chunk)[131](index=131&type=chunk) Ethanol and Related Co-products Volumes (in thousands) | Product | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Ethanol (gallons shipped) | 190,368 | 184,845 | 575,567 | 576,392 | | Vegetable oils (pounds shipped) | 343,619 | 207,509 | 908,976 | 556,073 | | DDG (tons shipped) | 497 | 386 | 1,534 | 1,336 | [Nutrient & Industrial (Operating Results Discussion)](index=29&type=section&id=Nutrient%20%26%20Industrial%20(Operating%20Results%20Discussion)) Discusses the operating performance and key drivers for the Nutrient & Industrial segment - For the three months ended September 30, 2023, Nutrient & Industrial segment operating results improved by **$3.2 million**, with gross profit increasing by **$3.9 million** due to higher margins on core agriculture products, despite a **6% decrease in volumes**[120](index=120&type=chunk) - For the nine months ended September 30, 2023, operating results decreased by **$13.8 million**, as gross profit declined by **$17.9 million** due to a **43% decrease in fertilizer prices**, partially offset by a **6% increase in tons sold**[132](index=132&type=chunk) Tons of Product Sold (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Ag Supply Chain | 209 | 195 | 1,053 | 904 | | Specialty Liquids | 59 | 84 | 282 | 322 | | Engineered Granules | 25 | 33 | 134 | 153 | | **Total tons** | **293** | **312** | **1,469** | **1,379** | [Other (Operating Results Discussion)](index=33&type=section&id=Other%20(Operating%20Results%20Discussion)) Discusses the financial performance and key factors impacting the 'Other' category - The 'Other' category's results improved by **$1.9 million** for the three months and expenses decreased by **$2.1 million** for the nine months ended September 30, 2023, primarily driven by a **$4.8 million revaluation gain** of a cost method investment, partially offset by higher benefit claims[121](index=121&type=chunk)[133](index=133&type=chunk) [Income Taxes (Operating Results Discussion)](index=33&type=section&id=Income%20Taxes%20(Operating%20Results%20Discussion)) Provides a discussion of the company's income tax provision and effective tax rates Effective Tax Rate from Continuing Operations | Period | 2023 Effective Tax Rate | 2022 Effective Tax Rate | | :----------------------------------------- | :---------------------- | :---------------------- | | Three months ended September 30 | 20.5% | 28.3% | | Nine months ended September 30 | 30.5% | 18.2% | - The **30.5% effective tax rate** for the nine months ended September 30, 2023, includes a net income tax benefit of **$10.6 million** related to ELEMENT's current year operations, impairment charge, and gain on deconsolidation[134](index=134&type=chunk) - The Company is under federal tax examination by the IRS for tax years 2015-2018 and by Mexican tax authorities for 2015, with potential favorable impacts on income tax expense ranging from **$2.9 million to $8.1 million** upon resolution[136](index=136&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's cash flows, working capital, and overall financial flexibility Working Capital from Continuing Operations (in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | Variance | | :----------------------------------------- | :----------- | :----------- | :----------- | | Total current assets | $2,527,099 | $3,265,227 | $(738,128) | | Total current liabilities | $1,407,634 | $2,320,507 | $(912,873) | | **Working Capital** | **$1,119,465** | **$944,720** | **$174,745** | - Current assets decreased primarily due to reductions in inventories and current commodity derivative assets, offset by a sharp increase in cash, reflecting the stabilization of agricultural commodity prices[138](index=138&type=chunk) - Current liabilities decreased mainly due to reduced utilization of short-term revolving credit lines, driven by commodity price stabilization and strategic working capital management in a rising interest rate environment[139](index=139&type=chunk) Sources and Uses of Cash (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :----------------------------------------- | :------------ | :------------ | | Net cash provided by (used in) operating activities | $696,087 | $(153,370) | | Net cash (used in) provided by investing activities | $(117,263) | $2,919 | | Net cash (used in) provided by financing activities | $(275,846) | $75,489 | - Investing activities used **$117.3 million** cash in 2023, due to increased purchases of property, plant, and equipment (**$36.5 million**) and a business acquisition (**$24.3 million**), compared to providing cash in the prior year[142](index=142&type=chunk) - Financing activities used **$275.8 million** cash in 2023, primarily for repayments on short-term credit facilities as commodity prices stabilized, contrasting with cash provided in the prior year[143](index=143&type=chunk) - The Company had **$1,841.4 million** available for borrowing from its **$1,858.5 million** credit facilities as of September 30, 2023, and is in compliance with all debt covenants[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) States that there were no material changes in the Company's market risk exposures, specifically commodity and interest rate risk, during the nine months