Andersons Inc
For the period ended May 9, 2024. Filed Mar 13, 2024.
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May 9, 2024 · Filed Mar 13, 2024
Contents
Appendix A
APPENDIX A - Reconciliation of Non-GAAP Measures
AIP Adjusted Pretax Income
| Twelve months ended December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2023 | 2022 | 2021 | 2020 |
| Income (loss) before income taxes from continuing operations | $169,563 | $194,582 | $160,770 | (27,081) |
| Income (loss) attributable to the noncontrolling interests | 31,339 | 35,899 | 31,880 | (21,925) |
| Pretax income (loss) from continuing operations attributable to The Andersons, Inc. | 138,224 | 158,683 | 128,890 | (5,156) |
| Adjustments: | ||||
| Insured inventory (recoveries) expenses | (16,080) | 15,993 | — | — |
| Gain on deconsolidation of joint venture | (6,544) | — | — | — |
| Gain on sale of assets and businesses | (5,643) | (3,762) | (14,619) | — |
| Gain on cost method investment | (4,798) | — | — | — |
| Goodwill impairment | 686 | — | — | — |
| Transaction related compensation | 7,818 | — | 1,274 | 4,206 |
| Asset impairment including equity and cost method investments | 45,413 | 13,455 | 11,105 | — |
| Severance costs | — | — | — | 6,091 |
| Total adjusting items | 20,852 | 25,686 | (2,240) | 10,297 |
| Adjusted pretax income from continuing operations attributable to The Andersons, Inc. | $159,076 | $184,369 | $126,650 | $5,141 |
| Adjustments for executive compensation: | ||||
| USDA Biofuel Producer Program funds (1) | — | (8,878) | — | — |
| ELEMENT (2) | (7,100) | — | — | — |
| Property, plant, and equipment insurance recoveries (3) | (4,000) | — | — | — |
| Gain on sale of assets | — | — | (1,979) | — |
| Legacy Rail segment impact | — | — | 7,700 | 5,494 |
| Total executive compensation adjusting items | (11,100) | (8,878) | 5,721 | 5,494 |
| AIP Adjusted Pretax Income | $147,976 | $175,491 | $132,371 | $10,635 |
(1) In 2022, the USDA as a part of the Biofuel Producer Program, created under the CARES Act, provided funding to help lower costs and support biofuel producers who faced unexpected market losses due to the COVID-19 pandemic. Under this program The Andersons Marathon Holdings LLC ("TAMH') and ELEMENT LLC ("ELEMENT") received $13.3 million and $4.3 million, respectively. As the Company owned 50.1% of TAMH and 51% of ELEMENT in 2022, this adjustment was reduced by the amount attributable to the noncontrolling interests that would already be removed through "Income (loss) attributable to the noncontrolling interests" in the table above.
(2) As a result of the deconsolidation of ELEMENT in the second quarter of 2023, management reassessed the 2023 AIP targets. The amount removed above was related to the budgeted operating losses related to ELEMENT built into the 2023 AIP targets. If these budgeted losses were not removed it would result in an overstatement of actual results solely due to the deconsolidation of the facility.
(3) The Company received property insurance recoveries in excess of losses recorded on damaged assets in 2023. The excess amount received was removed from the results above for purposes of executive compensation.
