The Andersons Inc.

05/06/2026 | Press release | Distributed by Public on 05/06/2026 08:37

Quarterly Report for Quarter Ending 03/31/2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Such factors include, but are not limited to, the effects of economic, weather and agricultural conditions, regulatory conditions, competition globally and in the markets the Company serves, geopolitical risk, fluctuations in cost and availability of commodities, the effectiveness of the Company's internal control over financial reporting and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors. The reader is urged to carefully consider these risks and others, including those risk factors listed under Item 1A of the 2025 Form 10-K. In some cases, the reader can identify forward-looking statements by terminology such as may, anticipates, believes, estimates, predicts, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although management believes that the expectations reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements.
Critical Accounting Policies and Estimates
The critical accounting policies and critical accounting estimates, as described in the 2025 Form 10-K, have not materially changed through the first quarter of 2026.
Executive Overview
The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on sales and merchandising revenues and cost of sales and merchandising revenues and a much less significant impact on gross profit. As a result, changes in sales and merchandising revenues and cost of sales and merchandising revenues between periods may not necessarily be indicative of the overall performance of the business and greater emphasis should be placed on changes in gross profit.
Agribusiness
The Agribusiness segment's first quarter operating results improved from the prior year. The diversified portfolio showed the resilience of its earnings as the segment experienced more volatility return to the market this quarter. As prices rallied during the quarter, more old crop bushels came to market, which provided opportunities for the merchandising businesses. The grain asset footprint saw less basis appreciation than expected as the price rally put pressure on basis values. Fertilizer results improved on higher margins.
Market conditions remain dynamic, and there is the potential of continued volatility that could provide opportunities through 2026 as the group will remain nimble as conditions change. If the volatility continues, more opportunities should shift to the merchandising businesses. We expect the asset footprint, especially in the west, to capture some of the delayed basis appreciation over the next few quarters. Anticipated corn plantings are above the five-year average with expanded margin opportunities in this higher priced environment. The fertilizer business is well positioned heading into the second quarter and the application season for planting.
Total Agribusiness grain storage capacity at company-owned or leased grain facilities, including temporary pile storage, was approximately 266 million and 280 million bushels at March 31, 2026 and 2025, respectively. The storage capacity at our nutrient facilities was evenly split between dry and liquid storage with a total capacity of approximately one million tons at March 31, 2026 and 2025.
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Renewables
The Renewables segment's first quarter operating results improved from the prior year as a result of efficient plant operations and record production. Ethanol demand drove board crush higher year over year but was offset by firmer corn basis and higher natural gas expense. First quarter results include $26.2 million of Section 45Z clean fuel production credits. As expected, each of the ethanol plants qualified for the next tier of credits following rule changes effective in 2026. The merchandising businesses had improved performance, largely driven by volatility surrounding the Renewable Volume Obligations (RVO) announcement, resulting in higher distillers corn oil and RIN values.
Ethanol fundamentals continue to be supportive as we anticipate elevated demand, including increasing global blend rates, high gasoline prices, and planned industry maintenance. Renewable feedstocks should also continue to benefit from the robust RVO.
Ethanol and related co-products volumes sold were as follows:
Three months ended March 31,
(in thousands) 2026 2025
Ethanol (gallons) 172,971 211,792
E-85 (gallons) 9,671 7,970
Renewable feedstocks (pounds)(a)
464,167 357,716
DDG (tons)(b)
478 614
(a) Includes corn oil, soybean oil, and other fats, oils, and greases.
(b) Dried distillers grains ("DDG") tons shipped converts wet tons to a dry ton equivalent amount.
Other
Our "Other" activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments and other elimination and consolidation adjustments.
Operating Results
The following discussion focuses on the operating results as shown in the Condensed Consolidated Statements of Operations and includes a separate discussion by segment. Additional segment information is included herein in Note 3, Segment Information.
Comparison of the three months ended March 31, 2026, with the three months ended March 31, 2025, including a reconciliation of GAAP to non-GAAP measures:
Three months ended March 31, 2026
(in thousands) Agribusiness Renewables Other Total
Sales and merchandising revenues $ 1,919,967 $ 707,299 $ - $ 2,627,266
Cost of sales and merchandising revenues 1,786,061 680,621 - 2,466,682
Gross profit 133,906 26,678 - 160,584
Operating, administrative and general expenses 121,420 10,300 12,944 144,664
Interest expense, net
13,688 3,059 91 16,838
Other income (loss), net
8,607 26,272 (69) 34,810
Income (loss) before income taxes
$ 7,405 $ 39,591 $ (13,104) $ 33,892
Loss before income taxes attributable to the noncontrolling interests
(3,856) - - (3,856)
Non-GAAP Income (loss) before income taxes attributable to the Company
$ 11,261 $ 39,591 $ (13,104) $ 37,748
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Three months ended March 31, 2025
(in thousands) Agribusiness Renewables Other Total
Sales and merchandising revenues $ 1,993,287 $ 665,811 $ - $ 2,659,098
Cost of sales and merchandising revenues 1,874,689 631,537 - 2,506,226
Gross profit 118,598 34,274 - 152,872
Operating, administrative and general expenses 124,489 9,783 11,482 145,754
Interest expense (income), net
12,826 698 (428) 13,096
Other income (loss), net
9,041 1,088 (938) 9,191
(Loss) income before income taxes
$ (9,676) $ 24,881 $ (11,992) $ 3,213
(Loss) income before income taxes attributable to the noncontrolling interest
(4,522) 9,569 - 5,047
Non-GAAP (Loss) income before income taxes attributable to the Company
$ (5,154) $ 15,312 $ (11,992) $ (1,834)
The Company uses Income (loss) before income taxes attributable to the Company, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company's financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. Management believes that Income (loss) before income taxes attributable to the Company is a useful measure of the Company's performance as it provides investors additional information about the Company's operations, allowing evaluation of underlying business performance and period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes, the most directly comparable amounts reported under GAAP.
