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ANDE Andersons

Participants
John Kraus Director, IR
Patrick E. Bowe President and CEO
Brian A. Valentine SVP and CFO
Kenneth Zaslow BMO Capital Markets
Ben Bienvenu Stephens, Inc
Call transcript
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Operator

Good morning, ladies and gentlemen and welcome to the 2020 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. I would now like to turn the conference over to your host, John Kraus, Director of Investor Relations, you may begin.

John Kraus

Celine. Thanks and XXXX joining Earnings everyone Andersons' for you Quarter First Call. thank morning us for The Good

We have provided today's discussion. a slide presentation that will enhance

and available and andersonsinc.com the If webcast, and website the sync. presentation at this will recording Investors webcast commentary be page slides slides our made This recorded you're in the will shortly. being via is supporting be on viewing the our of

statements XX forward-looking Certain those and as today and information the forward-looking information actual from prospectuses many the constitutes in that differ conditions, the conditions have of economic company's presented the Act could prepared additional result in industries, described reviewed. in connection its company's in offerings. general the States the are not financial filings United factors includes conditions, statements and the COVID-XX completely competitive results Today's call a materially including company's discussed with and publicly factors pandemic, auditors the independent company's which in internationally, both including weather, filed documents

will Although to the no which and information assurance financial can are assumptions these reasonable, forward-looking the statements that assumptions that the its based accurate. give upon be are believes company it prove

income period determined to net considered do generally to and taxes comparability. as of contain remarks and others better EBITDA be company, before about believes income attributable prepared not accounting EBITDA principles. additional investors by to EBITDA, provide today's or evaluation information operating financial income, to underlying not adjusted and income its and adjusted presentation as allowing income measures. The company the accepted non-GAAP pre-tax should pre-tax This adjusted pre-tax adjusted an performance period Adjusted EBITDA income, operations and and alternatives

and Pat On and Brian Vice the and prepared call will Valentine, take your Financial Brian me Executive be Executive Officer questions. remarks, to Chief Officer. President Pat, are I our happy Bowe, President After Chief today and with

were later floor that we sharing with We coming to the our reiterate that look opening host want to We postpone you Investor his year. I comments, sorry Before yours. April that presentation to X, this to With Pat, details that weeks. about to is in the making Day. intend more forward XXXX have still

Patrick E. Bowe

coming Thank you, joining for and all how you to not our Thank our good this tell about results, think so it responding morning the COVID-XX can in everyone. might first and pandemic company John you mean that our we to the only months. for call quarter is but also review we more what morning us

I the months. few Before to provides the the last reflecting a details, want moments spend on of financial Brian spreads in couple

crisis on We of years with our have this. mission-driven time focus It us operated shareholders a well noble serve than in XX and a purpose. employees, These serving the communities. principles fundamental more customers, is like

critical early of central both We customers are employees crisis our our more will We've the industry. to to are infrastructure volunteer the service our to they continued financial than an part by our facilities communities. important because serve practice contact our extraordinary no XXX pressing efforts and a all most them to on. provide operating for force needs promoted discuss the also and health distancing leaders executive community foundations hygiene. response communicated employees make them actively identify fund opportunities a matching their employee North and monitoring we We've to We've by helped American chain. and our their We've Brian families physical as sure We've that through crisis closely agriculture gifts. way help for related the good manage been momentarily. response to level the with often our task that and our supply private

responsive response proud our to able stay We've far. to pandemic thus very been suppliers. the to of customers I'm and

the new our be up our or communities, to smoothly. running seamlessly my deepest workers day working operational our to have the finally, from to every offer I'd our like who employees affected normal, shifted support American heartfelt in Ag like express to employees thanks Our home whether to show plants. And and it'd supply all have all food chain sympathies our who COVID-XX. for I'd who families business to by kept and been the