Adjusted Pretax Income from Continuing Operations Attributable to The Andersons, Inc. - Segment Data
| Twelve months ended December 31, 2023 | |||||
|---|---|---|---|---|---|
| (in thousands) | Trade | Renewables | Nutrient & Industrial | Other | Total |
| Income (loss) before income taxes from continuing operations | $96,234 | $91,175 | $25,049 | $(42,895) | $169,563 |
| Income attributable to the noncontrolling interests | — | 31,339 | — | — | 31,339 |
| Pretax income (loss) from continuing operations attributable to The Andersons, Inc. | 96,234 | 59,836 | 25,049 | (42,895) | 138,224 |
| Adjustments: | |||||
| Insured inventory recoveries | (16,080) | — | — | — | (16,080) |
| Gain on sale of assets | (5,643) | — | — | — | (5,643) |
| Asset impairment including equity method investments | 963 | 44,450 | — | — | 45,413 |
| Transaction related compensation | 7,818 | — | — | — | 7,818 |
| Gain on deconsolidation of joint venture | — | (6,544) | — | — | (6,544) |
| Goodwill impairment | — | — | 686 | — | 686 |
| Gain on cost method investment | — | — | — | (4,798) | (4,798) |
| Total adjusting items, net of tax | (12,942) | 37,906 | 686 | (4,798) | 20,852 |
| Adjusted pretax income (loss) from continuing operations attributable to The Andersons, Inc. | $83,292 | $97,742 | $25,735 | $(47,693) | $159,076 |
| Adjustments for executive compensation: | |||||
| ELEMENT (1) | — | (7,100) | — | — | (7,100) |
| Property, plant, and equipment insurance recoveries (2) | (4,000) | — | — | — | (4,000) |
| Total executive compensation adjusting items | (4,000) | (7,100) | — | — | (11,100) |
| AIP adjusted pretax income | $79,292 | $90,642 | $25,735 | $(47,693) | $147,976 |
(1)As a result of the deconsolidation of ELEMENT in the second quarter of 2023, management reassessed the 2023 AIP targets. The amount removed above was related to the budgeted operating losses related to ELEMENT built into the 2023 AIP targets. If these budgeted losses were not removed it would result in an overstatement of actual results solely due to the deconsolidation of the facility.
(2)The Company received property insurance recoveries in excess of losses recorded on damaged assets in 2023. The excess amount received was removed from the results above for purposes of executive compensation.
Adjusted Net Income from Continuing Operations Attributable to The Andersons, Inc.
| Twelve months ended December 31, | |||
|---|---|---|---|
| (in thousands, except for per share data) | 2023 | 2022 | 2021 |
| Net income from continuing operations | $132,529 | $154,954 | $131,542 |
| Net income attributable to noncontrolling interests | 31,339 | 35,899 | 31,880 |
| Net income from continuing operations attributable to The Andersons, Inc. | 101,190 | 119,055 | 99,662 |
| Adjustments: | |||
| Insured inventory (recoveries) expenses | (16,080) | 15,993 | — |
| Gain on deconsolidation of joint venture | (6,544) | — | — |
| Gain on sale of assets and businesses | (5,643) | (3,762) | (14,619) |
| Gain on cost method investment | (4,798) | — | — |
| Goodwill impairment | 686 | — | — |
| Transaction related compensation | 7,818 | — | 1,274 |
| Asset impairment including equity and cost method investments | 45,413 | 13,455 | 11,105 |
| Income tax impact of adjustments (1) | (3,775) | (5,308) | 300 |
| Total adjusting items, net of tax | 17,077 | 20,378 | (1,940) |
| Adjusted net income from continuing operations attributable to The Andersons, Inc. | $118,267 | $139,433 | $97,722 |
| Diluted earnings per share attributable to The Andersons, Inc. common shareholders from continuing operations | $2.94 | $3.46 | $2.94 |
| Impact on diluted earnings (loss) per share from continuing operations | $0.50 | $0.59 | $(0.06) |
| Adjusted diluted earnings per share attributable to The Andersons, Inc. common shareholders from continuing operations | $3.44 | $4.05 | $2.88 |
(1)The income tax impact of adjustments is taken at the statutory tax rate of 25% with the exception of certain transaction related compensation, goodwill impairments, and impairments of equity method investments in both 2023 and 2022, respectively.