ended September 30, 2023, compared to the disclosures in the Annual Report on Form 10-K for 2022 - There were no material changes in market risk, specifically commodity and interest rate risk, during the nine months ended September 30, 2023[146](index=146&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the third quarter of 2023 [Evaluation of Disclosure Controls and Procedures](index=39&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures - The Company's disclosure controls and procedures were effective as of September 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[147](index=147&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports on any material changes in the company's internal control over financial reporting - There were no material changes in the Company's internal control over financial reporting during the third quarter of 2023[148](index=148&type=chunk) PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, other information, and exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings in the ordinary course of business. Management believes it is unlikely that the results of current legal proceedings will be material, and estimated losses for reasonably possible claims are not material - The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business[150](index=150&type=chunk) - Management believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material[150](index=150&type=chunk) - The estimated losses for outstanding claims that are considered reasonably possible are not material[150](index=150&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Refers to the risk factors detailed in the Company's 2022 Form 10-K, which could materially and adversely affect its business, financial condition, operating results, and stock price - The Company's business, financial condition, and operating results can be affected by a number of factors, including those described in Part I, Item 1A of the 2022 Form 10-K[151](index=151&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During July 2023, the Company acquired common stock from employees to satisfy tax withholding obligations. As of September 30, 2023, a portion of the authorized share repurchase plan has been utilized - In July 2023, the Company acquired **234 shares** of common stock from employees at an average price of **$46.15 per share** to satisfy tax withholding obligations[154](index=154&type=chunk) - As of September 30, 2023, **$14.5 million** of the **$100 million** authorized under the Repurchase Plan (expiring August 20, 2024) had been utilized[152](index=152&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) States that no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the three months ended September 30, 2023 - None of the Company's directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[155](index=155&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed or furnished with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents for the financial statements and cover page - Exhibits include certifications of the Chief Executive Officer (31.1) and Chief Financial Officer (31.2) under Rule 13(a)-14(a)/15d-14(a), and Certifications Pursuant to 18 U.S.C. Section 1350 (32.1)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Inline XBRL Document Sets are provided for the Condensed Consolidated Financial Statements (101) and the cover page (104) of this Quarterly Report on Form 10-Q[158](index=158&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income from continuing operations of $55 million, or $1.61 per diluted share, compared to adjusted net income of $82 million, or $2.39 per diluted share in Q2 2022 [8] - Gross profit for Q2 2023 was $222 million, down from $231 million in 2022, while year-to-date gross profit increased to $370 million from $350 million [8][9] - Adjusted EBITDA for Q2 2023 was $144 million, compared to $169 million in Q2 2022, with trailing 12 months adjusted EBITDA exceeding $386 million [8] Business Line Data and Key Metrics Changes - Trade Group reported pre-tax income of $5 million and adjusted pre-tax income of $7 million in Q2 2023, down from $24 million in the same period of 2022 [11] - Renewables segment had pre-tax income of $39 million in Q2 2023, compared to $46 million in Q2 2022, with adjusted EBITDA of $74 million, down from $86 million [12][13] - Nutrient and Industrial business reported pre-tax income of $43 million, up from $38 million in 2022, with a volume increase of 21% [13][14] Market Data and Key Metrics Changes - The company noted that trade results were down year-over-year due to last year's strong demand and market volatility from geopolitical events [6] - The performance of North American assets was lower due to normalized grain elevation margins, while investments in premium food and feed ingredients contributed positively [6][11] - The total volume of vegetable oils merchandised increased by 64% over 2022, indicating growth in the renewable diesel feedstock business [13] Company Strategy and Development Direction - The company remains positive about its 2023 outlook, focusing on improving crop conditions and optimizing merchandising and grain assets [15][16] - The renewable segment is focused on enhancing ethanol