non-cash quarter were well. units, million The Group decrease XX% four pandemic the in but impact of Fully and our the income approximately half Ethanol directly adjusted changes results. to the traveled both miles decreased in most stay-at-home and Those groups significant of from country. the on the resulted in gasoline company the a from basis. dramatic came decrease decline significant the impacted of business attributable resulted most affected had Ethanol as A was our first which Trade $XX year-over-year pre-tax orders demand, turn The which Group, Rail charges. in a from corn margins ethanol resulted in vehicle throughout

not it record quickly as to beginning did nationally, demand that now did leading ethanol are slowly stocks subside. to slowed as While fall production

through Nutrient The back The declines discusses the impacted manage quarter now Brian current review for condition company financial expect we pandemic, the we our will results crisis traffic to carload improved Group financial forward. responses pandemic. by Rail first to the what discuss and year. quickly doing first then quarter was what the be are going to Plant see and After and Group's exacerbated being our much by to I'll that from we're last

turn over to Brian. Now call I'll the

Brian A. Valentine

good and Thanks, everyone. morning Pat

we're and want In we practical. discussing I wherever reducing Before the to quarter financial responding cash moment results, we our spend a how are review conserving pandemic. the to expenses of first short, implications

represented as have liquidity, the foremost, with plenty primary covenants, in which primarily of shows capacity tied assertion by to our agreement XXst. various $XXX adequate our that headroom performed testing are million debt-to-capital undrawn credit capital best we from debt stress of we have is have that approximately working and First Recent March metrics. we and

We quarter, short-term current to rose debt long-term debt priority. short-term our debt of in first as in consider we've planting the inventories the level normal. fertilizer does Reducing be usually it a built As season. remains seasonally anticipation

amounts no due of is significant debt year. well long-term August laddered coming Our maturity with before schedule next

building Since than an XXXX, in million by in we the million more other reduction plan increase expected $XX we $XX years, from operating a More $X the to we've four announced last expense an In synergies of culture acquisition million $XX the recently, million. management. expense opportunities. we've to additional reduce that been and from expenses Lansing identified

crisis calls us current more. do to the However, for

reduce $XX travel, contractors, use million professional immediately fees by outside to result, such by As intend now mentioned do We discretionary spending various a of and expenses. as previously. that in we began expenses to amounts of the other XXXX exclusive reducing

reducing We are capital also spending.

Over capital $XXX not an the intend average of In on grow year past to we and approximately growth not three selectively. more spend than mean to $XXX years, we does on will XXXX, maintenance spending. per such look million That we've spent projects. million

Our digital such LLC, a recent investment is in platform Roger good bulk example shipping for of new truck commodities growth. a by

$X.XX $XX.X or diluted XXXX, $X.XX adjusted first turning first reported loss on first billion. net of loss of $X adjusted $X.XX slide company $XX.X quarter loss diluted quarter per net on company now million Andersons $X.XX quarter net share share the to the million to of of results We're or loss In share seven. per attributable and number or The our the an share a net revenues per revenues an reported on million of In billion. diluted we per $X.X XXXX, of million to of attributable diluted $X.X and or of $XX a

XXXX. in the $XX.X to million attributable to in company million $XX.X from first quarter declined of the EBITDA first Adjusted XXXX of quarter the

our tax reported our XXXX effective for the comparison, rate by The be debt attributable XXXX tax of income to rate expect interests. the to have full adjusted under we accounts of based or was the and income. year last income increased reported excluded amount on We non-controlling currently little but a rate X.X% year-over-year rate XXXX a XX%, believe was $XX that could XX% year CARES XXXX than X.X%. for rate By Long-term benefits adjusted range compared full was decreased we to but of vary the to more that rate receive loss quarter. first million will Our effective Act our quarter the XX.X%. negative that the from in