Return on Invested Capital (ROIC)
| Twelve months ended December 31, 2023 · Twelve months ended, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) · Trade · Renewables · Nutrient & Industrial · Other · Total · December 31, 2022 · December 31, 2021 | |||||||||||
| Income (loss) before income taxes from continuing operations | $96,234 | $91,175 | $25,049 | $(42,895) | $169,563 | $194,582 | $160,770 | ||||
| Income attributable to the noncontrolling interests | — | 31,339 | — | — | 31,339 | 35,899 | 31,880 | ||||
| Pretax income (loss) from continuing operations attributable to The Andersons, Inc. | 96,234 | 59,836 | 25,049 | (42,895) | 138,224 | 158,683 | 128,890 | ||||
| Adjustments: | |||||||||||
| Insured inventory (expenses) recoveries | (16,080) | — | — | — | (16,080) | 15,993 | — | ||||
| Gain on sale of assets and businesses | (5,643) | — | — | — | (5,643) | (3,762) | (14,619) | ||||
| Asset impairment including equity method investments | 963 | 44,450 | — | — | 45,413 | 13,455 | 11,105 | ||||
| Transaction related compensation | 7,818 | — | — | — | 7,818 | — | 1,274 | ||||
| Gain on deconsolidation of joint venture | — | (6,544) | — | — | (6,544) | — | — | ||||
| Goodwill impairment | — | — | 686 | — | 686 | — | — | ||||
| Gain on cost method investment | — | — | — | (4,798) | (4,798) | — | — | ||||
| Adjusted pretax income (loss) from continuing operations attributable to The Andersons, Inc. | 83,292 | 97,742 | 25,735 | (47,693) | 159,076 | 184,369 | 126,650 | ||||
| Interest attributable to The Andersons, Inc. (1) | 35,234 | 4,385 | 7,016 | (1,768) | 44,867 | 53,149 | 33,692 | ||||
| Total ROIC pretax earnings | 118,526 | 102,127 | 32,751 | (49,461) | 203,943 | 237,518 | 160,342 | ||||
| Less: statutory blended tax rate of 25% | (29,632) | (25,532) | (8,188) | 12,365 | (50,986) | (59,480) | (40,086) | ||||
| Total ROIC earnings | 88,894 | 76,595 | 24,563 | (37,096) | 152,957 | 178,038 | 120,256 | ||||
| Invested Capital (2) | 1,331,290 | 266,397 | 319,843 | (128,977) | 1,788,553 | 2,432,406 | 2,236,022 | ||||
| ROIC | 6.7% | 28.8% | 7.7% | 8.6% | 7.3% | 5.4% | |||||
| Adjusting items for executive compensation, net of tax (3) | 406 | (5,325) | — | — | (4,919) | (6,659) | 4,291 | ||||
| Total AIP ROIC earnings | 89,300 | 71,270 | 24,563 | (37,096) | 148,037 | 171,379 | 124,547 | ||||
| AIP invested capital (2) | 1,331,290 | 287,907 | 319,843 | (128,977) | 1,810,063 | 2,432,406 | 2,236,022 | ||||
| AIP ROIC | 6.7% | 24.8% | 7.7% | 8.2% | 7.0% | 5.6% | |||||
(1) Excludes interest attributable to the noncontrolling interest within the Renewables segment.
(2)Invested capital and AIP invested capital are comprised of total equity and debt, less cash and cash equivalents and net debt attributable to the noncontrolling interest using a five-quarter rolling average. See the tables below for a reconciliation of these amounts.
(3)In the Trade segment, approximately $4.5 million of accounts receivable factoring fees were added back to the calculation as the segment used these facilities in lieu of short-term borrowings, which was partially offset by $4.0 million of property insurance recoveries received in excess of losses recorded on damaged assets in 2023. The excess amount received was removed from the results above for purposes of executive compensation. In the Renewables segment, as a result of the deconsolidation of ELEMENT in the second quarter of 2023, management reassessed the 2023 AIP targets. The amount removed above was related to the budgeted operating losses related to ELEMENT built into the 2023 AIP targets. If these budgeted losses were not removed it would result in an overstatement of actual results solely due to the deconsolidation of the facility. The income tax impact of all adjustments presented were taken at the statutory tax rate of 25%.