production efficiency and exploring opportunities to lower carbon intensity [17][18] - The Nutrient and Industrial business anticipates solid farm incomes supporting crop input purchases, with a commitment to a 2025 EBITDA goal of $475 million [18] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of weather conditions for crop production and the potential impact of geopolitical events on grain markets [15][29] - The company is actively monitoring working capital levels and balancing interest rate exposure in the current economic environment [9] - Management expressed confidence in the growth of the renewable diesel feedstock business and the overall strength of the ethanol market [22][35] Other Important Information - The company closed on the acquisition of ACJ International, enhancing its position in the pet food ingredients supply chain [10] - Capital expenditures for the year are expected to be between $125 million and $150 million, with a disciplined approach to spending [10] Q&A Session Summary Question: Comments on the renewables business and margin sustainability - Management noted that ethanol margins have surpassed expectations, driven by increased demand and favorable weather conditions [22] Question: East vs. West crop conditions and arbitrage opportunities - Management indicated that the east-west price differential has neutralized, and they are optimistic about merchandising opportunities in the grain market [25][27] Question: Balance sheet leverage and appetite for growth projects - Management expressed confidence in their current position and indicated a willingness to pursue growth projects as appropriate [31][32] Question: Strategy for renewable diesel and tax incentives - Management clarified that their focus is on being an ingredient supplier rather than a manufacturer, and they are looking for mid-sized acquisitions in the renewable diesel space [45][46] Question: Expansion of fermentation capacity - Management emphasized the importance of debottlenecking existing facilities to improve efficiency and yield, rather than building new plants [48][49]

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents unaudited consolidated financial statements, detailing Q2 2023 sales, net income, and improved H1 operating cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details Q2 2023 sales and net income, with six-month results impacted by an $87.2 million asset impairment Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | **Sales and merchandising revenues** | $4,020,183 | $4,450,617 | $7,901,421 | $8,428,571 | | **Gross profit** | $221,937 | $230,841 | $369,948 | $350,376 | | **Asset impairment** | $0 | $0 | $87,156 | $0 | | **Income before income taxes** | $104,418 | $118,153 | $39,417 | $128,760 | | **Net income attributable to The Andersons, Inc.** | $55,046 | $79,805 | $40,296 | $85,307 | | **Diluted earnings per share (Continuing Ops)** | $1.61 | $2.34 | $1.18 | $2.52 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets of **$3.57 billion** as of June 30, 2023, primarily reflecting reduced inventories and accounts receivable Condensed Consolidated Balance Sheet Highlights (In thousands) | Account | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | $96,293 | $115,269 | $86,035 | | **Inventories** | $990,789 | $1,731,725 | $1,618,326 | | **Total current assets** | $2,537,265 | $3,465,953 | $3,572,879 | | **Total assets** | $3,570,046 | $4,607,996 | $4,737,175 | | **Short-term debt** | $102,752 | $272,575 | $1,161,428 | | **Total current liabilities** | $1,393,239 | $2,521,322 | $2,577,576 | | **Total liabilities** | $2,131,564 | $3,178,227 | $3,319,969 | | **Total equity** | $1,438,482 | $1,429,769 | $1,417,206 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved to a **$207.4 million** source in H1 2023, primarily due to favorable working capital changes Cash Flow Summary (In thousands) | Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $207,404 | $(721,799) | | **Net cash used in investing activities** | $(71,673) | $(30,094) | | **Net cash (used in) provided by financing activities** | $(154,987) | $622,113 | | **Decrease in cash and cash equivalents** | $(18,976) | $(130,409) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the discontinued Rail segment, an **$87.2 million** impairment, ELEMENT deconsolidation, and a post-quarter acquisition - The Rail segment's operating results are classified as discontinued operations for all periods presented following the sale of the business[22](index=22&type=chunk) - A **$87.2 million** impairment charge was recorded in Q1 2023 for the ELEMENT, LLC joint venture ethanol plant due to operational and market challenges, with **49%** attributed to noncontrolling interests[30](index=30&type=chunk) - On April 18, 2023, ELEMENT was placed into receivership, leading the company to deconsolidate the entity and recognize a net pretax gain of **$6.5 million**[34](index=34&type=chunk)[87](index=87&type=chunk)[94](index=94&type=chunk) - On July 10, 2023, the company acquired ACJ International LLC, a pet food ingredient company, for **$41.4 million**[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, emphasizing gross profit, and analyzes segment results, liquidity, and capital resources [Segment