XXXX. million assets the drop the in pre-tax and of demand period ethanol lower substantial basis, of same Now, a Trade XXXX. an first a loss $X.X pre-tax reported its Group's in we'll of significant our resulted of million Trade business $XX return the decrease quarter the The with Group which each on drove eight. in of in in a million beginning of move pre-tax units, Trade in Group review to loss on loss to an four of a $XX.X of The on pre-tax million slide corn loss number storage than adjusted compared $X.X adjusted

accounts very well receivable by reserves solidly performed increased the group's more XXXX its doubling approximately million, results and businesses profitable. than food also were merchandizing specialty businesses $X ingredients We and

quarter will the Current year stock compared Trade the Lansing We or adjusted $X.X $X.X expenses Group $XX.X earnings million XXXX. that of quarter $X.XX acquisition. excludes outstanding in quarter in year the million full $X.X and compensation and shares adjusted of EBITDA $X.X during million per share $X.XX such XXXX Group current the the diluted full with during [Technical on for per recorded income respectively. Group million the XXXX. of based incur first associated pre-tax are The Trade impacts share share Difficulty] estimate compensation stock we million, adjustments per these was to expense

pre-tax from of $X the first everyone million nine, first as Moving XXXX. I to results pandemic, XXXX company to plants. a of of loss to XXXX all the attributable announced of March, quarter extended in recorded Group three shutdowns first quarter, where to decent consolidated to remind of to margins After million plants, onset decline want quarter income five Ethanol maintenance demand the the the equity of significantly. of included includes stay-at-home that COVID-XX ethanol $XX slide orders quarter compared pre-tax a we the those start resulting and In quarter earnings caused facilities. first the for

shut ran of late manner variable costs in the required Fortunately, the limited amount month, before plants quarter the in highly production. efficient we for down a which first them

attributable of -- negative and quarter or included comparisons makes lower relates million. of non-cash adjustments brought adjustment mark-to-mark contracts The our EBITDA to cost EBITDA ethanol year-over-year feedstocks, first first change mark-to-market quarter October's by basis. declines company difficult. recorded million net of the in and relates The in last $X.X to The co-products. reporting entities the compared results roughly the prices value inventory of value to million ethanol Our about of remainder XXXX corn two-thirds Group in EBITDA totaling $XX to $XX.X this a to merger realizable of due Of XXXX. adjustments ethanol, declining on amount

a driven recorded small significant XXXX in loss Group in Turning Nutrient than offset quarter improvement which first expenses of over $X.X first pre-tax and was million interest by decrease to operating gross a XX, profit Lower by a of slide number movement. timing product the Plant the more quarter results.

the Granules. EBITDA for quarter This subsets; Engineered As Chain, the year, quarter the of Group we was of in $X.X itself the new the to $X million, related better structure Group into markets beginning from up serve. Specialty businesses XXXX. first the align Plant Ag enable Supply the and to several with of adjusted three Liquids million reorganized integrates Nutrient

$X lease and fell cars result X% XX,XXX compared lease quarter in $X.X challenges year. to year-over-year. to lower scrapping fell of controlled was XX%. first slide XXXX remained quarter and Service cars Rail on lease lease, other at fourth ethanol fell generated XXX in business to flat average to last some Average and markets. of Turning rates sand results year-over-year. the marginally million income first relatively reflect rates, lower the on the as million income the quarter. amount, average Total slightly fewer repair Utilization pre-tax a to cars results Group credit Leasing were comparable the XX,XXX and to compared XX, cars

Finally, the And turn XX% I over $XX.X with [Technical back result. the than will Group Difficulty] lower was that, to last for year's quarter, things which million EBITDA Pat. in

Patrick E. Bowe

that said the to had we company. had XXth, material February impact Corona not virus spoke epidemic a direct last the we When Brian. Thanks, yet

our We implementation also for for the driver the in in trade be Groups trade thought positive Ethanol with agreement China XXXX. Phase that timeline would X a business

economic times, more continue these more the of unknown While known. remains potential we about each to unusual learn much than day implications

what is to to power continue control will control. in We our

the throughout start of Group. focused to food well our large part be to which A exceptional Plant with U.S. be to beneficial Group the the crisis, chain, operated of spring and beginning Though Nutrient the and health the strong Ag our and continue supply Central fall safety employees a with is harvest should into provide on remain XXXX. we positive an our which the season, customers, XXXX for for corn planting crop should Trade service

to economy demand U.S. positioned benefit and as plants highly the from We operate to it expect well when are that ethanol improve reopens. We happens. efficient

railcar trend not do year. For we originally end the repair result last we rate expect the On last this our Well, as normal which the unfortunately lower more move in hit in of have North Rail run adjusted remain both so loadings we the to we would further leasing Group, the this to year has suggests the quarter's $XXX condition. toward over widened not target pace with pandemic, do American goal that income conditions we could million year-over-year a decrease a market thought. normal EBITDA that reach and by COVID-XX call, XX even we than market XXXX shared on thought that weeks, of