ROIC (continued) - AIP Invested Capital
| Quarter Ended, · Trailing Five Quarter Average | ||||||
|---|---|---|---|---|---|---|
| (In thousands) · December 31, 2022 · March 31, 2023 · June 30, 2023 · September 30, 2023 · December 31, 2023 | ||||||
| Short-term debt | $272,575 | $638,210 | $102,752 | $14,138 | $43,106 | $214,156 |
| Current maturities of long-term debt | 110,155 | 85,567 | 27,511 | 27,535 | 27,561 | 55,666 |
| long-term debt | 492,518 | 486,892 | 576,489 | 569,730 | 562,960 | 537,718 |
| Total shareholders' equity of The Andersons, Inc. | 1,198,601 | 1,169,591 | 1,230,986 | 1,240,735 | 1,282,899 | 1,224,562 |
| Less: | ||||||
| Cash and Cash Equivalents | 115,269 | 70,853 | 96,293 | 418,055 | 643,854 | 268,865 |
| Net debt attributable to noncontrolling interest (1) | 11,227 | 11,983 | (24,939) | (51,288) | (73,565) | (25,316) |
| Invested Capital | $1,947,353 | $2,297,424 | $1,866,384 | $1,485,371 | $1,346,237 | $1,788,553 |
| Adjustments: | ||||||
| ELEMENT (2) | — | 33,338 | 26,173 | 24,953 | 23,086 | 21,510 |
| AIP Invested Capital | $1,947,353 | $2,330,762 | $1,892,557 | $1,510,324 | $1,369,323 | $1,810,063 |
| Trailing Five Quarter Average | ||
|---|---|---|
| (In thousands) | December 31, 2022 | December 31, 2021 |
| Short-term debt | $807,702 | $571,834 |
| Current maturities of long-term debt | 72,510 | 60,154 |
| long-term debt | 545,124 | 748,991 |
| Total shareholders' equity of The Andersons, Inc. | 1,144,224 | 1,014,784 |
| Less: | ||
| Cash and Cash Equivalents | 118,980 | 105,074 |
| Net debt attributable to noncontrolling interest (1) | 18,174 | 54,667 |
| Invested Capital | $2,432,406 | $2,236,022 |
(1) This amount is related to the net debt attributable to noncontrolling interest at the Company's joint venture ethanol plants. Net debt is calculated as the combination of both short-term and long-term debt less cash and cash equivalents then reduced by the respective ownership percentage of the minority interest.
(2) Invested capital was increased as a result of the deconsolidation of ELEMENT in the second quarter of 2023, management reassessed the 2023 AIP targets. The amount removed above was related to the budgeted invested capital related to ELEMENT built into the 2023 AIP targets. If this was not removed it would result in an overstatement of actual results solely due to the deconsolidation of the facility.
Free Cash Flow
| (in thousands) | |
|---|---|
| Cash provided by operating activities | $946,750 |
| Less: Changes in operating assets and liabilities | |
| Accounts receivable | 468,968 |
| Inventories | 572,235 |
| Commodity derivatives | 111,506 |
| Other current and non-current assets | 6,529 |
| Payables and other current and non-current liabilities | (563,718) |
| Total changes in operating assets and liabilities | 595,520 |
| Cash from operations before working capital changes | 351,230 |
| Purchases of property, plant and equipment, and capitalized software | (150,443) |
| Proceeds from sale of business | 10,318 |
| Proceeds from sale of assets and investments | 5,101 |
| Purchases of investments | (1,730) |
| Proceeds from insurance | 7,499 |
| Cash dividends | (25,373) |
| Net income attributable to the noncontrolling interest, less asset impairments (1) | (74,044) |
| Depreciation, amortization and capital expenditures attributable to noncontrolling interest | (25,347) |
| Purchases of property, plant and equipment, and capitalized software attributable to noncontrolling interest | 27,097 |
| Free Cash Flow | $124,308 |
| Adjustments for executive compensation: | |
| Unrealized foreign currency losses on receivables | (4,818) |
| Acquisition deemed asset acquisition | 6,100 |
| Insurance recoveries on Inventory and Property, plant and equipment (2) | (15,080) |
| Transaction related compensation expense (2) | 5,864 |
| Total adjusting items, net of tax | (7,934) |
| AIP Free Cash Flow | $116,374 |
(1) This amount includes an asset impairment charge associated to the ELEMENT ethanol plant of $42.7 million attributable to the noncontrolling interest as the consolidated asset impairment charge is included in the total of cash provided by operating activities.
(2) The income tax impact of these adjustments is taken at the statutory tax rate of 25%.
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