Performance](index=29&type=section&id=Segment%20Performance) This section analyzes Q2 2023 segment performance, noting mixed results in Trade, strong Renewables, and improved Nutrient & Industrial segments - **Trade:** Gross profit declined in Q2 despite strong merchandising, as agricultural inventory throughput decreased from Q2 2022[102](index=102&type=chunk) - **Renewables:** Q2 results were strong due to rallying crush margins and robust co-product values, outperforming the prior year when excluding a **$17.6 million** USDA grant and mark-to-market gains from 2022[104](index=104&type=chunk) - **Nutrient & Industrial:** Gross profit improved by **$4 million** in Q2 as higher sales volumes offset margin compression from declining market prices[108](index=108&type=chunk) [Comparison of Operating Results](index=33&type=section&id=Comparison%20of%20Operating%20Results) This section compares Q2 and H1 operating results by segment, highlighting the impact of the Renewables segment's **$87.2 million** asset impairment charge Income (Loss) Before Income Taxes by Segment (In thousands) | Segment | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | **Trade** | $4,990 | $23,666 | $44,354 | $27,335 | | **Renewables** | $66,604 | $67,776 | $(15,909) | $73,738 | | **Nutrient & Industrial** | $42,565 | $38,311 | $32,127 | $49,054 | | **Other** | $(9,741) | $(11,600) | $(21,155) | $(21,367) | | **Total** | **$104,418** | **$118,153** | **$39,417** | **$128,760** | - The H1 2023 Renewables segment loss was driven by an **$87.2 million** asset impairment charge related to the ELEMENT ethanol plant[132](index=132&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased to **$1.14 billion**, driven by lower commodity prices, with strong liquidity and **$1.74 billion** available for borrowing - Working capital from continuing operations increased to **$1.14 billion** at June 30, 2023, from **$984.0 million** a year earlier[139](index=139&type=chunk)[140](index=140&type=chunk) - The decrease in both current assets and current liabilities is largely attributed to the stabilization of agricultural commodity prices in 2023 compared to significant price increases in 2022[140](index=140&type=chunk)[141](index=141&type=chunk) - The company expects to invest approximately **$125 million to $150 million** in property, plant and equipment in 2023[144](index=144&type=chunk) - Total borrowing capacity was **$1.87 billion**, with **$1.74 billion** available as of June 30, 2023[145](index=145&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes in market risk, including commodity and interest rate risk, during the first six months of 2023 - There were no material changes in market risk, specifically commodity and interest rate risk, during the first six months of 2023[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2023[150](index=150&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2023[151](index=151&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) Management believes there is no reasonable possibility of a material loss from current legal proceedings beyond recorded accruals - In management's opinion, there is not a reasonable possibility of a material loss from current legal proceedings beyond what has been accrued[153](index=153&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company refers to its 2022 Form 10-K for detailed risk factors, indicating no new material risks are presented in this report - The company refers to the risk factors disclosed in its 2022 Form 10-K and does not present any new material risks in this filing[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **2,113** shares in Q2 2023 under its **$100 million** plan, with **$85.5 million** remaining available Share Repurchase Activity (Q2 2023) | Month | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | 0 | N/A | | May 2023 | 2,113 | $35.95 | | June 2023 | 0 | N/A | | **Total** | **2,113** | **$35.95** | - As of June 30, 2023, **$85.5 million** remained available for share repurchases under the current plan, which expires in August 2024[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) The company will continue annual say-on-pay votes, and a treasurer entered a Rule 10b5-1 plan to sell company stock - The company will continue to hold an annual advisory vote on named executive officer compensation[157](index=157&type=chunk) - Treasurer Brian K. Walz entered into a Rule 10b5-1 plan to sell up to **3,414** shares of common stock between August 2023 and August 2024[157](index=157&type=chunk)

The Andersons, Inc. (NASDAQ:ANDE) Q1 2023 Results Conference Call May 3, 2023 11:00 AM ET Company Participants Mike Hoelter - Vice President, Corporate Controller and Investor Relations Pat Bowe - President and Chief Executive Officer Brian Valentine - Executive Vice President and Chief Financial Officer Conference Call Participants Ben Bienvenu - Stephens Ben Klieve - Lake Street Capital Markets Eric Larson - Seaport Research Partners Operator Good morning, and welcome to the Andersons 2023 First Quarter E ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 03/31/2023 ☐ 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 the registrant as specified in its charter) Ohio 34-1562374 (State of incorporation o ...