Agribusiness
Operating results for the Agribusiness segment increased by $16.4 million from the prior year. Sales and merchandising revenues decreased by $73.3 million, and cost of sales and merchandising revenues decreased by $88.6 million for an increased gross profit impact of $15.3 million. The modest decrease in sales and merchandising revenues and cost of sales and merchandising revenues can be attributed to lower sales volumes in the merchandising businesses. The $15.3 million improvement in gross profit from the prior year reflects a $9.8 million improvement in the Company's merchandising businesses from recent capital investments and favorable market conditions, along with a $5.0 million increase the Nutrient business driven by stronger margins.
Operating, administrative, and general expenses decreased by $3.1 million compared to the prior year, reflecting $5.0 million of higher bad debt expense in the prior period.
Interest expense increased by $0.9 million, due to increased borrowings on the Company's revolving credit facility.
Renewables
The Renewables segment had a strong first quarter as operating results increased by $24.3 million from prior year as the Company now has full ownership of the ethanol plants and is recording a significant amount of clean fuel production credits. Sales and merchandising revenues and cost of sales and merchandising revenues were slightly higher than the prior year due to both increased volumes and values in renewable feedstocks that were partially offset by lower ethanol sales volumes as ethanol values remained consistent with the prior year. Gross profit decreased by $7.6 million, primarily due to a $12.8 million decline at the ethanol plants. Although the plants operated efficiently with solid yields and higher production, this was offset by firmer corn basis and higher natural gas expenses in the quarter. Partially offsetting the decline at the ethanol plants was the improvement in Company's trading businesses on the final RVO policy and higher RIN values in the quarter.
Interest expense, net increased $2.4 million from the prior year due to increased borrowings on the Company's revolving credit facility.
Other income, net increased by $25.2 million compared to the prior year, primarily driven by the recognition of $26.2 million of clean fuel production credits in the current year.
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Other
Results declined by $1.1 million, primarily due to increased incentive costs driven by improved results.
Income Taxes
For the three months ended March 31, 2026, the Company recorded income tax expense of $4.6 million. The Company's effective tax rate was 13.5% on income before taxes of $33.9 million. The difference between the 13.5% effective tax rate and the U.S. federal statutory rate of 21.0% is primarily attributable to nontaxable clean fuel production credits offset by state and local income taxes and nondeductible compensation.
For the three months ended March 31, 2025, the Company recorded an income tax benefit of $2.1 million. The Company's effective tax rate was (65.9)% on income before income taxes of $3.2 million. The difference between the (65.9)% effective tax rate and the U.S. federal statutory rate of 21.0% was primarily attributable to a discrete adjustment of unrecognized tax benefits related to prior period U.S. federal research and development tax credits.
The Company and its subsidiary partnership returns are under U.S. federal and certain state tax examinations for tax years 2018 through 2024. The Company's subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. The U.S. federal, state, and Mexican tax authorities' examinations could potentially be resolved within the next 12 months. The resolution of these examinations could change our unrecognized tax benefits and favorably impact income tax expense by a range of zero to $8.7 million.
On December 20, 2021, the Organization for Economic Co-operation and Development ("OECD") issued Pillar Two model rules introducing a global minimum tax of 15% on large corporations. Although the U.S. has not adopted the Pillar Two model rules, several foreign countries have enacted legislation which closely follows OECD's Pillar Two guidance. Additional OECD guidance issued on January 5, 2026 introduced a "side-by-side" framework which provides relief from certain Pillar Two charging provisions for eligible U.S.-parented multinational groups while keeping foreign country minimum tax regimes in place. The impact of Pillar Two legislation in our relevant jurisdictions is not expected to materially affect the Company's effective tax rate for 2026.
On July 4, 2025, the U.S. passed the OBBBA, which modified the existing international tax framework and permanently extended select provisions of the Tax Cuts and Jobs Act. This legislation is not expected to materially affect the Company's effective tax rate for 2026, with the exception of clean fuel production credits. Changes in the calculation of the carbon intensity score may significantly affect credits, recorded as Other income, resulting in a favorable impact on the effective tax rate through 2029.