In ANDE of summary, together great unprecedented to under circumstances the for our during its to immensely this team proud time. I'm and service whole work effectively customers difficult efforts provide

is our and be believe in to that, is to position While for and from may With longer, economic future in challenges of to to We a hand we'll this in a time. questions. the entertain it stronger the emerge difficult American back good operator our happy strong. call like your I'd bit company Celine, the continue long-term future agriculture

Operator

[Operator Instructions].

BMO comes Kenneth first from the Your of Markets. question from line Zaslow Capital

open. line Your is

Kenneth Zaslow

everyone. Hey, good morning

Patrick E. Bowe

Ken. morning, Good

Kenneth Zaslow

just a questions. of couple So,

returning, you you big will think the power, question? businesses off there that that -- is you change picture. impaired think COVID-XX matter structurally it's just about think Do think of are start that's are that, how earnings you me the Let do business do a or a longer-term

Patrick E. Bowe

a Sure. Ken. good question, No, it's

spring. is having So our is look a the Nutrient business good we strong so news to have portfolio Plant very

we last had very that wet a you As hurt our spring remember, year volumes.

lease with Plant good economic to Nutrient a running year the very impacted We Rail our so, has general start the will rapid as due are decline and of that's repairs good in business slower having usually is to off. not position really we year, and The continue in a think well. been even but business big we slowdowns maybe slow COVID the and a drop volume rates number, a

would return improving. normal us could which We see a The a and all Well, a trade out month see, grain the March. having five suffered you Andersons. The then as the we business to corn because And from plants optimistic very bad down more that in normally for corn Ken storage had unknown is our had is to ethanol know, we're big we more volume see and probably the we crop, a crop future shut of for bigger not crop big income give business. the in thing we East of return good a a in the

our the with all pandemic, our time We the shape run. bring done contractors many maintenance want to to employees. I site so. think the of all at to are do were own so great didn't they early to we to got in We

also plants brought Michigan now Iowa. Albany, up Denison, in We've two in our of and

increases. So we're that as half well. last as impacts see market plants the that returns we the less some but gas are demand we some took back And of in rate, than ethanol ethanol running coming quarter mark-to-market

XX%. were increase from We've on out we numbers to went week. today seen Just down the on nice demand, XX% gasoline down a

what recovery. our thus a demand, big little think the for question be the the of the key driving ways and go driving ethanol. But thing long company. for I of for demand beginning miles economic that's conditions on That's bit So recovery is will to optimism at this gasoline

Kenneth Zaslow

little why was it surprised operations, I companies Can much just ethanol, of you peers you of Other terms bit There maybe more? Okay. grain expected. some -- the than in by was would Ethanol in the I just was was than the there issue. grain did the a that not based little of have as of results. what on the not more weakness your a -- side obviously green greater color do have larger issues give

Patrick E. Bowe

very Yeah, that's question, a Ken. good

our are parts Group of doing our business So, several well. of Trade quite

our we pet lot impacts of ethanol to because our food, ingredients business several had feed plants lot our Ethanol a of corn own. good a quarter. supply trading of besides our So, business very a

the in first the part So that the decline in during that corn hurt would being us of corn the quarter a a that's demand for typical on really ethanol the eastern and really particular the for footprint basis us corn weakness large in quarter. basis. that And especially company has that

Kenneth Zaslow

my business, long get does this like terms last how of then permanent end? ethanol does restructured, industry very the does get up a does the is in get things And as just -- long, question better, Okay. closures, this until it does view end does end on the how picture there how --

Patrick E. Bowe

crystal ball, is That's it difficult. the

You potential thing right outlined that's plants of to that control and industry for that part key want very that highly that we that have is ethanol plays, I gasoline comes for the we back think running the and efficient shows so, we that additive. the be demand three

we're for just at And just market the right the that will I some for up there key very us smart bring permanently and a when thing could position run them. and on economic them environment. a efficient and plants think think I asks be in closed due plants those tough a to to make be tight time very sure is them

Kenneth Zaslow

Great. I appreciate you. Thank it.