Financial Performance - The Trade segment achieved sales and merchandising revenues of $13,047.5 million in 2022, up from $9,304.4 million in 2021, marking a significant increase of approximately 40%[101] - The Renewables segment reported sales of $3,178.5 million in 2022, compared to $2,440.8 million in 2021, reflecting a growth of about 30%[102] - The Plant Nutrient segment's operating results decreased slightly in 2022, with sales of $1,099.3 million compared to $866.9 million in 2021, indicating a growth of approximately 27% despite a decline in volumes[101] - Total sales and merchandising revenues for 2022 reached $17,325.4 million, a 37% increase from $12,612.1 million in 2021[158] - Gross profit for 2022 was $684.2 million, up from $592.7 million in 2021, reflecting a 15.4% increase[158] - Net income attributable to The Andersons, Inc. for 2022 was $131.1 million, compared to $104.0 million in 2021, representing a 26.3% increase[158] - Earnings per share attributable to common shareholders for continuing operations was $3.53 in 2022, up from $2.99 in 2021, a 17.9% increase[158] - Comprehensive income attributable to The Andersons, Inc. for 2022 was $150.4 million, an increase from $117.3 million in 2021[161] Expenses and Liabilities - Operating, administrative, and general expenses rose by $22.7 million, primarily due to $18.1 million in higher labor and benefits costs[105] - Interest expense increased by $18.9 million, attributed to rising interest rates and higher borrowings related to new merchandising locations[105] - Current liabilities from continuing operations increased by $70.8 million, primarily due to increases in current maturities of long-term debt[115] - The company had outstanding long-term debt of $541.4 million (recourse) and $64.2 million (non-recourse) with $46.3 million and $63.8 million payable within 12 months respectively[125] - Future interest payments associated with recourse long-term debt total $165.6 million, with $28.1 million payable within 12 months[126] - The company had fixed operating lease payment obligations of $67.5 million, with $28.1 million payable within 12 months[127] Cash Flow and Investments - Net cash provided by operating activities was $287.1 million in 2022, compared to cash used of $51.1 million in 2021[119] - Capital expenditures for 2022 totaled $108.3 million, with expectations to invest approximately $125 to $150 million in 2023[120] - The company paid $24.6 million in dividends in 2022, an increase from $23.7 million in 2021, with a declared cash dividend of $0.185 per common share for January 2023[122] - Total current assets increased to $3,465,953 in 2022, up from $3,372,328 in 2021, reflecting a growth of 2.8%[163] - Total liabilities decreased to $3,178,227 in 2022, down 2.5% from $3,261,515 in 2021[163] - Total shareholders' equity increased to $1,429,769 in 2022, up from $1,307,704 in 2021, representing a growth of 9.3%[163] Inventory and Asset Management - Agricultural inventories on hand were 129.7 million bushels as of December 31, 2022, down from 187.0 million bushels in 2021, indicating a decrease of approximately 30.6%[92] - The Company reported a total inventory of $1,731.7 million as of December 31, 2022, down from $1,814.5 million in 2021, reflecting a decrease of approximately 4.5%[206] - The Company incurred inventory damage charges of $17.3 million in 2022, with $16.2 million related to a fire at a Michigan grain asset[207] - The Company recorded depreciation expense on property, plant, and equipment amounting to $110.6 million for the year ended December 31, 2022[209] - The Company recorded impairment charges of $9.0 million for property, plant, and equipment in December 2022 related to a Nebraska grain asset[210] Taxation and Compliance - The effective tax rate for 2022 was approximately 20.3%, compared to 18.2% in 2021[260] - The company recognized a federal income tax provision of $25,376 in 2022, up from $19,646 in 2021[260] - Unrecognized tax benefits as of December 31, 2022, totaled $79.2 million, including $60.3 million associated with federal and state R&D credits[269] - The company has $47.3 million of state net operating loss carryforwards beginning to expire in 2023[265] - The gross unrecognized tax benefits may change within the next twelve months by a range of $18.6 million to $40.7 million due to ongoing tax examinations[268] Risk Management - The company has established controls to manage and limit risk exposure related to commodity prices through daily reviews of position limits[139] - The company utilizes interest rate swaps to manage its mix of fixed and variable interest rate debt, effectively limiting interest rate volatility[145] - The company is a significant consumer of short-term debt, with a capacity of approximately $2.0 billion, and is exposed to interest rate increases impacting profitability[145] Segment Performance - The Trade business segment includes commodity merchandising and terminal grain elevator operations, contributing significantly to overall revenue[285] - The Renewables business segment produced and sold ethanol and co-products, indicating a focus on sustainable energy solutions[285] - The Plant Nutrient business segment manufactures and distributes agricultural inputs, highlighting the company's commitment to agricultural support[285]