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Liquidity and Capital Resources
Working Capital
At March 31, 2026, the Company had working capital of $686.5 million, a decrease of $408.0 million from the prior year. This decrease was attributable to changes in the following components of current assets and current liabilities:
(in thousands) March 31, 2026 March 31, 2025 Variance
Current Assets:
Cash and cash equivalents $ 72,398 $ 219,219 $ (146,821)
Accounts receivable, net 772,010 812,482 (40,472)
Inventories 1,398,686 1,249,047 149,639
Commodity derivative assets - current 161,858 155,028 6,830
Other current assets 152,153 92,968 59,185
Total current assets 2,557,105 2,528,744 28,361
Current Liabilities:
Short-term debt 716,519 222,691 493,828
Trade and other payables 633,027 661,202 (28,175)
Customer prepayments and deferred revenue 222,811 223,702 (891)
Commodity derivative liabilities - current 67,682 69,648 (1,966)
Current maturities of long-term debt 23,466 62,675 (39,209)
Accrued expenses and other current liabilities 207,125 194,390 12,735
Total current liabilities 1,870,630 1,434,308 436,322
Working Capital $ 686,475 $ 1,094,436 $ (407,961)
As of March 31, 2026, current assets increased by $28.4 million compared to the prior year, primarily driven by higher inventory values resulting from increased commodity prices and an additional $62.0 million of clean fuel production credits in Other current assets. These increases were partially offset by a $146.8 million decrease in cash related to the acquisition of the remaining interest in TAMH later in 2025.
Current liabilities increased $436.3 million year over year, primarily driven by $493.8 million of additional borrowings under the Company's revolving credit facilities, reflecting lower cash balances than the prior year following the TAMH transaction and increased market volatility in 2026. The increase in short-term debt was partially offset by lower current maturities of long-term debt due to the timing of scheduled debt maturities.
Sources and Uses of Cash
Three months ended March 31,
(in thousands) 2026 2025
Net cash used in operating activities
$ (393,675) $ (350,020)
Net cash used in investing activities
(49,464) (43,831)
Net cash provided by financing activities
417,783 50,445
Operating Activities
Operating activities used $393.7 million of cash during the first three months of 2026, compared to $350.0 million of cash used in the same period of 2025. The $43.7 million year-over-year increase in cash use was primarily attributable to a $54.8 million unfavorable shift in operating assets and liabilities through normal business operations, partially offset by stronger earnings in the current year. Excluding the changes in operating assets and liabilities, cash generation from operations has improved from prior year.
Investing Activities
Investing activities used $49.5 million of cash during the first three months of 2026, up from $43.8 million in the prior year. The $5.6 million increase was primarily driven by $5.2 million in higher capital expenditures to support previously announced growth initiatives. Management expects to invest approximately $225 million in property, plant, and equipment in 2026; roughly split 50% between growth and maintenance capital.
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Financing Activities
Cash provided by financing activities totaled $417.8 million for the three months ended March 31, 2026, compared to $50.4 million for the same period in 2025. The $367.3 million year-over-year increase was primarily driven by $411.5 million of additional borrowings on the Company's short-term lines of credit. This was partially offset by additional net payments of long-term debt of $36.8 million from the prior year.
The Company paid $6.8 million in dividends in the first three months of 2026 compared to $6.7 million paid in the prior period. The Company paid dividends of $0.20 and $0.195 per common share in January of 2026 and 2025, respectively. On February 12, 2026, the Company declared a cash dividend of $0.20 per common share, payable on April 22, 2026, to shareholders of record on April 1, 2026.
The Company is party to borrowing arrangements with a syndicate of banks that provide a total borrowing capacity of $1,802.5 million, reflecting the amendment that reduced the Company's revolving credit facility by $250.0 million, as discussed within Note 1 to the Condensed Financial Statements. As of March 31, 2026, the Company had $1,083.1 million available for borrowing.
Certain long-term borrowings include covenants that, among other things, impose minimum levels of working capital and various debt leverage ratios. The Company is in compliance with all covenants as of March 31, 2026. In addition, certain long-term borrowings are collateralized by mortgages on various facilities.
The Company is typically in a net short-term borrowing position in the first half of the year. The majority of these short-term borrowings bear interest at variable rates, and an increase in interest rates could have a significant impact on the Company's profitability. In addition, periods of high grain prices could require us to make additional margin deposits on exchange traded futures contracts. Conversely, in periods of declining prices, the Company could receive a return of cash.
Management believes the Company's sources of liquidity will be adequate to fund operations, capital expenditures and service indebtedness. At March 31, 2026, the Company had standby letters of credit outstanding of $2.8 million.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
For further information, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2025. There were no material changes in market risk, specifically commodity and interest rate risk, during the three months ended March 31, 2026.
The Andersons Inc. published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 06, 2026 at 14:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]