Patrick E. Bowe

Ken. Thanks,

Operator

Stephens. line from of Bienvenu from Ben next Your comes question the

line Your open. is

Ben Bienvenu

good everyone. Hey, morning

Patrick E. Bowe

Ben. morning, Good

Ben Bienvenu

follow I the want ethanol business. up on to

about recovery or demand are You at demand saying, in XX% back a are want running at when see to looking think should said formal the and you demand you gasoline, we production recovery you And that before lockstep think really ramp gasoline we matching up? about you're you April. in in

Patrick E. Bowe

Yeah.

Ben Bienvenu

in versus are? tepid want you to you're how How aggressive of do plants line be efficient

Patrick E. Bowe

Understand I I up all, that didn’t said because dictate for mean XX% if locations. We've April that and economics the just two of our first Denison of Difficulty] Albion plants quarter. those at [Technical

it's core know, you back DDGs price, bit. combination as etc, products, basis Ben quite have rallied a corn So, a the ethanol of all

sense those cash a to So that makes that on plants basis. dictates run

want be We really to at back location. early plants So we're of be and be the to We watching with look smart the it don't the don't it, we -- tune economically profitability to each very in way be early stay just were down. maximize want early we want leading bringing to That's the up. smart to market. we and volume

I think the we the as month recover. each demand is be gasoline economy to how question much begins don't know will

So that we'll tune at just stay accordingly with by plant react in and time. each market a

Ben Bienvenu

Okay, get trade I'd great. love flow impressions your to And of outlook.

good buying and to export March kind export have China here some of been like more soybeans pork We numbers key the they've categories of recently.

think of trade the or you about later seeing? seen that cast into how recovery which flows COVID would this in what this you're context market could we've Just the potential in obviously actions normalization of and be that in for of year some the favor the what that market uncertainty mean year

Patrick E. Bowe

from to for see commodities. nice some wheat and sorghum also it's bought some the Yeah, They've hard China U.S. back

of Argentina the had to them year know be you very have made devaluation competitive. that their Brazil, currencies a As and good

latter of optimistic half We the are exports in China year. about the to more

Ethanol think capturing corn have right markets going carries as kind see big demand we'll see the would have on so dairy, U.S. solid, disputes a like the swine to all decline in to in rattling those saber have beef volume by Group. in corn and So the the challenges -- corn [Technical to I and related those some into be feel of Difficulty] or trade the in corn community different early about crop, go. domestically and exports. we'll We to the because biggest pandemic some being good of think I but with Ag chicken, any farmer we basis ETG welcome

Brian A. Valentine

my and was Okay, a phone out up bit. cutting

the of talked heading this you you're coverage all apologize in where the if business, into at about XQ, I but hedged ethanol have XQ? year already, and you rest through kind if of guys what your So just

Patrick E. Bowe

don't forward we opportunity to Yeah, hasn’t There have really attractive. been coverage. an anything do that's

move we Of [Technical we course, will do that. Difficulty] on if

been hasn't just opportunity there on book forward a this So, year. put to

Ben Bienvenu

you Thank so Okay. much.

Operator

time, over back I are further question turn this will There no Kraus. call to now the at John

John Kraus

you to the want again all our with this for morning. presentation andersonsinc.com. Thanks, at are that available Celine. joining We of want additional slides I this supporting on also us to mention and information page website thank Investors

Our well. quarter scheduled call next at XXXX Eastern is our until we review when earnings time, XXXX at results. again can Time will for We August join then Wednesday, you X, XX hope second conference AM be us that

Operator

concludes teleconference. This today's

You may disconnect. now