Financial Data and Key Metrics Changes - The company reported net income from continuing operations of $15 million or $0.44 per diluted share for Q4 2022, compared to adjusted net income of $39 million or $1.14 per diluted share in Q4 2021 [9] - Full year adjusted EBITDA reached $412 million, an increase of nearly $60 million compared to 2021, marking a second consecutive record [10][12] - Gross profit for the full year increased to $684 million, up more than $90 million or 15% compared to 2021 [10] Business Line Data and Key Metrics Changes - The Trade business achieved record fourth quarter adjusted EBITDA of $72 million, up from $42 million in Q4 2021, with pretax income of $27 million [13] - The Renewables segment reported fourth quarter EBITDA of $36 million, down from $78 million in Q4 2021, with pretax income of $13 million compared to $27 million in the prior year [14] - The Plant Nutrient business saw a decrease in fourth quarter pretax income to $2 million from $16 million in Q4 2021, with EBITDA dropping to $11 million from $24 million [15] Market Data and Key Metrics Changes - The company noted that fertilizer prices have declined significantly, impacting the Plant Nutrient business, while farmer income remains high, supporting margins in specialty liquid products [8][15] - The company expects higher US corn plantings, which is positive for all business segments, despite challenges in the western Corn Belt from the 2022 harvest [17] Company Strategy and Development Direction - The company aims to grow within and adjacent to its core grain and fertilizer verticals, focusing on sustainable and carbon reduction opportunities [19] - The revised EBITDA target for 2025 has been increased to $475 million, representing a compound annual growth rate of almost 20% from 2018 to 2025 [20] - The company is exploring M&A opportunities within its core areas of strength, including farm centers and product line extensions [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2023 EBITDA target of $350 million to $375 million, despite a weaker start due to low ethanol crush margins and declining fertilizer prices [24][25] - The company anticipates a stronger second half of the year, driven by increased corn plantings and improved trading opportunities in grain markets [26][42] - Management highlighted the importance of monitoring risks in core fertilizer positions as market prices have declined [18] Other Important Information - The company generated $90 million in cash from operations before working capital changes in Q4 2022, compared to $84 million in Q4 2021 [11] - The company executed over $5 million in share repurchases during the quarter, with a total cash used for this program exceeding $14 million [12] Q&A Session Summary Question: Earnings cadence for the year - Management expects earnings to moderate from the peak of the previous year, with a slow start in Q1 but optimism for a stronger finish later in the year [24][25] Question: Renewable diesel and feedstock business - Management indicated that the renewable diesel trading desk has been successful, and they expect strong demand for feedstocks as new plants come online [28][29] Question: CapEx budget for 2023 - The estimated CapEx spend for 2023 is projected to be between $125 million to $150 million, with half allocated for maintenance capital [32][33] Question: Financial goals and growth investments - Management emphasized a balanced approach to growth investments and maintaining a long-term debt-to-EBITDA ratio below 2.5x [38][39] Question: Wheat business outlook - Management expressed optimism for the wheat business, expecting strong volumes and favorable conditions for soft red wheat production [60][61]

The Andersons, Inc. (NASDAQ:ANDE) Q3 2022 Earnings Conference Call November 2, 2022 11:00 AM ET Company Participants Mike Hoelter - VP, Corporate Controller & IR Pat Bowe - President & CEO Brian Valentine - EVP & CFO Conference Call Participants Ben Bienvenu - Stephens Inc. Ben Klieve - Lake Street Capital Markets Ken Zaslow - BMO Eric Larson - Seaport Research Partners Operator Good morning, ladies and gentlemen. And welcome to the Andersons 2022 Third Quarter Earnings Conference Call. My name is Joe, and ...